UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported)   December 19, 2019

 

Hudson Technologies, Inc.
(Exact Name of Registrant as Specified in Charter)

 

New York
(State or Other Jurisdiction of Incorporation)

 

1-13412   13-3641539
(Commission File Number)   (IRS Employer Identification No.)

 

PO Box 1541, 1 Blue Hill Plaza, Pearl River, New York   10965
(Address of Principal Executive Offices)   (Zip Code)

 

(845) 735-6000
(Registrant's Telephone Number, Including Area Code)

 

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbols(s)   Name of each exchange on which registered
Common Stock, $0.01 par value   HDSN   Nasdaq Capital Market

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company    o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

 

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement

 

See Item 2.03 and Item 5.02 below.

 

Item 1.02 Termination of a Material Definitive Agreement

 

See Item 2.03 below.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

 

New Revolving Credit Facility

 

On December 19, 2019, Hudson Technologies Company (“HTC”), Hudson Holdings, Inc. (“Holdings”) and Aspen Refrigerants, Inc. (“ARI”), as borrowers (collectively, the “Borrowers”), and Hudson Technologies, Inc (the “Company”) as a guarantor, became obligated under a Credit Agreement (the “Wells Fargo Facility”) with Wells Fargo Bank, National Association, as administrative agent and lender (“Agent” or “Wells Fargo”) and such other lenders as may thereafter become a party to the Wells Fargo Facility.

 

Under the terms of the Wells Fargo Facility, the Borrowers may borrow, from time to time, up to $60 million at any time consisting of revolving loans in a maximum amount up to the lesser of $60 million and a borrowing base that is calculated based on the outstanding amount of the Borrowers’ eligible receivables and eligible inventory, as described in the Wells Fargo Facility. The Wells Fargo Facility also contains a sublimit of $5 million for swing line loans and $2 million for letters of credit.

 

Amounts borrowed under the Wells Fargo Facility were used by the Borrowers to repay existing revolving indebtedness under its Prior Revolving Credit Facility (as defined below), repay certain principal amounts under the Term Loan Facility (as defined below), and may be used for working capital needs, certain permitted acquisitions, and to reimburse drawings under letters of credit.

 

Interest on loans under the Wells Fargo Facility is payable in arrears on the first day of each month. Interest charges with respect to loans are computed on the actual principal amount of loans outstanding during the month at a rate per annum equal to (A) with respect to Base Rate loans, the sum of (i) a rate per annum equal to the higher of (1) the federal funds rate plus 0.5%, (2) one month LIBOR plus 1.0%, and (3) the prime commercial lending rate of Wells Fargo, plus (ii) between 1.25% and 1.75% depending on average monthly undrawn availability and (B) with respect to LIBOR rate loans, the sum of the LIBOR rate plus between 2.25% and 2.75% depending on average monthly undrawn availability.

 

In connection with the closing of the Wells Fargo Facility, the Company also entered into a Guaranty and Security Agreement, dated as of December 19, 2019 (the “Revolver Guaranty and Security Agreement”), pursuant to which the Company and certain subsidiaries unconditionally guaranteed the payment and performance of all obligations owing by Borrowers to Wells Fargo, as Agent for the benefit of the revolving lenders. Pursuant to the Revolver Guaranty and Security Agreement, Borrowers, the Company and ten other subsidiaries granted to the Agent, for the benefit of the Wells Fargo Facility lenders, a security interest in substantially all of their respective assets, including receivables, equipment, general intangibles (including intellectual property), inventory, subsidiary stock, real property, and certain other assets.

 

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The Wells Fargo Facility contains a financial covenant requiring the Company to maintain at all times minimum liquidity (defined as availability under the Wells Fargo Facility plus unrestricted cash) of at least $5 million, of which at least $3 million must be derived from availability. The Wells Fargo Facility also contains a springing covenant, which takes effect only upon a failure to maintain undrawn availability of at least $7.5 million, requiring the Company to maintain a Fixed Charge Coverage Ratio (FCCR) of not less than 1.00 to 1.00, as of the end of each trailing period of twelve consecutive fiscal months commencing with the month prior to the triggering of the covenant. The FCCR (as defined in the Wells Fargo Facility) is the ratio of (a) EBITDA for such period, minus unfinanced capital expenditures made during such period, to (b) the aggregate amount of (i) interest expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash interest expense) during such period, (ii) scheduled principal payments (but excluding principal payments relating to outstanding revolving loans under the Wells Fargo Facility), (iii) all net federal, state, and local income taxes required to be paid during such period (provided, that any tax refunds received shall be applied to the period in which the cash outlay for such taxes was made), (iv) all restricted payments paid (as defined in the Wells Fargo Facility) during such period, and (v) to the extent not otherwise deducted from EBITDA for such period, all payments required to be made during such period in respect of any funding deficiency or funding shortfall with respect to any pension plan. The FCCR covenant ceases after the Borrowers have been in compliance therewith for two consecutive months.

 

The Wells Fargo Facility also contains customary non-financial covenants relating to the Company and the Borrowers, including limitations on Borrowers’ ability to pay dividends on common stock or preferred stock, and also includes certain events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other obligations, events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, impairments to guarantees and a change of control. The Wells Fargo Facility also contains certain covenants contained in the Fourth Amendment to the Term Loan Facility described below.

 

The commitments under the Wells Fargo Facility will expire and the full outstanding principal amount of the loans, together with accrued and unpaid interest, are due and payable in full on December 19, 2022, unless the commitments are terminated and the outstanding principal amount of the loans are accelerated sooner following an event of default.

 

The descriptions of the foregoing agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the Wells Fargo Facility agreement and the Revolver Guaranty and Security Agreement, which are filed as Exhibits 10.1 and 10.2, respectively, to this Report.

 

Termination of Prior Revolving Credit Facility

 

In conjunction with entry into the Wells Fargo Credit Facility as described above, on December 19, 2019 the Company's existing secured revolving loan set forth in the Amended and Restated Revolving Credit and Security Agreement, as amended (the “Prior Revolving Credit Facility”), with PNC Bank, National Association, as administrative agent, collateral agent and lender (“PNC”) and the lenders thereunder, which had a principal balance of approximately $6.7 million, was repaid in full and the Prior Revolving Credit Facility was terminated.

 

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Term Loan Facility Amendment

 

On December 19, 2019, Hudson Technologies Company (“HTC”), an indirect subsidiary of Hudson Technologies, Inc. (the “Company”), and HTC’s affiliates Hudson Holdings, Inc. and Aspen Refrigerants, Inc. (formerly known as Airgas-Refrigerants, Inc.), as borrowers (collectively, the “Borrowers”), and the Company as a guarantor, entered into a Waiver and Fourth Amendment to Term Loan Credit and Security Agreement (the “Fourth Amendment”) with U.S. Bank National Association, as collateral agent and administrative agent, and the various lenders thereunder.

 

The Fourth Amendment waived financial covenant defaults at June 30, 2019 and September 30, 2019 and amended the Term Loan Credit and Security Agreement dated October 10, 2017 (as previously amended, the “Term Loan Facility”) to reset the maximum Total Leverage Ratio covenant contained in the Term Loan Facility at the indicated dates as follows: (i) September 30, 2019 - 15.67:1.00; (ii) December 31, 2019 – 14.54:1.00; (iii) March 31, 2020 – 16.57:1.00; (iv) June 30, 2020 – 10.87:1.00; (v) September 30, 2020 – 8.89:1.00; (vi) December 31, 2020 – 8.89:1.00; (vii) March 31, 2021 – 7.75:1.00; (viii) June 30, 2021 – 7.03:1.00; (ix) September 30, 2021 – 6.08:1.00; and (x) December 31, 2021 – 5:36:1.00. The Fourth Amendment also reset the minimum liquidity requirement (consisting of cash plus undrawn availability on the Borrowers’ revolving loan facility) of $5 million, measured monthly. Furthermore, the Fourth Amendment added a minimum LTM Adjusted EBITDA covenant as of the indicated dates as follows: (i) September 30, 2019 - $7.887 million; (ii) December 31, 2019 – $7.954 million; (iii) March 31, 2020 – $7.359 million; (iv) June 30, 2020 – $11.745 million; (v) September 30, 2020 – $12.021 million; (vi) December 31, 2020 – $12.300 million; (vii) March 31, 2021 –$14.295 million; (viii) June 30, 2021 – $14.566 million; (ix) September 30, 2021 – $15.431 million; and (x) December 31, 2021 – $16.267 million.

 

The Fourth Amendment also (i) continues the limitation on acquisitions and dividends, (ii) required a principal repayment of $14,000,000 upon execution of the Fourth Amendment and (iii) increases the scheduled quarterly principal repayments to $562,000 effective March 31, 2020 and $1,312,000 effective December 31, 2020.

 

The Fourth Amendment also terminated the exit fee payable to the term loan lenders, which would have been payable in full in cash upon the earlier to occur of (x) repayment in full of the term loans, or (y) any acceleration of the term loans. In lieu of the exit fee, the Fourth Amendment reinstated a prepayment premium equal to the following percentages of the principal amount prepaid, depending upon the date of prepayment: (i) through March 31, 2020 – 0.50%; (ii) from April 1, 2020 through March 31, 2021 – 2.50%; and (iii) from April 1, 2021 and thereafter – 5.00%.

 

The Fourth Amendment also requires that within two weeks from the date of the Fourth Amendment a representative of Grant Thornton LLP shall serve as Chief Restructuring Officer of the Company and its subsidiaries (the “CRO”). In the event that, following the retention of the CRO, LTM Adjusted EBITDA exceeds the greater of (x) 105% of the minimum LTM Adjusted EBITDA and (y) $9.55 million for two consecutive quarterly reporting periods, the Company may terminate the CRO if the Company reasonably determines that the services of the CRO are no longer needed; provided, that no default shall have occurred or be continuing under the Term Loan Facility.

 

The Fourth Amendment also provides the Term Loan Facility lenders with the right to appoint one board observer to attend all meetings of the board of directors and any restructuring committee of the Company and its subsidiaries.

 

The Fourth Amendment also adds a new covenant providing that in the event of a breach of a financial covenant contained in the Term Loan Facility or any failure to make a required principal repayment (a “Trigger Event”), then on or prior to six months after a Trigger Event, the Company shall commence a process to (x) sell its businesses and/or assets, and/or (y) consummate a refinancing transaction with respect to the Term Loan Facility (a “Transaction”), in each case, subject to enumerated time milestones contained in the Fourth Amendment, and which requires that Transaction shall, in any event, be consummated on or prior to the eighteen (18) month anniversary of the Trigger Event.

 

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As closing conditions to the execution and delivery of the Fourth Amendment, the Company was required to: (i) amend its Bylaws in a manner acceptable to the Term Loan Facility lenders; (ii) appoint two new independent directors to the board of directors (the “Special Directors”); and (iii) pay an amendment fee of 0.50% of the amount of the outstanding loans under the Term Loan Facility.

 

The Fourth Amendment also adds a covenant requiring the Company and each of its subsidiaries to maintain at least two (2) Special Directors on their respective board of directors. The Special Directors shall be individuals acceptable to the Term Loan Facility lenders acting reasonably. In the event that any such Special Director is unable to serve by reason of death, resignation, or removal without cause, such vacancy shall be promptly filled by an individual meeting the requirements for a Special Director set forth in the applicable entity’s by-laws and acceptable to the Term Loan Facility lenders acting reasonably. The Fourth Amendment also added a covenant that the Company will not (i) amend, modify or waive any term or provision of its articles of incorporation or by-laws without the consent of (A) a majority of the Company’s then-serving directors, including any Special Directors, and (B) the Required Lenders under the Term Loan Facility; or (ii) issue any equity securities of that are senior to, or that have voting rights that exceed the rights of, the common stock.

 

The description of the Fourth Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Fourth Amendment which is filed as Exhibit 10.3 to this Report.

 

Item 5.02              Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

Appointment of New Directors

 

In accordance with the terms of the Fourth Amendment to the Term Loan Facility, effective December 19, 2019, the Company appointed Jill K. Frizzley and Richard D. Caruso to its Board of Directors as “Special Directors” (as defined above). Mr. Caruso will serve in the class of directors whose term extends to the annual meeting of stockholders in 2020 and Ms. Frizzley will serve in the class of directors whose term extends to the annual meeting of stockholders in 2021. Each of the Special Directors shall be appointed to the Executive Committee and the newly formed Restructuring Committee of the Board of Directors.

 

Amendments to Employment Agreements

 

On December 19, 2019, the Company entered into amended and restated employment agreements with: (i) Kevin J. Zugibe, its Chairman of the Board and Chief Executive Officer; and (ii) Brian F. Coleman, its President and Chief Operating Officer.

 

These amended and restated agreements amended the prior agreements with the indicated executives to make certain technical amendments and otherwise to add a provision providing that severance is triggered under the applicable agreement in the event that the executive’s employment is terminated by the Company without Cause (as defined) or for any reason by the executive within sixty (60) days following a Fundamental Change (as defined). A “Fundamental Change” is defined to include (a) if the Company or certain of its subsidiaries shall make a general assignment for the benefit of creditors, or a trustee, receiver or liquidator shall be appointed; (b) upon commencement of any proceedings by the Company or certain of its subsidiaries under any bankruptcy, reorganization, or similar law or statute; (c) upon the commencement of the dissolution or liquidation of the Company or certain of its subsidiaries; or a (d) upon a Change in Control (as defined therein).

 

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The description of the foregoing agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the agreements which are filed as Exhibit 10.4 and Exhibit 10.5 to this Report.

 

Item 5.03 Amendment to Articles of Incorporation of Bylaws; Change in Fiscal Year

 

As required by the Fourth Amendment described above, effective December 19, 2019, the Company amended its Bylaws to provide that:

 

· At all times at least two (2) members of the Board of Directors are designated as (“Special Directors”), which Special Directors shall not, and will not be, during the continuation of his or her service as a Special Director or has not been during for the five-year period prior to his or her appointment as a Special Director, (i) an employee, stockholder, or officer of the Company or any of its affiliates, (ii) a customer or supplier of the Company or any of its affiliates (other than an independent director provided by a corporate services company that provides independent directors in the ordinary course of its business), or (iii) any member of the immediate family of a person described in clause (i) or (ii). Vacancies caused by the death, resignation or removal of a Special Director may only be filled by another individual that satisfies the requirements for a Special Director.

 

· Unless otherwise specified in the By-laws, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business or of any specified item of business, which majority shall include at least one Special Director.

 

· The Board of Directors may only authorize any amendment to the articles of incorporation of the Company by a majority vote of the then-serving members of the Board of Directors, which majority shall include the Special Directors. In addition, the Company may only institute a proceeding to adjudicate it bankrupt, consent to the filing of any bankruptcy proceeding against it, declare insolvency or otherwise decide to liquidate, wind up, reorganize, dissolve or conduct any similar action by a majority vote of the then-serving members of the Board of Directors, which majority shall include the Special Directors.

 

· The Company may permit one or more board observers to attend meetings of the Board of Directors and the restructuring committee thereof.

 

· The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, shall appoint from among its members a restructuring committee consisting of the Chief Executive Officer and the Special Directors. The Chief Executive Officer serving on the restructuring committee shall act as chairman of the committee. All action by the restructuring committee shall be authorized by majority vote of its members. The restructuring committee shall have full authority (a) to commence, oversee and manage any process to (i) sell the Company’s businesses and/or assets and/or (ii) consummate a refinancing transaction, and (b) to manage all aspects of the Company’s restructuring efforts and strategies. The committee shall exercise such other powers as may be specifically delegated to it by the Board of Directors and act upon such matters as may be referred to it from time to time for study and recommendation by the Board of Directors or the Chief Executive Officer.

 

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· The Board of Directors may also appoint from among its own members such other committees as the Board of Directors may determine, which shall in each case consist of not less than two directors, which shall at least include the Special Directors, and which shall have such powers and duties as shall from time to time be prescribed by the Board of Directors.

 

· The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members an executive committee consisting of three or more directors, which shall at least include the Special Directors and either the Chief Executive Officer or the President.

 

· The Board of Directors shall elect or appoint a Chief Executive Officer and/or a President from its own members. Where both a Chief Executive Officer and President are appointed, the Chief Executive Officer shall also serve as Chairman of the Board of Directors.

 

· The By-laws of the Corporation may also be amended or repealed by the Board of Directors, including any By-law adopted, amended, or repealed by the shareholders generally, by a majority vote of the then-serving members of the Board of Directors, which majority shall include the Special Directors.

 

The description of the foregoing Amended and Restated By-Laws does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated By-Laws which are filed as Exhibit 3.1 to this Report.

 

Item 8.01 Other Events

 

On December 19, 2019, the Company issued a press release announcing certain of the matters described in this Current Report on Form 8-K. A copy of the foregoing press release is attached hereto as Exhibit 99.1.

 

Item 9.01 Financial Statements and Exhibits

 

(d)           Exhibits

 

Exhibit Number     Name of Exhibit

 

3.1 Amended and Restated By-Laws of Hudson Technologies, Inc.

 

10.1 Credit Agreement dated December 19, 2019 by and among Wells Fargo Bank, National Association, as Agent, the Lenders that are parties thereto, Hudson Technologies, Inc. and the Borrowers Described Therein

 

10.2 Guaranty and Security Agreement dated December 19, 2019 by and among the Grantors named therein and Wells Fargo Bank, National Association, as Agent

 

10.3 Waiver and Fourth Amendment to Term Loan and Credit and Security Agreement dated December 19, 2019

 

10.4 Fourth Amended and Restated Employment Agreement dated December 19, 2019 between the Registrant and Kevin J. Zugibe

 

10.5 Third Amended and Restated Agreement dated December 19, 2019 between the Registrant and Brian F. Coleman

 

99.1 Press Release dated December 19, 2019

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: December 20, 2019

 

  HUDSON TECHNOLOGIES, INC.
   
  By: /s/ Nat Krishnamurti
  Name: Nat Krishnamurti
  Title: Chief Financial Officer & Secretary

 

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Exhibit 3.1

 

AMENDED AND RESTATED BY-LAWS

OF

HUDSON TECHNOLOGIES, INC.

(a New York corporation)

 

(With all amendments through December 18, 2019)

(ADOPTED BY RESOLUTION MADE December 18, 2019)

 

Article I

 

OFFICES, SEAL AND FISCAL YEAR

 

1.           OFFICES: The principal office of the Corporation shall be in the County of Rockland, State of New York, or at such other location as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time designate. The Corporation may also have offices in such other places, either within or without the State of New York, as the Board of Directors may from time to time designate or as the business of the Corporation may require.

 

2.           CORPORATE SEAL: The seal of the Corporation shall be in the form and style as the Board of Directors may designate or approve.

 

3.           FISCAL YEAR: The Board of Directors shall have the power to fix, and from time to time, change, the fiscal year of the Corporation. Unless otherwise fixed by the Board of Directors, the calendar year shall be the Corporation’s fiscal year.

 

Article II

 

SHAREHOLDERS

 

1.           PLACE OF MEETINGS: All meetings of the shareholders of the Corporation shall be held at such place either within or without the State of New York as may from time to time be designated by the Board of Directors and stated in the notice of meeting.

 

2.           ANNUAL MEETING:

 

(a)             An annual meeting of the shareholders of the Corporation shall be held in each year on a regular business day on a date to be determined by the Board of Directors. Any previously scheduled annual meeting of the shareholders may be postponed by the Board of Directors by public announcement made at any time prior to the date scheduled for such annual meeting.

 

(b)             At any annual meeting of the shareholders, only such nominations of persons for election to the Board of Directors shall be made, and only such other business shall be conducted or considered, as shall have been properly brought before the meeting. For nominations to be properly made at an annual meeting, and proposals of other business to be properly brought before an annual meeting, nominations and proposals of other business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (iii) otherwise properly requested to be brought before the annual meeting by a shareholder of the Corporation who (A) is a shareholder of record (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) at the time of giving of notice of such annual meeting by or at the direction of the Board of Directors and at the time of the annual meeting, (B) is entitled to vote at such annual meeting and (C) complies with the procedures set forth in these By-laws as to such business or nominations. Clause (iii) of the immediately preceding sentence shall be the exclusive means for a shareholder to make nominations or propose other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of meeting) to be brought before an annual meeting of shareholders. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, the Chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with these By-laws and, if any proposed nomination or other business is not in compliance with these By-laws, to declare that no action shall be taken on such nomination or other proposal and such nomination or other proposal shall be disregarded.

 

 

 

3.           SPECIAL MEETINGS:

 

(a)             Special Meetings of the shareholders, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called at any time only (i) by the Chief Executive Officer, (ii) by the Board of Directors, pursuant to a resolution approved by a majority of the entire Board of Directors, or (iii) by the Chief Executive Officer, the President or the Secretary of the Corporation, following his or her receipt of one or more written requests to call a special meeting by shareholders of record holding in the aggregate not less than 35% of all votes entitled to be cast on the matters or matters to be brought before the proposed special meeting. Such request shall state the purpose or purposes of the meeting and the matters proposed to be acted upon at the meeting. The Secretary shall inform the shareholders requesting the meeting of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Corporation of these costs, written notice of the special meeting shall be mailed by the Chief Executive Officer, the President or Secretary to each shareholder entitled to vote at the meeting. The purpose or purposes for which the meeting is called must be included in the notice. Special meetings of the shareholders shall be held at such place as may be designated in the call for the meeting.

 

(b)             To be properly brought before a special meeting, proposals of business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or (ii) otherwise properly brought before the special meeting, by or at the direction of the Board of Directors. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board of Directors or (ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who (A) is a shareholder of record at the time of giving of notice of such special meeting and at the time of the special meeting, (B) is entitled to vote at the meeting, and (C) complies with the procedures set forth in these By-laws as to such nominations. The immediately preceding sentence shall be the exclusive means for a shareholder to make nominations or other business proposals before a special meeting of shareholders (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the Corporation’s notice of meeting).

 

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4.           FIXING RECORD DATE:

 

(a)             For purposes of determining the shareholders entitled to notice of or to vote at any meeting of the shareholders or to any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors shall fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty (60) days, nor less than ten (10) days prior to the date of such meeting, nor more than sixty (60) days prior to any other action.

 

(b)             If no record date is fixed, the record date for the determination of shareholders entitled to notice or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held. For any other purpose for the determination of shareholders, if no record date is fixed, the record date shall be at the close of business the day on which the resolution of the Board of Directors relating thereto is adopted.

 

(c)             When a determination of shareholders or record entitled to notice or to vote at any meeting of the shareholders has been made as provided herein, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date under this section for the adjourned meeting.

 

5.           NOTICE OF MEETING OF SHAREHOLDERS:

 

(a)             Written notice of each meeting of the shareholders shall state the purpose or purposes for which the meeting is called, the place, date and hour of the meeting and, unless it is the annual meeting, shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice shall be given personally or by regular mail to each shareholder entitled to vote at such meeting as of the record date fixed by the Board of Directors, not less than ten (10) nor more than fifty (50) days before the date of the meeting. If action is proposed to be taken that might entitle shareholders to payment for their shares, the notice shall include a statement of that purpose and to that effect. If mailed, the notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or, to such other address as designated by the shareholder pursuant to written request mailed to the Secretary.

 

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(b)             Notice of a meeting need not be given to any shareholder who signs a waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, or casting of any vote by any such shareholder, in person or by proxy, at any such meeting, regardless of any such protest, shall constitute a waiver of notice by that shareholder.

 

6.           QUORUM OF SHAREHOLDERS: The holders of a majority of the issued and outstanding shares of capital stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the shareholders except as may otherwise be provided by law. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholder. Where there is less than a quorum present, the holders of a majority of the stock so present or represented may adjourn the meeting without further notice other than by announcement at the meeting, until a quorum is present.

 

7.           CHAIRMAN OF MEETING: The Chairman of the Board shall preside at all meetings of shareholders. In the absence of the Chairman of the Board, the Chief Executive Officer shall preside or, in his or her absence, any officer designated by the Board of Directors shall preside.

 

8.           VOTING: At all meetings of the shareholders, every shareholder of record as of the record date, shall be entitled to one vote for every share standing in his name on the books of the Corporation. Any corporate action, other than the election of directors to be taken by vote of the shareholders, shall be authorized by a majority of votes cast by the holders of shares entitled to vote thereon. Election of directors shall be accomplished by a candidate or candidates receiving a plurality of the votes cast by the shareholders entitled to vote in the election.

 

9.           INSPECTORS:

 

(a)             The Board of Directors or, if the Board of Directors shall not have made the appointment, the chairman presiding at any meeting of shareholders, shall appoint inspectors of election. The number of inspectors shall be either one or three. No candidate for the office of director shall be appointed as inspector at any meeting for the election of directors.

 

(b)             The inspectors of election shall determine the number of shares outstanding and the voting power or each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, shall receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.

 

(c)             A list of shareholders as of the record date, certified by the Secretary or by the transfer agent, if any, shall be produced at any meeting of shareholders upon the request, made either at or before such meeting, of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.

 

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(d)             If there are three inspectors of election, the decision, act, or certificate of a majority of the inspectors is effective in all respects as the decision, act, or certificate of all.

 

(e)             On request of the chairman of the meeting or of any shareholder or his proxy, the inspectors shall make a report in writing of any challenge or question or matter determined by them and execute a certificate of any fact found by them, and any such report or certificate is prima facie evidence of the facts stated therein.

 

10.         PROXIES: Every shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy appointed by instrument in writing subscribed by the shareholder or by his attorney-in-fact, and bearing a date not more than ten months prior to the date of the meeting, unless the instrument provides for a longer period. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by law.

 

11.         SECRETARY OF MEETING: The Secretary of the Corporation shall act as secretary of all meetings of the shareholders. In the absence of the Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

12.         SHAREHOLDER PROPOSALS:

 

(a)             At an annual meeting of the stockholders, only stockholders of record as of both the record date established for such meeting, and as of the date of submission of advance notice under subparagraph (b) below, may introduce business at a meeting of the stockholders.

 

(b)            Shareholders who wish to have proposals considered at an annual meeting of the shareholders must deliver a timely and proper advance notice to the Chairman of the Board of Directors that complies with the following requirements:

 

 (i)                the proponent shareholder must be a record holder on the date of delivery of the advance notice;

 

 (ii)               to be timely, the advance notice must be in writing and must be delivered to, or mailed and received by, the Chairman of the Board of Directors at the principal executive offices of the Corporation no earlier than 120 days, and no later than 90 days, prior to the first anniversary date of the prior year’s annual meeting; provided, however, that in the event that the annual meeting is called for a date that is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder in order to be timely must be so delivered, or mailed and received, not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first “Public Announcement” (as hereinafter defined in Section 13(f) of these By-Laws) of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which Public Announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting, or the Public Announcement thereof, commence a new time period for the giving of a shareholder’ s notice as described above;

 

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 (iii)              in addition, to be timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Chairman of the Board of Directors at the principal executive offices of the Corporation not later than 5 business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than 8 business days prior to the date for the meeting, or if the meeting is adjourned or postponed, on the first practicable date after any adjournment or postponement thereof (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof);

 

 (iv)             the proponent shareholder must disclose to the Corporation, as part of the advance notice, its name and address as they appear on the Corporation’ s books and of any beneficial owner, if any, and their respective affiliates and associates or others acting in concert therewith;

 

 (v)              the proponent shareholder must disclose to the Corporation, as part of the advance notice, (a) the class or series and number of shares of capital stock or other securities of the Corporation which are, directly or indirectly, owned of record or beneficially (within the meaning of Rule 13d-3 under the Exchange Act) by such proponent shareholder, (b) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any shares of capital stock or other securities of the Corporation or with a price or value derived in whole or in part from the price or value of any shares of capital stock or other securities of the Corporation or any derivative, synthetic, hedging, swap or similar transaction or arrangement having characteristics of a long or short position or ownership interest in any shares of capital stock or other securities of the Corporation, whether or not any such instrument or right shall be subject to settlement in the underlying shares of capital stock or other securities of the Corporation or otherwise, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the price or value of shares of capital stock or other securities of the Corporation directly or indirectly owned beneficially by such proponent shareholder, (c) any proxy, agreement, arrangement, understanding or relationship pursuant to which such proponent shareholder has given or received a right to vote, directly or indirectly, any shares of capital stock or other securities of the Corporation, and (d) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, which such proponent shareholder has engaged in or is a party to, directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk of shares of capital stock or other securities of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such proponent shareholder with respect to shares of capital stock or other securities of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any increase or decrease in the price or value of the shares of capital stock or other securities of the Corporation;

 

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 (vi)             the proponent shareholder must also disclose to the Corporation, as part of the advance notice, all stock ownership information required by the immediately preceding clause (v) with respect to (a) the beneficial owner or beneficial owners of capital stock of the Corporation, if different, on whose behalf the business proposed to be brought before the annual meeting is being brought, (b) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act) of the proponent shareholder or any such beneficial owner, and, and (c) any shareholder or shareholder group with whom the proponent shareholder is acting in concert with, whether or not such persons constitute a filing group for purposes of Schedule 13D;

 

 (vii)            the proponent shareholder must represent to the Corporation, as part of the advance notice, whether the proponent intends individually or as part of a group, to (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal, and/or (y) to otherwise solicit proxies in support of such proposal; and

 

 (viii)           the proponent shareholder must disclose to the Corporation, as part of its advance notice: (i) a reasonably brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such shareholder and beneficial owner, if any, in such business, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), and (iii) a reasonably detailed description of all agreements, arrangements and understandings between such proponent and the beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such shareholder.

 

(c)             In addition to the provisions of Section 12(a), a shareholder shall also comply with all applicable requirements of state law and all applicable requirements of the Exchange Act, and the rules and regulations thereunder, with respect to the matters set forth herein.

 

(d)             Nothing in these By-laws shall be deemed to affect any rights of shareholders to request the inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act. Subject to Rule 14a-8 under the Exchange Act, nothing in these By-laws shall be construed to permit any shareholder, or give any shareholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of director or directors or any other business proposal.

 

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13.           SHAREHOLDER DIRECTOR NOMINATIONS

 

(a)             At an annual meeting of the shareholders, only shareholders of record as of both the record date established for such meeting and as of the date of submission of advance notice under the subparagraph (b) may nominate candidates for election to the Board of Directors at a meeting of the shareholders.

 

(b)             Notwithstanding anything in these By-laws to the contrary, shareholders who wish to introduce nominations of candidates for election as directors at an annual meeting of the shareholders must deliver a timely and proper advance notice to the Chairman of the Board of Directors that complies with the following requirements:

 

 (i)               the proponent shareholder must be a record holder on the date of delivery of the advance notice;

 

 (ii)              to be timely, the advance notice must be in writing and must be delivered to, or mailed and received by, the Chairman of the Board of Directors at the principal executive offices of the Corporation no earlier than 120 days, and no later than 90 days, prior to the first anniversary date of the prior year’s annual meeting; provided, however, that in the event that the annual meeting is called for a date that is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder in order to be timely must be so delivered, or mailed and received, not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first Public Announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which Public Announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting, or the Public Announcement thereof, commence a new time period for the giving of a shareholder’s notice as described above;

 

 (iii)             In addition, to be timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Chairman of the Board of Directors at the principal executive offices of the Corporation not later than 5 business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than 8 business days prior to the date for the meeting, or if the meeting is adjourned or postponed, on the first practicable date after any adjournment or postponement thereof (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof);

 

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 (iv)             In the event that the number of directors to be elected to the Board of Directors is increased by the Board of Directors, and there is no Public Announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a shareholder’s notice required by this Section 13(b) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to, or mailed and received by, the Chairman of the Board of Directors at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such Public Announcement is first made by the Corporation;

 

 (v)             the proponent shareholder must disclose to the Corporation, as part of the advance notice, (a) the class or series and number of shares of capital stock or other securities of the Corporation which are, directly or indirectly, owned of record or beneficially (within the meaning of Rule 13d-3 under the Exchange Act) by such proponent shareholder, (b) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any shares of capital stock or other securities of the Corporation or with a price or value derived in whole or in part from the price or value of any shares of capital stock or other securities of the Corporation or any derivative, synthetic, hedging, swap or similar transaction or arrangement having characteristics of a long or short position or ownership interest in any shares of capital stock or other securities of the Corporation, whether or not any such instrument or right shall be subject to settlement in the underlying shares of capital stock or other securities of the Corporation or otherwise, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the price or value of shares of capital stock or other securities of the Corporation directly or indirectly owned beneficially by such proponent shareholder, (c) any proxy, agreement, arrangement, understanding or relationship pursuant to which such proponent shareholder has given or received a right to vote, directly or indirectly, any shares of capital stock or other securities of the Corporation, and (d) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, which such proponent shareholder has engaged in or is a party to, directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk of shares of capital stock or other securities of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such proponent shareholder with respect to shares of capital stock or other securities of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any increase or decrease in the price or value of the shares of capital stock or other securities of the Corporation;

 

 (vi)            the proponent shareholder must also disclose to the Corporation, as part of the advance notice, all stock ownership information required by the immediately preceding clause (v) with respect to (a) the beneficial owner or beneficial owners of capital stock of the Corporation, if different, on whose behalf the nomination proposed to be brought before the annual meeting is made, (b) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act) of the proponent shareholder or any such beneficial owner, and, and (c) any shareholder or shareholder group with whom the proponent shareholder is acting in concert with, whether or not such persons constitute a filing group for purposes of Schedule 13D;

 

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 (vii)            the proponent shareholder must represent to the Corporation, as part of the advance notice, whether the proponent intends individually or as part of a group, to (a) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to elect the nominee and/or (b) to otherwise solicit proxies in support of such nomination; and

 

 (viii)           the proponent shareholder must disclose to the Corporation, as part of the advance notice, (a) all other information about the proposed nominees that would be required to be to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and (b) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and such proposed nominee were a director or executive officer of such registrant.

 

(c)             The Corporation may also require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

 

(d)             Compliance with the provisions of this Section 13 is the sole and exclusive method for shareholders to nominate candidates for election to the Board of Directors at an annual meeting of shareholders. No person shall be eligible for election as a director of the Corporation at an annual meeting of shareholders unless nominated in accordance with the procedures set forth in this Section 13.

 

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(e)             In addition to the provisions of this Section 13, a shareholder shall also comply with all applicable requirements of state law and all applicable requirements of the Exchange Act, and the rules and regulations thereunder, with respect to the matters set forth herein.

 

(f)              For purposes of these By-laws, “Public Announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

 

14.           NOMINATION OF DIRECTORS AT A SPECIAL MEETING

 

(a)             In the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any shareholder may nominate a person or persons (as the case may be) for election to such position(s) to be elected as specified in the Corporation’s notice calling the meeting, provided that the shareholder gives a proper and timely notice thereof and timely updates and supplements thereof in writing to the Chairman of the Board. In order to be timely, a shareholder’ s notice shall be delivered to, or mailed and received by, the Chairman of the Board at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to the date of such special meeting and not later than the close of business on the later of the 90th day prior to the date of such special meeting or, if the first Public Announcement of the date of such special meeting is less than 100 days prior to the date of such special meeting, the 10th day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting, or the Public Announcement thereof, commence a new time period for the giving of a shareholder’s notice as described above.

 

(b)             In addition, to be timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Chairman of the Board at the principal executive offices of the Corporation not later than 5 business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than 8 business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof.

 

(c)             For purposes of this Section 14, for a notice to be proper it must contain the same information as would be contained if the proponent were submitting an advance notice of nomination in connection with an annual meeting of shareholders.

 

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15.         CONDUCT OF MEETINGS: To the maximum extent permitted by applicable law, the Board of Directors shall be entitled to make such rules, regulations and procedures for the conduct of meetings of shareholders as it shall deem necessary, appropriate or convenient for the proper conduct of the meeting. Subject to such rules, regulations and procedures of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are deemed necessary, appropriate or convenient for the proper conduct of the meeting. Such rules, regulations and procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) establishing an agenda for the meeting and the order for the consideration of the items of business on such agenda; (ii) restricting admission to the time set for the commencement of the meeting; (iii) limiting attendance at the meeting to shareholders of record of the Corporation entitled to vote at the meeting , their duly authorized proxies or other such persons as the chairman of the meeting may determine; (iv) limiting participation at the meeting on any matter to shareholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine to recognize and, as a condition to recognizing any such participant, requiring such participant to provide the chairman of the meeting with evidence of his or her name and affiliation, whether he or she is a shareholder or a proxy for a shareholder, and the class and series and number of shares of each class and series of capital stock of the Corporation which are owned beneficially and/or of record by such shareholder; (v) limiting the time allotted to questions or comments by participants; (vi) determining when the polls should be opened and closed for voting; (vii) taking such actions as are necessary or appropriate to maintain order, decorum, safety and security at the meeting; (viii) removing any shareholder who refuses to comply with meeting procedures, rules or guidelines as established by the chairman of the meeting; and (ix) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Article III

 

DIRECTORS

 

1.           BOARD OF DIRECTORS: The property, business and affairs of the Corporation shall be managed and controlled by its Board of Directors. Each member of the Board of Directors shall be at least 18 years of age and need not be shareholders. No member of the Board of Directors may be employed by the Corporation, except that the Chief Executive Officer, President and any Vice President of the Corporation may be members of the Board of Directors. At all times at least two (2) members of the Board of Directors (the “Special Directors”), in order to be qualified to serve on the Board of Directors, shall each represent to the Board of Directors that he or she is not, and will not be, during the continuation of his or her service as a Special Director or has not been during for the five-year period prior to his or her appointment as a Special Director, (i) an employee, stockholder, or officer of the Corporation or any of its affiliates, (ii) a customer or supplier of the Corporation or any of its affiliates (other than an independent director provided by a corporate services company that provides independent directors in the ordinary course of its business), or (iii) any member of the immediate family of a person described in (i) or (ii).

 

The Corporation may permit one or more board observers to attend meetings of the Board of Directors and the restructuring committee of the Corporation. Any such board observer (i) shall receive notice of, and may attend, all such meetings as if it were a member of the Board of Directors or the restructuring committee, as applicable, and (ii) shall receive copies of any information or other materials to be discussed at such meetings, each subject to any restrictions or limitations thereon that, upon the written advice of counsel, is necessary or advisable to preserve attorney-client privilege or avoid actual conflicts of interest.

 

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2.           GENERAL POWERS OF THE BOARD OF DIRECTORS: In addition to the powers and authority expressly conferred upon them by these By-laws, the Board of Directors may by vote made at a duly called and conducted annual or special meeting of the Board of Directors, exercise all powers of the Corporation except those required by law or the By-laws of the Corporation to be exercised by the shareholders.

 

3.           NUMBER OF DIRECTORS: The number of directors shall be fixed by resolution of the Board of Directors from time to time but in any event, shall be no less than five (5). No decrease in the minimum number of directors shall have the effect of removing any director prior to the expiration of the term of office.

 

4.           CLASSIFICATION AND TERM OF DIRECTORS: The Board of Directors shall be divided into two classes in respect of term of office, each class to contain as near as possible one-half of the whole number of Board of Directors. At each annual meeting of the shareholders, successors to the class of directors whose terms shall expire that year shall be elected to hold office for a term of two years so that the term of office of one class of directors shall expire in each year. Each director shall hold office from the date of the annual meeting at which said director is elected, until the expiration of the term for which he is elected and until his successor has been elected and qualified, or until his prior resignation or removal.

 

5.           VACANCIES AND NEWLY CREATED DIRECTORSHIPS: Vacancies on the Board of Directors created by the death, resignation, removal of directors, an increase in the authorized number of directors or otherwise shall be filled only by the affirmative vote of a majority of the remaining directors. If the directors remaining in office are unable, by majority vote, to fill a vacancy on the Board of Directors within twenty (20) days of the creation of the vacancy, the Chief Executive Officer, the President or the Secretary of the Corporation may call a special meeting of the shareholders at which time the vacancy shall be filled. Any directors chosen to fill any vacancy or to fill a newly created directorship shall hold office until the next annual meeting of the shareholders and until their successors are duly elected and shall qualify, unless sooner displaced. Notwithstanding the foregoing, vacancies caused by the death, resignation or removal (including for Cause) of a Special Director may only be filled by another individual that satisfies the requirements for a Special Director.

 

6.           REMOVAL OF DIRECTORS: Any or all of the directors may be removed for Cause by vote of a majority of the entire Board of Directors. With respect to the removal of directors by the Corporation’s shareholders, any or all directors may be removed from office by the Corporation’s shareholders only for cause by the affirmative vote of the holders of at least a majority of the voting power of all the then outstanding shares of capital stock of the Corporation entitled to vote at any special meeting called for that purpose, or at annual meeting provided such proposed action is contained in the notice of meeting. “Cause” shall mean willful and continuous failure of a director to substantially perform such director’s duties to the Corporation or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation.

 

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7.           POWER TO APPOINT AND REMOVE OFFICERS: The Board of Directors shall have the power to elect the officers of the Corporation, remove any officer with or without cause, to fix the salary of all officers of the Corporation, and to determine the general business polices of the Corporation.

 

8.           QUORUM OF DIRECTORS: Unless otherwise specified in these By-laws, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business or of any specified item of business, which majority shall include at least one Special Director, except that if at any meeting of the Board of Directors there is less than a quorum present, a majority of those present may adjourn the meeting without further notice other than by announcement at the meeting, until a quorum is present.

 

9.           ACTION OF THE BOARD:

 

(a)             The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Each director present shall have one vote regardless of the number of shares, if any, which he may hold. At any meeting at which every director shall be present, even though without notice, any business may be transacted. Notwithstanding the foregoing or any other provision of these By-laws to the contrary, or any provision of law that otherwise so empowers the Board of Directors or the Corporation, (a) the Board of Directors may only authorize any amendment to the articles of incorporation of the Corporation by a majority vote of the then-serving members of the Board of Directors, which majority shall include the Special Directors, and (b) the Corporation may only institute a proceeding to adjudicate it bankrupt, consent to the filing of any bankruptcy proceeding against it, declare insolvency or otherwise decide to liquidate, wind up, reorganize, dissolve or conduct any similar action by a majority vote of the then-serving members of the Board of Directors, which majority shall include the Special Directors.

 

(b)             A resolution in writing, signed by all of the members of the Board of Directors shall be deemed to be an action by the Board of Directors with the same force and effect as if it had been duly passed by vote at a duly convened meeting and it shall be the duty of the Secretary to record any such resolution, and the written consents thereto by the members of the Board of Directors, in the minute book of the Corporation under the proper date.

 

(c)             Any one or more member of the Board of Directors may participate in a meeting of such Board of Directors by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

 

(d)             A member of the Board of Directors who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary promptly after the adjournment of the meeting. Such right to dissent shall not apply to a member of the Board of Directors who voted in favor of such action.

 

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10.          ANNUAL MEETING OF THE BOARD: The annual meeting of the Board of Directors elected at the first annual meeting of the shareholders held after the adoption of these amended By-laws, shall be held during the month of June following the first annual meeting of the shareholders. Notice of this first annual meeting shall be given to each director by the President, either personally or by regular mail, at least three days in advance of the meeting. In the case of mailing, notice shall be deemed to have been given as of the date of mailing. Notice of this meeting need not be given to any director who submits a waiver of notice, whether submitted before or after the meeting, or who attends the meeting without protesting the lack of notice prior thereto or at the commencement of the meeting. Notice of this meeting need not specify the purpose of the meeting or the action proposed to be taken at the meeting, and any business may be transacted by the Board of Directors at this meeting.

 

Thereafter, the annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders, or immediately following any adjournment thereof, for the purpose of the organization of the Board of Directors, for the election or appointment of officers for the ensuing year, and for the transaction of such other business as may conveniently and properly be brought before such meeting. No notice of the annual meeting or of the action to be taken thereat, shall be necessary.

 

11.          REGULAR MEETINGS OF THE BOARD: Regular meetings of the Board of Directors may, at the discretion of the Board, be held monthly, but in any event, shall be held no less frequently than quarterly, with such quarterly meetings to be held during the months of March, June, September and December of each year. The regular meetings shall be held at such time and place, either within or without the State of New York, as the Board of Directors shall from time to time determine. Notice of regular meetings shall be given to each director by the President either personally or by regular mail, at least three days in advance of the meeting. In the case of mailing, notice shall be deemed to have been given as of the date of mailing. Notice of a meeting need not be given to any director who submits a waiver of notice, whether submitted before or after the meeting, or who attends the meeting without protesting the lack of notice prior thereto or at the commencement of the meeting. Notice of any regular meeting need not specify the purpose of the meeting or the action proposed to be taken at the meeting, and any business may be transacted by the Board of Directors at any regular meeting.

 

12.          SPECIAL MEETINGS OF THE BOARD: Special meetings of the Board of Directors may be called by order of the Chairman of the Board, the President, or by one-third of the directors presently in office. The Secretary shall give written notice by regular mail to each director of the time, place and purpose or purposes or each special meeting at least three days in advance of the meeting, which notice shall be deemed to have been given as of the date of mailing.

 

13.          CHAIRMAN OF THE BOARD OF DIRECTORS: At all meetings of the Board of Directors, the Chief Executive Officer shall preside as Chairman of the Board of Directors. In the absence of the Chief Executive Officer, the President shall preside as Chairman of the Board of Directors, or in his or her absence, the Board of Directors shall choose from among its members a chairman to preside at such meeting.

 

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14.          RESIGNATION OF DIRECTORS: A director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of the resignation shall not be necessary to make it effective.

 

15.          COMPENSATION: The directors shall receive such compensation for their services as directors and as members of any committee appointed by the Board of Directors as may be prescribed by the Board of Directors and shall be reimbursed by the Corporation for ordinary and reasonable expenses incurred in the performance of their duties.

 

16.          REPORTS BY DIRECTORS: The Board of Directors shall send, or cause to be sent, an annual report for the preceding year to the shareholders not later than two hundred forty (240) days after the close of the fiscal or calendar year. The annual report shall include, audited financial statements, or a balance sheet, as of the closing date, certified by the Corporation’s independent public accountants, quarterly financial reports of income or profit and loss for the first three quarters of the year ending on such closing date, and such other information as the Board of Directors may determine.

 

17.          INDEMNIFICATION OF DIRECTORS AND OFFICERS: Each director and officer, at the time of that such person’s commencement of service to or at the request of the Corporation, shall be vested with the contractual right of indemnification by the Corporation as follows:

 

(a)             The Corporation shall indemnify its directors and officers, and the Board of Directors may authorize the Corporation to indemnify any employee or other agent, made or threatened to be made a party to, or is otherwise involved in, any action or proceeding (other than one by or in the right of the Corporation to procure a judgment in its favor), whether civil, criminal, investigative or administrative, including any and all appeals thereof, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director of officer of the Corporation served in any capacity at the request of the Corporation, by reason of the fact that he, his testator or intestate, is or was a director, officer, employee or other agent of the Corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose believed to be in, or in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe his conduct was unlawful.

 

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(b)             The Corporation shall indemnify its directors and officers, and the Board of Directors may authorize the Corporation to indemnify any employee or other agent of the Corporation made or threatened to be made a party to an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that he, his testator or intestate, is or was a director, officer, employee or other agent of the Corporation, or is or was serving at the request of the Corporation as a director or officer of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director, officer employee or other agent acted, in good faith, for a purpose believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Corporation. However, no such indemnification may be made in connection with any threatened or pending action which is settled or otherwise disposed of, or in connection with any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, unless such indemnification, and the amounts thereof, are approved by the court in which the action was brought, or, if no such action was brought, by a court of competent jurisdiction.

 

(c)             The Corporation shall indemnify its directors and officers, and the Board of Directors may authorize the Corporation to indemnify any employee or other agent of the Corporation made or threatened to be made a party to, or otherwise involved in, any other action or proceeding, except that no indemnification may be made to or behalf of any director, officer, employee or other agent if a judgment or other final adjudication adverse to the director, officer, employee or other agent establishes that the said director’s, officer’s, employee’s or other agent’s acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that the director, officer, employee or other agent personally gained in fact a financial profit or other advantage to which he was not legally entitled.

 

(d)             Indemnification of any director, officer, employee or agent required and/or permitted by this section shall be made by the Corporation only if authorized in the specific case by vote of the Board of Directors, acting by a quorum consisting of directors who are not parties to such action or proceeding, finding that the director, officer, employee or other agent has met the standards of conduct set forth in subparagraphs “a”, “b” or “c”, as the case may be. If a quorum of disinterested directors is not obtainable, or even if obtainable, a quorum of disinterested directors so directs, indemnification shall be authorized either (i) by vote of the Board of Directors upon the opinion in writing of independent legal counsel that indemnification is proper under the circumstances because the applicable standard of conduct has been met by such director, officer, employee or other agent, or (ii) by vote of the shareholders upon a finding that the director, officer, employee or other agent has met the applicable standards of conduct.

 

(e)             For purposes of any determination under subparagraph “d,” a person shall be deemed to have acted in good faith if the action is based on (i) the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, (ii) the advice of legal counsel for the Corporation or another enterprise, or (iii) information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant, independent financial adviser, appraiser or other expert selected with reasonable care by the Corporation or the other enterprise. The provisions of this subparagraph “e” shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct.

 

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(f)              Losses reasonably incurred by an officer or director in defending any threatened or pending proceeding shall be paid by the Corporation (on an unsecured, interest-free basis) in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article. Losses shall be reasonably documented by the officer or director and required payments shall be made promptly by the Corporation. Losses incurred by other employees may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

 

(g)             The Corporation may, but shall not be required to, purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member, employee, fiduciary or agent of another against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’ s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Section 17.

 

(h)             The indemnification and advancement of losses provided by or granted pursuant to these By-laws shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, any by-law, agreement, contract, vote of shareholders or of disinterested directors, or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise. The provisions of this Section 17 shall not be deemed to preclude the indemnification of any person who is not specified in subparagraphs “a”, “ b” or “c” of this Section 17 but whom the Corporation has the power or obligation to indemnify under the provisions of the New York Business Corporation Law, or otherwise. The rights conferred by this Section 17 shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of such person and the heirs, executors, administrators and other comparable legal representatives of such person. The rights conferred in this Section 17 shall be enforceable as contract rights that vest at the time of such person’s service to, or at the request of, the Corporation, and shall continue to exist after any rescission or restrictive modification hereof with respect to events occurring prior thereto. Persons who after the date of the adoption of this provision in Section 17 become or remain directors or officers of the Corporation or who, while a director or officer of the Corporation, become or remain a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnification and advancement of expenses contained in this Section 17.

 

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(i)              If this Section 17 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer to the fullest extent not prohibited by any applicable portion of this Section 17 that shall not have been invalidated, or by any other applicable law. If this Section 17 shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the Corporation shall indemnify each director and officer to the fullest extent under any other applicable law.

 

Article IV

 

COMMITTEES

 

1.           EXECUTIVE COMMITTEE: The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members an executive committee consisting of three or more directors, which shall at least include the Special Directors and either the Chief Executive Officer or the President. The Board of Directors may also designate one or more of its members as alternates to serve as a member or members of the executive committee in the absence of a regular member or members. The Board of Directors shall reserve to itself alone the power to declare dividends, issue stock, recommend to shareholders any action requiring their approval, change the membership of any committee at any time, fill vacancies therein, and discharge any committee either with or without cause at any time. Subject to the foregoing limitations, the executive committee shall possess and exercise all other powers of the Board of Directors during the intervals between meetings.

 

2.           AUDIT COMMITTEE: The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, shall appoint from among its members, an audit committee consisting of three or more directors. Each member of the audit committee must meet the following conditions: (i) be independent as defined under Rule 5605(a)(2) of the Nasdaq Stock Market’s Marketplace Rules; (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act (subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act); (iii) not have participated in the preparation of the financial statements of the Corporation or any current subsidiary of the Corporation at any time during the past three years; and (iv) be able to read and understand fundamental financial statements, including the Corporation’s balance sheet, income statement, and cash flow statement. At least one member of the audit committee must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. The Board of Directors shall elect or appoint a chairperson of the audit committee (or, if it does not do so, the audit committee members shall elect a chairperson by vote of a majority of the full committee); the chairperson will have authority to act on behalf of the audit committee between meetings.

 

3.           FINANCE COMMITTEE: The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members a finance committee consisting of three or more directors, at least a majority of whom shall be neither officers nor otherwise employed by the Corporation. The Board of Directors shall designate one director to act as chairman of the committee, and may designate one or more directors as alternate members of the committee who may replace any absent or disqualified member at any meeting of the committee. The committee shall exercise such powers as may be specifically delegated to it by the Board of Directors and act upon such matters as may be referred to it from time to time for study and recommendation by the Board of Directors or the President.

 

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4.           RESTRUCTURING COMMITTEE: The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, shall appoint from among its members a restructuring committee consisting of the Chief Executive Officer and the Special Directors. The Chief Executive Officer serving on the restructuring committee shall act as chairman of the committee. All action by the restructuring committee shall be authorized by majority vote of its members. The restructuring committee shall have full authority (a) to commence, oversee and manage any process to (i) sell the Corporation’s businesses and/or assets and/or (ii) consummate a refinancing transaction, and (b) to manage all aspects of the Corporation’s restructuring efforts and strategies. The committee shall exercise such other powers as may be specifically delegated to it by the Board of Directors and act upon such matters as may be referred to it from time to time for study and recommendation by the Board of Directors or the Chief Executive Officer.

 

5.           OTHER COMMITTEES: The Board of Directors may also appoint from among its own members such other committees as the Board of Directors may determine, which shall in each case consist of not less than two directors, which shall at least include the Special Directors, and which shall have such powers and duties as shall from time to time be prescribed by the Board of Directors.

 

6.           RULES OF PROCEDURE: A majority of the members of any committee may fix its rules of procedure. Each committee shall meet at such time and place at it determines to be necessary to carry out its functions. No formal notice of any such meeting need be given to the committee. All action by any committee shall be authorized by a majority of its members (unless otherwise provided in these By-laws) and shall be reported to the Board of Directors at a meeting succeeding such action and shall be subject to revision, alteration, and approval by the Board of Directors, provided, however, that no rights or acts of third parties shall be affected by any such revision or alteration.

 

Article V

 

OFFICERS

 

1.           OFFICES, ELECTION, TERM:

 

(a)             The Board of Directors shall elect or appoint a Chief Executive Officer and/or a President from its own members. Where both a Chief Executive Officer and President are appointed, the Chief Executive Officer shall also serve as Chairman of the Board of Directors. The Board of Directors may also appoint one or more Vice-Presidents who may or may not be directors, a Secretary, a Treasurer, and a General Counsel, and it may elect or appoint from time to time such other or additional officers as in its opinion are desirable for the conduct of the business of the Corporation. Any two or more offices may be held by the same person, except the offices of President and Secretary.

 

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(b)             All officers shall be elected or appointed to hold office until the meeting of the Board of Directors following the annual meeting of the shareholders. Each officer shall hold office until a successor has been elected or appointed and qualified.

 

2.           REMOVAL OF OFFICERS:

 

(a)             Any officer elected or appointed by the Board of Directors may be removed by the vote of a majority of the entire Board of Directors, with or without cause.

 

(b)             In the event of the death, resignation or removal of an officer, the Board of Directors in its discretion may elect or appoint a successor to fill the unexpired term, or may, by vote of a majority of the entire Board of Directors, leave unfilled for any such period as it may fix by resolution any office except those of President, Treasurer or Secretary. In the event of the absence or disability of any officer, the Board of Directors may delegate the powers and/or duties of any such officer to another officer or a director until the return or removal of the disability of such officer.

 

3.           CHIEF EXECUTIVE OFFICER/ PRESIDENT:

 

(a)             The Chief Executive Officer or the President shall be Chairman of the Board of Directors of the Corporation, and shall preside at all meetings of the shareholders and the Board of Directors. The Chief Executive Officer and/or the President, shall have the general and active management and supervision of the business of the Corporation and shall see that all orders, directions and resolutions of the Board of Directors are carried out, subject, however, to the right of the Board of Directors to delegate and specific powers, not exclusively conferred by law upon the President, to any other officer or officers of the Corporation. In addition, the President, along with the Secretary shall sign all stock certificates of the Corporation and shall sign all deeds, contracts, leases or other instruments required to be in writing, except that the signature of the President on any such instrument shall not be required where the signature of any other officer has been authorized either by these By-laws or by the Board of Directors or the President. The President shall have such other and additional powers and duties as are conferred by these by laws, whether or not specifically enumerated in this section.

 

(b)             Where the Board of Directors have elected or appointed both a Chief Executive Officer and a President, the Chief Executive Officer shall be the Chairman of the Board of Directors of the Corporation, and shall preside at all meetings of the shareholders and the Board of Directors, and shall have the same powers as the President, except to the extent that such powers are exclusively conferred by law upon the President.

 

4.           VICE-PRESIDENTS: The Vice-Presidents shall have such powers and perform such duties as may be assigned to them by the Board of Directors, the Chief Executive Officer and/or by the President. In the absence or disability of the Chief Executive Officer and/or the President, any Vice-President so designated by the Board of Directors or by the President, shall perform the duties and exercise the powers of the President. A Vice-President may sign and execute contracts and other obligations pertaining to the regular course of his duties.

 

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5.           SECRETARY: In addition to all other powers and duties conferred by the By-laws, the Secretary shall attend and keep the minutes of all meetings, and shall record all votes taken, of the Board of Directors and of the shareholders, and, to the extent directed by the Board of Directors, all committee meetings. The Secretary shall cause notice to be given of all meetings of the shareholders and of special meetings of the Board of Directors. The Secretary shall have custody of the corporate seal and affix it to any instrument when authorized by the Board of Directors or, where permissible, by the President, and shall keep and maintain all the documents and records of the Corporation, which shall be available for inspection by any member of the Board of Directors at all reasonable times. The Secretary shall also have such other and additional powers and duties as may be prescribed by the Board of Directors.

 

6.           ASSISTANT SECRETARY: The Board of Directors may designate one or more Assistant Secretaries to assist the Secretary and to perform the duties and exercise the powers conferred upon the Secretary during the absence or disability of the Secretary

 

7.           TREASURER: The Treasurer shall, subject to the direction of a designated Vice- President, if any, have general custody of all the corporate funds and securities; shall have general supervision of the collection and disbursement of the funds of the Corporation; shall enter or cause to be entered regularly in the books of the Corporation all monies received and paid out by the Corporation or any officer thereof, and shall keep full and accurate accounts thereof; shall deposit or cause to be deposited all checks, notes, monies, securities or other valuables of the Corporation in the name and credit of the Corporation in such bank, banks or depositories as may be designated by the Board of Directors; shall disburse or cause to be disbursed the funds of the Corporation in such manner, at such times, for such purposes and to such person, persons or entities as may be designated or directed by the Board of Directors, and may sign, execute or endorse on behalf of the Corporation, all checks, drafts, promissory notes, bills or exchange; shall render to the President and to the Board of Directors at the regular meetings of the Board of Directors, and at such other times as they may require, a report and account of all transactions by the Treasurer and of the financial affairs and condition of the Corporation; shall render a full financial report of the financial condition of the Corporation at the annual meeting of the shareholders, if so requested by the Board of Directors; shall be furnished by all corporate officers and agents at his request, such reports, statements and accounts as the Treasurer may require as to any and all financial transactions of the Corporation; and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the President.

 

8.           ASSISTANT TREASURER: The Board of Directors may designate one or more Assistant Treasurers to assist the Treasurer and to perform the duties and exercise the powers conferred upon the Treasurer during the absence or disability of the Treasurer.

 

9.           COMPTROLLER: The Board of Directors may appoint or elect a Comptroller who shall be responsible to the Board of Directors and to the President for all financial control and internal audits of the Corporation. The Comptroller shall verify the assets of the Corporation, shall audit the books and accounts of the Corporation from time to time, and shall perform such other duties as may be prescribed by the Board of Directors.

 

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10.         EXERCISE OF RIGHTS AS SHAREHOLDERS: Unless otherwise directed by the Board of Directors, the Chief Executive Officer, President, or any Vice-President duly authorized by the President, shall have full power and authority on behalf of the Corporation to attend and to vote at any meeting of shareholders of any corporation in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all rights and powers incident to such stock ownership, including the power and authority to execute and deliver proxies, consents and waivers. The Board of Directors may from time to time confer like powers upon any other person or entity.

 

11.         COMPENSATION OF OFFICERS: The compensation of all officers shall be fixed by the compensation committee of the Board of Directors or, if no compensation committee has been established, by the independent members of the Board of Directors. Such compensation may include bonus plans for granting additional compensation to the Corporation’s officers in the form of money or shares of stock of the Corporation which shares have been either issued and are held in the treasury of the Corporation, or which have been authorized by the Certificate of Incorporation but not issued by the Corporation.

 

12.         OFFICER STOCK OPTION PLAN: The Board of Directors shall have the power to adopt and to alter, amend or repeal, a stock option plan pursuant to which officers and key employees of the Corporation who are primarily responsible for the continued growth and development and future financial success of the Corporation, may be granted options to purchase shares of common stock of the Corporation, in order to secure to the Corporation the advantages of the incentive and sense of proprietorship inherent in stock ownership by these persons.

 

Article VI

 

CAPITAL STOCK

 

1.           STOCK CERTIFICATES: The shares of the Corporation shall be represented by certificates or shall be un-certificated shares. Certificates for stock of the Corporation shall be in such form as the Board of Directors may from time to time prescribe. Certificates shall be numbered and entered in the stock register of the Corporation as they are issued, and shall be signed by the President or a Vice-President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary. If certificates are signed by a transfer agent, acting on behalf of the Corporation, and by a registrar, the signatures of the officers of the Corporation may be facsimiles. The certificates shall exhibit the holder’s name and number of shares, the date issued, and shall bear the corporate seal. The Board of Directors may also provide for and prescribe forms of scrip certificates representing fractional shares, if any, as they may, in their discretion, deem necessary or advisable.

 

2.           TRANSFER AGENT: The Board of Directors may appoint one or more transfer agents and registrars or the transfer and registration of certificates of stock of any class, and may require that stock certificates shall be countersigned and registered by one or more of such transfer agents and registrars.

 

3.           TRANSFER OF STOCK: Shares of capital stock of the Corporation shall be transferable on the books of the Corporation only by the holder of record thereof in person or by duly authorized attorney, upon surrender thereof and cancellation of certificates for a like number of shares. Possession of certificates of stock shall not entitle the holder to any right of shareholders nor shall it be regarded as evidence of ownership unless it appears on the books of the Corporation.

 

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4.           RECORD OWNERSHIP: The Corporation shall be entitled to treat the holder of record of any share of capital stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as may otherwise be expressly prescribed by law.

 

5.           LOST OR STOLEN SHARES: In case any certificate for the capital stock of the Corporation shall be lost, stolen or destroyed, the Corporation, as a condition to the issuance of a replacement certificate, may require such proof by affidavit or other means of the fact, and such indemnity to be given to the Corporation and to its transfer agent and registrar, if any, as shall be deemed necessary or advisable by the Corporation.

 

6.           CLOSING OF BOOKS: The Board of Directors shall fix, in advance, a date, not exceeding fifty (50) days and not less than ten (10) days preceding the date of any meeting of the shareholders, or the date for the payment of any dividend or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividends, or any such allotment or fights, or the exercise the rights in respect to any such change, conversion or exchange of capital stock. Where the Board of Directors fixes such a record date, only shareholders of record, as shown on the stock register, on the date so fixed shall be entitled to such notice and to vote at such meeting, or to receive payment of such dividend, or allotment of rights, or exercise such rights, as the case may be, and notwithstanding any transfer of any stock on the books of the Corporation after such record date as fixed herein. The Corporation shall not be required to recognize any person other than the record holder as the owner of shares, except as otherwise required by applicable law.

 

Article VII

 

CORPORATE RECORDS

 

1.           SHARE REGISTER: The Corporation shall keep at the principal office, or at the office of the transfer agent or registrar, a stock register showing the names of the shareholders and their addresses, the number of shares held by each, and the number and date of certificates issued or the shares, and the number and date of cancellation of every certificate surrendered for cancellation. The stock register may be in written form or in any other form capable of being converted into written form within a reasonable time.

 

2.           CORPORATE MINUTES: The Corporation shall keep at the principal office, or at such other place as the Board of Directors may direct, a book of minutes of the proceedings of its shareholders, Board of Directors and executive committee, with the date, time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, any waivers of notice received, the names of those present at directors’ meetings, the number of shares present or represented at shareholders’ meetings, and the proceedings thereof. The corporate minutes may be in written form or in any other form capable of being converted into written form within a reasonable time.

 

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3.           BOOKS OF ACCOUNT: The Corporation shall keep at the principal office, or at such other place as the Board of Directors may direct, correct and complete books and records of account of its properties and business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus, and shares. The corporate books of account may be in written form or in any other form capable of being converted into written form within a reasonable time.

 

Article VIII

 

DIVIDENDS

 

The Board of Directors may at such time or times as it determines in its discretion, declare and pay dividends or make other distributions of its property, including shares of its stock, on its outstanding shares of capital stock. Dividends may be declared and paid, or other distributions may be made, out of surplus only, so that the net assets of the Corporation remaining after such declaration, payment or distribution shall at least equal the amount of its stated capital.

Article IX

 

BY-LAW AMENDMENT

 

1.           AMENDMENT OR REPEAL: The By-laws of the Corporation may be amended or repealed by vote of the holders of two-third (2/3) of the stock of the Corporation entitled to vote at a meeting of the shareholders, provided that a statement of the proposed action is included in the notice of such meeting of the shareholders. The By-laws of the Corporation may also be amended or repealed by the Board of Directors, including any By-law adopted, amended, or repealed by the shareholders generally, by a majority vote of the then-serving members of the Board of Directors, which majority shall include the Special Directors.

 

2.           MISCELLANEOUS: If any By-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, the notice of the next meeting of shareholders for the election of directors shall set forth the By-law so adopted, amended or repealed, together with a concise statement of the changes made.

 

Article X

 

MISCELLANEOUS

 

1.           EXECUTION OF DOCUMENTS: All corporate instruments, contracts and documents to be signed or entered into by or on behalf of the Corporation shall be signed, executed, verified or acknowledged by such officer or officers, or such other person or persons as the Board of Directors may from time to time designate.

 

2.           CERTIFICATE OF INCORPORATION: All references to the Certificate of Incorporation contained in these By-laws shall include all amendments thereto or changes thereof, unless otherwise excepted.

 

3.           GENDER NEUTRALITY: Words of the masculine gender in any by-law include the feminine and the neuter, and, when the sense so indicates, words of the neuter gender may refer to any gender.

 

* * *

 

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Exhibit 10.1

 

EXECUTION VERSION

  

   

CREDIT AGREEMENT

 

by and among

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Agent,

 

THE LENDERS THAT ARE PARTIES HERETO
as the Lenders,

 

HUDSON TECHNOLOGIES INC.,
as Parent,

 

and

 

HUDSON HOLDINGS, INC.,
HUDSON TECHNOLOGIES COMPANY,
ASPEN REFRIGERANTS, INC.
and
THE OTHER BORROWERS THAT ARE PARTIES
FROM TIME TO TIME HERETO,
collectively, as the Borrowers

 

Dated as of December 19, 2019

 

 

 

 

 

Table of Contents

 

    Page
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 49
1.3 Code 49
1.4 Construction 50
1.5 Time References 50
1.6 Schedules and Exhibits 50
1.7 Divisions 50
2. LOANS AND TERMS OF PAYMENT 51
2.1 Revolving Loans 51
2.2 [Reserved] 51
2.3 Borrowing Procedures and Settlements 51
2.4 Payments; Reductions of Commitments; Prepayments 58
2.5 Promise to Pay; Promissory Notes 61
2.6 Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations 62
2.7 Crediting Payments 63
2.8 Designated Account 63
2.9 Maintenance of Loan Account; Statements of Obligations 64
2.10 Fees 64
2.11 Letters of Credit 64
2.12 LIBOR Option 72
2.13 Capital Requirements 75
2.14 Incremental Facilities 76
2.15 Joint and Several Liability of Borrowers 78
3. CONDITIONS; TERM OF AGREEMENT 80
3.1 Conditions Precedent to the Initial Extension of Credit 80
3.2 Conditions Precedent to all Extensions of Credit 81
3.3 Maturity 81
3.4 Effect of Maturity 81
3.5 Early Termination by Borrowers 81
3.6 Conditions Subsequent 81
4. REPRESENTATIONS AND WARRANTIES 82
4.1 Due Organization and Qualification; Subsidiaries 82
4.2 Due Authorization; No Conflict 82

 

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Table of Contents

 

(continued)

  

    Page
4.3 Governmental Consents 83
4.4 Binding Obligations; Perfected Liens 83
4.5 Title to Assets; No Encumbrances 83
4.6 Litigation 84
4.7 Compliance with Laws 84
4.8 No Material Adverse Effect 84
4.9 Solvency 84
4.10 Employee Benefits 84
4.11 Environmental Condition 85
4.12 Complete Disclosure 85
4.13 Patriot Act 86
4.14 Indebtedness 86
4.15 Payment of Taxes 86
4.16 Margin Stock 86
4.17 Governmental Regulation 86
4.18 OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws 86
4.19 Employee and Labor Matters 87
4.20 Parent as a Holding Company 87
4.21 Leases 87
4.22 Eligible Accounts 87
4.23 Eligible Inventory 87
4.24 Location of Inventory 88
4.25 Inventory Records 88
4.26 Term Loan Documents 88
4.27 Hedge Agreements 88
4.28 Material Contracts 88
4.29 Non-Loan Party Subsidiaries 88
4.30 Immaterial Subsidiaries 88
5. AFFIRMATIVE COVENANTS 89
5.1 Financial Statements, Reports, Certificates 89
5.2 Reporting 89
5.3 Existence 89
5.4 Maintenance of Properties 89

 

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Table of Contents

 

(continued)

 

    Page
5.5 Taxes 89
5.6 Insurance 89
5.7 Inspection 90
5.8 Compliance with Laws 91
5.9 Environmental 91
5.10 Disclosure Updates 93
5.11 Formation of Subsidiaries 93
5.12 Further Assurances 94
5.13 Lender Meetings 94
5.14 Location of Inventory; Chief Executive Office 95
5.15 OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws 95
5.16 Material Contracts 95
5.17 Compliance with ERISA and the IRC 95
5.18 Bank Products 96
5.19 Credit Enhancement 96
5.20 Chief Restructuring Officer 96
5.21 Term Loan Milestones and Cooperation 96
5.22 Bi-Weekly Reporting; Monthly Lender Calls 97
6. NEGATIVE COVENANTS 97
6.1 Indebtedness 97
6.2 Liens 97
6.3 Restrictions on Fundamental Changes 98
6.4 Disposal of Assets 98
6.5 Nature of Business 98
6.6 Prepayments, Payments of Certain Indebtedness and Amendments 98
6.7 Restricted Payments 100
6.8 Accounting Methods 100
6.9 Investments 100
6.10 Transactions with Affiliates 100
6.11 Use of Proceeds 101
6.12 Limitation on Issuance of Equity Interests 101
6.13 Inventory with Bailees 101
6.14 Parent as Holding Company 101

 

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Table of Contents

 

(continued)

 

    Page
6.15 Employee Benefits 101
6.16 Non-Loan Party Subsidiaries 102
6.17 Acquisition of Indebtedness 102
6.18 Anti-Layering 102
6.19 Immaterial Subsidiaries 102
7. FINANCIAL COVENANTS 102
8. EVENTS OF DEFAULT 103
8.1 Payments 103
8.2 Covenants 103
8.3 Judgments 103
8.4 Voluntary Bankruptcy 104
8.5 Involuntary Bankruptcy 104
8.6 Default Under Other Agreements 104
8.7 Representations 104
8.8 Guaranty 104
8.9 Security Documents 104
8.10 Loan Documents 104
8.11 Change of Control 104
8.12 ERISA 105
8.13 Invalidity of Intercreditor Agreement 105
8.14 Material Contracts 105
8.15 Conduct of Business 105
8.16 Material Adverse Effect 105
9. RIGHTS AND REMEDIES 105
9.1 Rights and Remedies 105
9.2 Remedies Cumulative 106
10. WAIVERS; INDEMNIFICATION 106
10.1 Demand; Protest; etc. 106
10.2 The Lender Group’s Liability for Collateral 106
10.3 Indemnification 107
11. NOTICES 107
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 108
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS 110

 

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Table of Contents

 

(continued)

 

    Page
13.1 Assignments and Participations 110
13.2 Successors 113
14. AMENDMENTS; WAIVERS 113
14.1 Amendments and Waivers 113
14.2 Replacement of Certain Lenders 115
14.3 No Waivers; Cumulative Remedies 116
15. AGENT; THE LENDER GROUP 116
15.1 Appointment and Authorization of Agent 116
15.2 Delegation of Duties 117
15.3 Liability of Agent 117
15.4 Reliance by Agent 117
15.5 Notice of Default or Event of Default 118
15.6 Credit Decision 118
15.7 Costs and Expenses; Indemnification 119
15.8 Agent in Individual Capacity 119
15.9 Successor Agent 119
15.10 Lender in Individual Capacity 120
15.11 Collateral Matters 120
15.12 Restrictions on Actions by Lenders; Sharing of Payments 121
15.13 Agency for Perfection 121
15.14 Payments by Agent to the Lenders 121
15.15 Concerning the Collateral and Related Loan Documents 122
15.16 Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information 122
15.17 Several Obligations; No Liability 123
16. WITHHOLDING TAXES 123
16.1 Payments 123
16.2 Exemptions 124
16.3 Reductions 125
16.4 Refunds 126
17. GENERAL PROVISIONS 126
17.1 Effectiveness 126
17.2 Section Headings 126

 

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Table of Contents

 

(continued)

 

    Page
17.3 Interpretation 126
17.4 Severability of Provisions 126
17.5 Bank Product Providers 127
17.6 Debtor-Creditor Relationship 127
17.7 Counterparts; Electronic Execution 127
17.8 Revival and Reinstatement of Obligations 128
17.9 Confidentiality 128
17.10 Survival 129
17.11 Patriot Act; Due Diligence 130
17.12 Integration 130
17.13 Hudson Technologies as Agent for Borrowers 130
17.14 Acknowledgement and Consent to Bail-In of EEA Financial Institutions 131
17.15 Intercreditor Agreement 131
17.16 Acknowledgement Regarding Any Supported QFCs 132

 

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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 J-1 Form of Joinder
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 P-1 Permitted Investments
Schedule P-2 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 3.1 Conditions Precedent
Schedule 3.6 Conditions Subsequent
Schedule 4.1(b) Capitalization of Loan Parties
Schedule 4.1(c) Capitalization of Loan Parties’ Subsidiaries
Schedule 4.8 Material Adverse Effect
Schedule 4.10 Employee Benefits
Schedule 4.11 Environmental Matters
Schedule 4.14 Permitted Indebtedness
Schedule 4.24 Location of Inventory
Schedule 4.28 Material Contracts
Schedule 5.1 Financial Statements, Reports, Certificates
Schedule 5.2 Collateral Reporting

 

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CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, is entered into as of December 19, 2019 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”), HUDSON TECHNOLOGIES, INC., a New York corporation (“Parent”), HUDSON HOLDINGS, INC., a Nevada corporation (“Hudson Holdings”), HUDSON TECHNOLOGIES COMPANY, a Tennessee corporation (“Hudson Technologies”), ASPEN REFRIGERANTS, INC., a Delaware corporation (“Aspen”; and together with Hudson Holdings, Hudson Technologies, and those additional entities that hereafter become parties hereto as Borrowers in accordance with the terms hereof by executing the form of Joinder attached hereto as Exhibit J-1, each, a “Borrower” and individually and collectively, jointly and severally, the “Borrowers”).

 

The parties agree as follows:

 

1.           DEFINITIONS AND CONSTRUCTION.

 

1.1         Definitions. As used in this Agreement, the following terms shall have the following definitions:

 

13-Week Cash Flow Forecast” has the meaning specified therefor in Section 5.22(a) of this Agreement.

 

Acceptable Appraisal” means, with respect to an appraisal of Inventory, the most recent appraisal of such property received by Agent (a) from an appraisal company satisfactory to Agent, (b) the scope and methodology (including, to the extent relevant, any sampling procedure employed by such appraisal company) of which are satisfactory to Agent, and (c) the results of which are satisfactory to Agent, in each case, in Agent's Permitted Discretion.

 

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.

 

Account Party” has the meaning specified therefor in Section 2.11(h) of this Agreement.

 

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 a Loan Party 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 of the Equity Interests of any other Person.

 

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

 

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

 

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

 

Affected Lender” has the meaning specified therefor in Section 2.13(b) of this 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 definition of Eligible Accounts and Section 6.10 of this Agreement: (a) if any Person owns directly or indirectly 20% 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 20% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person), then both such Persons shall be Affiliates of each other, (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 this 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 Loan Party or its Subsidiaries to Agent under the Loan Documents and securing the Obligations.

 

Agreement” means this Credit Agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.

 

Anti-Corruption Laws” means the FCPA, the U.K. Bribery Act of 2010, as amended, and all other applicable laws and regulations or ordinances concerning or relating to bribery, money laundering or corruption in any jurisdiction in which any Loan Party or any of its Subsidiaries or Affiliates is located or is doing business.

 

Anti-Money Laundering Laws” means the applicable laws or regulations in any jurisdiction in which any Loan Party or any of its Subsidiaries or Affiliates is located or is doing business that relates to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto.

 

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Applicable Margin” means, as of any date of determination and with respect to 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 June 30, 2020, the Applicable Margin shall be set at the margin in the row styled “Level III”; 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”:

 

Level Average Excess
Availability
Applicable Margin Relative
to Base Rate Loans

(the “Base Rate Margin”)
Applicable Margin Relative
to LIBOR Rate Loans
 
(the “LIBOR Rate Margin”)
I > 30.0% of the Maximum Revolver Amount 1.25 percentage points 2.25 percentage points
II < 30.0% of the Maximum Revolver Amount and > 15.0% of the Maximum Revolver Amount 1.50 percentage points 2.50 percentage points
III < 15.0% of the Maximum Revolver Amount 1.75 percentage points 2.75 percentage points

 

The Applicable Margin shall be re-determined as of the first day of each month based on the Average Excess Availability for the immediately prior month.

 

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 March 31, 2020, the Applicable Unused Line Fee Percentage shall be set at the rate in the row styled “Level II”; provided further,that any time an Event of Default has occurred and is continuing, the Applicable Unused Line Fee Percentage shall be set at the margin in the row styled “Level II”:

 

Level Average Revolver Usage Applicable Unused
Line Fee Percentage
I > 50% of the Maximum Revolver Amount 0.35 percentage points
II < 50% of the Maximum Revolver Amount 0.50 percentage points

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

 

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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 Agent or the Required Lenders to require that payments and proceeds of Collateral be applied pursuant to Section 2.4(b)(iii) of this Agreement.

 

Aspen” has the meaning specified therefor in the preamble to this Agreement.

 

Aspen Vendor Cylinder Deposit Liabilities Reserve” means a reserve in the amount of $1,700,000 which shall be adjusted by the Agent on the date that is the earliest of (a) the date that Agent shall have received a management prepared calculation of such reserve and such calculation shall be satisfactory to Agent in all respects, (b) the date that Agent shall have received an updated estimate of such reserve pursuant to a field examination reasonably acceptable to Agent, and (c) (i) the date that Agent shall have received the annual audited financial statements of Parent and its Subsidiaries for the fiscal year ending December 31, 2019 pursuant to the terms of Section 5.1 of this Agreement or (ii) March 31, 2020.

 

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

 

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

 

Authorized Person” means any one of the individuals identified as an officer of a Borrower on Schedule A-2 to this Agreement, or any other individual identified by Administrative Borrower as an authorized person and authenticated through Agent’s electronic platform or portal in accordance with its procedures for such authentication.

 

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

 

Available Increase Amount” means, as of any date of determination, an amount equal to the result of (a) $15,000,000, minus (b) the aggregate principal amount of Increases to the Revolver Commitments previously made pursuant to Section 2.14 of this Agreement.

 

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

 

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

 

Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

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Bank Product” means any one or more of the following financial products or accommodations extended to any Loan Party or any of its Subsidiaries by a Bank Product Provider: (a) credit cards (including commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”)), (b) payment 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 any Loan Party or any of its Subsidiaries with a Bank Product Provider in connection with the obtaining of any of the Bank Products.

 

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, operational risk or processing risk 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 Loan Party 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 Loan Party or 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 Provider Agreement” means an agreement in form and substance satisfactory to Agent, duly executed by the applicable Bank Product Provider, the applicable Loan Parties, and Agent.

 

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 each Loan Party 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 ½%, (b) the LIBOR Rate (which rate shall be calculated based upon an Interest Period of one month and shall be determined on a daily basis), plus one 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 (and, if any such announced rate is below zero, then the rate determined pursuant to this clause (c) shall be deemed to be zero).

 

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

 

-5-

 

 

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

 

Benchmark Replacement” means the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by Agent and Administrative Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the LIBOR Rate for United States dollar-denominated syndicated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement shall be deemed to be zero for the purposes of this Agreement.

 

Benchmark Replacement Adjustment” means, with respect to any replacement of the LIBOR Rate with an Unadjusted Benchmark Replacement for each applicable Interest Period, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero) that has been selected by Agent and Administrative Borrower in their reasonable discretion giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR Rate with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR Rate with the applicable Unadjusted Benchmark Replacement for United States dollar-denominated syndicated credit facilities at such time.

 

Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate”, the definition of “Interest Period”, timing and frequency of determining rates and making payments of interest and other administrative matters) that Agent decides in Agent’s Permitted Discretion may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by Agent in a manner substantially consistent with market practice (or, if Agent decides that adoption of any portion of such market practice is not administratively feasible or if Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as Agent decides is reasonably necessary in connection with the administration of this Agreement).

 

Benchmark Replacement Date” means the earlier to occur of the following events with respect to the LIBOR Rate:

 

(a)           in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of the LIBOR Rate permanently or indefinitely ceases to provide the LIBOR Rate; or

 

(b)           in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

 

Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the LIBOR Rate:

 

(a)           a public statement or publication of information by or on behalf of the administrator of the LIBOR Rate announcing that such administrator has ceased or will cease to provide the LIBOR Rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBOR Rate;

 

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(b)           a public statement or publication of information by the regulatory supervisor for the administrator of the LIBOR Rate, the Federal Reserve System of the United States (or any successor), an insolvency official with jurisdiction over the administrator for the LIBOR Rate, a resolution authority with jurisdiction over the administrator for the LIBOR Rate or a court or an entity with similar insolvency or resolution authority over the administrator for the LIBOR Rate, which states that the administrator of the LIBOR Rate has ceased or will cease to provide the LIBOR Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBOR Rate; or

 

(c)           a public statement or publication of information by the regulatory supervisor for the administrator of the LIBOR Rate announcing that the LIBOR Rate is no longer representative.

 

Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by Agent or the Required Lenders, as applicable, by notice to Administrative Borrower, Agent (in the case of such notice by the Required Lenders) and the Lenders.

 

Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the LIBOR Rate and solely to the extent that the LIBOR Rate has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the LIBOR Rate for all purposes hereunder in accordance with Section 2.12(d)(iii) and (y) ending at the time that a Benchmark Replacement has replaced the LIBOR Rate for all purposes hereunder pursuant to Section 2.12(d)(iii).

 

Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

 

Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

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.

 

BHC Act Affiliate” of a Person means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such Person.

 

Bi-Weekly Reporting Package” has the meaning specified therefor in Section 5.22(b) of this Agreement.

 

Bill and Hold Arrangements” means “banked gas” arrangements under which goods are invoiced to an Account Debtor but stored by a Borrower for future delivery, and title to such goods passes to such Account Debtor as of the date of issuance of such invoice therefore by such Borrower.

 

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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).

 

BOC” means BOC Limited, a private limited company organized under the laws of the United Kingdom, and which maintains its chief executive office in the United Kingdom.

 

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

 

Borrower Materials” has the meaning specified therefor in Section 17.9(c) of this 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)          85% of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve, plus

 

(b)          the lesser of

 

(i)             $40,000,000, and

 

(ii)            the lesser of (A) the product of 75% multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Eligible Inventory (including Eligible R-22 Inventory) at such time and (B) the sum of (1) the product of 75% multiplied by the Net Recovery Percentage identified in the most recent Acceptable Appraisal of Inventory, multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Eligible R-22 Inventory and (2) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent Acceptable Appraisal of Inventory, multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Eligible Inventory (other than Eligible R-22 Inventory (such determination may be made as to different categories of Eligible Inventory based upon the Net Recovery Percentage applicable to such categories) at such time, minus

 

(c)          the aggregate amount of Reserves, if any, established by Agent from time to time under Section 2.1(c) of this Agreement.

Borrowing Base Certificate” means a certificate substantially in the form of Exhibit B-1 to this Agreement, which such form of Borrowing Base Certificate may be amended, restated, supplemented or otherwise modified from time to time (including without limitation, changes to the format thereof) in accordance with the terms of this Agreement, as approved by Agent in Agent’s sole discretion.

 

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 New York, 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.

 

-8-

 

 

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) 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 and (b) expenditures made during such period to consummate one or more Permitted Acquisitions.

 

Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

Capitalized Lease Obligation” means that portion of the obligations under a Capital Lease that is required to be capitalized 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 one 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 one 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 one 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 of any 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.

 

-9-

 

 

CFC” means a controlled foreign corporation (as that term is defined in the IRC) in which any Loan Party is a “United States shareholder” within the meaning of Section 951(b) of the IRC.

 

Change in Law” means the occurrence after the date of this 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 this 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.

 

Change of 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 Parent (or other securities convertible into such Equity Interests) representing 35% or more of the combined voting power of all Equity Interests of Parent entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Parent,

 

(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 Parent or control over the Equity Interests of such Person entitled to vote for members of the Board of Directors of Parent on a fully-diluted basis (and taking into account all such Equity Interests that such Person or group has the right to acquire pursuant to any option right) representing 35% or more of the combined voting power of such Equity Interests,

 

(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 Parent such that a majority of the members of such Board of Directors are not Continuing Directors,

 

(d)           Parent fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party,

 

(e)           Hudson Holdings fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party (other than Parent),

 

(f)            any sale of all or substantially all of the property or assets of Parent and its Subsidiaries other than in a sale or transfer to another Loan Party,

 

(g)           the occurrence of any “Change of Control” (or equivalent term) as defined in Term Loan Agreement or in any other material Indebtedness shall have occurred.

 

Closing Date” means December 19, 2019.

 

Code” means the New York Uniform Commercial Code, as in effect from time to time.

 

-10-

 

 

Collateral” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by any Loan Party or 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 Loan Party’s or its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in form and substance reasonably satisfactory to Agent.

 

Collections” means, all cash, checks, notes, instruments, and other items of payment (including insurance proceeds, cash proceeds of asset sales, rental proceeds and tax refunds).

 

Commitment” means, with respect to each Lender, its Revolver Commitment and, with respect to all Lenders, their Revolver 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 this Agreement or in the Assignment and Acceptance pursuant to which such Lender became a Lender under this 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 this 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.

 

Competitor” means any person as may be identified in writing to the Agent by the Administrative Borrower from time to time after the Closing Date as bona fide business competitors of the Borrowers (other than bona fide debt funds) (in the good faith determination of the Borrowers), by delivery of a notice thereof to the Agent setting forth such person or persons; provided that no such updates pursuant to this definition shall be deemed to retroactively disqualify any parties that have previously acquired an assignment or participation interest in respect of the Loans from continuing to hold or vote such previously acquired assignments and participation on terms set forth herein for Lenders.

 

Compliance Certificate” means a certificate substantially in the form of Exhibit C-1 to this Agreement delivered by the chief financial officer or treasurer of Parent to Agent.

 

Confidential Information” has the meaning specified therefor in Section 17.9(a) of this Agreement.

 

Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of Parent 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 Loan Party 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.

 

-11-

 

 

Covenant Testing Period” means a period (a) commencing on the last day of the fiscal month of Parent most recently ended prior to a Covenant Trigger Event for which Borrowers are required to deliver to Agent monthly, quarterly or annual financial statements pursuant to Section 5.1 and Schedule 5.1 to this Agreement, and (b) continuing through and including the first day after such Covenant Trigger Event that Excess Availability has equaled or exceeded 12.5% of the Maximum Revolver Amount for two consecutive calendar months.

 

Covenant Trigger Event” means if at any time Excess Availability is less than 12.5% of the Maximum Revolver Amount.

 

Covered Entity” means any of the following:

 

(a)           a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

 

(b)           a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

 

(c)           a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

Covered Party” has the meaning specified therefor in Section 17.16 of this Agreement.

 

CRO” has the meaning specified therefor in Section 5.20 of this Agreement.

 

Cylinder Inventory” means inventory consisting of gas cylinders.

 

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.

 

Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

 

Defaulting Lender” means any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies Agent and Administrative Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable Default or Event of Default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Agent, Issuing Bank, or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit) within two Business Days of the date when due, (b) has notified any Borrower, Agent or Issuing Bank in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable Default or Event of Default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by Agent or Administrative Borrower, to confirm in writing to Agent and Administrative Borrower that it will comply with its prospective funding obligations hereunder (provided, that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Agent and Administrative Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of any Insolvency Proceeding, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action; provided, that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender upon delivery of written notice of such determination to Administrative Borrower, Issuing Bank, and each Lender.

 

-12-

 

 

Defaulting Lender Rate” means (a) for the first three 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 the applicable Borrower identified on Schedule D-1 to this 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).

 

Designated Account Bank” has the meaning specified therefor in Schedule D-1 to this 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 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 the extent to which Dilution is in excess of 5%.

 

Disbursement Letter” means a disbursement letter, dated as of even date with this Agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by Borrowers.

 

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) result in 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.

 

-13-

 

 

 

 

DLA Contract” means that certain Contract No. SPE4A6-16-D-0226, dated as of July 30, 2016, by and between Hudson Technologies and DLA Aviation, as amended, amended and restated, restated, supplemented, modified or otherwise in effect from time to time in accordance with the terms of this Agreement.

 

Dollars” or “$” means United States dollars.

 

Domestic Subsidiary” means any Subsidiary of any Loan Party that is not a Foreign Subsidiary.

 

Drawing Document” means any Letter of Credit or other document presented for purposes of drawing under any Letter of Credit, including by electronic transmission such as SWIFT, electronic mail, facsimile or computer generated communication.

 

Early Opt-in Election” means the occurrence of:

 

(a)          (i) a determination by Agent or (ii) a notification by the Required Lenders to Agent (with a copy to Administrative Borrower) that the Required Lenders have determined that United States dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 2.12(d)(iii) are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the LIBOR Rate, and

 

(b)           (i) the election by Agent or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by Agent of written notice of such election to Administrative Borrower and the Lenders or by the Required Lenders of written notice of such election to Agent.

 

Earn-Outs” means 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 and with respect to Parent determined, in each case, on a consolidated basis in accordance with GAAP:

 

(a)           the consolidated net income (or loss),

 

  minus

 

(b)          without duplication, the sum of the following amounts for such period to the extent included in determining consolidated net income (or loss) for such period:

 

(i) unusual or non-recurring gains, and

 

(ii) interest income,

 

  plus

 

(c)           without duplication, the sum of the following amounts for such period to the extent deducted in determining consolidated net income (or loss) for such period:

 

   -14-  

 

 

(i) non-cash unusual or non-recurring losses;

 

(ii) unusual or non-recurring loss; provided that the aggregate amount added back pursuant to this clause (ii) in any fiscal year shall not exceed $500,000;

 

(iii) non-cash charges (including, without limitation, for the avoidance of doubt, non-cash stock compensation, expense and non-cash purchase accounting adjustments);

 

(iv) non-cash adjustments or charges for lower of cost or net realizable value of Inventory adjustments to the extent any such adjustment has occurred prior to the Closing Date; provided that any items pursuant to this clause (iv) shall not be permitted to be added back to EBITDA for any period after September 30, 2020 (or such longer period as may be acceptable to Agent in its sole discretion);

 

(v) (A) reasonable and documented costs, fees to Persons (other than any Loan Party or its Affiliates), charges or expenses directly incurred on or prior to the Closing Date in connection with the transactions consummated on the Closing Date and (1) actually paid on or prior to the Closing Date in an aggregate amount not to exceed $2,500,000, and (2) actually paid after the Closing Date in an aggregate amount not to exceed such amount as approved by Agent in its sole discretion, and (B) professional fees to Persons (other than any Loan Party or its Affiliates) directly incurred in connection with the Borrowers’ restructuring process and actually paid within fifteen (15) months after the Closing Date, in each case as disclosed in writing to the Agent; provided that the amount added back pursuant to this clause (v)(B) shall not exceed $4,250,000 in the aggregate;

 

(vi) Interest Expense,

 

(vii) income taxes, and

 

(viii) depreciation and amortization.

 

For the purposes of calculating EBITDA for any period of twelve consecutive months (each, a “Reference Period”), if at any time during such Reference Period (and after the Closing Date), any Loan Party 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 determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the SEC) 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.

 

In addition, notwithstanding the foregoing, (a) EBITDA for the month ended January 31, 2019, shall be deemed to be $341,703.36, (b) EBITDA for the month ended February 28, 2019, shall be deemed to be $542,754.92, (c) EBITDA for the month ended March 31, 2019, shall be deemed to be $1,511,888.61, (d) EBITDA for the month ended April 30, 2019, shall be deemed to be $1,398,664.33, (e) EBITDA for the month ended May 31, 2019, shall be deemed to be $548,148.29, (f) EBITDA for the month ended June 30, 2019, shall be deemed to be $1,599,977.41, (g) EBITDA for the month ended July 31, 2019, shall be deemed to be $2,123,557.52, (h) EBITDA for the month ended August 31, 2019, shall be deemed to be $2,769,845.00, and (i) EBITDA for the month ended September 30, 2019, shall be deemed to be $(982,109.96).

 

   -15-  

 

 

EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

Eligible 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 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 information with respect to the Borrowers’ business or assets of which Agent becomes aware after the Closing Date, including 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 Accounts shall be calculated net of customer deposits, unapplied cash, taxes, finance charges, service charges, discounts, credits, allowances, and rebates. Eligible Accounts shall not include the following:

 

(a)           Accounts that the Account Debtor has failed to pay within 90 days (except with respect to any Accounts not to exceed $400,000 in the aggregate at any time, 120 days) of original invoice date or 90 days of due date,

 

(b)           Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,

 

(c)           Accounts with selling terms of more than 90 days,

 

(d)           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,

 

(e)           Accounts (i) 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, or any other terms by reason of which the payment by the Account Debtor may be conditional, or (ii) with respect to which the payment terms are “C.O.D.”, cash on delivery or other similar terms,

 

(f)            Accounts that are not payable in Dollars,

 

(g)           except for Accounts with respect to which the Account Debtor is BOC, Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or Canada, or (ii) is not organized under the laws of the United States or Canada or any state or province 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 reasonably satisfactory to Agent (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Agent and, if requested by Agent, is directly drawable by Agent, or (B) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to Agent,

   -16-  

 

 

(h)           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 or any other Governmental Authority, unless such Borrower assigns its right to payment of such Account to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes or ordinances, provided, however, that notwithstanding the foregoing, through and including the date which is 120 days following the Closing Date (or such longer period as the Agent may agree to in its sole discretion), such Accounts may be included as Eligible Accounts irrespective of whether the applicable Borrower complies with the requirements set forth in this clause (h),

 

(i)            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 its obligation to pay all or any portion of the Account, to the extent of such claim, right of recoupment or setoff, or dispute,

 

(j)            Accounts with respect to an Account Debtor whose Eligible Accounts owing to Borrowers exceed (i) 20.0% (or such other increased percentage amount as the Agent may agree to in writing in its Permitted Discretion) with respect to DLA Aviation and (ii) 15.0% (or such other increased percentage amount as the Agent may agree to in writing in its Permitted Discretion) in the case of all other Account Debtors (in each case, 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,

 

(k)           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 received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor,

 

(l)            Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be doubtful, including by reason of the Account Debtor’s financial condition,

 

(m)          Accounts that are not subject to a valid and perfected first priority Agent’s Lien,

 

(n)           Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor (other than certain Accounts pursuant to Bill and Hold Arrangements which (x) may be deemed Eligible Accounts by Agent after the Closing Date in an amount to be determined in Agent’s sole discretion and (y) are on terms satisfactory to Agent in its sole discretion), or (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor,

 

   -17-  

 

 

(o)           Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Entity,

 

(p)           Accounts (i) 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, or (ii) that represent credit card sales,

 

(q)           Accounts owned by a target acquired in connection with a Permitted Acquisition or Permitted Investment, or Accounts owned by a Person that is joined to this Agreement as a Borrower pursuant to the provisions of this Agreement, until the completion of a field examination with respect to such Accounts, in each case, satisfactory to Agent in its Permitted Discretion, or

 

(r)            Accounts that are not otherwise satisfactory to Agent as determined in good faith by Agent in the exercise of its discretion in a reasonable manner.

 

Eligible In-Transit Inventory” means those items of Inventory that do not qualify as Eligible Inventory solely because they are not in a location set forth on Schedule 4.24 to this Agreement (as such Schedule 4.24 may be amended from time to time in accordance with Section 5.14) or in transit among such locations and a Borrower does not have actual and exclusive possession thereof, but as to which,

 

(a)         such Inventory which is stored or contained in (A) railroad cars located within the continental United States or (B) portable tanks or bulk containers (including intermodal tanks and tanker trailers, but excluding cylinders and drums of any size) located within the continental United States and used for over-the-road transportation of refrigerant,

 

(b)           title to such Inventory has passed to a Borrower and Agent shall have received such evidence thereof as it may from time to time require,

 

(c)           such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in its Permitted Discretion, and Agent shall have received a copy of the certificate of marine cargo insurance in connection therewith in which it has been named as an additional insured and loss payee in a manner acceptable to Agent,

 

(d)           unless Agent otherwise agrees in writing in its sole discretion, such Inventory is the subject of a negotiable bill of lading governed by the laws of a state within the United States (x) that is consigned to Agent (either directly or by means of endorsements), (y) that was issued by the carrier (including a non-vessel operating common carrier) in possession of the Inventory that is subject to such bill of lading, and (z) that is in the possession of Agent (in each case in the continental United States),

 

(e)           such Inventory is in the possession of a common carrier (including on behalf of any non-vessel operating common carrier) that has issued the bill of lading or other document of title with respect thereto;

 

(f)            the documents of title related thereto are subject to the valid and perfected first priority Lien of Agent;

 

(g)           Agent determines that such Inventory is not subject to (i) any Person’s right of reclamation, repudiation, stoppage in transit or diversion or (ii) any other right or claim of any other Person which is (or is capable of being) senior to, or pari passu with, the Lien of Agent or Agent determines that any Person’s right or claim impairs, or interferes with, directly or indirectly, the ability of Agent to realize on, or reduces the amount that Agent may realize from the sale or other disposition of such Inventory;

 

   -18-  

 

 

(h)           Administrative Borrower has provided (i) a certificate to Agent that certifies that, to the best knowledge of such Borrower, such Inventory meets all of Borrowers’ representations and warranties contained in the Loan Documents concerning Eligible In-Transit Inventory, and (ii) upon Agent’s request, a copy of the invoice, packing slip and manifest with respect thereto, or

 

(i)            such Inventory shall not have been in transit for more than forty-five (45) days.

 

Eligible Inventory” means finished goods Inventory of a Borrower, that complies with each of the representations and warranties respecting Eligible Inventory made in the Loan Documents, and that is 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 information with respect to the Borrowers’ business or assets of which Agent becomes aware after the Closing Date, including any field examination or appraisal performed or received by Agent from time to time after the Closing Date. In determining the amount to be so included, Inventory shall be valued at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices. An item of Inventory shall not be included in Eligible Inventory if:

 

(a)           a Borrower does not have good, valid, and marketable title thereto,

 

(b)           a Borrower does not have actual and exclusive possession thereof (either directly or through a bailee or agent of a Borrower),

 

(c)           it is not located at one of the locations in the continental United States set forth on Schedule 4.24 to this Agreement (as such Schedule 4.24 may be amended from time to time in accordance with Section 5.14) (or in-transit from one such location to another such location),

 

(d)           it is stored at locations holding less than $50,000 of the aggregate value of such Borrower’s Inventory,

 

(e)           it is in-transit to or from a location of a Borrower (other than in-transit from one location set forth on Schedule 4.24 to this Agreement to another location set forth on Schedule 4.24 to this Agreement (as such Schedule 4.24 may be amended from time to time in accordance with Section 5.14)),

 

(f)            it is located on real property leased by a Borrower or in a contract warehouse or with a bailee, in each case, unless either (i) it is subject to a Collateral Access Agreement executed by the lessor or warehouseman, as the case may be, and it is segregated or otherwise separately identifiable from goods of others, if any, stored on the premises, or (ii) Agent has established a Landlord Reserve with respect to such location,

 

(g)           it is the subject of a bill of lading or other document of title,

 

(h)           it is not subject to a valid and perfected first priority Agent’s Lien,

 

(i)            it consists of goods returned or rejected by a Borrower’s customers (provided, that such returned or rejected goods shall not include goods that a Borrower reclaimed in the ordinary course of its business),

 

(j)             it consists of goods that are obsolete, slow moving, spoiled or are otherwise past the stated expiration, “sell-by” or “use by” date applicable thereto, restrictive or custom items or otherwise is manufactured in accordance with customer-specific requirements, work-in-process, raw materials, or goods that constitute spare parts, packaging and shipping materials, supplies used or consumed in Borrowers’ business, bill and hold goods, defective goods, “seconds,” or Inventory acquired on consignment,

 

   -19-  

 

 

(k)           it is subject to third party intellectual property, licensing or other proprietary rights, unless Agent is satisfied that such Inventory can be freely sold by Agent on and after the occurrence of an Event of Default despite such third party rights,

 

(l)            it was acquired in connection with a Permitted Acquisition or Permitted Investment, or such Inventory is owned by a Person that is joined to this Agreement as a Borrower pursuant to the provisions of this Agreement, until the completion of an Acceptable Appraisal of such Inventory and the completion of a field examination with respect to such Inventory that is satisfactory to Agent in its Permitted Discretion, or

 

(m)          it was acquired pursuant to a trade Letter of Credit to the extent such trade Letter of Credit remains outstanding.

 

Notwithstanding anything to the contrary contained herein, Eligible Inventory shall include (I) Slow Moving Inventory; provided, however, Eligible Inventory consisting of Slow Moving Inventory shall not exceed in the aggregate, at any time outstanding, $1,500,000, (II) Eligible In-Transit Inventory; provided, however, Eligible Inventory consisting of Eligible In-Transit Inventory shall not exceed in the aggregate, at any time outstanding, $2,000,000 (as such amount may be increased in writing by the Agent in its sole discretion), (III) Mixed Gases; provided, however, Eligible Inventory consisting of Mixed Gases shall not exceed in the aggregate, at any time outstanding, $650,000, and (IV) Cylinder Inventory; provided, however, Eligible Inventory consisting of Cylinder Inventory shall not exceed in the aggregate, at any time outstanding, $3,000,000.

 

Eligible R-22 Inventory” means R-22 Inventory that qualifies as Eligible Inventory and consists of R-22 Inventory held for sale in the ordinary course of Borrowers’ business.

 

Eligible Transferee” means (a) any Lender (other than a Defaulting Lender), any Affiliate of any 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 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.

 

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 ERISA Affiliate or (b) to which any Loan Party or ERISA Affiliate has, or has had at any time within the preceding six (6) years, any liability, contingent or otherwise; provided, that such definition shall not apply with respect to any Employee Benefit Plan of Aspen which was sponsored or maintained by the owner(s) of Aspen’s Equity Interests prior to October 10, 2017, and to which Aspen and any Loan Party and ERISA Affiliate is not reasonably likely to have any liability, contingent or otherwise.

 

   -20-  

 

 

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 Loan Party, any Subsidiary of any Loan Party, 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 Loan Party, any Subsidiary of any Loan Party, 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 Loan Party 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.

 

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 statute thereto.

 

ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which any Loan Party or any of its Subsidiaries is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with any Loan Party or any of its Subsidiaries and whose employees are aggregated with the employees of such Loan Party or its Subsidiaries under IRC Section 414(o).

 

EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

Event of Default” has the meaning specified therefor in Section 8 of this Agreement.

 

   -21-  

 

 

Excess Availability” means, as of any date of determination, the amount equal to Availability.

 

Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

 

Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Loan Party of (including by virtue of the joint and several liability provisions of Section 2.15), 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 guaranty of such Loan Party 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 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 or 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 this Agreement or any other Loan Document), (ii) United States federal withholding 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 this 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 this Agreement (or designates a new lending office, other than a designation made at the request of a Loan Party), except 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 this Agreement, if any, with respect to such withholding tax at the time such Foreign Lender becomes a party to this 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 this Agreement (or designates a new lending office), as a result of a change in law, rule, regulation, treaty, order or other decision or other Change in Law with respect to any of the foregoing by any Governmental Authority, and (iv) any United States federal withholding taxes imposed under FATCA.

 

Existing Agent” has the meaning specified therefor in the definition of the “Existing Credit Facility”.

 

Existing Credit Facility” means that certain Amended and Restated Revolving Credit and Security Agreement, dated as of October 10, 2017, by and among Parent, the Borrowers party thereto, the Guarantors party thereto, the lenders from time to time party thereto, PNC Capital Markets LLC, as lead arranger and sole bookrunner, and PNC Bank, National Association, as collateral agent and administrative agent for the lenders party thereto (in such capacities, the “Existing Agent”), as amended, amended and restated, restated, supplemented, modified or otherwise in effect from time to time immediately prior to the Closing Date.

 

   -22-  

 

 

Extraordinary Advances” has the meaning specified therefor in Section 2.3(d)(iii) of this Agreement.

 

FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and (a) any current or future regulations or official interpretations thereof, (b) any agreements entered into pursuant to Section 1471(b)(1) of the IRC, and (c) any intergovernmental agreement entered into by the United States (or any fiscal or regulatory legislation, rules, or practices adopted pursuant to any such intergovernmental agreement entered into in connection therewith).

 

FCPA” means the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

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, 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 (and, if any such rate is below zero, then the rate determined pursuant to this definition shall be deemed to be zero).

 

Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.

 

Fee Letter” means that certain fee letter, dated as of even date with this Agreement, among Borrowers and Agent, in form and substance reasonably satisfactory to Agent.

 

Fixed Charge Coverage Ratio” means, with respect to any fiscal period and with respect to Parent 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.

 

Fixed Charges” means, with respect to any fiscal period and with respect to Parent determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) Interest Expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period, (b) scheduled principal payments in respect of Indebtedness that are required to be paid during such period (including any required payments or prepayments from excess cash flow during such period, but excluding, for the avoidance of doubt, principal payments relating to outstanding Revolving Loans), (c) all federal, state, and local income taxes required to be paid during such period (net receipt of tax refunds paid in cash); provided that any tax refunds received shall be applied in the inverse order for, and in amounts actually paid in, the period in which the applicable cash outlay for such taxes was made, (d) all Restricted Payments paid (whether in cash or other property, other than common Equity Interests) during such period, and (e) to the extent not otherwise deducted from EBITDA for such period, all payments required to be made during such period in respect of any funding deficiency or funding shortfall with respect to any Pension Plan or for any Withdrawal Liability.

 

For the purposes of calculating Fixed Charge Coverage Ratio for any Reference Period, if at any time during such Reference Period (and after the Closing Date), any Loan Party or any of its Subsidiaries shall have made a Permitted Acquisition, Fixed Charges and Unfinanced Capital Expenditures for such Reference Period shall be calculated after giving pro forma effect thereto or in such other manner acceptable to Agent as if any such Permitted Acquisition occurred on the first day of such Reference Period.

 

   -23-  

 

 

Flood Laws” means the National Flood Insurance Act of 1968, Flood Disaster Protection Act of 1973, and related laws, rules and regulations, including any amendments or successor provisions.

 

Foreign Lender” means any Lender or Participant that is not a United States person within the meaning of IRC section 7701(a)(30).

 

Foreign Subsidiary” means any direct or indirect subsidiary of any Loan Party that is organized under the laws of any jurisdiction other than the United States, any state thereof or the District of Columbia.

 

Funding Date” means the date on which a Borrowing occurs.

 

Funding Losses” has the meaning specified therefor in Section 2.12(b)(ii) of this Agreement.

 

GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

GES Software” means an energy and efficiency optimization platform that provides real-time continuous monitoring of a water-cooled chiller plant system.

 

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, county, 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 Person that guaranties all or a portion of the Obligations, including Parent and any Person that is a “Guarantor” under the Guaranty and Security Agreement, and (b) each other Person that becomes a guarantor after the Closing Date pursuant to Section 5.11 of this Agreement.

 

Guaranty and Security Agreement” means a guaranty and security agreement, dated as of even date with this Agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by each of the Loan Parties to Agent.

 

Hazardous Discharge” has the meaning specified therefor in Section 5.9(g) of this 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.

 

   -24-  

 

 

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 Loan Party 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.

 

Hudson Holdings” has the meaning specified therefor in the preamble to this Agreement.

 

Hudson Technologies” has the meaning specified therefor in the preamble to this Agreement.

 

Immaterial Subsidiaries” means, collectively, (a) Safety Hi-Tech USA, LLC, a Delaware limited liability company and (b) RRC International, Inc., a New York corporation.

 

Increase” has the meaning specified therefor in Section 2.14.

 

Increase Date” has the meaning specified therefor in Section 2.14.

 

Increase Joinder” has the meaning specified therefor in Section 2.14.

 

Increased Reporting Event” means if at any time Excess Availability is less than the greater of (a) 15.0% of the Maximum Revolver Amount and (b) $9,000,000.

 

Increased Reporting Period” means the period commencing after the continuance of an Increased Reporting Event and continuing until the date when no Increased Reporting Event has occurred for 60 consecutive days.

 

Indebtedness” as to any Person means (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 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) and any earn-out or similar obligations, (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.

 

   -25-  

 

 

Indemnified Liabilities” has the meaning specified therefor in Section 10.3 of this Agreement.

 

Indemnified Person” has the meaning specified therefor in Section 10.3 of this Agreement.

 

Indemnified Taxes” means, (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by, or on account of any obligation of, any Loan Party under any Loan Document, and (b) to the extent not otherwise described in the foregoing clause (a), Other 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 executed and delivered by each Loan Party and each of its Subsidiaries, and Agent, the form and substance of which is reasonably satisfactory to Agent.

 

Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of even date with this Agreement, between Agent and Term Loan Agent, and acknowledged by the Loan Parties.

 

Interest Expense” means, for any period, the aggregate of the interest expense of Parent 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, 3, or 6 months thereafter; provided, that (a) interest shall accrue at the applicable rate based upon 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, 3, or 6 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).

 

Inventory Reserves” means, as of any date of determination, (a) Landlord Reserves in respect of Inventory (including R-22 Inventory), (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 slow moving Inventory (including R-22 Inventory), Mixed Gases, and Inventory (including R-22 Inventory) shrinkage) with respect to Eligible Inventory, Eligible R-22 Inventory, or the Maximum Revolver Amount, including based on the results of appraisals, (c) the Aspen Vendor Cylinder Deposit Liabilities Reserve in respect of Cylinder Inventory, and (d) with respect to Eligible In-Transit Inventory, 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 Eligible In-Transit Inventory or the Maximum Revolver Amount (i) for the estimated costs relating to unpaid freight charges, warehousing or storage charges, taxes, duties, and other similar unpaid costs associated with the acquisition of such Eligible In-Transit Inventory, plus (ii) for the estimated reclamation claims of unpaid sellers of such Eligible In-Transit Inventory.

 

   -26-  

 

 

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. 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.

 

IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

 

ISP” means, with respect to any Letter of Credit, the International Standby Practices 1998 (International Chamber of Commerce Publication No. 590) and any version or revision thereof accepted by the Issuing Bank for use.

 

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 this Agreement, and Issuing Bank shall be a Lender.

 

Joinder” means a joinder agreement substantially in the form of Exhibit J-1 to this Agreement.

 

Landlord Reserve” means, as to each location at which a Borrower has Inventory or books and records located and as to which a Collateral Access Agreement has not been received by Agent, a reserve in an amount equal to 3 months’ rent, storage charges, fees or other amounts under the lease or other applicable agreement relative to such location or, if greater and Agent so elects, the number of months’ rent, storage charges, fess or other amounts for which the landlord, bailee, warehouseman or other property owner will have, under applicable law, a Lien in the Inventory of such Borrower to secure the payment of such amounts under the lease or other applicable agreement relative to such location.

 

Lender” has the meaning set forth in the preamble to this Agreement, shall include Issuing Bank and the Swing Lender, and shall also include any other Person made a party to this Agreement pursuant to the provisions of Section 13.1 of this 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.

 

   -27-  

 

 

Lender Group Expenses” means all (a) costs or expenses (including taxes and insurance premiums) required to be paid by any Loan Party or its Subsidiaries under any of the Loan Documents that are paid, advanced, or incurred by the Lender Group in accordance with the Loan Documents, (b) documented out-of-pocket fees or charges paid or incurred by Agent in connection with the Lender Group’s transactions with each Loan Party and its Subsidiaries under any of the Loan Documents, 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 customary fees and charges imposed or incurred in connection with any background checks or OFAC/PEP searches related to any Loan Party 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 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 5.7(c) of this Agreement, (h) subject to the limitations in Section 10.3, Agent’s and Lenders’ reasonable, documented costs and expenses (including reasonable and 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 or otherwise in connection with the transactions contemplated by the Loan Documents, Agent’s Liens in and to the Collateral, or the Lender Group’s relationship with any Loan Party or any of its Subsidiaries, (i) Agent’s reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees and due diligence expenses) incurred in advising, structuring, drafting, reviewing, administering (including travel, meals, and lodging), or amending, waiving, or modifying the Loan Documents, and (j) Agent’s and each Lender’s reasonable and documented costs and expenses (including reasonable and 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 Loan Party or any of its Subsidiaries or in exercising rights or remedies under the Loan Documents), 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 this 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 that Agent has a first priority perfected Lien in such cash collateral), 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 this 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 this 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).

 

   -28-  

 

 

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 participation in the Letter of Credit Usage pursuant to Section 2.11(e) on such date.

 

Letter of Credit Fee” has the meaning specified therefor in Section 2.6(b) of this Agreement.

 

Letter of Credit Indemnified Costs” has the meaning specified therefor in Section 2.11(f) of this Agreement.

 

Letter of Credit Related Person” has the meaning specified therefor in Section 2.11(f) of this Agreement.

 

Letter of Credit Sublimit” means $2,000,000.

 

Letter of Credit Usage” means, as of any date of determination, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit, plus (b) the aggregate amount of outstanding reimbursement obligations with respect to Letters of Credit which remain unreimbursed or which have not been paid through a Revolving Loan.

 

LIBOR Deadline” has the meaning specified therefor in Section 2.12(b)(i) of this Agreement.

 

LIBOR Notice” means a written notice in the form of Exhibit L-1 to this Agreement.

 

LIBOR Option” has the meaning specified therefor in Section 2.12(a) of this Agreement.

 

LIBOR Rate” means the rate per annum as published by ICE Benchmark Administration Limited (or any successor page or other commercially available source as the Agent may designate from time to time) as of 11:00 a.m., London time, two 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 this Agreement (and, if any such published rate is below zero, then the LIBOR Rate shall be deemed to be zero). Each determination of the LIBOR Rate shall be made by the Agent and shall be conclusive in the absence of manifest error.

 

LIBOR Rate Loan” means each portion of a Revolving Loan that bears interest at a rate determined by reference to the LIBOR Rate.

 

   -29-  

 

 

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.

 

Liquidity” means, as of any date of determination, the sum of Availability and Qualified Cash.

 

Loan” means any Revolving Loan, Swing Loan or Extraordinary Advance made (or to be made) hereunder.

 

Loan Account” has the meaning specified therefor in Section 2.9 of this Agreement.

 

Loan Documents” means this Agreement, the Control Agreements, the Copyright Security Agreement, any Borrowing Base Certificate, the Fee Letter, the Guaranty and Security Agreement, the Intercompany Subordination Agreement, the Intercreditor Agreement, any Issuer Documents, the Letters of Credit, any Mortgages, the Patent Security Agreement, the Subordination Agreement, the Trademark Security Agreement, the Perfection Certificate, any Compliance Certificate, any note or notes executed by Borrowers in connection with this 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 Loan Party or any of its Subsidiaries and any member of the Lender Group in connection with this Agreement (but specifically excluding Bank Product Agreements).

 

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 the Loan Parties and their Subsidiaries, taken as a whole, (b) a material impairment of the Loan Parties’ 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.

 

Material Contract” means, with respect to any Person,(a) the DLA Contract, (b) each contract or agreement to which such Person or any of its Subsidiaries is a party involving aggregate consideration payable to or by such Person or such Subsidiary of $750,000 or more per fiscal year (other than purchase orders in the ordinary course of the business of such Person or such Subsidiary and other than contracts that by their terms may be terminated by such Person or Subsidiary in the ordinary course of its business upon less than 60 days’ notice without penalty or premium) and (c) all other contracts or agreements, the loss of which could reasonably be expected to result in a Material Adverse Effect.

 

Maturity Date” means the earlier of (a) December 19, 2022 or (b) the date that is ninety (90) days prior to (i) the Term Loan Maturity Date or (ii) the date that the Term Loan Obligations shall (or may) otherwise become due and payable.

 

   -30-  

 

 

Maximum Revolver Amount” means $60,000,000, decreased by the amount of reductions in the Revolver Commitments made in accordance with Section 2.4(c) of this Agreement and increased by the amount of any Increase made in accordance with Section 2.14 of this Agreement.

 

Mixed Gases” means mixed refrigerants and/or crossed refrigerants.

 

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 Loan Party 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 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, with respect to the issuance or incurrence of any Indebtedness by any Loan Party or any of its Subsidiaries, 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 Loan Party or such Subsidiary in connection with such incurrence, after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by such Loan Party or such Subsidiary in connection with such incurrence, and (ii) taxes paid or payable to any taxing authorities by such Loan Party or such Subsidiary in connection with such incurrence 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 Loan Party 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 Acceptable Appraisal of Inventory.

 

Non-Consenting Lender” has the meaning specified therefor in Section 14.2(a) of this Agreement.

 

Non-Defaulting Lender” means each Lender other than a Defaulting Lender.

 

   -31-  

 

 

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 issued by the PBGC, (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, if the plan assets are not sufficient to pay all plan liabilities, (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension 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, (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 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), (h) any event or condition that results in the reorganization or insolvency of a Multiemployer Plan under Sections of ERISA, (i) 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, (j) any Pension Plan being in “at risk status” within the meaning of IRC Section 430(i), (k) 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, (l) 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), (m) an “accumulated funding deficiency” within the meaning of the IRC or ERISA (including Section 412 of the IRC or Section 302 of ERISA) or 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, (n) 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, (o) the failure to make by its due date a required payment or contribution with respect to any Pension Plan or Multiemployer Plan, (p) 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 or ERISA Affiliate pursuant to Title IV of ERISA or Section 401(a)(29) of the IRC, or (q) any of the foregoing is reasonably likely to occur in the following 30 days.

 

Obligations” means (a) all loans (including 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 this 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 this 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 any Loan Party is 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; provided that, anything to the contrary contained in the foregoing notwithstanding, the Obligations shall exclude any Excluded Swap Obligation. 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, (ii) interest accrued on the Revolving Loans, (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 this 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 this 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.

 

   -32-  

 

 

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 this Agreement.

 

Other Taxes” means all present or future stamp, court, excise, value added, or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document.

 

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 of this Agreement.

 

Parent” has the meaning specified therefor in the preamble to this Agreement.

 

Participant” has the meaning specified therefor in Section 13.1(e) of this Agreement.

 

Participant Register” has the meaning set forth in Section 13.1(i) of this 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 this Agreement.

 

Payment Conditions” means, at the time of determination with respect to a proposed payment to fund an Acquisition, that:

 

(a)       no Default or Event of Default then exists or would arise as a result of the consummation of such Acquisition,

 

(b)      either

 

           (i)          Excess Availability (x) at all times during the 60 consecutive days immediately preceding the date of the consummation of such Acquisition, calculated on a pro forma basis as if such Acquisition was consummated, on the first day of such period, and (y) after giving effect to such Acquisition is not less than the greater of (A) 40.0% of the Maximum Revolver Amount, and (B) $24,000,000, or

 

           (ii)        both (A) the Fixed Charge Coverage Ratio of the Loan Parties and their Subsidiaries is equal to or greater than 1.00:1.00 for the trailing 12 month period most recently ended for which financial statements are required to have been delivered to Agent pursuant to Schedule 5.1 to this Agreement (calculated as if such Acquisition had been made on the first day of the trailing 12 month period ending immediately prior to the actual occurrence of such Acquisition for which financial statements were delivered or required to have been delivered to Agent under the Loan Documents), and (B) Excess Availability, (x) at all times during the 60 consecutive days immediately preceding the date of the consummation of such Acquisition, calculated on a pro forma basis as if such Acquisition was consummated, on the first day of such period, and (y) after giving effect to such Acquisition is not less than the greater of (A) 30.0% of the Maximum Revolver Amount, and (B) $18,000,000, and

 

(c)       Administrative Borrower has delivered a certificate to Agent certifying that all conditions described in clauses (a) and (b) above have been satisfied.

 

PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

 

   -33-  

 

 

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 this 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 Loan Party 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 Loan Party or its Subsidiaries as a result of such Acquisition other than Permitted Liens,

 

(c)           Borrowers have provided Agent 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 determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the SEC) created by adding the historical combined financial statements of Parent (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, the Loan Parties and their Subsidiaries (i) would have been in compliance with the financial covenants in Section 7 of this Agreement for the fiscal month ended immediately prior to the proposed date of consummation of such proposed Acquisition regardless of whether such financial covenant(s) are required to be tested for such fiscal month, and (ii) are projected to be in compliance with the financial covenants in Section 7 of this Agreement for each of the twelve fiscal months in the period ended one year after the proposed date of consummation of such proposed Acquisition assuming that such financial covenant(s) will be required to be tested in each such fiscal month,

 

(d)           Borrowers have provided Agent with its 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 one year period following the date of the proposed Acquisition, on a quarter by quarter basis), in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Agent,

 

(e)           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,

 

(f)            Borrowers have provided Agent 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 five 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,

 

   -34-  

 

 

(g)           the assets being acquired (other than a de minimis amount of assets in relation to Parent’s and its Subsidiaries’ total assets), or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the business of the Loan Parties and their Subsidiaries or a business reasonably related thereto,

 

(h)           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,

 

(i)          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 this Agreement, as applicable, of this Agreement and, in the case of an acquisition of Equity Interests, the Person whose Equity Interests are acquired shall become a Loan Party and the applicable Loan Party shall have demonstrated to Agent that the new Loan Parties have received consideration sufficient to make the joinder documents binding and enforceable against such new Loan Parties,

 

(j)           the purchase consideration payable in respect of all Permitted Acquisitions (including the proposed Acquisition and including deferred payment obligations) shall not exceed $15,000,000 in the aggregate; provided, that the purchase consideration payable in respect of any single Acquisition or series of related Acquisitions shall not exceed $5,000,000 in the aggregate,

 

(k)           the Payment Conditions are satisfied, and

 

(l)            the Agent shall have received a certificate in form and substance satisfactory to the Agent executed by a Responsible Officer of Parent that the conditions set forth in clauses (a) through (k) have been satisfied.

 

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 the Loan Parties 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 this Agreement or the other Loan Documents,

 

(d)           (i) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business or (ii) the licensing, on an exclusive (subject to Agent’s Lien) or non-exclusive basis, or sale of the Borrowers’ GES Software which does not materially interfere with the business of the Loan Parties and their Subsidiaries as conducted immediately prior to such license or sale,

 

(e)           the granting of Permitted Liens,

 

   -35-  

 

 

(f)            the sale or discount, in each case without recourse, of accounts receivable (other than 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, 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 Loan Party or its Subsidiaries in the ordinary course of business,

 

(j)            the sale or issuance of Equity Interests (other than Disqualified Equity Interests) of Parent,

 

(k)           (i) the lapse of registered patents, trademarks, copyrights and other intellectual property of any Loan Party or any of its Subsidiaries to the extent not economically desirable in the conduct of its business, or (ii) the abandonment of patents, trademarks, 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 this 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 Loan Party or any of its Subsidiaries (other than any Borrower) to a Loan Party (other than Parent), and (ii) from any Subsidiary of any Loan Party that is not a Loan Party to any other Subsidiary of any Loan Party,

 

(o)           dispositions of Equipment or Real Property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property, or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement property; provided, that to the extent the property being transferred constitutes Collateral, such replacement property shall constitute Collateral,

 

(p)           dispositions of assets acquired by the Loan Parties and their Subsidiaries pursuant to a Permitted Acquisition consummated within 12 months of the date of the proposed disposition so long as (i) the consideration received for the assets to be so disposed is at least equal to the fair market value of such assets, (ii) the assets to be so disposed are not necessary or economically desirable in connection with the business of the Loan Parties and their Subsidiaries, and (iii) the assets to be so disposed are readily identifiable as assets acquired pursuant to the subject Permitted Acquisition, and

 

(q)           sales or dispositions of fixed assets (including intangible property related to such fixed assets) not otherwise permitted in clauses (a) through (p) above so long as made at fair market value and the aggregate fair market value of all assets disposed of in fiscal year (including the proposed disposition) would not exceed $500,000;

 

   -36-  

 

 

Permitted Indebtedness” means:

 

(a)           Indebtedness in respect of the Obligations,

 

(b)           Indebtedness as of the Closing Date set forth on Schedule 4.14 to this 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)           Indebtedness arising in connection with the endorsement of instruments or other payment items for deposit,

 

(e)           Indebtedness consisting of (i) unsecured 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; and (ii) unsecured guarantees arising with respect to customary indemnification obligations to purchasers in connection with Permitted Dispositions,

 

(f)            unsecured Indebtedness of any Loan Party that is incurred on the date of the consummation of a Permitted Acquisition solely for the purpose of consummating such 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 and is otherwise on terms and conditions (including economic terms and absence of covenants) reasonably satisfactory to Agent,

 

(g)           Acquired Indebtedness in an amount not to exceed $2,000,000 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 Loan Party 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 Loan Party or its Subsidiaries of Indebtedness under Hedge Agreements that is incurred for the bona fide purpose of hedging the interest rate, commodity, or foreign currency risks associated with such Loan Party’s or such Subsidiary’s 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 “purchase cards”, “procurement cards” or “p-cards”), or Cash Management Services,

 

(l)            unsecured Indebtedness of any Loan Party owing to employees, former employees, former officers, directors, or former directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in connection with the repurchase or redemption by such Loan Party of the Equity Interests of Parent that has 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, (ii) the aggregate amount of all such Indebtedness outstanding at any one time does not exceed $250,000, and (iii) such Indebtedness is subordinated in right of payment to the Obligations on terms and conditions reasonably acceptable to Agent,

 

   -37-  

 

 

(m)          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,

 

(n)           Indebtedness comprising Permitted Investments,

 

(o)           unsecured Indebtedness incurred in respect of netting services, overdraft protection, and other like services, in each case, incurred in the ordinary course of business,

 

(p)           unsecured Indebtedness of any Loan Party or its Subsidiaries in respect of Earn-Outs owing to sellers of assets or Equity Interests to such Loan Party or its Subsidiaries that is incurred in connection with the consummation of one or more Permitted Acquisitions so long as such unsecured Indebtedness is on terms and conditions reasonably acceptable to Agent,

 

(q)           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,

 

(r)            Indebtedness under the Term Loan pursuant to the Term Loan Documents (other than any Refinancing Indebtedness) in an aggregate principal amount not to exceed $88,112,500, minus the amount of any mandatory repayment, prepayment or redemption on or prior to the date of any determination, so long as such Indebtedness is subject to the terms of the Intercreditor Agreement, and

 

(s)            any other unsecured Indebtedness incurred by any Loan Party or any of its Subsidiaries in an aggregate outstanding amount not to exceed $2,000,000 at any one time.

 

Permitted Intercompany Advances” means loans made by (a) a Loan Party to another Loan Party other than Parent, (b) a Subsidiary of a Loan Party that is not a Loan Party to another Subsidiary of a Loan Party that is not a Loan Party, and (c) a Subsidiary of a Loan Party that is not a Loan Party to a Loan Party, so long as the parties thereto are party to the Intercompany Subordination Agreement.

 

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 this Agreement,

 

(f)            guarantees permitted under the definition of Permitted Indebtedness,

 

   -38-  

 

 

(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 Loan Party or any of its Subsidiaries for the purpose of purchasing Equity Interests in Parent so long as the proceeds of such loans are used in their entirety to purchase such Equity Interests in Parent, and (ii) loans and advances to employees and officers of a Loan Party or any of its Subsidiaries in the ordinary course of business for any other business purpose and in an aggregate amount not to exceed $250,000 at any one time,

 

(k)              Permitted Acquisitions,

 

(l)              Investments in the form of capital contributions and the acquisition of Equity Interests made by any Loan Party in any other Loan Party (other than capital contributions to or the acquisition of Equity Interests of Parent),

 

(m)             Investments resulting from entering into (i) Bank Product Agreements, or (ii) agreements relative to obligations permitted under clause (j) of the definition of Permitted Indebtedness,

 

(n)             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,

 

(o)             Investments held by a Person acquired in a Permitted Acquisition to the extent that such Investments were not made in contemplation of or in connection with such Permitted Acquisition and were in existence on the date of such Permitted Acquisition, and

 

(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 $250,000 during the term of this Agreement.

 

Permitted Liens” means:

 

(a)             Liens granted to, or for the benefit of, Agent 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 this Agreement,

 

(d)             Liens set forth on Schedule P-2 to this Agreement; provided, that to qualify as a Permitted Lien, any such Lien described on Schedule P-2 to this Agreement shall only secure the Indebtedness that it secures on the Closing Date and any Refinancing Indebtedness in respect thereof,

 

   -39-  

 

 

(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 or acquired and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that was incurred to acquire the fixed asset purchased or acquired or any Refinancing Indebtedness in respect thereof,

 

(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 Parent’s and its Subsidiaries’ obligations in connection with worker’s compensation or other unemployment insurance,

 

(i)               Liens on amounts deposited to secure Parent’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 Parent’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, 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 a Loan Party 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 Loan Party or its Subsidiaries in connection with a Permitted Acquisition that secure Acquired Indebtedness that is Permitted Indebtedness, and

 

   -40-  

 

 

(s)              Liens securing the Term Loan Obligations permitted under clause (r) of the definition of Permitted Indebtedness; provided that such Liens are subject to the Intercreditor Agreement.

 

Permitted Protest” means the right of any Loan Party 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 Loan Party’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 Loan Party 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 20 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 $6,500,000.

 

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 this Agreement.

 

Post-Increase Revolver Lenders” has the meaning specified therefor in Section 2.14 of this Agreement.

 

Pre-Increase Revolver Lenders” has the meaning specified therefor in Section 2.14 of this Agreement.

 

Projections” means Parent’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a basis consistent with Parent’s 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 the percentage obtained by dividing (A) the Letter of Credit Exposure of such Lender, by (B) the Letter of Credit Exposure of all Lenders, and

 

   -41-  

 

 

(c)             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 this Agreement), the percentage obtained by dividing (i) the Revolving Loan Exposure of such Lender, by (ii) the aggregate Revolving 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 and all Commitments have been terminated, Pro Rata Share under this clause shall be the percentage obtained by dividing (A) the Letter of Credit Exposure of such Lender, by (B) the Letter of Credit Exposure of all Lenders.

 

Protective Advances” has the meaning specified therefor in Section 2.3(d)(i) of this Agreement.

 

Public Lender” has the meaning specified therefor in Section 17.9(c) of this 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 Parent issued in connection with such Acquisition and including the maximum amount of Earn-Outs), paid or delivered by a Loan Party 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.

 

QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. § 5390(c)(8)(D).

 

QFC Credit Support” has the meaning specified therefor in Section 17.16 of this Agreement.

 

Qualified Cash” means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of Parent and its 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 Equity Interests” means and refers to any Equity Interests issued by Parent (and not by one or more of its Subsidiaries) that is not a Disqualified Equity Interest.

 

R-22 Inventory” means the Borrowers’ salable R-22 Refrigerant Gas Inventory. As used in this definition, the term “salable” means R-22 Refrigerant Gas that conforms to Standard 700.

 

R-22 Refrigerant Gas” means chlorodifluoromethane or monochlorodifluoromethane.

 

RCRA” means the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as the same may be amended from time to time.

 

Real Property” means any estates or interests in real property now owned or hereafter acquired by any Loan Party or one of its Subsidiaries and the improvements thereto.

 

Real Property Collateral” means (a) the Real Property identified on Schedule R-1 to this Agreement, and (b) any Real Property hereafter acquired by any Loan Party or one of its Subsidiaries with a fair market value in excess of $1,000,000.

 

   -42-  

 

 

Receivable 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 (including Landlord Reserves for books and records locations and reserves for rebates, discounts, warranty claims, and returns) 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.

 

Reference Period” has the meaning set forth in the definition of EBITDA.

 

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 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 final stated maturity or 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,

 

(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,

 

(e)             if the Indebtedness that is refinanced, renewed or extended was unsecured, such refinancing, renewal or extension shall be unsecured, and

 

(f)              if the Indebtedness that is refinanced, renewed, or extended was secured (i) such refinancing, renewal, or extension shall be secured by substantially the same or less collateral as secured such refinanced, renewed or extended Indebtedness on terms no less favorable to Agent or the Lender Group and (ii) the Liens securing such refinancing, renewal or extension shall not have a priority more senior than the Liens securing such Indebtedness that is refinanced, renewed or extended.

 

Register” has the meaning set forth in Section 13.1(h) of this Agreement.

 

Registered Loan” has the meaning set forth in Section 13.1(h) of this 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.

 

Releases” has the meaning specified therefor in Section 4.11 of this Agreement.

 

   -43-  

 

 

Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

 

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.

 

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

 

Report” has the meaning specified therefor in Section 15.16 of this Agreement.

 

Required Availability” means that Excess Availability exceeds $15,000,000.

 

Required Lenders” means, at any time, Lenders having or holding more than 50% of the aggregate Revolving Loan Exposure of all Lenders; provided, that (i) the Revolving Loan Exposure of any Defaulting Lender shall be disregarded in the determination of the Required Lenders, and (ii) at any time there are two or more Lenders (who are not Affiliates of one another or Defaulting Lenders), “Required Lenders” must include at least two Lenders (who are not Affiliates of one another).

 

Reserves” means, as of any date of determination, Inventory Reserves (including, without limitation, the Aspen Vendor Cylinder Deposit Liabilities Reserve, Receivables Reserves, Bank Product Reserves and those other 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 Loan Party or its Subsidiaries are required to pay under any Section of this 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 Loan Party 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 (a) any declaration or payment of any dividend (fixed or otherwise) or the making of any other payment or distribution, directly or indirectly, on account of Equity Interests (including, without limitation, common or preferred Equity Interests) issued by Parent or any of its Subsidiaries (including any payment in connection with any merger or consolidation involving Parent or any of its Subsidiaries) or to the direct or indirect holders of Equity Interests (including, without limitation, common or preferred Equity Interests) issued by Parent or any of its Subsidiaries in their capacity as such (other than dividends or distributions payable in Qualified Equity Interests issued by Parent or any of its Subsidiaries) or (b) any purchase, redemption, making of any sinking fund or similar payment, or other acquisition or retirement for value (including in connection with any merger or consolidation involving Parent or any of its Subsidiaries) any Equity Interests (including, without limitation, common or preferred Equity Interests) issued by Parent or any of its Subsidiaries, or (c) any making of any payment to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire Equity Interests (including, without limitation, common or preferred Equity Interests) of Parent or any of its Subsidiaries now or hereafter outstanding.

 

   -44-  

 

 

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 this Agreement or in the Assignment and Acceptance or Increase Joinder pursuant to which such Revolving Lender became a Revolving Lender under this 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 this Agreement, and as such amounts may be decreased by the amount of reductions in the Revolver Commitments made in accordance with Section 2.4(c) hereof.

 

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 Credit Priority Collateral” means the “Revolving Credit Priority Collateral” as defined in the Intercreditor Agreement.

 

Revolving Lender” means a Lender that has a Revolving Loan Exposure or Letter of Credit Exposure.

 

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 this Agreement.

 

Sales/Inventory Report” has the meaning specified therefor in Section 5.22(b) of this Agreement.

 

Sanctioned Entity” means (a) a country or territory or a government of a country or territory, (b) an agency of the government of a country or territory, (c) an organization directly or indirectly controlled by a country or territory or its government, or (d) a Person resident in or determined to be resident in a country or territory, in each case of clauses (a) through (d) that is a target of Sanctions, including a target of any country sanctions program administered and enforced by OFAC.

 

Sanctioned Person” means, at any time (a) any Person named on the list of Specially Designated Nationals and Blocked Persons maintained by OFAC, OFAC’s consolidated Non-SDN list or any other Sanctions-related list maintained by any Governmental Authority, (b) a Person or legal entity that is a target of Sanctions, (c) any Person operating, organized or resident in a Sanctioned Entity, or (d) any Person directly or indirectly owned or controlled (individually or in the aggregate) by or acting on behalf of any such Person or Persons described in clauses (a) through (c) above.

 

Sanctions” means individually and collectively, respectively, any and all economic sanctions, trade sanctions, financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes anti-terrorism laws and other sanctions laws, regulations or embargoes, including those imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by OFAC, the U.S. Department of State, the U.S. Department of Commerce, or through any existing or future executive order, (b) the United Nations Security Council, (c) the European Union or any European Union member state, (d) Her Majesty’s Treasury of the United Kingdom, or (d) any other Governmental Authority with jurisdiction over any member of Lender Group or any Loan Party or any of their respective Subsidiaries or Affiliates.

 

   -45-  

 

 

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 this Agreement.

 

Settlement Date” has the meaning specified therefor in Section 2.3(e)(i) of this Agreement.

 

Slow Moving Inventory” means Inventory (excluding R-22 Inventory) not sold, processed, or blended into a saleable product within one (1) year of acquisition thereof by the applicable Borrower.

 

SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

 

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, (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).

 

Standard 700” means, as of any date of determination, Standard 700 of the Air-Conditioning, Heating and Refrigeration Institute, as in effect on the Closing Date.

 

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.

 

   -46-  

 

 

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, Revolving Lenders having or holding more than 66 2/3% of the aggregate Revolving Loan Exposure of all Revolving Lenders; provided, that (i) the Revolving Loan Exposure of any Defaulting Lender shall be disregarded in the determination of the Supermajority Lenders, and (ii) at any time there are two or more Revolving Lenders (who are not Affiliates of one another), “Supermajority Lenders” must include at least two Revolving Lenders (who are not Affiliates of one another or Defaulting Lenders).

 

Supported QFC” has the meaning specified therefor in Section 17.16 of this Agreement.

 

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 this Agreement.

 

Swing Loan” has the meaning specified therefor in Section 2.3(b) of this Agreement.

 

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.

 

Tax Lender” has the meaning specified therefor in Section 14.2(a) of this Agreement.

 

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.

 

Term Loan” means the “Loans” as defined in the Term Loan Agreement.

 

Term Loan Agent” means (a) U.S. Bank National Association, a national banking association, as administrative agent and collateral agent for the Term Loan Lenders under the Term Loan Agreement, (b) any successor to U.S. Bank National Association by assignment or otherwise, and (c) any other party that may become agent under the Term Loan Agreement in connection with a refinancing, renewal or replacement thereof.

 

Term Loan Agreement” means that certain Term Loan Credit and Security Agreement, dated as of October 10, 2017, by and among the Borrowers party thereto, the Guarantors party thereto, the Term Loan Agent, the Term Loan Lenders, and the other parties from time to time party thereto, as amended by that certain Limited Waiver and First Amendment to Term Loan Credit and Security Agreement and Certain Other Documents, dated as of June 29, 2018, as further amended by that certain Waiver and Second Amendment to Term Loan Credit and Security Agreement, dated as of August 14, 2018, as further amended by that certain Waiver and Third Amendment to Term Loan Credit and Security Agreement, dated as of November 30, 2018, as further amended by the Term Loan Fourth Amendment, and as the same may be further amended, amended and restated, restated, supplemented, modified or otherwise in effect from time to time in accordance with terms of the Intercreditor Agreement.

 

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Term Loan Documents” means the Term Loan Agreement and each other agreement, instrument or document executed or delivered pursuant to or in connection with the Term Loan Agreement, as the same may be amended, amended and restated, restated, supplemented, modified or otherwise in effect from time to time in accordance with terms of the Intercreditor Agreement.

 

Term Loan Fourth Amendment” means that certain Waiver and Fourth Amendment to Term Loan Credit and Security Agreement, dated as of the Closing Date, by and among the Borrowers party thereto, the Guarantors party thereto, the Term Loan Agent, and the Term Loan Lenders party thereto.

 

Term Loan Lenders” means the lenders from time to time party to the Term Loan Agreement.

 

Term Loan Maturity Date” means “Term” as defined in the Term Loan Agreement.

 

Term Loan Obligations” means the “Obligations” as such term is defined in the Term Loan Agreement.

 

Term Loan Priority Collateral” has the meaning assigned to such term in the Intercreditor Agreement.

 

Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

 

Trademark Security Agreement” has the meaning specified therefor in the Guaranty and Security 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 version or revision thereof accepted by Issuing Bank for use.

 

Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

 

Unfinanced Capital Expenditures” means Capital Expenditures (a) not financed with the proceeds of any incurrence of Indebtedness (other than the incurrence of any Revolving Loans), the proceeds of any sale or issuance of Equity Interests or equity contributions, the proceeds of any asset sale (other than the sale of Inventory in the ordinary course of business) or any insurance proceeds, and (b) that are not reimbursed by a third person (excluding any Loan Party or any of its Affiliates) in the period such expenditures are made pursuant to a written agreement.

 

United States” means the United States of America (including, without limitation, the Commonwealth of Puerto Rico).

 

Unused Line Fee” has the meaning specified therefor in Section 2.10(b) of this Agreement.

 

U.S. Special Resolution Regimes” has the meaning specified therefor in Section 17.16 of this Agreement.

 

Voidable Transfer” has the meaning specified therefor in Section 17.8 of this Agreement.

 

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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.

 

Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

1.2          Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP; provided, that if Administrative Borrower notifies 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 (or if Agent notifies Administrative Borrower 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 immediately before such Accounting Change took effect 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 “Parent” is used in respect of a financial covenant or a related definition, it shall be understood to mean the Loan Parties and their Subsidiaries on a consolidated basis, unless the context clearly requires otherwise. Notwithstanding anything to the contrary contained herein, (a) all financial covenants contained herein shall be calculated, without giving effect to any election under the Statement of Financial Accounting Standards Board’s Accounting Standards Codification Topic 825 (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.

 

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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, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” 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 regardless of whether demand has been made therefor, and (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 Eastern standard time or Eastern daylight saving time, as in effect in New York, New York 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.

 

1.7          Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

 

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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:

 

(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, or

 

(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, as adjusted for Reserves established by Agent in accordance with Section 2.1(c)), less (2) the sum of (x) the Letter of Credit Usage at such time, plus (y) 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 otherwise become 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) at any time, in the exercise of its Permitted Discretion, to establish and increase or decrease Reserves against the Borrowing Base or the Maximum Revolver Amount; provided, that Agent shall endeavor to notify the Administrative Borrower at or before the time any such Reserve in a material amount is to be established or increased, but a non-willful failure of Agent to so notify the Administrative Borrower shall not be a breach of this Agreement and shall not cause such establishment or increase of any such Reserve to be ineffective. The amount of any Reserve established by Agent, and any changes to the eligibility criteria set forth in the definitions of Eligible Accounts, Eligible Inventory, Eligible In-Transit Inventory, and Eligible R-22 Inventory shall have a reasonable relationship to the event, condition, other circumstance, or fact that is the basis for such reserve or change in eligibility and shall not be duplicative of any other reserve established and currently maintained or eligibility criteria.

 

2.2          [Reserved].

 

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 (which may be delivered through Agent’s electronic platform or portal) and received by Agent no later than 2:00 p.m. (i) on the Business Day that is the requested Funding Date in the case of a request for a Swing Loan, (ii) on the Business Day that is the requested Funding Date in the case of a request for a Base Rate Loan, and (iii) on the Business Day that is three Business Days 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 2:00 p.m. on the applicable Business Day. All Borrowing requests which are not made on-line via Agent’s electronic platform or portal shall be subject to (and unless Agent elects otherwise in the exercise of its sole discretion, such Borrowings shall not be made until the completion of) Agent’s authentication process (with results satisfactory to Agent) prior to the funding of any such requested Revolving Loan.

 

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(b)             Making of Swing Loans. In the case of a Revolving Loan and so long as any of (i) 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 $5,000,000, or (ii) Swing Lender, in its sole discretion, agrees to make a Swing Loan notwithstanding the foregoing limitation, 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 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)(i), 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 (A) in the case of a Base Rate Loan, at least one Business Day prior to the requested Funding Date, or (B) in the case of a LIBOR Rate Loan, prior to 2:00 p.m. at least three Business Days prior to the requested Funding Date. If Agent has notified the Lenders of a requested Borrowing on the Business Day that is one 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 1:00 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.

 

(ii)        Unless Agent receives notice from a Lender prior to 12:30 p.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 1:00 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 Administrative Borrower 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.

 

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(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”).

 

(ii)        Any contrary provision of this Agreement or any other Loan Document notwithstanding, the Lenders hereby authorize Agent 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 10.0% of the Borrowing Base, and (B) subject to Section 2.3(d)(iv) below, 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 this Section 2.3(d), 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)(i).

 

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(iii)       Each Protective Advance and each Overadvance (each, an “Extraordinary Advance”) shall be deemed to be a Revolving Loan hereunder, except that no Extraordinary Advance shall be eligible to be a LIBOR Rate Loan. Prior to Settlement of any Extraordinary Advance, all payments with respect thereto, including interest thereon, shall be payable to Agent solely for its own account. Each Revolving Lender shall be obligated to settle 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 Extraordinary Advance. 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, no Extraordinary Advance may be made by Agent if such Extraordinary Advance would cause the aggregate Revolver Usage to exceed the Maximum Revolver Amount or any Lender’s Pro Rata Share of the Revolver Usage to exceed such Lender’s Revolver Commitments; provided that Agent may make Extraordinary Advances in excess of the foregoing limitations so long as such Extraordinary Advances that cause the aggregate Revolver Usage to exceed the Maximum Revolver Amount or a Lender’s Pro Rata Share of the Revolver Usage to exceed such Lender’s Revolver Commitments are for Agent’s sole and separate account and not for the account of any Lender. No Lender shall have an obligation to settle with Agent for such Extraordinary Advances that cause the aggregate Revolver Usage to exceed the Maximum Revolver Amount or a Lender’s Pro Rata Share of the Revolver Usage to exceed such Lender’s Revolver Commitments as provided in Section 2.3(e) (or Section 2.3(g), as applicable).

 

(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 Swing Loans and 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 any Loan Party’s or any of their 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 5:00 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 3:00 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 3:00 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 and, together with the portion of such Swing Loans or Extraordinary Advances representing Swing Lender’s Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders. 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.

 

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(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 (including Swing Loans and Extraordinary Advances) as of a Settlement Date, Agent shall, as part of 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 or Swing Loans 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 the Loan Parties or their 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. Consistent with Section 13.1(h), Agent, as a non-fiduciary agent for Borrowers, shall maintain a register showing the principal amount and stated interest of the Revolving Loans, 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.

 

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(g)             Defaulting Lenders.

 

(i)         Notwithstanding the provisions of Section 2.4(b)(iii), 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, 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 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.

 

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(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’ Pro Rata Share of Revolver Usage 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 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 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 payable to 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 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 Issuing Bank and 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). Subject to Section 17.14, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

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(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 1:30 p.m. on the date specified herein; provided that, for the avoidance of doubt, any payments deposited into a Controlled Account (as defined in the Guaranty and Security Agreement) shall be deemed not to be received by Agent on any Business Day unless immediately available funds have been credited to Agent’s Account prior to 1:30 p.m. on such Business Day. Any payment received by Agent in immediately available funds in Agent’s Account later than 1:30 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 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)         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 2.4(b)(v) and Section 2.4(e), 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.

 

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(iii)       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 and to pay interest and principal on Extraordinary Advances that are held solely by Agent pursuant to the terms of Section 2.3(d)(iv), 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,

 

(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 Swing Loans), until paid in full,

 

(J)                 tenth,

 

i.                 ratably, to pay the principal of all Revolving Loans (other than Protective Advances and Swing Loans), 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, to (y) the Bank Product Providers based upon amounts then certified by each applicable Bank Product Provider to Agent (in form and substance satisfactory to Agent) to be due and payable to such Bank Product Provider 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,

 

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(K)              eleventh, to pay any other Obligations other than Obligations owed to Defaulting Lenders (including being paid, ratably, to the Bank Product Providers on account of all amounts then due and payable in respect of Bank Product Obligations, 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),

 

(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.

 

(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)        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 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. The Revolver Commitments shall terminate on the Maturity Date or earlier termination thereof pursuant to the terms of this Agreement. Borrowers may reduce the Revolver Commitments, without premium or penalty, to an amount not less than 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). Each such reduction shall be in an amount which is not less than $5,000,000, shall be made by providing not less than ten Business Days prior written notice to Agent, and shall be irrevocable. 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. In connection with any reduction in the Revolver Commitments prior to the Maturity Date, if any Loan Party or any of its Subsidiaries owns any Margin Stock, Borrowers shall deliver to Agent an updated Form U-1 (with sufficient additional originals thereof for each Lender), duly executed and delivered by the Borrowers, together with such other documentation as Agent shall reasonably request, in order to enable Agent and the Lenders to comply with any of the requirements under Regulations T, U or X of the Federal Reserve Board.

 

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

 

(e)           Mandatory Prepayments.

 

(i)            Borrowing Base. If, at any time, (A) the Revolver Usage on such date exceeds (B) the lesser of (x) the Borrowing Base reflected in the Borrowing Base Certificate most recently delivered by Borrowers to Agent, or (y) the Maximum Revolver Amount, in all cases as adjusted for Reserves established by Agent in accordance with Section 2.1(c), then Borrowers shall immediately prepay the Obligations in accordance with Section 2.4(f) in an aggregate amount equal to the amount of such excess.

 

(ii)           Indebtedness. Subject to the terms of the Intercreditor Agreement, on the date of incurrence of any Indebtedness by any Loan Party or any of its Subsidiaries (other than Permitted Indebtedness, but including any refinancing of the Term Loan Obligations), Borrowers shall prepay the Obligations in full in accordance with Section 2.4(f)(ii). The provisions of this Section 2.4(e) shall not be deemed to be implied consent to any such incurrence of Indebtedness otherwise prohibited by the terms of this Agreement.

 

(f)              Application of Payments.

 

(i)             Each prepayment pursuant to Section 2.4(e)(i) shall, (1) so long as no Application Event shall have occurred and be continuing, be applied, first, to the outstanding principal amount of the Revolving Loans until paid in full, and second, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, and (2) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(iii).

 

(ii)            Each prepayment pursuant to Section 2.4(e)(ii) shall, (1) so long as no Application Event shall have occurred and be continuing, be applied, first, to the outstanding principal amount of the Revolving Loans until paid in full (at the sole election of the Agent, with a corresponding permanent reduction in the Maximum Revolver Amount), and second, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, and (2) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(iii).

 

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 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.

 

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(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) and Section 2.12(d), 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 LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and

 

(ii)        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 LIBOR Rate Margin times the average amount of the Letter of Credit Usage during the immediately preceding month.

 

(c)             Default Rate. (i) Automatically upon the occurrence and during the continuation of an Event of Default under Section 8.4 or 8.5 and (ii) upon the occurrence and during the continuation of any other Event of Default (other than an Event of Default under Section 8.4 or 8.5), at the direction of Agent or the Required Lenders, and upon written notice by Agent to Borrowers of such direction (provided, that such notice shall not be required for any Event of Default under Section 8.1), (A) 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 at a per annum rate equal to two percentage points above the per annum rate otherwise applicable thereunder, and (B) the Letter of Credit Fee shall be increased to two 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 and all other fees payable hereunder or under any of the other Loan Documents (other than Letter of Credit Fees) shall be due and payable, in arrears, on the first day of each month, (ii) all Letter of Credit Fees payable hereunder, and all fronting fees and all commissions, other fees, charges and expenses provided for in Section 2.11(k) shall be due and payable, in arrears, on the first Business Day of each month, and (iii) all costs and expenses payable hereunder or under any of the other Loan Documents, and all other Lender Group Expenses shall be due and payable on (x) with respect to Lender Group Expenses outstanding as of the Closing Date, the Closing Date, and (y) otherwise, the earlier of (A) the first day of the month following the date on which the applicable costs, expenses, or Lender Group Expenses were first incurred, or (B) 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 (A) on the first day of each month, all interest accrued during the prior month on the Revolving Loans hereunder, (B) on the first Business 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) on the Closing Date and thereafter as and when incurred or accrued, all other Lender Group Expenses, and (G) 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).

 

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(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 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 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. 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 4:30 p.m. If any payment item is received into Agent’s Account on a non-Business Day or after 4:30 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 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.

 

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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 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 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 Revolver Usage during the immediately preceding month (or portion thereof), which Unused Line Fee shall be due and payable, in arrears, 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. Subject to any limitations set forth in Section 5.7(c), Borrowers shall pay to Agent, field examination, appraisal, electronic collateral reporting establishment 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 Loan Party or its Subsidiaries performed by or on behalf of Agent or for the establishment of electronic collateral reporting systems, and (ii) the fees, charges or expenses paid or incurred by Agent if it elects to employ the services of one or more third Persons to appraise the Collateral, or any portion thereof, to establish electronic collateral reporting systems, or to assess any Loan Party’s or its Subsidiaries’ business valuation.

 

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 standby Letter of Credit or a sight commercial Letter of Credit for the account of Borrowers. 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 (i) irrevocable and made in writing by an Authorized Person, (ii) delivered to Agent and Issuing Bank via telefacsimile or other electronic method of transmission reasonably acceptable to Agent and Issuing Bank and reasonably in advance of the requested date of issuance, amendment, renewal, or extension, and (iii) subject to Issuing Bank’s authentication procedures with results satisfactory to Issuing Bank. Each such request shall be in form and substance reasonably satisfactory to Agent and 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. Issuing 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 a Loan Party or one of its Subsidiaries in respect of (x) a lease of real property, or (y) an employment contract.

 

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(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 the Letter of Credit Sublimit, or

 

(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, 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) Issuing Bank has not otherwise entered into arrangements reasonably satisfactory to it and Borrowers to eliminate 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 or extend 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 not or may not be in 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 prior to the Business Day on which such Issuing Bank issues any Letter of Credit. In addition, each Issuing Bank (other than Wells Fargo or any of its Affiliates) shall, on the first Business Day of each week, submit to Agent a report detailing the daily undrawn amount of each Letter of Credit issued by such Issuing Bank during the prior calendar week. 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 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.

 

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(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 (or lack thereof) 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 any error, omission, interruption or delay in such instruction or request, whether transmitted by mail, courier, electronic transmission, SWIFT, or any other telecommunication including communications through a correspondent;

 

(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)       any prohibition on payment or delay in payment of any amount payable by Issuing Bank to a beneficiary or transferee beneficiary of a Letter of Credit arising out of Anti-Corruption Laws, Anti-Money Laundering Laws, or Sanctions;

 

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

 

(xi)        any foreign language translation provided to Issuing Bank in connection with any Letter of Credit;

 

(xii)       any foreign law or usage as it relates to Issuing Bank’s issuance of a Letter of Credit in support of a foreign guaranty including the expiration of such guaranty after the related Letter of Credit expiration date and any resulting drawing paid by Issuing Bank in connection therewith; or

 

(xiii)       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;

 

provided, that such indemnity shall not be available to any Letter of Credit Related Person claiming indemnification under clauses (i) through (xiii) above to the extent that such Letter of Credit Indemnified Costs may be finally determined in a final, 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.

 

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(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 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. 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 commercially reasonable 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 commercially 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 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 understand that the final form of any Letter of Credit may be subject to such revisions and changes as are deemed necessary or appropriate by Issuing Bank, and Borrowers hereby consent to such revisions and changes not materially different from the application executed in connection therewith. Borrowers are solely responsible for the suitability of the Letter of Credit for Borrowers’ purposes. If Borrowers request Issuing Bank to issue a Letter of Credit for an affiliated or unaffiliated third party (an “Account Party”), (i) such Account Party shall have no rights against Issuing Bank; (ii) Borrowers shall be responsible for the application and obligations under this Agreement; and (iii) communications (including notices) related to the respective Letter of Credit shall be among Issuing Bank and Borrowers. Borrowers will examine the copy of the Letter of Credit and any other documents sent by Issuing Bank in connection therewith and shall promptly notify Issuing Bank (not later than three (3) Business Days following Borrowers’ receipt of documents from Issuing Bank) of any non-compliance with Borrowers’ instructions and of any discrepancy in any document under any presentment or other irregularity. Borrowers understand and agree that Issuing Bank is not required to extend the expiration date of any Letter of Credit for any reason. 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 the then current expiration date of such Letter of Credit to be extended, Borrowers will so notify Agent and Issuing Bank at least 30 calendar days before Issuing Bank is required to notify the beneficiary of such Letter of Credit or any advising bank of such non-extension 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:

 

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(i)           any lack of validity, enforceability or legal effect of any Letter of Credit, any Issuer Document, this Agreement, or any Loan Document, 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;

 

(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 Loan Party or any of its Subsidiaries may have at any time against any beneficiary or transferee beneficiary, any assignee of proceeds, Issuing Bank or any other Person;

 

(vi)         Issuing Bank or any correspondent honoring a drawing upon receipt of an electronic presentation under a Letter of Credit requiring the same, regardless of whether the original Drawing Documents arrive at Issuing Bank’s counters or are different from the electronic presentation;

 

(vii)        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

 

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

 

provided, 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;

 

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(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;

 

(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 any Borrower;

 

(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 presenting 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 Bank equal to 0.25% per annum times the average amount of the Letter of Credit Usage during the immediately preceding month, 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).

 

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(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 any Loans or obligations to make Loans 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, Loans, or obligations to make Loans hereunder,

 

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)          Each standby Letter of Credit shall expire not later than the date that is 12 months after the date of the issuance of such Letter of Credit; provided, that any standby Letter of Credit may provide for the automatic extension thereof for any number of additional periods each of up to one year in duration; provided further, that with respect to any Letter of Credit which extends beyond the Maturity Date, Letter of Credit Collateralization shall be provided therefor on or before the date that is five Business Days prior to the Maturity Date. Each commercial Letter of Credit shall expire on the earlier of (i) 120 days after the date of the issuance of such commercial Letter of Credit and (ii) five Business Days prior to the Maturity Date.

 

(n)           If (i) any Event of Default shall occur and be continuing, or (ii) Availability shall at any time be less than zero, then on the Business Day following the date when the Administrative Borrower receives notice from Agent or the Required Lenders (or, if the maturity of the Obligations has been accelerated, Revolving Lenders with Letter of Credit Exposure representing greater than 50% of the total Letter of Credit Exposure) demanding Letter of Credit Collateralization pursuant to this Section 2.11(n) upon such demand, Borrowers shall provide Letter of Credit Collateralization with respect to the then existing Letter of Credit Usage. If Borrowers fail to provide Letter of Credit Collateralization as required by this Section 2.11(n), the Revolving Lenders may (and, upon direction of Agent, shall) advance, as Revolving Loans the amount of the cash collateral required pursuant to the Letter of Credit Collateralization provision so that the then existing Letter of Credit Usage is cash collateralized in accordance with the Letter of Credit Collateralization provision (whether or not the Revolver Commitments have terminated, an Overadvance exists or the conditions in Section 3 are satisfied).

 

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(o)           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.

 

(p)           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.

 

(q)           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 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.

 

(r)            The provisions of this Section 2.11 shall survive the termination of this Agreement and the repayment in full of the Obligations with respect to any Letters of Credit that remain outstanding.

 

(s)           At Borrowers’ costs and expense, Borrowers shall execute and deliver to Issuing Bank such additional certificates, instruments and/or documents and take such additional action as may be reasonably requested by Issuing Bank to enable Issuing Bank to issue any Letter of Credit pursuant to this Agreement and related Issuer Document, to protect, exercise and/or enforce Issuing Banks’ rights and interests under this Agreement or to give effect to the terms and provisions of this Agreement or any Issuer Document. Each Borrower irrevocably appoints Issuing Bank as its attorney-in-fact and authorizes Issuing Bank, without notice to Borrowers, to execute and deliver ancillary documents and letters customary in the letter of credit business that may include but are not limited to advisements, indemnities, checks, bills of exchange and issuance documents. The power of attorney granted by the Borrowers is limited solely to such actions related to the issuance, confirmation or amendment of any Letter of Credit and to ancillary documents or letters customary in the letter of credit business. This appointment is coupled with an interest.

 

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 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 three months in duration, interest shall be payable at three 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 Agent or 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.

 

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(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 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 2:00 p.m. at least three Business Days 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 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. 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 or required assignment 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 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. If a payment of a LIBOR Rate Loan on a day other than the last day of the applicable Interest Period would result in a Funding Loss, Agent may, in its sole discretion at the request of Borrowers, hold the amount of such payment as cash collateral in support of the Obligations until the last day of such Interest Period and apply such amounts to the payment of the applicable LIBOR Rate Loan on such last day, it being agreed that Agent has no obligation to so defer the application of payments to any LIBOR Rate Loan and that, in the event that Agent does not defer such application, Borrowers shall be obligated to pay any resulting Funding Losses.

 

(iii)          Unless Agent, in its sole discretion, agrees otherwise, Borrowers shall have not more than five 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; Prepayment. Borrowers may convert LIBOR Rate Loans to Base Rate Loans or prepay LIBOR 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)).

 

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(ii)           Subject to the provisions set forth in Section 2.12(d)(iii) below, 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 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.

 

(iii)           Effect of Benchmark Transition Event.

 

(A)          Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, Agent and Administrative Borrower may amend this Agreement to replace the LIBOR Rate with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after Agent has posted such proposed amendment to all Lenders and Administrative Borrower so long as Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders have delivered to Agent written notice that such Required Lenders accept such amendment. No replacement of the LIBOR Rate with a Benchmark Replacement pursuant to this Section 2.12(d)(iii) will occur prior to the applicable Benchmark Transition Start Date.

 

(B)           Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

 

(C)           Notices; Standards for Decisions and Determinations. Agent will promptly notify Administrative Borrower and the Lenders of (1) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (2) the implementation of any Benchmark Replacement, (3) the effectiveness of any Benchmark Replacement Conforming Changes and (4) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by Agent or Lenders pursuant to this Section 2.12(d)(iii) including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.12(d)(iii).

 

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(D)           Benchmark Unavailability Period. Upon Administrative Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, Administrative Borrower may revoke any request for a LIBOR Borrowing of, conversion to or continuation of LIBOR Rate Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, Administrative Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Base Rate Loans. During any Benchmark Unavailability Period, the component of Base Rate based upon the LIBOR Rate will not be used in any determination of the Base Rate.

 

(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, liquidity 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 or liquidity requirements (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 or liquidity as a consequence of Issuing Bank’s or such Lender’s commitments, Loans, participations or other obligations 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 or liquidity requirements 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, at the request of Administrative Borrower, 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 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 or prospective 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.

 

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(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         Incremental Facilities.

 

(a)           At any time during the period from and after the Closing Date through but excluding the date that is the two year anniversary of the Closing Date, at the option of Borrowers (but subject to the conditions set forth in clause (b) below), the Revolver Commitments and the Maximum Revolver Amount may be increased by an amount in the aggregate for all such increases of the Revolver Commitments and the Maximum Revolver Amount not to exceed the Available Increase Amount (each such increase, an “Increase”); provided, that in no event shall the Revolver Commitments and the Maximum Revolver Amount be increased by an amount in excess of the Available Increase Amount. Agent shall invite each Lender to increase its Revolver Commitments (it being understood that no Lender shall be obligated to increase its Revolver Commitments) in connection with a proposed Increase at the interest margin proposed by Borrowers, and if sufficient Lenders do not agree to increase their Revolver Commitments in connection with such proposed Increase, then Agent or Borrowers may invite any prospective lender who is reasonably satisfactory to Agent and Borrowers to become a Lender in connection with a proposed Increase. Any Increase shall be in an amount of at least $5,000,000 and integral multiples of $5,000,000 in excess thereof. In no event may the Revolver Commitments and the Maximum Revolver Amount be increased pursuant to this Section 2.14 on more than three (3) occasions in the aggregate for all such Increases. Additionally, for the avoidance of doubt, it is understood and agreed that in no event shall the aggregate amount of the Increases to the Revolver Commitments exceed $15,000,000.

 

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(b)           Each of the following shall be conditions precedent to any Increase of the Revolver Commitments and the Maximum Revolver Amount in connection therewith:

 

(i)            Agent or Borrowers have obtained the commitment of one or more Lenders (or other prospective lenders) reasonably satisfactory to Agent and Borrowers to provide the applicable Increase and any such Lenders (or prospective lenders), Borrowers, and Agent have signed a joinder agreement to this Agreement (an “Increase Joinder”), in form and substance reasonably satisfactory to Agent, to which such Lenders (or prospective lenders), Borrowers, and Agent are party,

 

(ii)           each of the conditions precedent set forth in Section 3.2 are satisfied,

 

(iii)          in connection with any Increase, if any Loan Party or any of its Subsidiaries owns or will acquire any Margin Stock, Borrowers shall deliver to Agent an updated Form U-1 (with sufficient additional originals thereof for each Lender), duly executed and delivered by the Borrowers, together with such other documentation as Agent shall reasonably request, in order to enable Agent and the Lenders to comply with any of the requirements under Regulations T, U or X of the Federal Reserve Board,

 

(iv)          Borrowers have delivered to Agent updated pro forma Projections (after giving effect to the applicable Increase) for the Loan Parties and their Subsidiaries evidencing compliance on a pro forma basis with Section 7 for the twelve months (on a month-by-month basis) immediately following the proposed date of the applicable Increase (calculated as if a Covenant Testing Period was in effect during the entire twelve month period),

 

(v)           The interest rate margins with respect to the Revolving Loans to be made pursuant to the increased Revolver Commitments shall be the same as the interest rate margin applicable to Revolving Loans hereunder immediately prior to the date of the effectiveness of the increased Revolver Commitments and the Maximum Revolver Amount (the “Increase Date”). Any Increase Joinder may, with the consent of Agent, Borrowers and the Lenders or prospective lenders agreeing to the proposed Increase, effect such amendments to this Agreement and the other Loan Documents as may be necessary to effectuate the provisions of this Section 2.14, and

 

(c)           Unless otherwise specifically provided herein, all references in this Agreement and any other Loan Document to Revolving Loans shall be deemed, unless the context otherwise requires, to include Revolving Loans made pursuant to the increased Revolver Commitments and Maximum Revolver Amount pursuant to this Section 2.14.

 

(d)           Each of the Lenders having a Revolver Commitment prior to the Increase Date (the Pre-Increase Revolver Lenders) shall assign to any Lender which is acquiring a new or additional Revolver Commitment on the Increase Date (the “Post-Increase Revolver Lenders”), and such Post-Increase Revolver Lenders shall purchase from each Pre-Increase Revolver Lender, at the principal amount thereof, such interests in the Revolving Loans and participation interests in Letters of Credit on such Increase Date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Loans and participation interests in Letters of Credit will be held by Pre-Increase Revolver Lenders and Post-Increase Revolver Lenders ratably in accordance with their Pro Rata Share after giving effect to such increased Revolver Commitments.

 

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(e)           The Revolving Loans, Revolver Commitments, and Maximum Revolver Amount established pursuant to this Section 2.14 shall constitute Revolving Loans, Revolver Commitments, and Maximum Revolver Amount under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from any guarantees and the security interests created by the Loan Documents. Borrowers shall take any actions reasonably required by Agent to ensure and demonstrate that the Liens and security interests granted by the Loan Documents continue to be perfected under the Code or otherwise after giving effect to the establishment of any such new Revolver Commitments and Maximum Revolver Amount.

 

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.

 

(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. Accordingly, each Borrower hereby waives any and all suretyship defenses that would otherwise be available to such Borrower under applicable law.

 

(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, whether upon maturity, acceleration, or otherwise, 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 Obligations until such time as all of the Obligations are paid in full, and without the need for demand, protest, or any other notice or formality.

 

(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.

 

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(e)           Without limiting the generality of the foregoing and except as otherwise expressly provided in this Agreement, each Borrower hereby waives presentments, demands for performance, protests and notices, including notices of acceptance of its joint and several liability, notice of any Revolving Loans or any Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Agreement, notices of the existence, creation, or incurring of new or additional Obligations or other financial accommodations 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 right to proceed against any other Borrower or any other Person, to proceed against or exhaust any security held from any other Borrower or any other Person, to protect, secure, perfect, or insure any security interest or Lien on any property subject thereto or exhaust any right to take any action against any other Borrower, any other Person, or any collateral, to pursue any other remedy in any member of the Lender Group’s or any Bank Product Provider’s power whatsoever, 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), any right to assert against any member of the Lender Group or any Bank Product Provider, any defense (legal or equitable), set-off, counterclaim, or claim which each Borrower may now or at any time hereafter have against any other Borrower or any other party liable to any member of the Lender Group or any Bank Product Provider, any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Obligations or any security therefor, and any right or defense arising by reason of any claim or defense based upon an election of remedies by any member of the Lender Group or any Bank Product Provider including any defense based upon an impairment or elimination of such Borrower’s rights of subrogation, reimbursement, contribution, or indemnity of such Borrower against any other Borrower. Without limiting the generality of the foregoing, 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 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 winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any other Borrower or any Agent or Lender. Each of the Borrowers waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement hereof. Any payment by any Borrower or other circumstance which operates to toll any statute of limitations as to any Borrower shall operate to toll the statute of limitations as to each of the Borrowers. Each of the Borrowers waives any defense based on or arising out of any defense of any Borrower or any other Person, other than payment of the Obligations to the extent of such payment, based on or arising out of the disability of any Borrower or any other Person, or the validity, legality, or unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Borrower other than payment of the Obligations to the extent of such payment. Agent may, at the election of the Required Lenders, foreclose upon any Collateral held by Agent by one or more judicial or nonjudicial sales or other dispositions, whether or not every aspect of any such sale is commercially reasonable or otherwise fails to comply with applicable law or may exercise any other right or remedy Agent, any other member of the Lender Group, or any Bank Product Provider may have against any Borrower or any other Person, or any security, in each case, without affecting or impairing in any way the liability of any of the Borrowers hereunder except to the extent the Obligations have been paid.

 

(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.

 

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(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 that arise from the existence, payment, performance or enforcement of the provisions of this Section 2.15, including rights of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Agent, any other member of the Lender Group, or any Bank Product Provider against any Borrower, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from any Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and 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. If any amount shall be paid to any Borrower in violation of the immediately preceding sentence, such amount shall be held in trust for the benefit of Agent, for the benefit of the Lender Group and the Bank Product Providers, and shall forthwith be paid to Agent to be credited and applied to the Obligations and all other amounts payable under this Agreement, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as Collateral for any Obligations or other amounts payable under this Agreement thereafter arising.  Notwithstanding anything to the contrary contained in this Agreement, no Borrower may exercise any rights of subrogation, contribution, indemnity, reimbursement or other similar rights against, and may not proceed or seek recourse against or with respect to any property or asset of, any other Borrower (the “Foreclosed Borrower”), including after payment in full of the Obligations, if all or any portion of the Obligations have been satisfied in connection with an exercise of remedies in respect of the Equity Interests of such Foreclosed Borrower whether pursuant to this Agreement or otherwise.

 

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 to this Agreement (the making of such initial extensions of credit by a Lender being conclusively deemed to be its satisfaction or waiver of the conditions precedent).

 

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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, including the issuance of any Letter of Credit) at any time shall be subject to the following conditions precedent:

 

(a)           the representations and warranties of each Loan Party 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

 

(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. The Commitments shall continue in full force and effect for a term ending on the Maturity Date (unless terminated earlier in accordance with the terms hereof).

 

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 (other than Hedge Obligations) immediately shall become due and payable without notice or demand and Borrowers shall be required to repay all of the Obligations (other than Hedge 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 ten Business Days prior written notice to Agent, to repay all of the Obligations in full and terminate the Commitments. 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, conditioned or delayed).

 

3.6           Conditions Subsequent. The obligation of the Lender Group (or any member thereof) to continue to make Revolving Loans (or otherwise extend credit hereunder) is subject to the fulfillment, on or before the date applicable thereto (as such date may be extended by the Agent in its sole discretion), of the conditions subsequent set forth on Schedule 3.6 to this Agreement (the failure by Borrowers to so perform or cause to be performed such conditions subsequent 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).

 

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4.             REPRESENTATIONS AND WARRANTIES.

 

In order to induce the Lender Group to enter into this Agreement, each of Parent and 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 thereof), as of the date of the making of each Revolving Loan (or any other extension of credit hereunder, including the issuance of any Letter of Credit) made thereafter, as though made on and as of the date of such Revolving Loan (or any other extension of credit, including the issuance of any Letter 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 and each of its Subsidiaries (other than the Immaterial Subsidiaries) (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)           Set forth on Schedule 4.1(b) to this Agreement (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 description of the authorized Equity Interests of each Loan Party, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding.

 

(c)           Set forth on Schedule 4.1(c) to this Agreement (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 the Loan Parties’ direct and indirect Subsidiaries (other than the Immaterial Subsidiaries). All of the outstanding Equity Interests of each such Subsidiary (other than any Immaterial Subsidiary) has been validly issued and is fully paid and non-assessable.

 

(d)           Except with respect to Parent, there are no subscriptions, options, warrants, or calls relating to any shares of any Loan Party’s or any of its Subsidiaries’ Equity Interests, including any right of conversion or exchange under any outstanding security or other instrument. No Loan Party is 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.

 

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.

 

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(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, 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 (including any Material Contract) 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 (including any Material Contract) 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 (including Material Contracts), 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, the terms of the Intercreditor Agreement, 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 to the extent permitted hereby. All of such assets are free and clear of Liens except for Permitted Liens.

 

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4.6           Litigation. There are no actions, suits, or proceedings pending or, to the knowledge of Parent or any Borrower, 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.

 

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 to this Agreement, since June 30, 2019, no event, circumstance, or change has occurred that has or could reasonably be expected to result in a Material Adverse Effect.

 

4.9           Solvency.

 

(a)           Each Loan Party is 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.

 

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.

 

(b)           Each Loan Party and each of the ERISA Affiliates has complied in all material respects with ERISA, the IRC and all applicable laws regarding each Employee Benefit Plan.

 

(c)           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.

 

(d)           Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the IRC has received a favorable determination letter from the Internal Revenue Service or is entitled to rely on an opinion letter provided under a volume submitted program. To the best knowledge of each Loan Party and the ERISA Affiliates, nothing has occurred which would prevent, or cause the loss of, such qualification.

 

(e)           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.

 

(f)            No Notification Event exists or has occurred in the past six (6) years.

 

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

 

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4.11         Environmental Condition. Except as set forth on Schedule 4.11 to this Agreement, (a) to Parent’s and each Borrower’s knowledge, no Loan Party’s nor any of its Subsidiaries’ properties or assets has ever been used by a Loan Party or its Subsidiaries 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 Parent’s and each Borrower’s knowledge, 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, (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, and (e) (i) there are no visible signs of release, spills, discharges, leaks or disposal (collectively referred to as “Releases”) of Hazardous Materials at, upon, under or within any Real Property or any premises leased by the Loan Parties and/or their respective Subsidiaries, (ii) there are no underground storage tanks or polychlorinated biphenyls on the Real Property or any premises leased by the Loan Parties and/or their respective Subsidiaries, and (iii) no Hazardous Materials are present on any Real Property or any premises leased by the Loan Parties and/or their respective Subsidiaries, excepting such quantities as are handled in accordance with all applicable manufacturer’s instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of the Loan Parties and their respective Subsidiaries or of their tenants.

 

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 the industry of any Loan Party or its Subsidiaries) furnished by or on behalf of a Loan Party or its Subsidiaries in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Loan Documents or Parent’s Exchange Act filings) 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 the industry of any Loan Party or its Subsidiaries) 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 November 13, 2019 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). As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

 

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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, as amended) (the “Patriot Act”).

 

4.14         Indebtedness. Set forth on Schedule 4.14 to this Agreement is a true and complete list of all Indebtedness of each Loan Party and each of its Subsidiaries outstanding immediately prior to the Closing Date ‎(other than unsecured Permitted Indebtedness outstanding immediately prior to the Closing Date with respect to any ‎one transaction or a series of related transactions in an amount not to exceed $100,000; provided, that all ‎such Permitted Indebtedness, in the aggregate, shall not exceed $250,000) 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 Indebtedness as of the Closing Date.

 

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 other Taxes upon a Loan Party and its Subsidiaries and 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, that 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. Neither any Loan Party nor any of its Subsidiaries owns any Margin Stock or 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. Neither any Loan Party nor any of its Subsidiaries expects to acquire any Margin Stock.

 

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; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws. No Loan Party or any of its Subsidiaries is in violation of any Sanctions. No Loan Party nor any of its Subsidiaries nor, to the knowledge of such Loan Party, any director, officer, employee, agent or Affiliate of such Loan Party or such Subsidiary (a) is a Sanctioned Person or a Sanctioned Entity, (b) has any assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. Each of the Loan Parties and its Subsidiaries has implemented and maintains in effect policies and procedures designed to ensure compliance with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. Each of the Loan Parties and its Subsidiaries, and to the knowledge of each such Loan Party, each director, officer, employee, agent and Affiliate of each such Loan Party and each such Subsidiary, is in compliance with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. No proceeds of any Loan made or Letter of Credit issued 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, or otherwise used in any manner that would result in a violation of any Sanction, Anti-Corruption Law or Anti-Money Laundering Law by any Person (including any Lender, Bank Product Provider, or other individual or entity participating in any transaction).

 

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4.19         Employee and Labor Matters. Except as set forth in Schedule 4.19 attached hereto, there is (i) no unfair labor practice complaint pending or, to the knowledge of any Borrower, threatened against any Loan Party or its Subsidiaries before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against any Loan Party or its Subsidiaries which arises out of or under any collective bargaining agreement and that could reasonably be expected to result in a material liability, (ii) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened in writing against any Loan Party or its Subsidiaries that could reasonably be expected to result in a material liability, or (iii) to the knowledge of any Borrower, no union representation question existing with respect to the employees of any Loan Party or its Subsidiaries and no union organizing activity taking place with respect to any of the employees of any Loan Party or its Subsidiaries. None of any Loan Party 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 Loan Party 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, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. All material payments due from any Loan Party 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 Parent, 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         Parent as a Holding Company. Parent is a holding company and does not have any material liabilities (other than liabilities arising under the Loan Documents and the Term Loan Documents or with respect to ordinary course Exchange Act compliance and corporate governance), own any material assets (other than the Equity Interests of Borrowers) or engage in any operations or business (other than the ownership of Borrowers and their Subsidiaries).

 

4.21         Leases. 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, subject to Permitted Protests, all of such material leases are valid and subsisting and 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 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 a Borrower’s 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 Accounts.

 

4.23         Eligible Inventory. As to each item of Inventory that is identified by Borrowers as Eligible Inventory, Eligible In-Transit Inventory, or Eligible R-22 Inventory in a Borrowing Base Certificate submitted to Agent, such Inventory is (a) of good and merchantable quality, free from known defects, and (b) 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 Inventory (in the case of Eligible In-Transit Inventory, after giving effect to any exclusions therefrom specified in the definition of Eligible In-Transit Inventory).

 

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4.24         Location of Inventory. Except as set forth in Schedule 4.24, the Inventory of the Loan Parties and their Subsidiaries is not stored with a bailee, warehouseman, or similar party and is located only at, or in-transit between, the locations identified on Schedule 4.24 to this Agreement (as such Schedule may be updated pursuant to Section 5.14).

 

4.25         Inventory Records. Each Loan Party keeps correct and accurate records itemizing and describing the type, quality, and quantity of its and its Subsidiaries’ Inventory and the book value thereof.

 

4.26         Term Loan Documents. Borrowers have delivered to Agent a complete and correct copy of the Term Loan Documents. The execution, delivery and performance of each of the Term Loan Documents has been duly authorized by all necessary corporate or limited liability company action on the part of each Borrower who is a party thereto. Each Term Loan Document is the legal, valid and binding obligation of each Borrower who is a party thereto, enforceable against each such Borrower in accordance with its terms, in each case, except (i) as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting generally the enforcement of creditors' rights and (ii) the availability of the remedy of specific performance or injunctive or other equitable relief is subject to the discretion of the court before which any proceeding therefor may be brought. Neither Parent nor any Borrower is in default in the performance or compliance with any provisions thereof.

 

4.27         Hedge Agreements. On each date that any Hedge Agreement is executed by any Hedge Provider, 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.

 

4.28         Material Contracts. Set forth on Schedule 4.28 (as such Schedule may be updated from time to time in accordance herewith) is a list of the Material Contracts of each Loan Party and its Subsidiaries as of the most recent date on which Parent provided the Compliance Certificate pursuant to Section 5.1; provided, that Borrowers may amend Schedule 4.28 to add additional Material Contracts so long as such amendment occurs by written notice to Agent on the date that Parent provides the Compliance Certificate. Except for matters which, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, each Material Contract (other than those that have expired at the end of their normal terms) (a) is in full force and effect and is binding upon and enforceable against the applicable Loan Party or its Subsidiary and, to Parent’s and each Borrower’s knowledge, each other Person that is a party thereto in accordance with its terms, (b) has not been otherwise amended or modified (other than amendments or modifications permitted by Section 6.6(b)), and (c) is not in default due to the action or inaction of the applicable Loan Party or its Subsidiary.

 

4.29         Non-Loan Party Subsidiaries. No Subsidiary of Parent that is not a Loan Party owns any intellectual property that is material to the business of the Loan Parties.

 

4.30         Immaterial Subsidiaries. No Immaterial Subsidiary (a) owns any assets (other than assets of a de minimis nature), (b) has any liabilities (other than liabilities of a de minimis nature), or (c) engages in any business activity.

 

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5.             AFFIRMATIVE COVENANTS.

 

 Each of Parent and each Borrower covenants and agrees that, until the 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, with copies to each Lender, each of the financial statements, reports, and other items set forth on Schedule 5.1 to this Agreement 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 Parent, (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; provided that it is hereby agreed and acknowledged that the billing systems and practices of Aspen may be changed to integrate and conform with the billing systems and practices of the other Borrowers.

 

5.2           Reporting. Borrowers (a) will deliver to Agent (and if so requested by Agent, with copies for each Lender) each of the reports set forth on Schedule 5.2 to this Agreement 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. Borrowers and Agent hereby agree that the delivery of the Borrowing Base Certificate through the Agent’s electronic platform or portal, subject to Agent’s authentication process, by such other electronic method as may be approved by Agent from time to time in its sole discretion, or by such other electronic input of information necessary to calculate the Borrowing Base as may be approved by Agent from time to time in its sole discretion, shall in each case be deemed to satisfy the obligation of Borrowers to deliver such Borrowing Base Certificate, with the same legal effect as if such Borrowing Base Certificate had been manually executed by Borrowers and delivered to Agent.

 

5.3           Existence. Except as otherwise permitted under Section 6.3 or Section 6.4, each Loan Party 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 Loan Party 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 Loan Party will, and will cause each of its Subsidiaries to, pay in full before delinquency or before the expiration of any extension period all Taxes imposed, levied, or assessed against it, or any of its assets or in respect of any of its income, businesses, or franchises, other than Taxes not in excess of $50,000 outstanding at any time and other than to the extent that the validity of such Tax is the subject of a Permitted Protest.

 

5.6           Insurance.

 

(a)           Each Loan Party will, and will cause each of its Subsidiaries to, at Borrowers’ expense, maintain insurance respecting each of each Loan Party’s and its Subsidiaries’ assets wherever located, covering liabilities, losses or damages as are customarily are 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 reasonably acceptable to Agent (it being agreed that, as of the Closing Date, the Loan Parties’ existing insurance providers as set forth in the certificates of insurance delivered to Agent on or about the Closing Date shall be deemed to be reasonably 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 reasonably acceptable to Agent). All property insurance policies 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 lender’s 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 the lender’s loss payable and additional insured endorsements in favor of Agent and shall provide for not less than thirty days (ten days in the case of non-payment) prior written notice to Agent of the exercise of any right of cancellation. If any Loan Party or its Subsidiaries fails to maintain such insurance, Agent may arrange for such insurance, but at Borrowers’ expense and without any responsibility on Agent’s part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Notwithstanding the foregoing, subject to the terms of the Intercreditor Agreement, if requested by the Loan Parties in writing within fifteen (15) days after Agent’s receipt of any insurance proceeds or condemnation awards relating to any loss or destruction of Equipment or Real Property, Loan Parties may use such proceeds or awards to repair or replace such Equipment or Real Property (and until so used, the proceeds shall be held by Agent as cash Collateral) so long as (i) no Event of Default exists; (ii) such repair or replacement is promptly undertaken and concluded within one hundred eighty (180) days from the date of receipt of such proceeds, in accordance with plans satisfactory to Agent determined in good faith; (iii) replacement buildings are constructed on the sites of the original casualties and are of comparable size, quality and utility to the destroyed buildings; (iv) the repaired or replaced Collateral is free of Liens, other than Permitted Liens; and (v) Loan Parties comply with disbursement procedures for such repair or replacement as Agent may reasonably require.

 

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(b)           Borrowers shall give Agent prompt notice of any loss exceeding $250,000 covered by the casualty or business interruption insurance of any Loan Party or its Subsidiaries. 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.

 

(c)           If at any time the area in which any Real Property that is subject to a Mortgage is located is designated a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount and on terms that are satisfactory to Agent and all Lenders from time to time, and otherwise comply with the Flood Laws or as is otherwise satisfactory to Agent and all Lenders.

 

5.7           Inspection.

 

(a)           Each Loan Party 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, that 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, at Borrowers’ expense in accordance with the provisions of the Fee Letter, subject to the limitations set forth below in Section 5.7(c).

 

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(b)           Each Loan Party will, and will cause each of its Subsidiaries to, permit Agent and each of its duly authorized representatives or agents to conduct field examinations, appraisals or valuations at such reasonable times and intervals as Agent may designate, at Borrowers’ expense in accordance with the provisions of the Fee Letter, subject to the limitations set forth below in Section 5.7(c).

 

(c)           So long as no Event of Default shall have occurred and be continuing during a calendar year, Borrowers shall not be obligated to reimburse Agent for more than (i) with respect to the first calendar year from and after the Closing Date, two (2) field examinations in such calendar year, and for each calendar year thereafter, one (1) field examination in such calendar year (increasing to two (2) field examinations if at any time during such calendar year Excess Availability is less than 20.0% of the Maximum Revolver Amount), and (ii) two (2) inventory appraisals in such calendar year (increasing to three (3) inventory appraisals if at any time during such calendar year Excess Availability is less than 20.0% of the Maximum Revolver Amount), in each case except for field examinations and appraisals conducted in connection with a proposed Permitted Acquisition (whether or not consummated) or any field examinations and inventory appraisals conducted prior to the Closing Date. Additional field examinations and inventory appraisals beyond those reimbursed pursuant to this Agreement may be permitted at Agent’s reasonable request and expense.

 

5.8           Compliance with Laws. Each Loan Party 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.

 

5.9           Environmental.

 

(a)           Each Loan Party will, and will cause each of its Subsidiaries to, 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)           Each Loan Party will, and will cause each of its Subsidiaries to, ensure that the Real Property and all operations and businesses conducted thereon remains in material compliance with all with Environmental Laws and such Loan Party will not, and will cause its Subsidiaries not to, place or permit to be placed any Hazardous Materials on any Real Property except as permitted by applicable law or appropriate Governmental Authorities,

 

(c)           Each Loan Party will, and will cause each of its Subsidiaries to, establish and maintain a system to assure and monitor continued compliance with all applicable Environmental Laws which system shall include periodic review of such compliance,

 

(d)           Each Loan Party will, and will cause each of its Subsidiaries to, (i) employ in connection with the use of any Real Property appropriate technology necessary to maintain material compliance with any applicable Environmental Laws and (ii) dispose of any and all Hazardous Materials generated at the Real Property only at facilities and with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws. The Loan Parties shall, and shall cause their respective Subsidiaries to, use best efforts to obtain certificates of disposal, such as hazardous waste manifest receipts, from all treatment, transport, storage or disposal facilities or operators employed by such Loan Parties or their respective Subsidiaries in connection with the transport or disposal of any Hazardous Materials generated at any Real Property,

 

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(e)           Each Loan Party will, and will cause each of its Subsidiaries to, promptly notify Agent of any Release of which any Loan Party has knowledge of a Hazardous Material in any reportable quantity from or onto any Real 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,

 

(f)            Each Loan Party will, and will cause each of its Subsidiaries to, promptly, but in any event within five 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,

 

(g)           Each Loan Party will, and will cause each of its Subsidiaries to, promptly forward to Agent copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Materials at any other site owned, operated or used by the Loan Parties and/or their respective Subsidiaries to dispose of Hazardous Materials and shall continue to forward copies of correspondence between the applicable Loan Party or Subsidiary, and the Governmental Authority regarding such claims to Agent until the claim is settled. The Loan Parties shall promptly forward to Agent copies of all documents and reports concerning any Release or threat of Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event being hereinafter referred to as a “Hazardous Discharge”) that the Loan Parties and/or their respective Subsidiaries are required to file under any Environmental Laws. Such information is to be provided solely to allow Agent to protect Agent's security interest in and Lien on the Real Property and the Collateral.

 

(h)           Each Loan Party will, and will cause each of its Subsidiaries to, respond promptly to any Hazardous Discharge or Environmental Action and take all necessary Remedial Actions in order to safeguard the health of any Person and to avoid subjecting the Collateral or Real Property to any Environmental Lien. If the Loan Parties shall fail to, or fail to cause their respective Subsidiaries to, respond promptly to any Hazardous Discharge or Environmental Action or the Loan Parties shall fail to, or fail to cause their respective Subsidiaries to, comply with any of the requirements of any Environmental Laws, Agent on behalf of Lenders may, but without the obligation to do so, for the sole purpose of protecting Agent's interest in the Collateral: (A) give such notices or (B) enter onto the Real Property (or authorize third parties to enter onto the Real Property) and take such actions as Agent (or such third parties as directed by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge or Environmental Action. All reasonable costs and expenses incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate for Base Rate Loans constituting Revolving Loans shall be paid upon demand by the Loan Parties, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the terms of this Agreement or any other agreement between Agent, any Lender and the Loan Parties.

 

(i)            Promptly upon the written request of Agent subsequent to a Hazardous Discharge, the Loan Parties shall provide Agent, at the Loan Parties’ sole expense, with an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the potential costs in connection with abatement, cleanup and removal of any Hazardous Materials found on, under, at or within the Real Property. Any report or investigation of such Hazardous Discharge proposed and acceptable to an appropriate Governmental Authority that is charged to oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent. If such estimates, individually or in the aggregate, exceed $100,000, Agent shall have the right to require Loan Parties to post a bond, letter of credit or other security reasonably satisfactory to Agent to secure payment of these costs and expenses.

 

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(j)            The Loan Parties shall defend and indemnify each Indemnified Person harmless from and against all loss, liability, damage and expense, claims, costs, fines and penalties, including attorney's fees, suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any Hazardous Materials affecting the Real Property, whether or not the same originates or emerges from the Real Property or any contiguous real estate, including any loss of value of the Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Agent or any Lender. The Loan Parties’ obligations under this Section 5.9(j) shall arise upon the discovery of the presence of any Hazardous Materials at the Real Property, whether or not any federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Materials. The Loan Parties’ obligation and the indemnifications hereunder shall survive the termination of this Agreement. For the avoidance of doubt, this clause (j) shall be supplemental to the provisions of Section 10.3.

 

(k)           For purposes of Section 4.11 and 5.9, all references to Real Property shall be deemed to include all of Loan Parties’ and their respective Subsidiaries’ right, title and interest in and to its owned and leased premises.

 

5.10         Disclosure Updates. Each Loan Party will, promptly and in no event later than five 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. Each Loan Party will, at the time that any Loan Party forms any direct or indirect Subsidiary, acquires any direct or indirect Subsidiary after the Closing Date, within ten days of such event (or such later date as permitted by Agent in its sole discretion) (a) cause such new Subsidiary (i) if such Subsidiary is a Domestic Subsidiary and Administrative Borrower requests, subject to the consent of Agent, that such Domestic Subsidiary be joined as a Borrower hereunder, to provide to Agent a Joinder to this Agreement, and (ii) to provide to Agent a joinder to the Guaranty and Security Agreement, in each case, 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 of greater than $1,000,000), 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, subject to the Intercreditor Agreement, of such newly formed or acquired Subsidiary); (b) provide, or cause the applicable 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 Loan Party 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 material 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 the Governing Documents of such Subsidiary and 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.

 

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5.12         Further Assurances. Each Loan Party 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, customary 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 of the Loan Parties (whether now owned or hereafter arising or acquired, tangible or intangible, real or personal) (other than any assets expressly excluded from the Collateral (as defined in the Guaranty and Security Agreement) pursuant to Section 3 of the Guaranty and Security Agreement), to create and perfect Liens in favor of Agent in any Real Property acquired by any other Loan Party with a fair market value in excess of $1,000,000, 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 Loan Party that is a CFC if providing such documents would result in material 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 not to exceed 15 Business Days 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 the Loan Parties, including all of the outstanding capital Equity Interests of Parent’s Subsidiaries (in each case, other than with respect to any assets expressly excluded from the Collateral (as defined in the Guaranty and Security Agreement) pursuant to Section 3 of the Guaranty and Security Agreement). Notwithstanding anything to the contrary contained herein (including Section 5.11 hereof and this Section 5.12) or in any other Loan Document, (x) Agent shall not accept delivery of any Mortgage from any Loan Party unless each of the Lenders has received 45 days prior written notice thereof and Agent has received confirmation from each Lender that such Lender has completed its flood insurance diligence, has received copies of all flood insurance documentation and has confirmed that flood insurance compliance has been completed as required by the Flood Laws or as otherwise satisfactory to such Lender and (y) Agent shall not accept delivery of any joinder to any Loan Document with respect to any Subsidiary of any Loan Party that is not a Loan Party, if such Subsidiary that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation unless such Subsidiary has delivered a Beneficial Ownership Certification in relation to such Subsidiary and Agent has completed its Patriot Act searches, OFAC/PEP searches and customary individual background checks for such Subsidiary, the results of which shall be satisfactory to Agent.

 

5.13         Lender Meetings. Parent will, within 90 days after the close of each fiscal year of Parent, at the request of Agent or of the Required Lenders and upon reasonable prior notice, hold a meeting (at a mutually agreeable location and time or, at the option of Agent, 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 the Loan Parties and their Subsidiaries and the projections presented for the current fiscal year of Parent. In addition, on a weekly basis from and after the Sale/Refinancing Process Start Date (as defined in the Term Loan Agreement), the Loan Parties, their advisors, the CRO and the Investment Banker (as defined in the Term Loan Agreement) shall participate in telephonic update calls with the Agent, the Lenders and their advisors concerning the Sale/Refinancing Process (as defined in the Term Loan Agreement) and including disclosure of materials relating thereto reasonably requested by the Agent and/or Lenders.

 

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5.14         Location of Inventory; Chief Executive Office. Each Loan Party will, and will cause each of its Subsidiaries to, keep (a) their Inventory only at the locations identified on Schedule 4.24 to this Agreement (provided that Borrowers may amend Schedule 4.24 to this Agreement so long as such amendment occurs by written notice to Agent not less than ten days prior to the date on which such Inventory is moved to such new location and such new location is within the United States), and (b) their respective chief executive offices only at the locations identified on Schedule 7 to the Guaranty and Security Agreement. Each Loan Party will, and will cause each of its Subsidiaries to, use their commercially reasonable efforts to obtain Collateral Access Agreements for each of the locations identified on Schedule 7 to the Guaranty and Security Agreement and Schedule 4.24 to this Agreement.

 

5.15         OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws. Each Loan Party will, and will cause each of its Subsidiaries to comply with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. Each of the Loan Parties and its Subsidiaries shall implement and maintain in effect policies and procedures designed to ensure compliance by the Loan Parties and their Subsidiaries and their respective directors, officers, employees, agents and Affiliates with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws.

 

5.16         Material Contracts. Contemporaneously with the delivery of each Compliance Certificate pursuant to Section 5.1, Borrowers will provide Agent with copies of (a) each Material Contract entered into since the delivery of the previous Compliance Certificate, and (b) each material amendment or modification of any Material Contract entered into since the delivery of the previous Compliance Certificate.

 

5.17         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 or ERISA Affiliate 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 Adverse Effect, (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, (e) operate each Employee Benefit Plan in such a manner that will not incur any material tax liability under the IRC (including Section 4980B of the IRC), and (e) furnish to Agent upon Agent’s written request such additional information about any Employee Benefit Plan for which any Loan Party or ERISA Affiliate could reasonably expect to incur any material liability. With respect to each Pension Plan (other than a Multiemployer Plan) except as could not reasonably be expected to result in 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.

 

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5.18         Bank Products. The Loan Parties shall establish their primary depository and treasury management relationships with Wells Fargo or one or more of its Affiliates on or before the ninetieth (90th) day after the Closing Date (or such later date as the Agent may agree to in its sole discretion). Following the date on which such depository and treasury management relationships are established pursuant to the immediately preceding sentence, the Loan Parties shall (a) maintain such depository and treasury management relationships at all times during the term of the Agreement and (b) deposit or cause to be deposited promptly all of their Collections in a Controlled Account (as defined in the Guaranty and Security Agreement) at one of the Controlled Account Banks (as defined in the Guaranty and Security Agreement) as required pursuant to the terms of the Guaranty and Security Agreement.

 

5.19         Credit Enhancement. If Term Loan Agent or any Term Loan Lender (or any trustee or agent acting for or behalf of such holder, lender, secured party or equivalent Person) receives any additional guaranty, any additional assets as collateral that do not already constitute Collateral, letter of credit, or any other credit enhancement after the Closing Date, the Loan Parties shall cause the same to be granted to the Lenders, subject to the terms of the Intercreditor Agreement.

 

5.20         Chief Restructuring Officer. At all times from and after the two (2) week anniversary of the Closing Date (subject to the third sentence of this Section 5.20), a representative of Grant Thornton LLP (or another firm acceptable to the Agent) shall serve as Chief Restructuring Officer of the Loan Parties (the “CRO”). Parent and each Borrower hereby acknowledges and agrees that (x) the CRO is authorized to cooperate fully with the Lenders and their advisors in connection with their ongoing examination of the Loan Parties’ financial affairs, finances, financial condition, business and operations, and (y) neither Parent nor any Borrower, nor any Subsidiary thereof, will terminate the CRO’s engagement or materially modify or reduce the CRO’s role or responsibilities without the prior written consent of the Agent. In the event that, following the retention of a CRO, the Borrowers’ LTM Adjusted EBITDA (as defined in the Term Loan Agreement) exceeds the greater of (x) 105% of the minimum LTM Adjusted EBITDA (as defined in the Term Loan Agreement) and (y) $9.55 million for two consecutive quarterly reporting periods, the Borrowers may, in their discretion and upon notice to the Lenders, terminate the CRO if the Borrowers reasonably determine that the services of the CRO are no longer needed; provided, that no Default or Event of Default shall have occurred or be continuing.

 

5.21         Term Loan Milestones and Cooperation.

 

(a)                Parent and the Borrowers shall provide written notice to Agent of a Trigger Event (as defined in the Term Loan Agreement) and of any waiver, modification or extension of any milestone set forth in Section 6.16 of the Term Loan Agreement as promptly as possible (but in any event within two (2) Business Days) after any such Trigger Event or any such waiver, modification or extension.

 

(b)                Parent and the Borrowers shall deliver copies of any and all deliverables and notices (including, without limitation, Buyer List (as defined in the Term Loan Agreement), draft and final versions of the CIM (as defined in the Term Loan Agreement), purchase agreements, proposal letters, term sheets, and/or commitment letters) delivered to, and or received from, the Term Loan Agent or any Term Loan Lender as promptly as possible (but in any event within two (2) Business Days) of delivery to the Term Loan Agent and/or any Term Loan Lender in accordance with the terms of Section 6.16 of the Term Loan Agreement, which, in each case shall be in form and substance satisfactory to the Agent.

 

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5.22         Bi-Weekly Reporting; Monthly Lender Calls.

 

(a)                On a bi-weekly basis thereafter (by 5:00 p.m. New York City time no later than the third (3rd) Business Day of each second week), or on such other schedule as may be agreed to by the Term Loan Agent with respect to the Term Loan Documents from time to time, furnish Agent and Lenders with a 13-week rolling cash flow forecast, which shall (i) show receipts and disbursements of the Loan Parties projected through such period and (ii) commencing with the second such forecast and for each such forecast thereafter, contain a comparison of the Loan Parties’ actual receipts and disbursements for the immediately preceding two-week period or other applicable period to the projected receipts and disbursements for such period as set forth in the cash flow forecast for such period (each such report, a “13-Week Cash Flow Forecast”). The Borrowers represent, warrant and covenant that each cash flow forecast shall be, and when delivered has been, prepared in good faith based upon assumptions believed by the Borrowers to be reasonable in light of current market conditions, it being acknowledged and agreed by Agent and the Lenders that projections as to future events are inherently uncertain and are not a guarantee of financial performance and that actual results may differ from projected results.

 

(b)                Concurrently with the delivery of any 13-Week Cash Flow Forecast under the preceding clause (a), furnish Agent and Lenders with a bi-weekly (or other applicable period) sales and inventory report, which shall (i) show, with respect to the Loan Parties on a consolidated basis for the immediately preceding two-week or other applicable period, (x) sales by gas, including volumes and average pricing, and (y) inventory by gas, including cost and pounds on hand, and (ii) otherwise be in form and substance, and with such detail, as is reasonably acceptable to the Required Lenders (each such report, a “Sales/Inventory Report”; together with the 13-Week Cash Flow Forecast, the “Bi-Weekly Reporting Package”).

 

(c)                All deliverables required pursuant to clauses (a) and (b) above (i) shall be, unless otherwise required under Section 5.2, made only at such times and in such terms as required by the Term Loan Lenders in accordance with the Term Loan Documents from time to time, and (ii) shall not be deemed to supersede or amend the requirements set forth in Section 5.2 hereof in any respect.

 

(d)                Not later than the third (3rd) Business Day of each month, the Loan Parties shall cause their senior management to make themselves available during normal business hours for a telephonic meeting with the Lenders and their advisors to discuss any information regarding the Loan Parties’ business results and operations reasonably requested by the Lenders. In addition, on a weekly basis from and after the Sale/Refinancing Process Start Date (as defined in the Term Loan Agreement), the Loan Parties, their advisors, the CRO and the Investment Banker (as defined in the Term Loan Agreement) shall participate in telephonic update calls with the Lenders and their advisors concerning the Sale/Refinancing Process (as defined in the Term Loan Agreement) and including disclosure of materials relating thereto reasonably requested by the Lenders.

 

6.             NEGATIVE COVENANTS.

 

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

 

6.1          Indebtedness. Each Loan Party will not, and will not 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. Each Loan Party will not, and will not 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.

 

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6.3           Restrictions on Fundamental Changes. Each Loan Party will not, and will not 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 no merger may occur between Parent and any Borrower, (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, and (iii) any merger between Subsidiaries of any Loan Party 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 Loan Party with nominal assets and nominal liabilities, (ii) the liquidation or dissolution of a Loan Party (other than Parent or any Borrower) or any of its wholly-owned Subsidiaries (other than any Borrower) 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 Loan Party that is not a Loan Party (other than any such Subsidiary the Equity Interests of which (or any portion thereof) is subject to a Lien in favor of Agent) so long as all of the assets of such liquidating or dissolving Subsidiary are transferred to a Subsidiary of a Loan Party that is not liquidating or dissolving,

 

(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, or

 

(d)                change its classification/status for U.S. federal income tax purposes.

 

6.4           Disposal of Assets. Other than Permitted Dispositions or transactions expressly permitted by Sections 6.3 or 6.9, each Loan Party will not, and will not permit any of its Subsidiaries to, convey, sell, lease, license, assign, transfer, or otherwise dispose of any of its or their assets (including by an allocation of assets among newly divided limited liability companies pursuant to a “plan of division”).

 

6.5           Nature of Business. Each Loan Party will not, and will not permit any of its Subsidiaries to, make any material change in the nature of its or their business as described in Parent’s existing Exchange Act filings 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 any Loan Party and its Subsidiaries from engaging in any business that is reasonably related or ancillary to its or their business or interfere with its existing business.

 

6.6           Prepayments, Payments of Certain Indebtedness and Amendments. Each Loan Party will not, and will not 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 Loan Party or its Subsidiaries, other than (A) the Obligations in accordance with this Agreement, (B) Hedge Obligations, (C) Permitted Intercompany Advances, or (D) the Term Loan Obligations in accordance with the Term Loan Agreement to the extent permitted by Section 6.6(a)(iii), or

 

(ii)            make any payment on account of Indebtedness 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

 

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(iii)           make any payments (whether voluntary, scheduled or mandatory, or a prepayment, redemption, defeasance, purchase or acquisition) with respect to the Term Loan Obligations, except for:

 

(A)              any regularly scheduled payments or mandatory prepayments (including, without limitation, any mandatory payments on account of “Excess Cash Flow” (as defined in the Term Loan Agreement as in effect on the Closing Date)) so long as (1) expressly permitted under the Intercreditor Agreement, (2) no Default or Event of Default shall have occurred and be continuing or would exist therefrom, (3) Excess Availability at all times during the thirty (30) consecutive days immediately preceding the date of such payment or prepayment, calculated on a pro forma basis as if such payment or prepayment was made on the first day of such period shall not be less than $12,000,000, and (4) on a pro forma basis, Average Excess Availability for the ninety (90) consecutive day period immediately after giving effect to the making of such payment or prepayment shall not be less than $12,000,000, and

 

(B)              any other payments, prepayments, redemptions, defeasances, purchase or acquisitions so long as (1) expressly permitted under the Intercreditor Agreement, (2) no Default or Event of Default shall have occurred and be continuing or would exist therefrom, (3) Excess Availability at all times during the thirty (30) consecutive days immediately preceding the date of such payment, prepayment, redemption, defeasance, purchase or acquisition, calculated on a pro forma basis as if such payment, prepayment, redemption, defeasance, purchase or acquisition was made on the first day of such period shall not be less than $12,000,000, (4) on a pro forma basis, Average Excess Availability for the ninety (90) consecutive day period immediately after giving effect to the making of such payment, prepayment, redemption, defeasance, purchase or acquisition shall not be less than $12,000,000, and (5) the Agent shall have, in its sole discretion, consented in writing to such payment, prepayment, redemption, defeasance, purchase or acquisition.

 

(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) Hedge Obligations, (C) Permitted Intercompany Advances, and (D) Indebtedness permitted under clauses (c), (h), (j) and (k) of the definition of Permitted Indebtedness,

 

(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,

 

(iii)          any Material Contract except to the extent that such amendment, modification, or change would not, individually or in the aggregate, reasonably be expected to be materially adverse to the interests of the Lenders, or

 

(iv)          the Term Loan Documents other than to the extent expressly permitted pursuant to the terms of the Intercreditor Agreement.

 

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6.7           Restricted Payments. Each Loan Party will not, and will not permit any of its Subsidiaries to, make any Restricted Payment; provided, that so long as it is permitted by law,

 

(a)           so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrowers and their Subsidiaries may make distributions to Parent for the sole purpose of allowing Parent to, and Parent shall use the proceeds thereof solely to make distributions to former employees, officers, or directors of Parent (or any spouses, ex-spouses, or estates of any of the foregoing) on account of redemptions of Equity Interests of Parent held by such Persons; provided, that the aggregate amount of such redemptions made by Parent during the term of this Agreement plus the amount of Indebtedness outstanding under clause (l) of the definition of Permitted Indebtedness, does not exceed $350,000 in the aggregate,

 

(b)          so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, Parent may make distributions to former employees, officers, or directors of Parent (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 Parent on account of repurchases of the Equity Interests of Parent held by such Persons; provided, that such Indebtedness was incurred by such Persons solely to acquire Equity Interests of Parent, or

 

(c)           Parent’s Subsidiaries may make distributions to Parent (i) in an amount sufficient to pay franchise taxes and other fees required to maintain the legal existence of the Loan Parties and their Subsidiaries to the extent actually used by Parent to pay such taxes, costs and expenses, and (ii) in an amount sufficient to pay out-of-pocket legal, accounting and filing costs and other expenses in the nature of overhead in the ordinary course of business of the Loan Parties and their Subsidiaries, in the case of clause (ii) in an aggregate amount not to exceed $3,000,000 in any fiscal year.

 

6.8           Accounting Methods. Each Loan Party will not, and will not 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 or harmonize accounting methods among the Borrowers).

 

6.9           Investments. Each Loan Party will not, and will not 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. Each Loan Party will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction with any Affiliate of any Loan Party or any of its Subsidiaries except for:

 

(a)          transactions (other than the payment of management, consulting, monitoring, or advisory fees) between such Loan Party or its Subsidiaries, on the one hand, and any Affiliate of such Loan Party 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 Loan Party or its Subsidiaries in excess of $100,000 for any single transaction or series of related transactions, and (ii) are no less favorable, taken as a whole, to such Loan Party or its Subsidiaries, as applicable, than would be obtained in an arm’s length transaction with a non-Affiliate,

 

(b)          any indemnity provided for the benefit of directors (or comparable managers) of a Loan Party or one of its Subsidiaries so long as it has been approved by such Loan Party’s or such Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law,

 

(c)          the payment of reasonable compensation, severance, or employee benefit arrangements to employees, officers, and outside directors of a Loan Party or one of its Subsidiaries in the ordinary course of business and consistent with industry practice so long as it has been approved by such Loan Party’s or such Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law,

 

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(d)           (i) transactions solely among the Loan Parties (other than Parent), and (ii) transactions solely among Subsidiaries of Loan Parties that are not Loan Parties,

 

(e)           transactions permitted by Section 6.3, Section 6.7, or Section 6.9, and

 

(f)           agreements for the non-exclusive licensing of intellectual property, or distribution of products, in each case, among the Loan Parties and their Subsidiaries for the purpose of the counterparty thereof operating its business, and agreements for the assignment of intellectual property from any Loan Party or any of its Subsidiaries to any Loan Party.

 

6.11         Use of Proceeds. Each Loan Party will not, and will not 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, (ii) to pay the fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, the Term Loan Documents, and the transactions contemplated hereby and thereby, in each case, as set forth in the Disbursement Letter, and (iii) to pay a portion of the amounts required to be paid by the Borrowers to the Term Loan Lender pursuant to the terms of the Term Loan Fourth Amendment as set forth in the Disbursement Letter, and (b) thereafter, consistent with the terms and conditions hereof, for their lawful and permitted purposes; provided that (x) no part of the proceeds of the Loans 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, (y) no part of the proceeds of any Loan or Letter of Credit will be used, directly or indirectly, to make any payments to a Sanctioned Entity or a Sanctioned Person, to fund any investments, loans or contributions in, or otherwise make such proceeds available to, a Sanctioned Entity or a Sanctioned Person, to fund any operations, activities or business of a Sanctioned Entity or a Sanctioned Person, or in any other manner that would result in a violation of Sanctions by any Person, and (z) that no part of the proceeds of any Loan or Letter of Credit will be used, directly or indirectly, in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Sanctions, Anti-Corruption Laws or Anti-Money Laundering Laws.

 

6.12         Limitation on Issuance of Equity Interests. Except for the issuance or sale of Qualified Equity Interests by Parent, each Loan Party will not, and will not permit any of its Subsidiaries to, issue or sell any of its Equity Interests.

 

6.13        Inventory with Bailees. Each Borrower will not, and will not permit any of its Subsidiaries to, store its Inventory at any time with a bailee, warehouseman, or similar party except as set forth on Schedule 4.24 (as such Schedule may be amended in accordance with Section 5.14).

 

6.14         Parent as Holding Company. Parent will not incur any material liabilities (other than liabilities arising under the Loan Documents and the Term Loan Documents or with respect to ordinary course Exchange Act compliance and corporate governance), own or acquire any material assets (other than the Equity Interests of the other Loan Parties) or engage itself in any operations or business, except in connection with its ownership of the other Loan Parties and its rights and obligations under the Loan Documents.

 

6.15         Employee Benefits. Parent and each Borrower will not, and will not permit any of its Subsidiaries to,

 

(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 liability of any Loan Party or ERISA Affiliate to the PBGC.

 

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(b)          Fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all amounts 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 Adverse Effect.

 

(c)           Permit to exist, or allow any ERISA Affiliate to permit to exist, any accumulated funding deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Pension Plan which exceeds $250,000 with respect to all Pension Plans in the aggregate.

 

(d)          Acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to a Loan Party or with respect to any ERISA Affiliate if such Person sponsors, maintains, or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (i) any Pension Plan or (ii) any Multiemployer Plan.

 

(e)          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.

 

(f)           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 Pension Plan under the IRC.

 

6.16          Non-Loan Party Subsidiaries. Parent and each Borrower will not permit any of their respective Subsidiaries that are not Loan Parties to own any Intellectual Property (as defined in the Guaranty and Security Agreement) that is material to the business of the Loan Parties.

 

6.17          Acquisition of Indebtedness. Neither Parent nor any Subsidiary of Parent shall purchase, tender for or otherwise acquire, directly or indirectly, any interest in the outstanding Term Loan Obligations. Parent and Borrowers shall promptly cancel all Term Loan Obligations so acquired by such Loan Parties or any of their Subsidiaries or Affiliates, and no Term Loan Obligations may be issued in substitution or exchange for any such Term Loan Obligations.

 

6.18          Anti-Layering. Neither Parent nor any Subsidiary of Parent will create or incur any Indebtedness which is subordinated or junior in right of payment to any other Indebtedness of the Loan Parties, unless such Indebtedness is also subordinated or junior in right of payment, in the same manner and to the same extent, to the Obligations.

 

6.19          Immaterial Subsidiaries. No Loan Party may permit any Immaterial Subsidiary to (a) own any assets (other than assets of a de minimis nature), (b) have any liabilities (other than liabilities of a de minimis nature), or (c) engage in any business activity.

 

7.             FINANCIAL COVENANTS.

 

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

 

(a)           Fixed Charge Coverage Ratio. Upon the occurrence and during the continuance of a Covenant Testing Period, have a Fixed Charge Coverage Ratio, when measured on a trailing twelve (12) fiscal month basis as of the end of: (A) the last fiscal month immediately preceding the occurrence of such Covenant Testing Period for which financial statements have most recently been delivered pursuant to Section 5.1, and (B) each fiscal month for which financial statements are delivered pursuant to Section 5.1 during such Covenant Testing Period, in each case, of at least 1.0 to 1.0.

 

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(b)          Minimum Liquidity. At all times on and after the Closing Date, maintain Liquidity of no less than $5,000,000 (of which at least $3,000,000 must be derived from Availability).

 

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), and such failure continues for a period of three Business Days, (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;

 

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 Parent or any Borrower is not in good standing in its jurisdiction of organization), 5.6, 5.7 (solely if Parent or any Borrower refuses to allow Agent or its representatives or agents to visit its respective properties, inspect its assets or books or records, examine and make copies of its books and records, or discuss its affairs, finances, and accounts with officers and employees of any Borrower), 5.10, 5.11, 5.13, 5.14, 5.15, 5.17, 5.18, 5.20, 5.21 or 5.22 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 Parent or any Borrower is not in good standing in its jurisdiction of organization), 5.4, 5.5, 5.8, 5.12, 5.16, or 5.19 of this Agreement and such failure continues for a period of ten 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 thirty 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 $500,000, 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 forty (40) consecutive days at any time after the entry of any such judgment, order, or award during which (i) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (ii) a stay of enforcement thereof is not in effect, or (b) enforcement proceedings are commenced upon such judgment, order, or award;

 

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

 

8.5           Involuntary Bankruptcy. 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 sixty 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;

 

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 $500,000 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, (b) a default by a Loan Party or any of its Subsidiaries of one or more Hedge Agreements to which a Loan Party or any of its Subsidiaries is a party, (c) a “Default” or an “Event of Default” (or equivalent term) under the Term Loan Documents (and as defined therein), or (d) an enforcement notice delivered by the Term Loan Agent pursuant to the terms of the Intercreditor Agreement;

 

8.7           Representations. 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 was 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) or if any Guarantor repudiates or revokes or purports to repudiate or revoke any such guaranty;

 

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 (with respect to Revolving Credit Priority Collateral) or second priority (with respect to assets that do not constitute Revolving Credit Priority Collateral) Lien on the Collateral covered thereby, except as a result of a disposition of the applicable Collateral in a transaction permitted under this Agreement;

 

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;

 

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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, (b) an accumulated funding deficiency or funding shortfall in excess of $500,000 occurs or exists, whether or not waived, with respect to any Pension Plan, individually or in the aggregate, (c) a Notification Event, which could reasonably be expected to result in liability in excess of $500,000, either individually or in the aggregate, or (d) any Loan Party or ERISA Affiliate completely or partially withdraws from one or more Multiemployer Plans and incurs Withdrawal Liability in excess of $500,000 in the aggregate, or fails to make any Withdrawal Liability payment when due;

 

8.13         Invalidity of Intercreditor Agreement. Any material provision of the Intercreditor Agreement shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any Person shall contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations, for any reason shall not have the priority contemplated by this Agreement or the Intercreditor Agreement;

 

8.14         Material Contracts. Any Material Contract is cancelled, terminated, amended, restated or otherwise modified in a manner which has a Material Adverse Effect;

 

8.15         Conduct of Business. If a Loan Party or any of its Subsidiaries is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material of the business affairs of Parent and its Subsidiaries, taken as a whole; or

 

8.16         Material Adverse Effect. Any change in Loan Parties’ results of operations or condition (financial or otherwise) which in Agent’s Permitted Discretion has a Material Adverse Effect.

 

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 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)          by written notice to the Administrative Borrower, (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)          by written notice to Borrowers, 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.

 

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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 Parent and Borrowers.

 

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 Default or 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 of Parent and 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 Parent or any Borrower may in any way be liable.

 

10.2         The Lender Group’s Liability for Collateral. Each of Parent and 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 the Loan Parties.

 

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10.3         Indemnification. Each Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons, the Issuing Bank, 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 (provided, that Borrowers shall not be liable for costs and expenses (including attorneys’ fees) of any Lender (other than Wells Fargo) incurred in advising, structuring, drafting, reviewing, administering or syndicating the Loan Documents), 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 Parent’s and its Subsidiaries’ compliance with the terms of the Loan Documents (provided, that the indemnification in this clause (a) shall not extend to (i) disputes solely between or among the Lenders that do not involve any acts or omissions of any Loan Party, or (ii) disputes solely between or among the Lenders and their respective Affiliates that do not involve any acts or omissions of any Loan Party; it being understood and agreed that the indemnification in this clause (a) shall extend to Agent (but not the Lenders unless the dispute involves an act or omission of a Loan Party) relative to disputes between or among Agent on the one hand, and one or more Lenders, or one or more of their Affiliates, on the other hand, or (iii) any claims for Taxes, which shall be governed by Section 16, other than Taxes which relate 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 Loan Party 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 Loan Party 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 Loan Party or Agent, as the case may be, they shall be sent to the respective address set forth below:

 

If to any Loan Party: c/o HUDSON TECHNOLOGIES COMPANY
  One Blue Hill Plaza, 14th Floor
  P.O. Box 1541
  Pearl River, NY 10965
  Attn: Brian F. Coleman, President, COO
  E-mail: bcoleman@hudsontech.com
  Fax No. (845) 512-6070

 

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with copies to: WIGGIN AND DANA LLP
  Two Stamford Plaza
  281 Tresser Boulevard
  Stamford, CT 06901
  Attn:  Michael Grundei, Esq.
  E-mail: mgrundei@wiggin.com
  Fax No.:  (203) 363-7676
   
If to Agent: WELLS FARGO BANK, NATIONAL ASSOCIATION
  100 Park Avenue, 14th Floor
  New York, NY 10017
  Attn: Loan Portfolio Manager
  Fax No.:  (855) 609-0580
   
with copies to: MORGAN, LEWIS & BOCKIUS LLP
  101 Park Avenue
  New York, NY 10178
  Attn:  Marshall Stoddard, Jr., Esq.
  E-mail: marshall.stoddard@morganlewis.com
  Fax No.:  (212) 309-6001

 

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 three 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 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.

 

(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 NEW YORK.

 

(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 NEW YORK, STATE OF NEW YORK; 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 OF PARENT AND 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).

 

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(c)          TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF PARENT AND 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 OF PARENT AND 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 COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(d)           EACH OF PARENT AND EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK AND THE STATE OF NEW YORK, 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.

 

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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)          Administrative Borrower; provided, that no consent of Administrative Borrower shall be required (1) if a Default or 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; provided further, that Administrative Borrower shall be deemed to have consented to a proposed assignment unless it objects thereto by written notice to Agent within five Business Days after having received notice thereof; and

 

                (B)          Agent, Swing Lender, and Issuing Bank.

 

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

 

                (A)          no assignment may be made to (i) a Competitor, unless an Event of Default has occurred and is continuing under Section 8.1, 8.4 or 8.5, or (ii) 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 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).

 

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(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 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) decrease the amount or postpone 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.

 

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(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 Loan Party 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 to secure obligations of such Lender, including any pledge 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; provided, that no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(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 Loans (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 Revolving 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 Commitment 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.

 

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(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. No Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a 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.

 

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 the Fee Letter), and no consent with respect to any departure by Parent or 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 Section 2.4(c),

 

(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,

 

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(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 used in the financial covenants in this Agreement or the definition of Borrowing Base (or any of the defined terms that are used in such definition) 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,

 

(vii)     other than pursuant to the Intercreditor Agreement and as permitted by Section 15.11, release or contractually subordinate 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)       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,

 

(x)        amend, modify, or eliminate any of the provisions of Section 2.4(b)(i), (ii) or (iii) or Section 2.4(e) or (f),

 

(xi)       at any time that any Real Property is included in the Collateral, add, increase, renew or extend any Loan, Letter of Credit or Commitment hereunder until the completion of flood due diligence, documentation and coverage as required by the Flood Laws or as otherwise satisfactory to all Lenders, or

 

(xii)      amend, modify, or eliminate any of the provisions of Section 13.1 with respect to assignments to, or participations with, Persons who are Loan Parties or Affiliates of a Loan Party;

 

(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;

 

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(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 Inventory, Eligible In-Transit Inventory, and Eligible R-22 Inventory) 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

 

(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 Loan Party, shall not require consent by or the agreement of any Loan Party, (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 other than any of the matters governed by Section 14.1(a)(i) through (iii) that affect such Lender, and (iii) any amendment contemplated by Section 2.12(d)(iii) of this Agreement in connection with a Benchmark Transition Event or an Early Opt-in Election shall be effective as contemplated by such Section 2.12(d)(iii) hereof.

 

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 five 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, (ii) an assumption of its Pro Rata Share of participations in the Letters of Credit, and (iii) Funding Losses). 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 Parent and 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, or to take any other action with respect to any Collateral or Loan Documents which may be necessary to perfect, and maintain perfected, the security interests and Liens upon Collateral pursuant to the Loan Documents, (c) make Revolving Loans, for itself or on behalf of Lenders, as provided in the 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 Loan Party 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.

 

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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 Loan Party 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 Loan Party 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 Loan Party or its Subsidiaries. No Agent-Related Person shall have any liability to any Lender, and Loan Party or any of their respective Affiliates if any request for a Loan, Letter of Credit or other extension of credit was not authorized by the applicable Borrower. Agent shall not be required to take any action that, in its opinion or in the opinion of its counsel, may expose it to liability or that is contrary to any Loan Document or applicable law or regulation.

 

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 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).

 

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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 Loan Party 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 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).

 

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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 the Loan Parties and their Subsidiaries, each Lender hereby agrees that it is and shall be obligated to pay to Agent such Lender’s ratable share 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 Loan Party 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 Loan Party or its Affiliates or any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of such Loan Party 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 (ten 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 has occurred and is continuing under Section 8.1, 8.4 or 8.5) 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.

 

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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 Loan Party 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 Loan Party or its Affiliates or any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of such Loan Party or such other 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 the Loan Parties and their Subsidiaries 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 no Loan Party or 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 Loan Party 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, 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, (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 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)(iii)(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 authorizes (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 (by contract or otherwise) any Lien granted to or held by Agent on any property under any Loan Document (a) to the holder of any Permitted Lien on such property if such Permitted Lien secures purchase money Indebtedness (including Capitalized Lease Obligations) which constitute Permitted Indebtedness and (b) to the extent Agent has the authority under this Section 15.11 to release its Lien on such property. Notwithstanding the provisions of this Section 15.11, the Agent shall be authorized, without the consent of any Lender and without the requirement that an asset sale consisting of the sale, transfer or other disposition having occurred, to release any security interest in any building, structure or improvement located in an area determined by the Federal Emergency Management Agency to have special flood hazards provided that such building, structure or improvement has an immaterial fair market value.

 

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(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 a Loan Party or any of its 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 request of Agent, set off against the Obligations, any amounts owing by such Lender to any Loan Party or its Subsidiaries or any deposit accounts of any Loan Party 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 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.

 

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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 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 respecting any Loan Party 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 the Loan Parties and their Subsidiaries and will rely significantly upon Parent’s and its Subsidiaries’ books and records, as well as on representations of Parent’s and Borrowers’ personnel,

 

(d)                 agrees to keep all Reports and other material, non-public information regarding the Loan Parties 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.

 

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 Loan Party or its Subsidiaries to Agent that has not been contemporaneously provided by such Loan Party 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 Loan Party 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 promptly shall request of Borrowers the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from such Loan Party 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.

 

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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.

 

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 Taxes, except as otherwise required by applicable law, and in the event any deduction or withholding of Taxes is required, the applicable Loan Party shall make the requisite withholding, promptly pay over to the applicable Governmental Authority the withheld tax, and furnish to Agent as promptly as possible after the date the payment of any such Tax is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Loan Parties. Furthermore, if any such Tax is an Indemnified Tax or an Indemnified Tax is 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 promptly pay any Other Taxes or reimburse Agent for such Other Taxes upon Agent's demand. The 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 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.

 

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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 any 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;

 

(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 (including a withholding statement and copies of the tax certification documentation for its beneficial owner(s) of the income paid to the intermediary, if required based on its status provided on the Form W-8IMY); 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 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 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 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.

 

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(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.

 

(e)                If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable due diligence and 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 (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 (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.

 

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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 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 Parent, 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 Parent 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.

 

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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 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 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.

 

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17.8         Revival and Reinstatement of Obligations. 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 or to be subject to turn over pursuant to the Intercreditor Agreement (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. This provision shall survive the termination of this Agreement and the repayment in full of the Obligations.

 

17.9           Confidentiality.

 

(a)                Agent and Lenders each individually (and not jointly or jointly and severally) agree that material, non-public information regarding the Loan Parties 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 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.

 

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(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)                Each Loan Party agrees that Agent may make materials or information provided by or on behalf of Borrowers hereunder (collectively, “Borrower Materials”) available to the Lenders by posting the Communications on IntraLinks, SyndTrak or a substantially similar secure electronic transmission system (the “Platform”). The Platform is provided “as is” and “as available.” Agent does not warrant the accuracy or completeness of the Borrower Materials, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by Agent in connection with the Borrower Materials or the Platform. In no event shall Agent or any of the Agent-Related Persons have any liability to the Loan Parties, any Lender or any other person for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Party’s or Agent’s transmission of communications through the Internet, except to the extent the liability of such person is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such person’s gross negligence or willful misconduct. Each Loan Party further agrees that 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 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.

 

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17.11       Patriot Act; Due Diligence. Each Lender that is subject to the requirements of the Patriot Act hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender to identify each Loan Party in accordance with the Patriot Act. In addition, Agent and each Lender shall have the right to periodically conduct due diligence on all Loan Parties, their senior management and key principals and legal and beneficial owners. Each Loan Party agrees to cooperate in respect of the conduct of such due diligence and further agrees that the reasonable costs and charges for any such due diligence by Agent shall constitute Lender Group Expenses hereunder and be for the account of Borrowers.

 

17.12       Integration. This Agreement, 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.

 

17.13        Hudson Technologies as Agent for Borrowers. Each Borrower hereby irrevocably appoints Hudson Technologies as the borrowing agent and attorney-in-fact for all Borrowers (the “Administrative Borrower”) which appointment shall remain in full force and effect unless and until Agent shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed Administrative Borrower. 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), (c) to enter into Bank Product Provider Agreements on behalf of Borrowers and their Subsidiaries, and (d) 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.

 

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17.14       Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)                the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

(b)                the effects of any Bail-In Action on any such liability, including, if applicable:

 

(i)            a reduction in full or in part or cancellation of any such liability;

 

(ii)          a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)        the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 

17.15        Intercreditor Agreement. Each Lender hereunder authorizes and instructs Agent to enter into the Intercreditor Agreement and acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Lender. Each Lender hereby acknowledges that it has received and reviewed the Intercreditor Agreement. Each of the Lenders agrees to be bound by the Intercreditor Agreement. Any reference in this Agreement or any other Loan Document to “first priority lien” “or second priority” or words of similar effect in describing the Liens created hereunder or under any other Loan Document shall be understood to refer to such priority as set forth in the Intercreditor Agreement. Nothing in this Section 17.15 shall be construed to provide that any Loan Party is a third party beneficiary of the provisions of the Intercreditor Agreement or may assert any rights, defenses or claims on account of the Intercreditor Agreement or this Section 17.15 (other than as set forth in the last sentence hereof), and each Loan Party (x) agrees that nothing in the Intercreditor Agreement is intended or shall impair the obligation of any Loan Party to pay the obligations under this Agreement, or any other Loan Document as and when the same become due and payable in accordance with their respective terms, or to affect the relative rights of the creditors with respect to any Loan Party or except as expressly otherwise provided in the Intercreditor Agreement as to a Loan Party’s obligations, such Loan Party’s properties, and (y) if Agent shall enforce its rights or remedies in violation of the terms of the Intercreditor Agreement, agrees that it shall not use such violation as a defense to any enforcement of remedies otherwise made in accordance with the terms of this Agreement and the other Loan Documents by Agent or any Lender or assert such violation as a counterclaim or basis for set-off or recoupment against Agent or any Lender and agrees to abide by the terms of this Agreement and to keep, observe and perform the several matters and things herein intended to be kept, observed and performed by it. In furtherance of the foregoing, notwithstanding anything to the contrary set forth herein, prior to the payment in full of the Term Loan Obligations to the extent that any Loan Party is required to (i) give physical possession over any Term Loan Priority Collateral to Agent under this Agreement or the other Loan Documents, such requirement to give possession shall be satisfied if such Term Loan Priority Collateral is delivered to and held by the Term Loan Agent pursuant to the Intercreditor Agreement and (ii) take any other action with respect to the Term Loan Priority Collateral or any proceeds thereof, including delivery of such Collateral or proceeds thereof to Agent, such action shall be deemed satisfied to the extent undertaken by the Term Loan Agent.

 

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17.16       Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States): In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow.]

 

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

 

  PARENT:
   
  HUDSON TECHNOLOGIES, INC., a New York corporation

 

  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  BORROWERS:
   
  HUDSON TECHNOLOGIES COMPANY, a Tennessee corporation

 

  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  HUDSON HOLDINGS, INC., a Nevada corporation

 

  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  ASPEN REFRIGERANTS, INC., a Delaware corporation

 

  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

[Hudson Technologies – Signature Page to Credit Agreement]

 

 

 

 

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

 

  By: /s/ Victor Panasci
    Name: Victor Panasci
    Title: Its Authorized Signatory

 

[Hudson Technologies – Signature Page to Credit Agreement]

 

 

Exhibit 10.2

 

EXECUTION VERSION

 

GUARANTY AND SECURITY AGREEMENT

 

This GUARANTY AND SECURITY AGREEMENT (this “Agreement”), dated as of December 19, 2019, by and among the Persons listed on the signature pages hereof as “Grantors” and those additional entities that hereafter become parties hereto by executing the form of Joinder attached hereto as Annex 1 (each, a “Grantor” and collectively, the “Grantors”), and 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”).

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Credit Agreement, of even date herewith (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”), by and among HUDSON TECHNOLOGIES, INC., a New York corporation, (“Parent”), HUDSON HOLDINGS, INC., a Nevada corporation (“Hudson Holdings”), HUDSON TECHNOLOGIES COMPANY, a Tennessee corporation (“Hudson Technologies”), ASPEN REFRIGERANTS, INC., a Delaware corporation (“Aspen”; and together with Hudson Holdings, Hudson Technologies, and those additional entities that hereafter become parties to the Credit Agreement as Borrowers in accordance with the terms thereof, each, a “Borrower” and individually and collectively, jointly and severally, the “Borrowers”), the lenders party thereto as “Lenders” (each of such Lenders, together with its successors and assigns, is referred to hereinafter as a “Lender”), and Agent, the Lender Group has agreed to make certain financial accommodations available to Borrowers from time to time pursuant to the terms and conditions thereof; and

 

WHEREAS, Agent has agreed to act as agent for the benefit of the Lender Group and the Bank Product Providers in connection with the transactions contemplated by the Credit Agreement and this Agreement;

 

WHEREAS, in order to induce the Lender Group to enter into the Credit Agreement and the other Loan Documents and to extend the Loans thereunder, to induce the Bank Product Providers to enter into the Bank Product Agreements, and to induce the Lender Group and the Bank Product Providers to make financial accommodations to Borrowers as provided for in the Credit Agreement, the other Loan Documents and the Bank Product Agreements, (a) each Grantor (other than any Borrower) has agreed to guaranty the Guarantied Obligations, and (b) each Grantor has agreed to grant to Agent, for the benefit of the Lender Group and the Bank Product Providers, a continuing security interest in and to the Collateral in order to secure the prompt and complete payment, observance and performance of, among other things, the Secured Obligations; and

 

WHEREAS, each Grantor (other than Parent or any Borrower) is a Subsidiary of Parent and, as such, will benefit by virtue of the financial accommodations extended to Borrowers by the Lender Group.

 

NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1.              Definitions; Construction.

 

(a)               All initially capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Credit Agreement. Any terms (whether capitalized or lower case) used in this Agreement that are defined in the Code (including, without limitation, Account, Account Debtor, Chattel Paper, Commercial Tort Claims, Deposit Account, Drafts, Documents, Equipment, Farm Products, Fixtures, General Intangibles, Inventory, Investment Property, Instruments, Letters of Credit, Letter of Credit Rights, Promissory Notes, Proceeds, Securities Account and Supporting Obligations) 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. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

 

(i)          Acquisition Documents” means the agreements, instruments and documents evidencing, or entered into in connection with, an Acquisition (including a Permitted Acquisition) by a Grantor.

 

 

 

 

(ii)           Activation Instruction” has the meaning specified therefor in Section 7(k) hereof.

 

(iii)          Agent” has the meaning specified therefor in the preamble to this Agreement.

 

(iv)          “Agreement” has the meaning specified therefor in the preamble to this Agreement.

 

(v)           “Books” means books and records (including each Grantor’s Records indicating, summarizing, or evidencing such Grantor’s assets (including the Collateral) or liabilities, each Grantor’s Records relating to such Grantor’s business operations or financial condition, and each Grantor’s goods or General Intangibles related to such information).

 

(vi)          “Borrower” and “Borrowers” have the respective meanings specified therefor in the recitals to this Agreement.

 

(vii)         “Cash Dominion Event” means the occurrence of either of the following: (A) the occurrence and continuance of any Event of Default, or (B) Excess Availability is less than 15.0% of the Maximum Revolver Amount at any time.

 

(viii)        “Cash Dominion Period” means the period commencing after the occurrence of a Cash Dominion Event and continuing until the date when (A) no Event of Default shall exist and be continuing, and (B) Excess Availability is greater than or equal to 15.0% of the Maximum Revolver Amount for 60 consecutive days.

 

(ix)          “Code” means the New York Uniform Commercial Code, as in effect from time to time; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

 

(x)           “Collateral” has the meaning specified therefor in Section 3 hereof.

 

2

 

 

(xi)          “Collection Account” means a Deposit Account of a Grantor which is used exclusively for deposits of collections and proceeds of Collateral and not as a disbursement or operating account upon which checks or other drafts may be drawn.

 

(xii)         “Commercial Tort Claims” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims listed on Schedule 1.

 

(xiii)        “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.

 

(xiv)        “Controlled Account” has the meaning specified therefor in Section 7(k) hereof.

 

(xv)         “Controlled Account Agreements” means those certain cash management agreements, in form and substance reasonably satisfactory to Agent, each of which is executed and delivered by a Grantor, Agent, and one of the Controlled Account Banks.

 

(xvi)        “Controlled Account Bank” has the meaning specified therefor in Section 7(k) hereof.

 

(xvii)       “Copyrights” means any and all rights in any works of authorship, including (A) copyrights and moral rights, (B) copyright registrations and recordings thereof and all applications in connection therewith including those listed on Schedule 2, (C) income, license fees, royalties, damages, and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (D) the right to sue for past, present, and future infringements thereof, and (E) all of each Grantor’s rights corresponding thereto throughout the world.

 

(xviii)      “Copyright Security Agreement” means each Copyright Security Agreement executed and delivered by Grantors, or any of them, and Agent, in substantially the form of Exhibit A.

 

(xix)        “Credit Agreement” has the meaning specified therefor in the recitals to this Agreement.

 

(xx)         “Excluded Accounts” means (A) Deposit Accounts and Securities Accounts with an aggregate amount on deposit therein of not more than $ 250,000 at any one time for all such Deposit Accounts or Securities Accounts, or (B) Deposit Accounts specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for any Grantor’s employees.

 

(xxi)        “Excluded Swap Obligation” means, with respect to any Grantor, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Grantor of (including by virtue of the joint and several liability provisions of Section 2.15 of the Credit Agreement with respect to any Grantor that is a Borrower), or the grant by such Grantor 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 Grantor’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 guaranty of such Grantor 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 guaranty or security interest is or becomes illegal.

 

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(xxii)       “Foreclosed Grantor” has the meaning specified therefor in Section 2(i)(iv) hereof.

 

(xxiii)      “General Intangibles” means general intangibles (as that term is defined in the Code), and includes payment intangibles, software, contract rights, rights to payment, rights under Hedge Agreements (including the right to receive payment on account of the termination (voluntarily or involuntarily) of such Hedge Agreements), rights arising under common law, statutes, or regulations, choses or things in action, goodwill, Intellectual Property, Intellectual Property Licenses, purchase orders, customer lists, route lists, rights to payment and other rights under Acquisition Documents, rights to payment and other rights under any royalty or licensing agreements, including Intellectual Property Licenses, infringement claims, monies due or recoverable from pension funds, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Property, Negotiable Collateral, and oil, gas, or other minerals before extraction.

 

(xxiv)      “Grantor” and “Grantors” have the respective meanings specified therefor in the preamble to this Agreement.

 

(xxv)       “Guarantied Obligations” means all of the Obligations (including any Bank Product Obligations) now or hereafter existing, whether for 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), 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), or otherwise, and any and all reasonable and documented expenses (including reasonable counsel fees and expenses) incurred by Agent, any other member of the Lender Group, or any Bank Product Provider (or any of them) in enforcing any rights under any of the Loan Documents. Without limiting the generality of the foregoing, Guarantied Obligations shall include all amounts that constitute part of the Guarantied Obligations and would be owed by any Borrower to Agent, any other member of the Lender Group, or any Bank Product Provider but for the fact that they are unenforceable or not allowable, including due to the existence of a bankruptcy, reorganization, other Insolvency Proceeding or similar proceeding involving any Borrower or any Guarantor; provided that, anything to the contrary contained in the foregoing notwithstanding, the Guarantied Obligations shall exclude any Excluded Swap Obligation.

 

(xxvi)      “Guarantor” means each Grantor other than any Borrower.

 

(xxvii)     “Guaranty” means the guaranty set forth in Section 2 hereof.

 

(xxviii)    “Intellectual Property” means any and all Patents, Copyrights, Trademarks, trade secrets, know-how, inventions (whether or not patentable), algorithms, software programs (including source code and object code), processes, product designs, industrial designs, blueprints, drawings, data, customer lists, URLs and domain names, specifications, documentations, reports, catalogs, literature, and any other forms of technology or proprietary information of any kind, including all rights therein and all applications for registration or registrations thereof.

 

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(xxix)       “Intellectual Property Licenses” means, with respect to any Grantor, (A) any licenses or other similar rights provided to such Grantor in or with respect to Intellectual Property owned or controlled by any other Person, and (B) any licenses or other similar rights provided to any other Person in or with respect to Intellectual Property owned or controlled by such Grantor, in each case, including (x) any software license agreements (other than license agreements for commercially available off-the-shelf software that is generally available to the public which have been licensed to a Grantor pursuant to end-user licenses), (y) the license agreements listed on Schedule 3, and (z) the right to use any of the licenses or other similar rights described in this definition in connection with the enforcement of the Lender Group’s rights under the Loan Documents.

 

(xxx)        Investment Property” means (A) any and all investment property, and (B) any and all of the following (regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

 

(xxxi)       “Joinder” means each Joinder to this Agreement executed and delivered by Agent and each of the other parties listed on the signature pages thereto, in substantially the form of Annex 1.

 

(xxxii)      “Lender” and “Lenders” have the respective meanings specified therefor in the recitals to this Agreement.

 

(xxxiii)     “Negotiable Collateral” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts and documents (as each such term is defined in the Code).

 

(xxxiv)     “Parent” has the meaning specified therefor in the recitals to this Agreement.

 

(xxxv)      Patents” means patents and patent applications, including (A) the patents and patent applications listed on Schedule 4, (B) all continuations, divisionals, continuations-in-part, re-examinations, reissues, and renewals thereof and improvements thereon, (C) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (D) the right to sue for past, present, and future infringements thereof, and (E) all of each Grantor’s rights corresponding thereto throughout the world.

 

(xxxvi)     “Patent Security Agreement” means each Patent Security Agreement executed and delivered by Grantors, or any of them, and Agent, in substantially the form of Exhibit B.

 

(xxxvii)    “Pledged Companies” means each Person listed on Schedule 5 as a “Pledged Company”, together with each other Person, all or a portion of whose Equity Interests are acquired or otherwise owned by a Grantor after the Closing Date and is required to be pledged pursuant to Section 5.11 of the Credit Agreement.

 

(xxxviii)   “Pledged Interests” means all of each Grantor’s right, title and interest in and to all of the Equity Interests now owned or hereafter acquired by such Grantor, regardless of class or designation, including in each of the Pledged Companies, and all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Equity Interests, the right to receive any certificates representing any of the Equity Interests, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof and the right to receive all dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in cash or in kind, and all cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

 

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(xxxix)     “Pledged Interests Addendum” means a Pledged Interests Addendum substantially in the form of Exhibit C.

 

(xl)           “Pledged Notes” has the meaning specified therefor in Section 6(m) hereof.

 

(xli)          “Pledged Operating Agreements” means all of each Grantor’s rights, powers, and remedies under the limited liability company operating agreements of each of the Pledged Companies that are limited liability companies.

 

(xlii)         “Pledged Partnership Agreements” means all of each Grantor’s rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships.

 

(xliii)        “Proceeds” has the meaning specified therefor in Section 3 hereof.

 

(xliv)        “PTO” means the United States Patent and Trademark Office.

 

(xlv)         “Qualified ECP Grantor” means, in respect of any Swap Obligation, each Grantor 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 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.

 

(xlvi)        “Real Property” means any estates or interests in real property now owned or hereafter acquired by any Grantor and the improvements thereto.

 

(xlvii)       “Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

 

(xlviii)      “Rescission” has the meaning specified therefor in Section 7(k) hereof.

 

(xlix)        “Secured Obligations” means each and all of the following: (A) all of the present and future obligations of each of the Grantors arising from, or owing under or pursuant to, this Agreement (including the Guaranty), the Credit Agreement, or any of the other Loan Documents, (B) all Bank Product Obligations, and (C) all other Obligations of each Borrower and all other Guarantied Obligations of each Guarantor (including, in the case of each of clauses (A), (B) and (C), Lender Group Expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding); provided that, anything to the contrary contained in the foregoing notwithstanding, the Secured Obligations shall exclude any Excluded Swap Obligation.

 

(l)            “Security Interest” has the meaning specified therefor in Section 3 hereof.

 

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(li)           “Supporting Obligations” means supporting obligations (as such term is defined in the Code), and includes letters of credit and guaranties issued in support of Accounts, Chattel Paper, documents, General Intangibles, instruments or Investment Property.

 

(lii)          Swap Obligation” means, with respect to any Grantor, 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.

 

(liii)         “Trademarks” means any and all trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks and service mark applications, including (A) the trade names, registered trademarks, trademark applications, registered service marks and service mark applications listed on Schedule 6, (B) all renewals thereof, (C) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (D) the right to sue for past, present and future infringements and dilutions thereof, (E) the goodwill of each Grantor’s business symbolized by the foregoing or connected therewith, and (F) all of each Grantor’s rights corresponding thereto throughout the world.

 

(liv)         Trademark Security Agreement” means each Trademark Security Agreement executed and delivered by Grantors, or any of them, and Agent, in substantially the form of Exhibit D.

 

(lv)          URL” means “uniform resource locator,” an internet web address.

 

(lvi)         “VIN” has the meaning specified therefor in Section 6(l) hereof.

 

(b)                    This Agreement shall be subject to the rules of construction set forth in Section 1.4 of the Credit Agreement, and such rules of construction are incorporated herein by this reference, mutatis mutandis.

 

(c)                    All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

 

2.              Guaranty.

 

(a)                    In recognition of the direct and indirect benefits to be received by Guarantors from the proceeds of the Revolving Loans, the issuance of the Letters of Credit, and the entering into of the Bank Product Agreements and by virtue of the financial accommodations to be made to Borrowers, each of the Guarantors, jointly and severally, hereby unconditionally and irrevocably guarantees as a primary obligor and not merely as a surety the full and prompt payment when due, whether upon maturity, acceleration, or otherwise, of all of the Guarantied Obligations. If any or all of the Obligations constituting Guarantied Obligations become due and payable, each of the Guarantors, unconditionally and irrevocably, and without the need for demand, protest, or any other notice or formality, promises to pay such indebtedness to Agent, for the benefit of the Lender Group and the Bank Product Providers, together with any and all expenses (including Lender Group Expenses) that may be incurred by Agent or any other member of the Lender Group or any Bank Product Provider in demanding, enforcing, or collecting any of the Guarantied Obligations (including the enforcement of any collateral for such Guarantied Obligations or any collateral for the obligations of the Guarantors under this Guaranty). If claim is ever made upon Agent or any other member of the Lender Group or any Bank Product Provider for repayment or recovery of any amount or amounts received in payment of or on account of any or all of the Guarantied Obligations and any of Agent or any other member of the Lender Group or any Bank Product Provider repays all or part of said amount by reason of (i) any judgment, decree, or order of any court or administrative body having jurisdiction over such payee or any of its property, or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including any Borrower or any Guarantor), then and in each such event, each of the Guarantors agrees that any such judgment, decree, order, settlement, or compromise shall be binding upon the Guarantors, notwithstanding any revocation (or purported revocation) of this Guaranty or other instrument evidencing any liability of any Grantor, and the Guarantors shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee.

 

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(b)                    Each of the Guarantors unconditionally and irrevocably guarantees the payment of any and all of the Guarantied Obligations to Agent, for the benefit of the Lender Group and the Bank Product Providers, whether or not due or payable by any Loan Party upon the occurrence of any of the events specified in Section 8.4 or 8.5 of the Credit Agreement, and irrevocably and unconditionally promises to pay such indebtedness to Agent, for the benefit of the Lender Group and the Bank Product Providers, without the requirement of demand, protest, or any other notice or other formality, in lawful money of the United States.

 

(c)                    The liability of each of the Guarantors hereunder is primary, absolute, and unconditional, and is independent of any security for or other guaranty of the Guarantied Obligations, whether executed by any other Guarantor or by any other Person, and the liability of each of the Guarantors hereunder shall not be affected or impaired by (i) any payment on, or in reduction of, any such other guaranty or undertaking (other than payment in full of the Guarantied Obligations), (ii) any dissolution, termination, or increase, decrease, or change in personnel by any Grantor, (iii) any payment made to Agent, any other member of the Lender Group, or any Bank Product Provider on account of the Obligations which Agent, such other member of the Lender Group, or such Bank Product Provider repays to any Grantor pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding (or any settlement or compromise of any claim made in such a proceeding relating to such payment), and each of the Guarantors waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding, (iv) any action or inaction by Agent, any other member of the Lender Group, or any Bank Product Provider, or (v) any invalidity, irregularity, avoidability, or unenforceability of all or any part of the Obligations or of any security therefor.

 

(d)                    This Guaranty includes all present and future Guarantied Obligations including any under transactions continuing, compromising, extending, increasing, modifying, releasing, or renewing the Guarantied Obligations, changing the interest rate, payment terms, or other terms and conditions thereof, or creating new or additional Guarantied Obligations after prior Guarantied Obligations have been satisfied in whole or in part. To the maximum extent permitted by law, each Guarantor hereby waives any right to revoke this Guaranty as to future Guarantied Obligations. If such a revocation is effective notwithstanding the foregoing waiver, each Guarantor acknowledges and agrees that (i) no such revocation shall be effective until written notice thereof has been received by Agent, (ii) no such revocation shall apply to any Guarantied Obligations in existence on the date of receipt by Agent of such written notice (including any subsequent continuation, extension, or renewal thereof, or change in the interest rate, payment terms, or other terms and conditions thereof), (iii) no such revocation shall apply to any Guarantied Obligations made or created after such date to the extent made or created pursuant to a legally binding commitment of any member of the Lender Group or any Bank Product Provider in existence on the date of such revocation, (iv) no payment by any Guarantor, any Borrower, or from any other source, prior to the date of Agent’s receipt of written notice of such revocation shall reduce the maximum obligation of such Guarantor hereunder, and (v) any payment by any Borrower or from any source other than such Guarantor subsequent to the date of such revocation shall first be applied to that portion of the Guarantied Obligations as to which the revocation is effective and which are not, therefore, guaranteed hereunder, and to the extent so applied shall not reduce the maximum obligation of such Guarantor hereunder. This Guaranty shall be binding upon each Guarantor, its successors and assigns and inure to the benefit of and be enforceable by Agent (for the benefit of the Lender Group and the Bank Product Providers) and its successors, transferees, or assigns.

 

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(e)                    The guaranty by each of the Guarantors hereunder is a guaranty of payment and not of collection. The obligations of each of the Guarantors hereunder are independent of the obligations of any other Guarantor or Grantor or any other Person and a separate action or actions may be brought and prosecuted against one or more of the Guarantors whether or not an action is brought against any other Guarantor or Grantor or any other Person and whether or not any other Guarantor or Grantor or any other Person be joined in any such action or actions. Each of the Guarantors waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement hereof. Any payment by any Grantor or other circumstance which operates to toll any statute of limitations as to any Grantor shall operate to toll the statute of limitations as to each of the Guarantors.

 

(f)                     Each of the Guarantors authorizes Agent, the other members of the Lender Group, and the Bank Product Providers without notice or demand (other than any notice expressly required to be provided hereunder or under any other Loan Document and in each case in accordance with any applicable terms and conditions hereof or any other applicable Loan Document), and without affecting or impairing its liability hereunder, from time to time to:

 

(i)            change the manner, place, or terms of payment of, or change or extend the time of payment of, renew, increase, accelerate, or alter: (A) any of the Obligations (including any increase or decrease in the principal amount thereof or the rate of interest or fees thereon), or (B) any security therefor or any liability incurred directly or indirectly in respect thereof, and this Guaranty shall apply to the Obligations as so changed, extended, renewed, or altered;

 

(ii)           take and hold security for the payment of the Obligations and sell, exchange, release, impair, surrender, realize upon, collect, settle, or otherwise deal with in any manner and in any order any property at any time pledged or mortgaged to secure the Obligations or any of the Guarantied Obligations (including any of the obligations of all or any of the Guarantors under this Guaranty) incurred directly or indirectly in respect thereof or hereof, or any offset on account thereof;

 

(iii)          exercise or refrain from exercising any rights against any Grantor;

 

(iv)          release or substitute any one or more endorsers, guarantors, any Grantor, or other obligors;

 

(v)           settle or compromise any of the Obligations, any security therefor, or any liability (including any of those of any of the Guarantors under this Guaranty) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of any Grantor to its creditors;

 

(vi)          apply any sums by whomever paid or however realized to any liability or liabilities of any Grantor to Agent, any other member of the Lender Group, or any Bank Product Provider regardless of what liability or liabilities of such Grantor remain unpaid;

 

(vii)         consent to or waive any breach of, or any act, omission, or default under, this Agreement, any other Loan Document, any Bank Product Agreement, or any of the instruments or agreements referred to herein or therein, or otherwise amend, modify, or supplement this Agreement, any other Loan Document, any Bank Product Agreement, or any of such other instruments or agreements; or

 

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(viii)       take any other action that could, under otherwise applicable principles of law, give rise to a legal or equitable discharge of one or more of the Guarantors from all or part of its liabilities under this Guaranty (other than a defense of payment in full of the Guarantied Obligations).

 

(g)                    It is not necessary for Agent, any other member of the Lender Group, or any Bank Product Provider to inquire into the capacity or powers of any of the Guarantors or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.

 

(h)                    Each Guarantor jointly and severally guarantees that the Guarantied Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation, or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any member of the Lender Group or any Bank Product Provider with respect thereto. The obligations of each Guarantor under this Guaranty are independent of the Guarantied Obligations, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce such obligations, irrespective of whether any action is brought against any other Guarantor or whether any other Guarantor is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defense it may now or hereafter have in any way relating to, any or all of the following:

 

(i)            any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

 

(ii)           any change in the time, manner, or place of payment of, or in any other term of, all or any of the Guarantied Obligations, or any other amendment or waiver of or any consent to departure from any Loan Document, including any increase in the Guarantied Obligations resulting from the extension of additional credit;

 

(iii)          any taking, exchange, release, or non-perfection of any Lien in and to any Collateral, or any taking, release, amendment, waiver, supplement, restatements, extension, novation, renewal, replacements, or continuation of, or consent to departure from any other guaranty, for all or any of the Guarantied Obligations;

 

(iv)          the existence of any claim, set-off, defense, or other right that any Guarantor may have at any time against any Person, including Agent, any other member of the Lender Group, or any Bank Product Provider;

 

(v)           any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guarantied Obligations or any security therefor;

 

(vi)          any right or defense arising by reason of any claim or defense based upon an election of remedies by any member of the Lender Group or any Bank Product Provider including any defense based upon an impairment or elimination of such Guarantor’s rights of subrogation, reimbursement, contribution, or indemnity of such Guarantor against any Grantor or any other guarantors or sureties;

 

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(vii)        any change, restructuring, or termination of the corporate, limited liability company, partnership or other relevant structure or existence of any Grantor; or

 

(viii)       any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or any other guarantor or surety.

 

(i)                     Waivers.

 

(i)            Each of the Guarantors waives any right (except as shall be required by applicable law and cannot be waived) to require Agent, any other member of the Lender Group, or any Bank Product Provider to (A) proceed against any other Grantor or any other Person, (B) proceed against or exhaust any security held from any other Grantor or any other Person, or (C) protect, secure, perfect, or insure any security interest or Lien on any property subject thereto or exhaust any right to take any action against any other Grantor, any other Person, or any collateral, or (D) pursue any other remedy in any member of the Lender Group’s or any Bank Product Provider’s power whatsoever. Each of the Guarantors waives any defense based on or arising out of any defense of any Grantor or any other Person, other than payment of the Guarantied Obligations to the extent of such payment, based on or arising out of the disability of any Grantor or any other Person, or the validity, legality, or unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Grantor other than payment of the Obligations to the extent of such payment. Agent may, at the election of the Required Lenders, foreclose upon any Collateral held by Agent by one or more judicial or non-judicial sales or other dispositions, whether or not every aspect of any such sale is commercially reasonable or otherwise fails to comply with applicable law or may exercise any other right or remedy Agent, any other member of the Lender Group, or any Bank Product Provider may have against any Grantor or any other Person, or any security, in each case, without affecting or impairing in any way the liability of any of the Guarantors hereunder except to the extent the Guarantied Obligations have been paid.

 

(ii)           Each of the Guarantors waives all presentments, demands for performance, protests and notices, including notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation, or incurring of new or additional Obligations or other financial accommodations. Each of the Guarantors waives notice of any Default or Event of Default under any of the Loan Documents. Each of the Guarantors assumes all responsibility for being and keeping itself informed of each Grantor’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope, and extent of the risks which each of the Guarantors assumes and incurs hereunder, and agrees that neither Agent nor any of the other members of the Lender Group nor any Bank Product Provider shall have any duty to advise any of the Guarantors of information known to them regarding such circumstances or risks.

 

(iii)          To the fullest extent permitted by applicable law, each Guarantor hereby waives: (A) any right to assert against the Agent, any member of the Lender Group or any Bank Product Provider, any defense (legal or equitable) (other than the defense that all of the Guarantied Obligations have been paid in full), set-off, counterclaim, or claim which each Guarantor may now or at any time hereafter have against any Borrower or any other party liable to the Agent, any member of the Lender Group or any Bank Product Provider, (B) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Guarantied Obligations or any security therefor, (C) any right or defense arising by reason of any claim or defense based upon an election of remedies by the Agent, any member of the Lender Group or any Bank Product Provider including any defense based upon an impairment or elimination of such Guarantor’s rights of subrogation, reimbursement, contribution, or indemnity of such Guarantor against any Borrower or other guarantors or sureties, and (D) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Guarantied Obligations shall similarly operate to defer or delay the operation of such statute of limitations applicable to such Guarantor’s liability hereunder.

 

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(iv)          No Guarantor will exercise any rights that it may now or hereafter acquire against any Grantor or any other guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s obligations under this Guaranty, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Agent, any other member of the Lender Group, or any Bank Product Provider against any Grantor or any other guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from any Grantor or any other guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guarantied Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and all of the Commitments have been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence, such amount shall be held in trust for the benefit of Agent, for the benefit of the Lender Group and the Bank Product Providers, and shall forthwith be paid to Agent to be credited and applied to the Guarantied Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Credit Agreement, or to be held as Collateral for any Guarantied Obligations or other amounts payable under this Guaranty thereafter arising. Notwithstanding anything to the contrary contained in this Guaranty, no Guarantor may exercise any rights of subrogation, contribution, indemnity, reimbursement or other similar rights against, and may not proceed or seek recourse against or with respect to any property or asset of, any other Grantor (the “Foreclosed Grantor”), including after payment in full of the Obligations, if all or any portion of the Obligations have been satisfied in connection with an exercise of remedies in respect of the Equity Interests of such Foreclosed Grantor whether pursuant to this Agreement or otherwise.

 

3.              Grant of Security. Each Grantor hereby unconditionally grants, collaterally assigns, and pledges to Agent, for the benefit of each member of the Lender Group and each of the Bank Product Providers, to secure the Secured Obligations (whether now existing or hereafter arising), a continuing security interest (hereinafter referred to as the “Security Interest”) in all of such Grantor’s right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (the “Collateral”):

 

(a)               all of such Grantor’s Accounts;

 

(b)               all of such Grantor’s Books;

 

(c)               all of such Grantor’s Chattel Paper;

 

(d)              all of such Grantor’s Commercial Tort Claims;

 

(e)               all of such Grantor’s Deposit Accounts;

 

(f)               all of such Grantor’s Equipment;

 

(g)              all of such Grantor’s Farm Products;

 

(h)              all of such Grantor’s Fixtures;

 

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(i)                all of such Grantor’s General Intangibles;

 

(j)                all of such Grantor’s Inventory (including, without limitation, gas cylinders and other similar items that contain gas);

 

(k)               all of such Grantor’s Investment Property;

 

(l)                all of such Grantor’s Intellectual Property and Intellectual Property Licenses;

 

(m)              all of such Grantor’s Negotiable Collateral (including all of such Grantor’s Pledged Notes);

 

(n)               all of such Grantor’s Pledged Interests (including all of such Grantor’s Pledged Operating Agreements and Pledged Partnership Agreements);

 

(o)               all of such Grantor’s Securities Accounts;

 

(p)               all of such Grantor’s Supporting Obligations;

 

(q)               all of such Grantor’s money, Cash Equivalents, or other assets of such Grantor that now or hereafter come into the possession, custody, or control of Agent (or its agent or designee) or any other member of the Lender Group; and

 

(r)                all of the Proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, Farm Products, Fixtures, General Intangibles, Inventory, Investment Property, Intellectual Property, Negotiable Collateral, Pledged Interests, Securities Accounts, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (the “Proceeds”). Without limiting the generality of the foregoing, the term “Proceeds” includes whatever is receivable or received when Investment Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to any Grantor or Agent from time to time with respect to any of the Investment Property.

 

4.              Security for Secured Obligations. The Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to Agent, the Lender Group, the Bank Product Providers or any of them, but for the fact that they are unenforceable or not allowable (in whole or in part) as a claim in an Insolvency Proceeding involving any Grantor due to the existence of such Insolvency Proceeding. Further, the Security Interest created hereby encumbers each Grantor’s right, title, and interest in all Collateral, whether now owned by such Grantor or hereafter acquired, obtained, developed, or created by such Grantor and wherever located.

 

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5.              Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Agent or any other member of the Lender Group of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) neither the Agent nor any of the members of the Lender Group shall have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Agent or any of the members of the Lender Group be obligated to perform any of the obligations or duties of any Grantors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement, the Credit Agreement, or any other Loan Document, Grantors shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and of the Credit Agreement and the other Loan Documents. Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, dividend, and distribution rights, shall remain in the applicable Grantor until (i) the occurrence and continuance of an Event of Default, and (ii) Agent has notified the applicable Grantor of Agent’s election to exercise such rights with respect to the Pledged Interests pursuant to Section 16.

 

6.              Representations and Warranties. In order to induce Agent to enter into this Agreement for the benefit of the Lender Group and the Bank Product Providers, each Grantor 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 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:

 

(a)              The name (within the meaning of Section 9-503 of the Code) and jurisdiction of organization of each Grantor is set forth on Schedule 7 (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under the Loan Documents).

 

(b)              The chief executive office of each Grantor is located at the address indicated on Schedule 7 (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under the Loan Documents).

 

(c)               Each Grantor’s tax identification numbers and organizational identification numbers, if any, are identified on Schedule 7 (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under the Loan Documents).

 

(d)              As of the Closing Date, no Grantor holds any commercial tort claims that exceed $250,000 in amount, except as set forth on Schedule 1.

 

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(e)               Set forth on Schedule 9 (as such Schedule may be updated from time to time subject to Section 7(k)(iii) with respect to Controlled Accounts and provided that Grantors comply with Section 7(c) hereof) is a listing of all of Grantors’ Deposit Accounts and Securities Accounts, including, with respect to each bank or securities intermediary (i) the name and address of such Person, and (ii) the account numbers of the Deposit Accounts or Securities Accounts maintained with such Person.

 

(f)               Schedule 8 sets forth all Real Property owned by any of the Grantors as of the Closing Date.

 

(g)              As of the Closing Date: (i) Schedule 2 provides a complete and correct list of all registered Copyrights owned by any Grantor, all applications for registration of Copyrights owned by any Grantor, and all other Copyrights owned by any Grantor and material to the conduct of the business of any Grantor, (ii) Schedule 3 provides a complete and correct list of all Intellectual Property Licenses entered into by any Grantor pursuant to which (A) any Grantor has provided any license or other rights in Intellectual Property owned or controlled by such Grantor to any other Person (other than non-exclusive software licenses granted in the ordinary course of business), or (B) any Person has granted to any Grantor any license or other rights in Intellectual Property owned or controlled by such Person that is material to the business of such Grantor, including any Intellectual Property that is incorporated in any Inventory, software, or other product marketed, sold, licensed, or distributed by such Grantor (other than off-the-shelf, shrink-wrapped or “click to accept” software licenses or other licenses to generally commercially available software), (iii) Schedule 4 provides a complete and correct list of all Patents owned by any Grantor and all applications for Patents owned by any Grantor, and (iv) Schedule 6 provides a complete and correct list of all registered Trademarks owned by any Grantor, and all applications for registration of Trademarks owned by any Grantor, and all other Trademarks owned by any Grantor.

 

(h)              (i) (A) each Grantor owns exclusively or holds licenses in all Intellectual Property that is necessary in or material to the conduct of its business, and (B) all employees and contractors of each Grantor who were involved in the creation or development of any Intellectual Property for such Grantor that is necessary in or material to the business of such Grantor have signed agreements containing assignment of Intellectual Property rights to such Grantor and obligations of confidentiality;

 

(ii)           to each Grantor’s knowledge, no Person has infringed or misappropriated or is currently infringing or misappropriating any Intellectual Property rights owned by such Grantor, in each case, that either individually or in the aggregate would reasonably be expected to result in a Material Adverse Effect;

 

(iii)          (A) to each Grantor’s knowledge, (1) such Grantor has never infringed or misappropriated and is not currently infringing or misappropriating any Intellectual Property rights of any Person, and (2) no product manufactured, used, distributed, licensed, or sold by or service provided by such Grantor has ever infringed or misappropriated or is currently infringing or misappropriating any Intellectual Property rights of any Person, in each case, except where such infringement either individually or in the aggregate would not reasonably be expected to result in a Material Adverse Effect, and (B) there are no infringement or misappropriation claims or proceedings pending, or to any Grantor’s knowledge, threatened in writing against any Grantor, and no Grantor has received any written notice or other communication of any actual or alleged infringement or misappropriation of any Intellectual Property rights of any Person, in each case, except where such infringement either individually or in the aggregate would not reasonably be expected to result in a Material Adverse Effect;

 

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(iv)         to each Grantor’s knowledge, all registered Copyrights, registered Trademarks, and issued Patents that are owned by such Grantor and necessary in or material to the conduct of its business are valid, subsisting and enforceable and in compliance with all legal requirements, filings, and payments and other actions that are required to maintain such Intellectual Property in full force and effect; and

 

(v)          each Grantor has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all trade secrets owned by such Grantor that are necessary in or material to the conduct of the business of such Grantor.

 

(i)                This Agreement creates a valid security interest in the Collateral of each Grantor, to the extent a security interest therein can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing of financing statements listing each applicable Grantor, as a debtor, and Agent, as secured party, in the jurisdictions listed next to such Grantor’s name on Schedule 11. Upon the making of such filings, Agent shall have a first priority (subject only to the terms of the Intercreditor Agreement, the Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases) perfected security interest in the Collateral of each Grantor to the extent such security interest can be perfected by the filing of a financing statement under the Code. Upon filing of any Copyright Security Agreement with the United States Copyright Office, filing of any Patent Security Agreement and any Trademark Security Agreement with the PTO, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 11, all action necessary or desirable to protect and perfect the Security Interest in and on each Grantor’s United States issued and registered Patents, Trademarks, or Copyrights has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and purchasers from any Grantor. All action by any Grantor necessary to protect and perfect such security interest on each item of Collateral has been duly taken.

 

(j)                (i) Except for the Security Interest created hereby, each Grantor is and will at all times be the sole holder of record and the legal and beneficial owner, free and clear of all Liens other than Permitted Liens, of the Pledged Interests indicated on Schedule 5 as being owned by such Grantor and, when acquired by such Grantor, any Pledged Interests acquired after the Closing Date, (ii) all of the Pledged Interests are duly authorized, validly issued, fully paid and non-assessable and the Pledged Interests constitute or will constitute the percentage of the issued and outstanding Equity Interests of the Pledged Companies of such Grantor identified on Schedule 5 as supplemented or modified by any Pledged Interests Addendum or any Joinder to this Agreement, (iii) such Grantor has the right and requisite authority to pledge, the Investment Property pledged by such Grantor to Agent as provided herein, (iv) all actions necessary or desirable to perfect and establish the first priority (subject only to the terms of the Intercreditor Agreement, the Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases) of, or otherwise protect, Agent’s Liens in the Investment Property, and the proceeds thereof, have been duly taken, upon (A) the execution and delivery of this Agreement, (B) the taking of possession by Agent (or its agent or designee) of any certificates representing the Pledged Interests, to the extent such Pledged Interests are represented by certificates, together with undated powers (or other documents of transfer acceptable to Agent) endorsed in blank by the applicable Grantor, (C) the filing of financing statements in the applicable jurisdiction set forth on Schedule 11 for such Grantor with respect to the Pledged Interests of such Grantor that are not represented by certificates, and (D) with respect to any Securities Accounts, the delivery of Control Agreements with respect thereto, and (v) subject to the terms of the Intercreditor Agreement, each Grantor has delivered to and deposited with Agent all certificates representing the Pledged Interests owned by such Grantor to the extent such Pledged Interests are represented by certificates, and undated powers (or other documents of transfer acceptable to Agent) endorsed in blank with respect to such certificates. None of the Pledged Interests owned or held by such Grantor has been issued or transferred in violation of any securities registration, securities disclosure, or similar laws of any jurisdiction to which such issuance or transfer may be subject.

 

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(k)               No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Grantor in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Grantor, or (ii) for the exercise by Agent of the voting or other rights provided for in this Agreement with respect to the Investment Property or the remedies in respect of the Collateral pursuant to this Agreement, except (A) as may be required in connection with such disposition of Investment Property by laws affecting the offering and sale of securities generally, (B) for consents, approvals, authorizations, or other orders or actions that have already been obtained or given (as applicable) and that are still in force, (C) with respect to the DLA Contract under the Assignment of Claims Act or other applicable law, and (D) the filing of financing statements and other filings necessary to perfect the Security Interests granted hereby. No Intellectual Property License of any Grantor that is necessary in or material to the conduct of such Grantor’s business requires any consent of any other Person that has not been obtained in order for such Grantor to grant the security interest granted hereunder in such Grantor’s right, title or interest in or to such Intellectual Property License.

 

(l)                Schedule 12 sets forth all motor vehicles owned by Grantors as of the Closing Date, by model, model year, and vehicle identification number (“VIN”).

 

(m)             There is no default, breach, violation, or event of acceleration existing under any promissory note (as defined in the Code) constituting Collateral and pledged hereunder (each a “Pledged Note”) and no event has occurred or circumstance exists which, with the passage of time or the giving of notice, or both, would constitute a default, breach, violation, or event of acceleration under any Pledged Note. No Grantor that is an obligee under a Pledged Note has waived any default, breach, violation, or event of acceleration under such Pledged Note.

 

(n)              As to all limited liability company or partnership interests, issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor hereby represents and warrants that the Pledged Interests issued pursuant to such agreement (i) are not dealt in or traded on securities exchanges or in securities markets, (ii) do not constitute investment company securities, and (iii) are not held by such Grantor in a Securities Account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provides that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction.

 

7.              Covenants. Each Grantor, jointly and severally, covenants and agrees with Agent that from and after the date of this Agreement and until the date of termination of this Agreement in accordance with Section 23:

 

(a)              Possession of Collateral. In the event that any Collateral, including Proceeds, is evidenced by or consists of Negotiable Collateral, Investment Property, or Chattel Paper having an aggregate value or face amount of $250,000 or more for all such Negotiable Collateral, Investment Property, or Chattel Paper, the Grantors shall promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) after acquisition thereof), notify Agent thereof, and if and to the extent that perfection or priority of Agent’s Security Interest is dependent on or enhanced by possession, the applicable Grantor, promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion)) after request by Agent, shall execute such other documents and instruments as shall be requested by Agent or, if applicable, endorse and deliver physical possession of such Negotiable Collateral, Investment Property, or Chattel Paper to Agent, together with such undated powers (or other relevant document of transfer acceptable to Agent) endorsed in blank as shall be requested by Agent, and shall do such other acts or things deemed necessary or desirable by Agent to protect Agent’s Security Interest therein.

 

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(b)               Chattel Paper.

 

(i)            Promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion)) after request by Agent, each Grantor shall take all steps reasonably necessary to grant Agent control of all electronic Chattel Paper in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the Uniform Electronic Transaction Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction, to the extent that the aggregate value or face amount of such electronic Chattel Paper equals or exceeds $250,000; and

 

(ii)           If any Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent permitted hereby and by the Credit Agreement), promptly upon the request of Agent, such Chattel Paper and instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the Security Interest of Wells Fargo Bank, National Association, as Agent for the benefit of the Lender Group and the Bank Product Providers”.

 

(c)               Control Agreements.

 

(i)            Subject to any applicable time periods provided under Schedule 3.6 to the Credit Agreement, each Grantor shall obtain an authenticated Control Agreement (which may include a Controlled Account Agreement), from each bank maintaining a Deposit Account or Securities Account for such Grantor (other than with respect to any Excluded Accounts);

 

(ii)           Each Grantor shall obtain an authenticated Control Agreement, from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for any Grantor, or maintaining a Securities Account for such Grantor(other than with respect to any Excluded Accounts); and

 

(iii)          Each Grantor shall obtain an authenticated Control Agreement with respect to all of such Grantor’s investment property.

 

(d)               Letter-of-Credit Rights. If the Grantors (or any of them) are or become the beneficiary of letters of credit having a face amount or value of $250,000 or more in the aggregate, then the applicable Grantor or Grantors shall promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) after becoming a beneficiary), notify Agent thereof and, promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion)) after request by Agent, enter into a tri-party agreement with Agent and the issuer or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit rights to Agent and directing all payments thereunder to Agent’s Account, all in form and substance reasonably satisfactory to Agent.

 

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(e)               Commercial Tort Claims. If the Grantors (or any of them) obtain Commercial Tort Claims having a value, or involving an asserted claim, in the amount of $250,000 or more in the aggregate for all Commercial Tort Claims, then the applicable Grantor or Grantors shall promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) of obtaining such Commercial Tort Claim), notify Agent upon incurring or otherwise obtaining such Commercial Tort Claims and, promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion)) after request by Agent, amend Schedule 1 to describe such Commercial Tort Claims in a manner that reasonably identifies such Commercial Tort Claims and which is otherwise reasonably satisfactory to Agent, and hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and agrees to do such other acts or things deemed necessary or desirable by Agent to give Agent a first priority (subject only to Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases), perfected security interest in any such Commercial Tort Claim.

 

(f)                Government Contracts. Other than Accounts and Chattel Paper the aggregate value of which does not at any one time exceed $250,000, if any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department, agency, or instrumentality thereof, Grantors shall promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) of the creation thereof) notify Agent thereof and, promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion)) after request by Agent, execute any instruments or take any steps reasonably required by Agent in order that all moneys due or to become due under such contract or contracts shall be assigned to Agent, for the benefit of the Lender Group and the Bank Product Providers, and shall provide written notice thereof under the Assignment of Claims Act or other applicable law.

 

(g)                Intellectual Property.

 

(i)            Upon the request of Agent, in order to facilitate filings with the PTO and the United States Copyright Office, each Grantor shall execute and deliver to Agent one or more Copyright Security Agreements, Trademark Security Agreements, or Patent Security Agreements to further evidence Agent’s Lien on such Grantor’s United States issued and registered Patents, Trademarks, or Copyrights, and the General Intangibles of such Grantor relating thereto or represented thereby;

 

(ii)           Each Grantor shall have the duty, with respect to Intellectual Property that is necessary in or material to the conduct of such Grantor’s business, to protect and diligently enforce and defend at such Grantor’s expense its Intellectual Property, including (A) to diligently enforce and defend, including promptly suing for infringement, misappropriation, or dilution and to recover any and all damages for such infringement, misappropriation, or dilution, and filing for opposition, interference, and cancellation against conflicting Intellectual Property rights of any Person, (B) to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, (D) to take all reasonable and necessary action to preserve and maintain all of such Grantor’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including paying all maintenance fees and filing of applications for renewal, affidavits of use, and affidavits of noncontestability, and (E) to require all employees, consultants, and contractors of each Grantor who were involved in the creation or development of such Intellectual Property to sign agreements containing assignment of Intellectual Property rights and obligations of confidentiality. Each Grantor further agrees not to abandon any Intellectual Property or Intellectual Property License that is necessary in or material to the conduct of such Grantor’s business. Each Grantor hereby agrees to take the steps described in this Section 7(g)(ii) with respect to all new or acquired Intellectual Property to which it or any of its Subsidiaries is now or later becomes entitled that is necessary in or material to the conduct of such Grantor’s business;

 

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(iii)          Grantors acknowledge and agree that the Lender Group shall have no duties with respect to any Intellectual Property or Intellectual Property Licenses of any Grantor. Without limiting the generality of this Section 7(g)(iii), Grantors acknowledge and agree that no member of the Lender Group shall be under any obligation to take any steps necessary to preserve rights in the Collateral consisting of Intellectual Property or Intellectual Property Licenses against any other Person, but any member of the Lender Group may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of Borrowers and shall be chargeable to the Loan Account;

 

(iv)          On each date on which a Compliance Certificate is required to be delivered pursuant to Section 5.1 of the Credit Agreement (or, if an Event of Default has occurred and is continuing, more frequently if requested by Agent), each Grantor shall provide Agent with a written report of all new Patents, Trademarks or Copyrights that are registered or the subject of pending applications for registrations, 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 period and any statement of use or amendment to allege use with respect to intent-to-use trademark applications. In the case of such registrations or applications therefor, which were acquired by any Grantor, each such Grantor shall file the necessary documents with the appropriate Governmental Authority identifying the applicable Grantor as the owner (or as a co-owner thereof, if such is the case) of such Intellectual Property. In each of the foregoing cases, the applicable Grantor shall promptly cause to be prepared, executed, and delivered to Agent supplemental schedules to the applicable Loan Documents to identify such Patent, Trademark and Copyright registrations and applications therefor (with the exception of Trademark applications filed on an intent-to-use basis for which no statement of use or amendment to allege use has been filed) and Intellectual Property Licenses as being subject to the security interests created thereunder;

 

(v)          Anything to the contrary in this Agreement notwithstanding, in no event shall any Grantor, either itself or through any agent, employee, licensee, or designee, file an application for the registration of any Copyright with the United States Copyright Office or any similar office or agency in another country without giving Agent written notice thereof at least five (5) Business Days prior to such filing and complying with Section 7(g)(i) and, if available, each such application for registration shall be filed on an “expedited basis”. Upon receipt from the United States Copyright Office of notice of registration of any Copyright, each Grantor shall promptly (but in no event later than five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) following such receipt) notify (but without duplication of any notice required by Section 7(g)(iv)) Agent of such registration by delivering, or causing to be delivered, to Agent, documentation sufficient for Agent to perfect Agent’s Liens on such Copyright. If any Grantor acquires from any Person any Copyright registered with the United States Copyright Office or an application to register any Copyright with the United States Copyright Office, such Grantor shall promptly (but in no event later than five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) following such acquisition) notify Agent of such acquisition and deliver, or cause to be delivered, to Agent, documentation sufficient for Agent to perfect Agent’s Liens on such Copyright. In the case of such Copyright registrations or applications therefor which were acquired by any Grantor, each such Grantor shall promptly (but in no event later than five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) following such acquisition) file the necessary documents with the appropriate Governmental Authority identifying the applicable Grantor as the owner (or as a co-owner thereof, if such is the case) of such Copyrights;

 

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(vi)          Each Grantor shall take reasonable steps to maintain the confidentiality of, and otherwise protect and enforce its rights in, the Intellectual Property that is necessary in or material to the conduct of such Grantor’s business, including, as applicable (A) protecting the secrecy and confidentiality of its confidential information and trade secrets by having and enforcing a policy requiring all current employees, consultants, licensees, vendors and contractors with access to such information to execute appropriate confidentiality agreements, (B) taking actions reasonably necessary to ensure that no trade secret falls into the public domain, and (C) protecting the secrecy and confidentiality of the source code of all software programs and applications of which it is the owner or licensee by having and enforcing a policy requiring any licensees (or sublicensees) of such source code to enter into license agreements with commercially reasonable use and non-disclosure restrictions; and

 

(vii)         No Grantor shall enter into any Intellectual Property License material to the conduct of the business to receive any license or rights in any Intellectual Property of any other Person unless such Grantor has used commercially reasonable efforts to permit the assignment of or grant of a security interest in such Intellectual Property License (and all rights of Grantor thereunder) to Agent (and any transferees of Agent).

 

(h)               Investment Property.

 

(i)            If any Grantor shall acquire, obtain, receive or become entitled to receive any Pledged Interests after the Closing Date, it shall promptly (and in any event within five Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) of acquiring or obtaining such Collateral) deliver to Agent a duly executed Pledged Interests Addendum identifying such Pledged Interests;

 

(ii)           Upon the occurrence and during the continuance of an Event of Default, following the request of Agent, all sums of money and property paid or distributed in respect of the Investment Property that are received by any Grantor shall be held by the Grantors in trust for the benefit of Agent segregated from such Grantor’s other property, and such Grantor shall deliver it forthwith to Agent in the exact form received;

 

(iii)          Each Grantor shall promptly deliver to Agent a copy of each material notice or other material communication received by it in respect of any Pledged Interests;

 

(iv)          No Grantor shall make or consent to any amendment or other modification or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests if the same is prohibited pursuant to the Loan Documents;

 

(v)           Each Grantor agrees that it will cooperate with Agent in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law to effect the perfection of the Security Interest on the Investment Property or to effect any sale or transfer thereof;

 

(vi)         As to all limited liability company or partnership interests owned by such Grantor and issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor hereby covenants that the Pledged Interests issued pursuant to such agreement (A) are not and shall not be dealt in or traded on securities exchanges or in securities markets, (B) do not and will not constitute investment company securities, and (C) are not and will not be held by such Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provides or shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction; and

 

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(vii)        With regard to any Pledged Interests that are not certificated, any such Grantor of such non-certificated Pledged Interests (i) agrees promptly to note on its books the security interests granted to Agent and confirmed under this Agreement, (ii) agrees that after the occurrence and during the continuation of an Event of Default, it will comply with instructions of Agent or its nominee with respect to the applicable Pledged Interests without further consent by the applicable Grantor, (iii) to the extent permitted by law, agrees that the “issuer’s jurisdiction” (as defined in Section 8-110 of the UCC) is the State of New York, (iv) agrees to notify Agent upon obtaining knowledge of any interest in favor of any person in the applicable Pledged Interests that is materially adverse to the interest of the Agent therein, other than any Permitted Liens and (v) waives any right or requirement at any time hereafter to receive a copy of this Agreement in connection with the registration of any Pledged Interests hereunder in the name of Agent or its nominee or the exercise of voting rights by Agent or its nominee.

 

(i)                Real Property; Fixtures. Each Grantor covenants and agrees that upon the acquisition of any fee interest in Real Property having a fair market value in excess of $1,000,000 it will promptly (and in any event within two Business Days (or such longer period as agreed to by Agent in writing in its sole discretion) of acquisition) notify Agent of the acquisition of such Real Property and will grant to Agent, for the benefit of the Lender Group and the Bank Product Providers, a first priority (subject only to the terms of the Intercreditor Agreement, the Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases) Mortgage on each fee interest in Real Property now or hereafter owned by such Grantor and shall deliver such other documentation and opinions, in form and substance satisfactory to Agent, in connection with the grant of such Mortgage as Agent shall request in its Permitted Discretion, including title insurance policies, financing statements, fixture filings and environmental audits and such Grantor shall pay all recording costs, intangible taxes and other fees and costs (including reasonable attorneys’ fees and expenses) incurred in connection therewith. Each Grantor acknowledges and agrees that, to the extent permitted by applicable law, all of the Collateral shall remain personal property regardless of the manner of its attachment or affixation to real property.

 

(j)                Transfers and Other Liens. Grantors shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except as expressly permitted by the Credit Agreement, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral of any Grantor, except for Permitted Liens. The inclusion of Proceeds in the Collateral shall not be deemed to constitute Agent’s consent to any sale or other disposition of any of the Collateral except as expressly permitted in this Agreement or the other Loan Documents.

 

(k)               Controlled Accounts; Controlled Investments.

 

(i)            Subject to any applicable time periods provided under Schedule 3.6 to the Credit Agreement, each Grantor shall (A) establish and maintain cash management services of a type and on terms reasonably satisfactory to Agent at Wells Fargo or one or more of the other banks set forth on Schedule 10 (each a “Controlled Account Bank”), and shall take reasonable steps to ensure that all of its Account Debtors forward payment of the amounts owed by them directly to a Collection Account at such Controlled Account Bank that is not an Excluded Account (each, a “Controlled Account”) (by wire transfer to the applicable Controlled Account Bank or to a lockbox maintained by the applicable Controlled Account Bank for deposit into such Collection Account), and (B) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all of their Collections (including those sent directly by their Account Debtors to a Grantor) and proceeds of Collateral into a Controlled Account;

 

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(ii)           Subject to any applicable time periods provided under Schedule 3.6 to the Credit Agreement, each Grantor shall establish and maintain Controlled Account Agreements with Agent and the applicable Controlled Account Bank, in form and substance reasonably acceptable to Agent. Each such Controlled Account Agreement shall provide, among other things, that (A) the Controlled Account Bank will comply with any instructions originated by Agent directing the disposition of the funds in each applicable Controlled Account without further consent by the applicable Grantor, (B) the Controlled Account Bank waives, subordinates, or agrees not to exercise any rights of setoff or recoupment or any other claim against each applicable Controlled Account other than for payment of its service fees and other charges directly related to the administration of such Controlled Account and for returned checks or other items of payment, and (C) upon the instruction of Agent (an “Activation Instruction”), the Controlled Account Bank will forward by daily sweep all amounts in each applicable Controlled Account to the Agent’s Account. Agent agrees not to issue an Activation Instruction with respect to the Controlled Accounts unless a Cash Dominion Event has occurred at the time such Activation Instruction is issued. Agent agrees to use commercially reasonable efforts to rescind an Activation Instruction (the “Rescission”) after any Cash Dominion Period has ended;

 

(iii)          So long as no Default or Event of Default has occurred and is continuing or would result therefrom, Borrowers may amend Schedule 10 to add or replace a Controlled Account Bank or Controlled Account and shall upon such addition or replacement provide to Agent an amended Schedule 10; provided, that (A) such prospective Controlled Account Bank shall be reasonably satisfactory to Agent, and (B) prior to the time of the opening of such Controlled Account, the applicable Grantor and such prospective Controlled Account Bank shall have executed and delivered to Agent a Controlled Account Agreement. Each Grantor shall close any of its Controlled Accounts (and establish replacement Controlled Account accounts in accordance with the foregoing sentence) as promptly as practicable and in any event within 45 days after notice from Agent that the operating performance, funds transfer, or availability procedures or performance of the Controlled Account Bank with respect to Controlled Account Accounts or Agent’s liability under any Controlled Account Agreement with such Controlled Account Bank is no longer acceptable in Agent’s reasonable judgment; and

 

(iv)         Other than (A) with respect to Excluded Accounts, and (B) an aggregate amount of not more than $50,000 (calculated at current exchange rates) at any one time, in the case of Subsidiaries of Grantors that are CFCs, no Grantor will, and no Grantor will permit its Subsidiaries to, make, acquire, or permit to exist Permitted Investments consisting of cash, Cash Equivalents, or amounts credited to Deposit Accounts or Securities Accounts unless Grantor or its Subsidiary, as applicable, and the applicable bank or securities intermediary have entered into Control Agreements or, with respect to CFCs, other arrangement or agreements under applicable foreign law, governing such Permitted Investments in order to perfect (or further establish) Agent’s Liens in such Permitted Investments.

 

(l)                Name, Etc. No Grantor will, nor will any Grantor permit any of its Subsidiaries to, change its name, chief executive office, organizational identification number, jurisdiction of organization or organizational identity; provided, that any Grantor or any of its Subsidiaries may change its name or chief executive office upon at least ten (10) days prior written notice to Agent of such change.

 

(m)              Account Verification. Each Grantor will, and will cause each of its Subsidiaries to, permit Agent, in Agent’s name or in the name or a nominee of Agent, to verify the validity, amount or any other matter relating to any Account, by mail, telephone, facsimile transmission or other electronic means of transmission or otherwise. Further, at the request of Agent, each Grantor will, and will cause each of its Subsidiaries to, send requests for verification of Accounts or, after the occurrence and during the continuance of an Event of Default, send notices of assignment of Accounts to Account Debtors and other obligors.

 

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(n)              Motor Vehicles. Promptly (and in any event within ten (10) Business Days) (or such later date as the Agent may agree to in its sole discretion) after request by Agent, with respect to all goods covered by a certificate of title owned by any Grantor with an aggregate fair market value in excess of $500,000, such Grantor shall deliver to Agent or Agent’s designee, the certificates of title for all such goods and promptly (and in any event within ten (10) Business Days) (or such later date as the Agent may agree to in its sole discretion) after request by Agent, such Grantor shall take all actions necessary to cause such certificates to be filed (with the Agent’s Lien noted thereon) in the appropriate state motor vehicle filing office.

 

(o)               Pledged Notes. Grantors (i) without the prior written consent of Agent, will not (A) waive or release any obligation of any Person that is obligated under any of the Pledged Notes, (B) take or omit to take any action or knowingly suffer or permit any action to be omitted or taken, the taking or omission of which would result in any right of offset against sums payable under the Pledged Notes, or (C) other than Permitted Dispositions, assign or surrender their rights and interests under any of the Pledged Notes or terminate, cancel, modify, change, supplement or amend the Pledged Notes, and (ii) shall provide to Agent copies of all material written notices (including notices of default) given or received with respect to the Pledged Notes promptly after giving or receiving such notice.

 

(p)               Keepwell. Each Qualified ECP Grantor 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 Loan Party to guaranty and otherwise honor all Obligations in respect of Swap Obligations. The obligations of each Qualified ECP Grantor under this Section shall remain in full force and effect until payment in full of the Obligations. Each Qualified ECP Grantor intends that this Section 7(p) constitute, and this Section 7(p) 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.

 

8.              Relation to Other Security Documents. The provisions of this Agreement shall be read and construed with the other Loan Documents referred to below in the manner so indicated.

 

(a)               Credit Agreement. In the event of any conflict between any provision in this Agreement and a provision in the Credit Agreement, such provision of the Credit Agreement shall control.

 

(b)               Patent, Trademark, Copyright Security Agreements. The provisions of the Copyright Security Agreements, Trademark Security Agreements, and Patent Security Agreements are supplemental to the provisions of this Agreement, and nothing contained in the Copyright Security Agreements, Trademark Security Agreements, or the Patent Security Agreements shall limit any of the rights or remedies of Agent hereunder. In the event of any conflict between any provision in this Agreement and a provision in a Copyright Security Agreement, Trademark Security Agreement or Patent Security Agreement, such provision of this Agreement shall control.

 

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9.              Further Assurances.

 

(a)               Each Grantor agrees that from time to time, at its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that Agent may reasonably request, in order to perfect and protect the Security Interest granted hereby, to create, perfect or protect the Security Interest purported to be granted hereby or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.

 

(b)               Each Grantor authorizes the filing by Agent of financing or continuation statements, or amendments thereto, and such Grantor will execute and deliver to Agent such other instruments or notices, as Agent may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby.

 

(c)               Each Grantor authorizes Agent at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all personal property of debtor” or “all assets of debtor” or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. Each Grantor also hereby ratifies any and all financing statements or amendments previously filed by Agent in any jurisdiction.

 

(d)               Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the Code.

 

10.           Agent’s Right to Perform Contracts, Exercise Rights, etc. Upon the occurrence and during the continuance of an Event of Default, Agent (or its designee) (a) may proceed to perform any and all of the obligations of any Grantor contained in any contract, lease, or other agreement and exercise any and all rights of any Grantor therein contained as fully as such Grantor itself could, (b) shall have the right (subject to Section 17(b)) to use any Grantor’s rights under Intellectual Property Licenses in connection with the enforcement of Agent’s rights hereunder, including the right to prepare for sale and sell any and all Inventory and Equipment now or hereafter owned by any Grantor and now or hereafter covered by such licenses, and (c) shall have the right to request that any Equity Interests that are pledged hereunder be registered in the name of Agent or any of its nominees.

 

11.           Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints Agent its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, at such time as an Event of Default has occurred and is continuing under the Credit Agreement, to take any action and to execute any instrument which Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including:

 

(a)               to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Accounts or any other Collateral of such Grantor;

 

(b)               to receive and open all mail addressed to such Grantor and to notify postal authorities to change the address for the delivery of mail to such Grantor to that of Agent;

 

(c)               to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;

 

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(d)              to file any claims or take any action or institute any proceedings which Agent may deem necessary or desirable for the collection of any of the Collateral of such Grantor or otherwise to enforce the rights of Agent with respect to any of the Collateral;

 

(e)               to repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to such Grantor in respect of any Account of such Grantor;

 

(f)               to use any Intellectual Property or Intellectual Property Licenses of such Grantor, including but not limited to any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, or advertising matter, in preparing for sale, advertising for sale, or selling Inventory or other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of such Grantor; and

 

(g)              Agent, on behalf of the Lender Group or the Bank Product Providers, shall have the right, but shall not be obligated, to bring suit in its own name to enforce the Intellectual Property and Intellectual Property Licenses and, if Agent shall commence any such suit, the appropriate Grantor shall, at the request of Agent, do any and all lawful acts and execute any and all proper documents reasonably required by Agent in aid of such enforcement.

 

To the extent permitted by law, each Grantor hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated.

 

12.           Agent May Perform. If any Grantor fails to perform any agreement contained herein, Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Agent incurred in connection therewith shall be payable, jointly and severally, by Grantors in accordance with the terms of the Credit Agreement.

 

13.           Agent’s Duties. The powers conferred on Agent hereunder are solely to protect Agent’s interest in the Collateral, for the benefit of the Lender Group and the Bank Product Providers, and shall not impose any duty upon Agent to exercise any such powers. Except for the safe custody of any Collateral in its actual possession and the accounting for moneys actually received by it hereunder, Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially equal to that which Agent accords its own property.

 

14.           Collection of Accounts, General Intangibles and Negotiable Collateral. At any time upon the occurrence and during the continuance of an Event of Default, Agent or Agent’s designee may (a) make direct verification from Account Debtors with respect to any or all Accounts that are part of the Collateral, (b) notify Account Debtors of any Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral of such Grantor have been assigned to Agent, for the benefit of the Lender Group and the Bank Product Providers, or that Agent has a security interest therein, or (c) collect the Accounts, General Intangibles and Negotiable Collateral of any Grantor directly, and any collection costs and expenses shall constitute part of such Grantor’s Secured Obligations under the Loan Documents.

 

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15.           Disposition of Pledged Interests by Agent. None of the Pledged Interests existing as of the date of this Agreement are, and none of the Pledged Interests hereafter acquired on the date of acquisition thereof will be, registered or qualified under the various federal or state securities laws of the United States and disposition thereof after an Event of Default has occurred and is continuing may be restricted to one or more private (instead of public) sales in view of the lack of such registration. Each Grantor understands that in connection with such disposition, Agent may approach only a restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified pursuant to federal and state securities laws and sold on the open market. Each Grantor, therefore, agrees that: (a) if Agent shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests or any portion thereof to be sold at a private sale, Agent shall have the right to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable at the private sale thereof, and (b) such reliance shall be conclusive evidence that Agent has handled the disposition in a commercially reasonable manner.

 

16.           Voting and Other Rights in Respect of Pledged Interests.

 

(a)               Upon the occurrence and during the continuation of an Event of Default, (i) Agent may, at its option, and with two (2) Business Days prior notice to any Grantor (unless such Event of Default is an Event of Default specified in Section 8.4 or 8.5 of the Credit Agreement, in which case no such notice need be given), and in addition to all rights and remedies available to Agent under any other agreement, at law, in equity, or otherwise, exercise all voting rights, or any other ownership or consensual rights (including any dividend or distribution rights) in respect of the Pledged Interests owned by such Grantor, but under no circumstances is Agent obligated by the terms of this Agreement to exercise such rights, and (ii) if Agent duly exercises its right to vote any of such Pledged Interests, each Grantor hereby appoints Agent, such Grantor’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner Agent deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders, partners or members, as the case may be. The power-of-attorney and proxy granted hereby is coupled with an interest and shall be irrevocable.

 

(b)              For so long as any Grantor shall have the right to vote the Pledged Interests owned by it, such Grantor covenants and agrees that it will not, without the prior written consent of Agent, vote or take any consensual action with respect to such Pledged Interests which would materially adversely affect the rights of Agent, the other members of the Lender Group, or the Bank Product Providers, or the value of the Pledged Interests.

 

17.            Remedies. Upon the occurrence and during the continuance of an Event of Default:

 

(a)              Agent may, and, at the instruction of the Required Lenders, shall exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Loan Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, each Grantor expressly agrees that, in any such event, Agent without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon any Grantor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require Grantors to, and each Grantor hereby agrees that it will at its own expense and upon request of Agent forthwith, assemble all or part of the Collateral as directed by Agent and make it available to Agent at one or more locations where such Grantor regularly maintains Collateral, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Agent’s offices or elsewhere, for cash, on credit, and upon such other terms as Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notification of sale shall be required by law, at least ten (10) days notification by mail to the applicable Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically such notification shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the Code. Agent shall not be obligated to make any sale of Collateral regardless of notification of sale having been given. Agent may adjourn any public sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor agrees that (A) the internet shall constitute a “place” for purposes of Section 9-610(b) of the Code, and (B) to the extent notification of sale shall be required by law, notification by mail of the URL where a sale will occur and the time when a sale will commence at least ten (10) days prior to the sale shall constitute a reasonable notification for purposes of Section 9-611(b) of the Code. Each Grantor agrees that any sale of Collateral to a licensor pursuant to the terms of a license agreement between such licensor and a Grantor is sufficient to constitute a commercially reasonable sale (including as to method, terms, manner, and time) within the meaning of Section 9-610 of the Code.

 

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(b)              Agent is hereby granted a license or other right to use, without liability for royalties or any other charge, each Grantor’s Intellectual Property, including but not limited to, any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, and advertising matter, whether owned by any Grantor or with respect to which any Grantor has rights under license, sublicense, or other agreements (including any Intellectual Property License), as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and each Grantor’s rights under all licenses and all franchise agreements shall inure to the benefit of Agent.

 

(c)              Agent may, in addition to other rights and remedies provided for herein, in the other Loan Documents, or otherwise available to it under applicable law and without the requirement of notice to or upon any Grantor or any other Person (which notice is hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), (i) with respect to any Grantor’s Deposit Accounts in which Agent’s Liens are perfected by control under Section 9-104 of the Code, instruct the bank maintaining such Deposit Account for the applicable Grantor to pay the balance of such Deposit Account to or for the benefit of Agent, and (ii) with respect to any Grantor’s Securities Accounts in which Agent’s Liens are perfected by control under Section 9-106 of the Code, instruct the securities intermediary maintaining such Securities Account for the applicable Grantor to (A) transfer any cash in such Securities Account to or for the benefit of Agent, or (B) liquidate any financial assets in such Securities Account that are customarily sold on a recognized market and transfer the cash proceeds thereof to or for the benefit of Agent.

 

(d)              Any cash held by Agent as Collateral and all cash proceeds received by Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations in the order set forth in the Credit Agreement. In the event the proceeds of Collateral are insufficient to satisfy all of the Secured Obligations in full, each Grantor shall remain jointly and severally liable for any such deficiency.

 

(e)               Each Grantor hereby acknowledges that the Secured Obligations arise out of a commercial transaction, and agrees that if an Event of Default shall occur and be continuing Agent shall have the right to an immediate writ of possession without notice of a hearing. Agent shall have the right to the appointment of a receiver for the properties and assets of each Grantor, and each Grantor hereby consents to such rights and such appointment and hereby waives any objection such Grantor may have thereto or the right to have a bond or other security posted by Agent.

 

18.            Remedies Cumulative. Each right, power, and remedy of Agent, any other member of the Lender Group, or any Bank Product Provider as provided for in this Agreement, the other Loan Documents or any Bank Product Agreement now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement, the other Loan Documents and the Bank Product Agreements or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Agent, any other member of the Lender Group, or any Bank Product Provider, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by Agent, such other member of the Lender Group or such Bank Product Provider of any or all such other rights, powers, or remedies.

 

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19.            Marshaling. Agent shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Agent’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

 

20.            Indemnity. Each Grantor agrees to indemnify Agent, the other members of the Lender Group, and the Bank Product Providers from and against all claims, lawsuits and liabilities (including reasonable attorneys’ fees) arising out of or resulting from this Agreement (including enforcement of this Agreement) or any other Loan Document to which such Grantor is a party in accordance with and to the extent set forth in Section 10.3 of the Credit Agreement. This provision shall survive the termination of this Agreement and the Credit Agreement and the repayment of the Secured Obligations.

 

21.            Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by Agent and each Grantor to which such amendment applies.

 

22.           Addresses for Notices. All notices and other communications provided for hereunder shall be given in the form and manner and delivered to Agent at its address specified in the Credit Agreement, and to any of the Grantors at the notice address specified for the Administrative Borrower in the Credit Agreement, or as to any party, at such other address as shall be designated by such party in a written notice to the other party.

 

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23.           Continuing Security Interest: Assignments under Credit Agreement.

 

(a)              This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the Obligations have been paid in full in accordance with the provisions of the Credit Agreement and the Commitments have expired or have been terminated, (ii) be binding upon each Grantor, and their respective successors and assigns, and (iii) inure to the benefit of, and be enforceable by, Agent, and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), any Lender may, in accordance with the provisions of the Credit Agreement, assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise. Upon payment in full of the Secured Obligations in accordance with the provisions of the Credit Agreement and the expiration or termination of the Commitments, the Guaranty made and the Security Interest granted hereby shall terminate and all rights to the Collateral shall revert to Grantors or any other Person entitled thereto. At such time, upon Borrowers’ request, Agent will authorize the filing of appropriate termination statements to terminate such Security Interest. No transfer or renewal, extension, assignment, or termination of this Agreement or of the Credit Agreement, any other Loan Document, or any other instrument or document executed and delivered by any Grantor to Agent nor any additional Revolving Loans or other loans made by any Lender to any Borrower, nor the taking of further security, nor the retaking or re-delivery of the Collateral to Grantors, or any of them, by Agent, nor any other act of the Lender Group or the Bank Product Providers, or any of them, shall release any Grantor from any obligation, except a release or discharge executed in writing by Agent in accordance with the provisions of the Credit Agreement. Agent shall not by any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by Agent and then only to the extent therein set forth. A waiver by Agent of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which Agent would otherwise have had on any other occasion.

 

(b)              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 Secured 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.

 

24.            Survival. All representations and warranties made by the Grantors in this Agreement and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement 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 Lender, 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 under the Credit Agreement, 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 the Credit Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.

 

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25.           CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

(a)               THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b)               THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK; 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 GRANTOR AND AGENT 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 25(b).

 

(c)               TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH GRANTOR AND AGENT 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 THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A “CLAIM”). EACH GRANTOR AND AGENT 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 COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(d)               EACH GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK AND THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, 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 SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY GRANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(e)               NO CLAIM MAY BE MADE BY ANY GRANTOR AGAINST THE AGENT, THE SWING LENDER, ANY OTHER LENDER, ISSUING LENDER, OR THE UNDERLYING ISSUER, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES 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 ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH, AND EACH GRANTOR 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.

 

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26.           New Subsidiaries. Pursuant to Section 5.11 of the Credit Agreement, certain Subsidiaries (whether by acquisition or creation) of any Grantor are required to enter into this Agreement by executing and delivering in favor of Agent a Joinder to this Agreement in substantially the form of Annex 1. Upon the execution and delivery of Annex 1 by any such new Subsidiary, such Subsidiary shall become a Guarantor and/or Grantor hereunder with the same force and effect as if originally named as a Guarantor and/or Grantor herein. The execution and delivery of any instrument adding an additional Guarantor or Grantor as a party to this Agreement shall not require the consent of any Guarantor or Grantor hereunder. The rights and obligations of each Guarantor and Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor or Grantor hereunder.

 

27.           Agent. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the “Agent” shall be a reference to Agent, for the benefit of each member of the Lender Group and each of the Bank Product Providers.

 

28.           Miscellaneous.

 

(a)               This Agreement is a Loan Document. 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 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.

 

(b)               Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. 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.

 

(c)               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.

 

(d)              Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against any member of the Lender Group, any Bank Product Provider, or any Grantor, whether under any rule of construction or otherwise. 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.

 

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29.            Intercreditor Agreement.

 

(a)               Notwithstanding anything herein to the contrary, the priority of Agent’s Liens and the exercise, after the occurrence and during the continuance of an Event of Default, of any right or remedy by Agent or any Lender with respect to certain of the Collateral hereunder or under any other Loan Document are subject to the provisions of the Intercreditor Agreement. In the event of any direct and irreconcilable conflict between the terms of the Intercreditor Agreement and this Agreement with respect to (a) the priority of Agent’s Liens or (b) the rights of Agent or any Lender under this Agreement with respect to certain Collateral after the occurrence and during the continuance of an Event of Default, the terms of the Intercreditor Agreement shall govern and control.

 

(b)              Any reference in this Agreement or any other Loan Document to a “first priority lien” or words of similar effect in describing the Liens created hereunder or under any other Loan Document shall be understood to refer to such priority as set forth in the Intercreditor Agreement. Nothing in this Section 29 shall be construed to provide that any Grantor is a third party beneficiary of the provisions of the Intercreditor Agreement or may assert any rights, defenses or claims on account of the Intercreditor Agreement or this Section 29 (other than as set forth in the last sentence hereof) and each Grantor (x) agrees that, except as expressly otherwise provided in the Intercreditor Agreement, nothing in the Intercreditor Agreement is intended or shall impair the obligation of any Grantor to pay the obligations under this Agreement or any other Loan Document as and when the same become due and payable in accordance with their respective terms, or to affect the relative rights of the creditors of any Grantor, other than Agent and the Lenders as between themselves and (y) if Agent shall enforce its rights or remedies in violation of the terms of the Intercreditor Agreement, no Grantor shall use such violation as a defense to any enforcement of remedies otherwise to the extent such action is taken in accordance with the terms of this Agreement and the other Loan Documents by Agent or any Lender or assert such violation, to the extent taken in accordance with the terms of this Agreement, as a counterclaim or basis for set-off or recoupment against Agent or any Lender and agrees to abide by the terms of this Agreement and to keep, observe and perform the several matters and things herein intended to be kept, observed and performed by it. In furtherance of the foregoing, notwithstanding anything to the contrary set forth herein (other than with respect to Grantors’ obligations to deliver Control Agreements pursuant to this Agreement, the Credit Agreement and any other Loan Document), prior to the payment in full of the Term Loan Obligations to the extent that any Grantor is required to (i) give physical possession over any Term Loan Priority Collateral to Agent under this Agreement or the other Loan Documents, such requirement to give possession shall be satisfied if such Collateral is delivered to and held by the Term Loan Agent pursuant to the Intercreditor Agreement and (ii) take any other action with respect to the Term Loan Priority Collateral or any proceeds thereof, including delivery of such Collateral or proceeds thereof, such requirement to take any action shall be satisfied if such action is taken with respect to the Term Loan Priority Collateral or any proceeds thereof in accordance with the terms of the Term Loan Documents and the Intercreditor Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow.]

 

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

 

  GRANTORS:
   
  HUDSON TECHNOLOGIES, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  HUDSON TECHNOLOGIES COMPANY,
  a Tennessee corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  HUDSON HOLDINGS, INC.,
  a Nevada corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  ASPEN REFRIGERANTS, INC.,
  a Delaware corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

[Hudson Technologies - Signature Page to Guaranty and Security Agreement]

 

 

 

  GRANTORS (CONT’D):
   
  GLACIER INTERNATIONAL, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  GLACIER TRADING CORP.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  HFC INTERNATIONAL, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  HFC TRADERS, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  RGIT TRADING CORP.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

[Hudson Technologies - Signature Page to Guaranty and Security Agreement]

 

 

 

  GRANTORS (CONT’D):
   
  RCTI CORP.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  RCTI TRADING, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  RGIT, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  RGT ENTERPRISES, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

  RCT INTERNATIONAL, INC.,
  a New York corporation
   
   
  By: /s/ Brian F. Coleman
    Name: Brian F. Coleman
    Title: President and Chief Operating Officer

 

[Hudson Technologies - Signature Page to Guaranty and Security Agreement]

 

 

 

  AGENT:
   
  WELLS FARGO BANK, NATIONAL ASSOCIATION,
  a national banking association
   
   
  By: /s/ Victor Panasci
    Name: Victor Panasci
    Title: Its Authorized Signatory

 

[Hudson Technologies - Signature Page to Guaranty and Security Agreement]

 

 

Exhibit 10.3

 

EXECUTION VERSION

 

WAIVER AND FOURTH AMENDMENT
TO TERM LOAN CREDIT AND SECURITY AGREEMENT

 

THIS WAIVER AND FOURTH AMENDMENT TO TERM LOAN CREDIT AND SECURITY AGREEMENT (this “Amendment”), dated as of December 19, 2019, is by and among Hudson Technologies Company, a Tennessee corporation (“Hudson Technologies”), HUDSON HOLDINGS, INC., a Nevada corporation (“Holdings”), and ASPEN REFRIGERANTS, INC. (formerly known as AIRGAS-REFRIGERANTS, INC.), a Delaware corporation (“ARI” and together with Hudson Technologies, and Holdings, collectively, the “Borrowers”, and each a “Borrower”), the other Credit Parties hereto, the financial institutions party hereto as lenders (the “Lenders”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as collateral agent and administrative agent for the Lenders (in such capacities, the “Agent”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement (as defined below).

 

W I T N E S S E T H

 

WHEREAS, the Borrowers, the other Credit Parties, the Lenders, and the Agent are parties to that certain Term Loan Credit and Security Agreement dated as of October 10, 2017 (as amended by that Limited Waiver and First Amendment to Term Loan Credit and Security Agreement and Certain Other Documents, dated as of June 29, 2018 (the “First Amendment”), that certain Waiver and Second Amendment to Term Loan Credit and Security Agreement, dated as of August 14, 2018 (the “Second Amendment”), that certain Waiver and Third Amendment to Term Loan Credit and Security Agreement, dated as of November 30, 2018 (the “Third Amendment”), and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);

 

WHEREAS, the existing Events of Default identified on Schedule 1 hereto (collectively, the “Specified Defaults”) have occurred and are continuing as of the date hereof; and

 

WHEREAS, the Credit Parties have requested that the Agent and the Lenders (a) waive the Specified Defaults, and (b) amend certain provisions of the Credit Agreement, and the Agent and the Lenders have agreed to grant such waivers and make such amendments, in each case, in accordance with and subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

Article I. 

WAIVER

 

1.1           Waiver of Existing Events of Default. Subject to the terms and conditions set forth herein, the Agent and the Required Lenders hereby waive the Specified Defaults.

 

1.2           Effectiveness of Waivers. The foregoing waivers shall be effective only to the extent specifically set forth herein and shall not (a) be construed as a waiver of any breach, Default or Event of Default other than as specifically waived herein nor as a waiver of any breach, Default or Event of Default of which the Lenders have not been informed by the Credit Parties, (b) affect the right of the Lenders to demand compliance by the Credit Parties with all terms and conditions of the Credit Agreement and the Other Documents, except as specifically modified or waived by the terms hereof, (c) be deemed a waiver of any transaction or future action on the part of the Credit Parties requiring the Lenders’ or the Required Lenders’ consent or approval under the Credit Agreement or the Other Documents, or (d) except as waived hereby, be deemed or construed to be a waiver or release of, or a limitation upon, the Agent’s or the Lenders’ exercise of any rights or remedies under the Credit Agreement or any Other Document, whether arising as a consequence of any Default or Event of Default which may now exist or otherwise, all such rights and remedies hereby being expressly reserved.

 

 

 

Article II.
AMENDMENTs TO CREDIT AGREEMENT

 

2.1          Amendments to Definitions in the Credit Agreement.

 

(a)           Section 1.2 of the Credit Agreement is hereby amended by adding the following new defined terms in proper alphabetical order:

 

Acceptable Sale” means the sale of all or substantially all of the stock or assets of the Credit Parties (whether in a single transaction or a series of transactions) that either (A) provides for the repayment in full in cash of all Obligations under the Credit Agreement and Other Documents, or (B) is otherwise for a net purchase price and other consideration acceptable to the Required Lenders.

 

Bid Deadline” shall have the meaning set forth in Section 6.16(a)(vi) hereof.

 

Board Observer” shall have the meaning set forth in Section 6.15 hereof.

 

Buyer List” shall have the meaning set forth in Section 6.16(a)(ii) hereof.

 

CIM” shall have the meaning set forth in Section 6.16(a)(iii) hereof.

 

CRO” shall have the meaning set forth in Section 6.17 hereof

 

Fourth Amendment” shall mean that certain Waiver and Fourth Amendment to Term Loan Credit and Security Agreement dated as of December 19, 2019, by and among the Borrowers, the other Credit Parties, the Agent, and the Lenders.”

 

Fourth Amendment Effective Date” shall mean December 19, 2019.”

 

Governing Body” shall have the meaning set forth in Section 6.15 hereof.

 

Investment Banker” shall have the meaning set forth in Section 6.16(a)(i) hereof.

 

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LTM Adjusted EBITDA” shall mean, at any date of determination, adjusted EBITDA for the most recent twelve (12) calendar months.

 

Milestones” shall have the meaning set forth in Section 6.16 hereof.

 

Outside Date” shall have the meaning set forth in Section 6.16 hereof.

 

Purchase Agreement” shall have the meaning set forth in Section 6.16(a)(viii) hereof.

 

Refinancing Commitment Letter” shall have the meaning set forth in Section 6.16(b)(iii)

 

Refinancing Milestones” shall have the meaning set forth in Section 6.16 hereof.

 

Sale” shall have the meaning set forth in Section 6.16 hereof.

 

Sale Milestones” shall have the meaning set forth in Section 6.16 hereof.

 

Sale/Refinancing Process” shall have the meaning set forth in Section 6.16 hereof.

 

Sale/Refinancing Process Start Date” shall have the meaning set forth in Section 6.16 hereof.

 

Transaction” shall have the meaning set forth in Section 6.16 hereof.

 

Trigger Event” shall mean any breach by the Credit Parties of Sections 6.5(a), (b), or (d) hereof, or the failure of the Credit Parties to make any payment under Section 2.6(a) hereof; provided, however, that a Trigger Event shall not constitute an Event of Default hereunder. For the avoidance of doubt, upon the occurrence of a Trigger Event, the Credit Parties shall remain obligated to make all interest, principal and other payments hereunder, unless otherwise agreed as between the Borrowers and the Lenders.

 

Winning Bid” shall have the meaning set forth in Section 6.16(a)(vii) hereof.

 

(b)           Section 1.2 of the Credit Agreement is hereby amended by deleting the terms “Business Recovery Plan”, “Exit Fee”, “Financial Advisor”, “Financial Covenant Relief Period”, and “Revolving Loan” in their entirety.

 

(c)            Section 1.2 of the Credit Agreement is hereby amended by amending and restating the terms “Intercreditor Agreement”, “Prepayment Premium”, “Revolving Agent”, “Revolving Loan Agreement”, “Revolving Loan Documents”, and “Revolving Loan Indebtedness” to read as follows:

 

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Intercreditor Agreement” shall mean that certain Intercreditor Agreement dated as of December 19, 2019 by and between Agent and Revolving Agent, and acknowledged by the Borrowers and Guarantors, as amended, restated, supplemented or otherwise modified from time to time.

 

Prepayment Premium” shall mean an amount equal to the applicable percentage of the principal amount so prepaid (including, without limitation, any payment upon acceleration of the Loans and, for the avoidance of doubt, in connection with any refinancing of the Loans and mandatory prepayments required under Section 2.20(b) or a prepayment required as a result of a disposition of assets not permitted hereunder) in accordance with the table set forth below:

 

Period Applicable Prepayment
Premium
From the Fourth Amendment
Effective Date through
March 31, 2020
0.50%
From April 1, 2020 through
March 31, 2021
2.50%
From April 1, 2021 and
thereafter
5.00%

 

Revolving Agent” shall mean, (a) Wells Fargo Bank, National Association, in its capacity as administrative agent for the Revolving Loan Lenders under the Revolving Loan Agreement, (b) any successor to Wells Fargo Bank, National Association, by assignment or otherwise, and (c) any other party that may become agent or trustee under the Revolving Loan Agreement in connection with a refinancing, renewal or replacement thereof.

 

Revolving Loan Agreement” shall mean that certain Credit Agreement, dated as of the Fourth Amendment Effective Date, in the original principal amount of at least $60,000,000, by and among the Revolving Agent, the lenders from time to time party thereto, the Borrowers, and the other parties from time to time party thereto, as the same may be amended, restated, replaced, modified or supplemented from time to time, including, without limitation, amendments, modifications, supplements, restatements and/or replacements thereof giving effect to increases, renewals, extensions, refundings, deferrals, restructurings, replacements or refinancings of, or additions to, the arrangements provided in such Credit Agreement.

 

Revolving Loan Documents” shall mean the Revolving Loan Agreement and the “Loan Documents”, as defined therein, as the same may be amended, restated, replaced, modified or supplemented from time to time, including, without limitation, amendments, modifications, supplements, restatements and/or replacements thereof giving effect to increases, renewals, extensions, refundings, deferrals, restructurings, replacements or refinancings of, or additions to, the arrangements provided in such documents.

 

4

 

 

Revolving Loan Indebtedness” shall mean the “Revolving Obligations” as defined in the Intercreditor Agreement.

 

(d)           Each reference contained in the Credit Agreement to “Undrawn Availability” shall be substituted with a reference to “Excess Availability”.

 

(e)           Each reference contained in the Credit Agreement to “Average Undrawn Availability” shall be substituted with a reference to “Average Excess Availability”.

 

(f)            Each reference contained in the Credit Agreement to “Maximum Loan Amount” shall be substituted with a reference to “Maximum Revolver Amount”.

 

(g)           Each reference contained in the Credit Agreement to “Revolving Loan” shall be substituted with a reference to “Revolving Loan Indebtedness”.

 

(h)           “Special Director” shall, with respect to a Credit Party, have the meaning given to such term in the applicable Credit Party’s By-Laws, as amended as of the date hereof.

 

2.2          Amendment to Section 2.2(b) of the Credit Agreement. Section 2.2(b) of the Credit Agreement is hereby amended by (a) adding “Subject to the Intercreditor Agreement,” at the beginning of the first sentence thereof and (b) deleting the proviso at the end of the sixth sentence thereof.

 

2.3          Amendment to Section 2.6(a) of the Credit Agreement. Section 2.6(a) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

(a)   Subject to the Intercreditor Agreement, the Borrowers shall repay the outstanding principal amount of the Loans in quarterly installments on the dates and in the amounts set forth in the table below, unless accelerated sooner pursuant to Section 11.1:

 

Payment Dates Principal Amortization
Payment
March 31, 2020 $562,000
June 30, 2020 $562,000
September 30, 2020 $562,000
December 31, 2020 $1,312,000
March 31, 2021 $1,312,000
June 30, 2021 $1,312,000
September 30, 2021 $1,312,000
December 31, 2021 $1,312,000
March 31, 2022 $1,312,000
June 30, 2022 $1,312,000
September 30, 2022 $1,312,000
December 31, 2022 $1,312,000
March 31, 2023 $1,312,000
June 30, 2023 $1,312,000
September 30, 2023 $1,312,000
Last day of the Term Outstanding Principal
Balance of Loans

 

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2.4          Amendment to Section 2.20(d) to the Credit Agreement. Section 2.20(d) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

(d)           Excess Cash Flow. Subject to the Intercreditor Agreement, commencing with respect to the fiscal year ended December 31, 2018, and with respect to each fiscal year thereafter during the Term, on or before the date that is ten (10) days after the date on which financial statements are required to be delivered pursuant to Section 9.7 (the “ECF Payment Date”), the Borrowers shall repay the Loans in an amount equal to (i) fifty percent (50%) of Excess Cash Flow for such fiscal year and thereafter, to the extent the Total Leverage Ratio is greater than 2.75 to 1.00 and (ii) 0.00% of the Excess Cash Flow for such fiscal year to the extent the Total Leverage Ratio is equal to or less than 2.75 to 1.00, less, in each case, the amount of voluntary prepayment of the Loans made by the Borrowers in such fiscal year; provided that Borrowers may, at their option, make all Excess Cash Flow payments for any fiscal year pursuant to clause (i) above even if the Total Leverage Ratio is equal to or less than 2.75 to 1.00. Each such prepayment shall be accompanied by a certificate signed by HT’s chief financial officer certifying the manner in which Excess Cash Flow and the resulting prepayment were calculated, which certificate shall be in form and substance reasonably satisfactory to Required Lenders. Any such prepayment shall be applied as set forth in clause (e) below. Notwithstanding the foregoing, solely with respect to any payment due hereunder with respect to the fiscal year ended December 31, 2019, such payment shall be calculated based solely on Excess Cash Flow for the fiscal quarter ended December 31, 2019.

 

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2.5          Amendment to Section 2.20(f) to the Credit Agreement. Section 2.20(f)(i) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

(i)            Notwithstanding anything herein to the contrary, no Prepayment Premium or Make-Whole Amount shall be payable in connection with any prepayment made pursuant to this Section 2.20 (other than a mandatory prepayment under Section 2.20(b), a payment as a result of acceleration or foreclosure, or a prepayment required as a result of a disposition of assets not permitted hereunder).

 

2.6          Amendment to Section 3.1(c) to the Credit Agreement. Section 3.1(c) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

(c)           Interest Payments. Subject to the Intercreditor Agreement, interest on each Loan shall be due and payable: (i) in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein; and (ii) in accordance with the terms hereof before and after judgment, and before and after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower.

 

2.7          Amendment to Section 3.4 of the Credit Agreement. Section 3.4 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

(a)           Subject to the Intercreditor Agreement, Borrowers shall pay the amounts required to be paid in the Fee Letter and the FS Fee Letter in the manner and at the times required by the Fee Letter and the FS Fee Letter.

 

(b)          Reserved.

 

2.8          Amendment to Section 6.5 of the Credit Agreement. Section 6.5 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

Financial Covenants.

 

(a)           Total Leverage Ratio. Maintain, as of the last day of the fiscal quarter ending on each date set forth below, a Total Leverage Ratio not greater than the maximum ratio set forth in the table below opposite such date.

 

Date Maximum Total
Leverage Ratio
September 30, 2019 15.67x
December 31, 2019 14.54x
March 31, 2020 16.57x
June 30, 2020 10.87x
September 30, 2020 8.89x
December 31, 2020 8.89x
March 31, 2021 7.75x
June 30, 2021 7.03x
September 30, 2021 6.08x
December 31, 2021 5.36x

 

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(b)           Minimum Liquidity. Maintain, as of the last day of each month commencing with the month after the Fourth Amendment Effective Date, Liquidity of at least $5,000,000.

 

(c)           From and after June 30, 2018, without the prior written consent of the Required Lenders, the Credit Parties shall not be permitted to (x) make Permitted Acquisitions or any other investments under Section 7.4(e) (excluding transactions permitted under Section 7.10 hereof so long as such transactions are solely among Borrowers and/or Guarantors) and Section 7.4(f), or (y) declare, pay or make any dividends or distributions on any shares of the common stock or preferred stock of any Credit Party (other than dividends or distributions payable solely in its stock or rights thereto, or split-ups or reclassifications of its stock), including Permitted Distributions, or payments in respect of Earn-outs, under Section 7.7.

 

(d)           Minimum Adjusted EBITDA. Maintain, as of the last day of the fiscal quarter ending on each date set forth below, a LTM Adjusted EBITDA not less than the amount set forth in the table below opposite such date.

 

Date Minimum LTM
Adjusted EBITDA
September 30, 2019 $7.887 million
December 31, 2019 $7.954 million
March 31, 2020 $7.359 million
June 30, 2020 $11.745 million
September 30, 2020 $12.021 million
December 31, 2020 $12.300 million
March 31, 2021 $14.295 million
June 30, 2021 $14.566 million
September 30, 2021 $15.431 million
December 31, 2021 $16.267 million

 

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2.9          Amendment to Section 6.12 of the Credit Agreement. Section 6.12 of the Credit Agreement is hereby amended by deleting the text thereof and replacing it with the text “Reserved.”

 

2.10        Amendment to Article VI of the Credit Agreement. Article VI of the Credit Agreement is hereby amended by adding the following new Section 6.15 at the end thereof:

 

6.15. Board Observer.

 

Permit one (1) board observer (the “Board Observer”), who shall be an individual designated by the Required Lenders (and which, for the avoidance of doubt, may be an employee or Affiliate of any Lender), to attend (including, at the option of such Board Observer, via telephone) all meetings of the board of directors and any restructuring committee thereof (each, a “Governing Body”) of any Credit Party. Furthermore, the Credit Parties shall provide to such Board Observer all reports, meeting materials, notices, written consents, and other materials, including, but not limited to, consents in lieu of meetings, as and when provided to the other members of such Governing Body in their role as a member of such Governing Body; provided, however, that the Board Observer shall not (i) receive confidential information in violation of applicable law or confidentiality restrictions where the counterparty has not waived the confidentiality thereof, (ii) participate in meetings or conversations between a Governing Body and its counsel that is privileged or receive materials that are attorney work product, written attorney advice or materials prepared at the request of an attorney and (iii) receive materials or participation in discussions where they have an actual conflict of interest (based on the advice of counsel). The Credit Parties shall pay (or cause to be paid) the reasonable and documented out-of-pocket expenses of the Board Observer.

 

2.11        Amendment to Article VI of the Credit Agreement. Article VI of the Credit Agreement is hereby amended by adding the following new Section 6.16 at the end thereof:

 

6.16. Sale/Refinancing Process.

 

On or prior to the date that is six (6) months after a Trigger Event, the Credit Parties shall commence a process (the “Sale/Refinancing Process”; the date of such commencement, the “Sale/Refinancing Process Start Date”) to (x) sell the Credit Parties’ businesses and/or assets (a “Sale”), and/or (y) consummate a refinancing transaction (a “Refinancing”; together with any Sale, a “Transaction”), in each case, subject to the below enumerated milestones (such Milestones with respect to a Sale, the “Sale Milestones”; such Milestones with respect to a Refinancing, the “Refinancing Milestones”; collectively, the “Milestones”), which Milestones shall, for the avoidance of doubt, include those listed below, and which Transaction shall, in any event, be consummated on or prior to the eighteen (18) month anniversary of the Trigger Event (the “Outside Date”):

 

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(a)           Sale Milestones:

 

(i)            By five (5) days after the Sale/Refinancing Process Start Date, the Credit Parties shall have retained an investment banker acceptable to the Required Lenders pursuant to an engagement letter on terms customary for transactions of this type and otherwise acceptable to the Required Lenders (the “Investment Banker”).

 

(ii)           By twenty-one (21) days after the Sale/Refinancing Process Start Date, the Credit Parties shall deliver to the Agent a list of potential purchasers (the “Buyer List”) to target in connection with the pursuit of an Acceptable Sale (as defined below). Upon the written request of the Required Lenders, the Credit Parties shall cause the Investment Banker to promptly add to the Buyer List any potential purchaser that such Lenders reasonably believe in good faith (after consultation with the Investment Banker) could propose and execute on an Acceptable Sale.

 

(iii)          By thirty (30) days after the Sale/Refinancing Process Start Date, the Credit Parties shall deliver a draft confidential information memorandum (the “CIM”) to the Lenders along with the proposed auction draft of the purchase agreement for the Sale Process.

 

(iv)          By forty-five (45) days after the Sale/Refinancing Process Start Date, the Credit Parties shall deliver a final version of the CIM and a final version of the auction draft of the purchase agreement (together with the related disclosure schedules) to prospective purchasers, including those prospective purchasers included on the Buyer List, that they believe in good faith could submit a binding bid, and such final version of the CIM, together with a list of such prospective purchasers, shall be delivered to the Lenders.

 

(v)           Promptly following receipt thereof, the Credit Parties shall deliver to the Lenders any written expressions of interest from prospective purchasers.

 

(vi)          The Credit Parties shall establish a date that is not later than seventy-five (75) days after the Sale/Refinancing Process Start Date (the “Bid Deadline”) as the deadline for final submission of binding bids, which shall be submitted with complete mark-ups of the auction draft of the purchase agreement and the related disclosure schedules. Any such binding bids shall promptly be delivered to the Lenders.

 

(vii)         By five (5) days after the Bid Deadline, the Credit Parties shall have selected a bid that, in accordance with the fiduciary responsibilities of the applicable Governing Bodies of the Credit Parties, they believe represents the highest and best offer for an Acceptable Sale (taking into account the impact of the revisions to the purchase agreement and the disclosure schedules requested by the prospective purchasers). Such bid is referred to as the “Winning Bid”.

 

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(viii)        On or prior to twenty-five (25) days after the Bid Deadline, the Credit Parties and the purchaser that submitted the Winning Bid will have executed and delivered a purchase agreement to the Lenders reflecting the terms of the Winning Bid (the “Purchase Agreement”).

 

(ix)          The Acceptable Sale contemplated by the Purchase Agreement shall have been consummated immediately following receipt of all applicable governmental approvals and, to the extent required, approval by the shareholders of HT, and the proceeds thereof shall have been applied to the Obligations in accordance with the terms of the Credit Agreement and the Intercreditor Agreement.

 

(b)           Refinancing Milestones:

 

(i)            By twenty-one (21) days after the Sale/Refinancing Process Start Date, the Credit Parties shall solicit indications of interest from financial institutions and funds (including any financial institutions or funds suggested by any Lender) with respect to providing a Refinancing.

 

(ii)           By forty-five (45) days after the Sale/Refinancing Process Start Date, the Credit Parties shall have delivered to the Lenders a reasonably detailed, bona fide proposal letter or term sheet from one or more financial institutions or funds setting forth the terms of a Refinancing that would be consummated on or before the Outside Date.

 

(iii)          By seventy-five (75) days after the Sale/Refinancing Process Start Date, the Credit Parties shall have delivered to the Lenders a binding commitment letter duly executed by one or more financial institutions or funds, providing for a Refinancing (on funds certain terms) that would be consummated on or before the Outside Date (a “Refinancing Commitment Letter”).

 

(iv)          In addition, on a weekly basis from and after the Sale/Refinancing Process Start Date, the Credit Parties, their advisors, the CRO, and the Investment Banker shall participate in telephonic update calls with the Lenders and their advisors, concerning the Sale/Refinancing Process and including disclosure of materials relating thereto reasonably requested by the Lenders.

 

(v)           On or prior to the Outside Date, the Credit Parties shall have completed the Refinancing and the net proceeds therefrom shall be used to repay, in full, in cash, all Obligations; provided, that, to the extent all or any portion of the Revolving Loan Indebtedness remains outstanding after giving effect to such Refinancing, the holders of Indebtedness under such Refinancing shall bind themselves in writing to the terms of the Intercreditor Agreement in accordance with Section 8.12 thereof.

 

Notwithstanding the foregoing, (x) in the event that the Credit Parties deliver to the Lenders a fully executed Purchase Agreement on or before the Sale Milestone set forth above, any failure to comply with a Refinancing Milestone after such date (other than the requirement to consummate a Transaction by the Outside Date) shall not constitute an Event of Default so long as such Purchase Agreement remains in full force and effect, and (y) in the event that the Credit Parties deliver to the Lenders a fully executed Refinancing Commitment Letter on or before the Refinancing Milestone set forth above, any failure to comply with a Sale Milestone after such date (other than the requirement to consummate a Transaction by the Outside Date) shall not constitute an Event of Default so long as such Refinancing Commitment Letter remains in full force and effect.

 

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2.12        Amendment to Article VI of the Credit Agreement. Article VI of the Credit Agreement is hereby amended by adding the following new Section 6.17 at the end thereof:

 

6.17   Chief Restructuring Officer. At all times from and after the two (2) week anniversary of the Fourth Amendment Effective Date (subject to the second sentence of this Section 6.17), a designee of Grant Thornton LLP (or another firm acceptable to the Required Lenders) shall serve as Chief Restructuring Officer of the Credit Parties (the “CRO”). The Credit Parties hereby acknowledge and agree that (x) the CRO is authorized to cooperate fully with the Lenders and their advisors in connection with their ongoing examination of the Credit Parties’ financial affairs, finances, financial condition, business and operations, and (y) the Credit Parties shall not terminate the CRO’s engagement or materially modify or reduce the CRO’s role or responsibilities without the prior written consent of the Required Lenders. In the event that, following the retention of a CRO, the Borrowers’ LTM Adjusted EBITDA exceeds the greater of (x) 105% of the minimum LTM Adjusted EBITDA and (y) $9.55 million for two consecutive quarterly reporting periods, the Borrowers may, in their discretion and upon notice to the Lenders, terminate the CRO if the Borrowers reasonably determine that the services of the CRO are no longer needed; provided, that no Default or Event of Default shall have occurred or be continuing.

 

2.13        Amendment to Article VI of the Credit Agreement. Article VI of the Credit Agreement is hereby amended by adding the following new Section 6.18 at the end thereof:

 

6.18.   Board Composition.

 

From and after the Fourth Amendment Effective Date, each Credit Party shall maintain at least two (2) Special Directors on their respective board of directors. The Special Directors shall be individuals acceptable to the Lenders acting reasonably. In the event that any such Special Director is unable to serve by reason of death, resignation, or removal without cause, such vacancy shall be promptly filled by an individual meeting the requirements for a Special Director set forth in the applicable Credit Party’s By-Laws (as amended as of the date hereof) and acceptable to the Lenders acting reasonably. Any removal of a Special Director for cause shall require the prior written consent of the Lenders, not to be unreasonably withheld.

 

2.14        Amendment to Section 7.15 of the Credit Agreement. Section 7.15 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

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7.15         Amendment of Articles of Incorporation, By-Law.

 

(a) Except as required to conform to applicable law, amend, modify or waive any term or provision of its Articles of Incorporation or By-Laws without the consent of (i) a majority of HT’s then-serving directors, including any Special Directors, and (ii) the Required Lenders.

 

(b) Issue, or commit or agree to issue, any Equity Securities of such Credit Party that are senior to, or that have voting rights that exceed the rights of, the common stock of the applicable Credit Party, regardless of whether such shares are currently authorized under the applicable Credit Party’s Articles of Incorporation. For the avoidance of doubt, and without limiting the generality of the foregoing, Hudson Technologies, Inc.  shall not, without the prior written consent of the Required Lenders, issue any shares of Series A Preferred Stock (as defined in the Articles of Incorporation of Hudson Technologies, Inc.), and Aspen Refrigerants, Inc. shall not, without the prior written consent of the Required Lenders, issue any shares of Preferred Stock (as defined in the Articles of Incorporation of Aspen Refrigerants, Inc.).

 

2.15        Amendment to Section 9.13(c) of the Credit Agreement. Section 9.13(c) of the Credit Agreement is hereby amended by adding the following sentence at the end thereof:

 

In addition, on a weekly basis from and after the Sale/Refinancing Process Start Date, the Credit Parties, their advisors, the CRO and the Investment Banker shall participate in telephonic update calls with the Lenders and their advisors concerning the Sale/Refinancing Process and including disclosure of materials relating thereto reasonably requested by the Lenders.

 

2.16        Amendment to Section 10.1 of the Credit Agreement. Section 10.1 of the Credit Agreement is hereby amended by adding the following new proviso at the end thereof:

 

; provided, however, that, from and after the Fourth Amendment Effective Date, any failure to make a required payment under Section 2.6(a)(i) shall not constitute an Event of Default for purposes of this Section 10.1 but shall constitute a “Trigger Event” for all purposes under this Agreement;

 

2.17        Amendment to Section 10.5 of the Credit Agreement. Section 10.5 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:

 

10.5       Noncompliance. Except as otherwise provided for in Sections 10.1, 10.3, 10.5(ii) and 10.21, (i) failure or neglect of Borrowers or any Guarantor to perform, keep or observe any term, provision, condition, covenant herein contained, or contained in any Other Document or any other agreement or arrangement, now or hereafter entered into between Borrowers or any Guarantor, and Agent or any Lender, or (ii) failure or neglect of Borrowers or any Guarantor to perform, keep or observe any term, provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured within ten (10) days from the occurrence of such failure or neglect; provided, however, that, from and after the Fourth Amendment Effective Date, any breach by the Credit Parties of Sections 6.5(a), (b), or (d) hereof shall not constitute an Event of Default for purposes of this Section 10.5 but shall constitute a “Trigger Event” for all purposes under this Agreement;Amendment to Article X of the Credit Agreement. Section 10 of the Credit Agreement is hereby amended by adding the following new Section 10.21 at the end thereof:

 

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10.21     Breach of Milestones. Any failure to comply with the Milestones which continues unremedied for a period of five (5) business days unless waived in writing by the Required Lenders, it being understood that failure to achieve the final Sale Milestone shall be deemed to have occurred if consummation of the transactions contemplated by the Purchase Agreement shall not have occurred within 60 days of the effective date of the Purchase Agreement.

 

2.19        Compliance Certificate. The form of Compliance Certificate is hereby amended and restated in its entirety as attached as Schedule 2 hereto.

 

Article III.
ADDITIONAL AGREEMENTS

 

3.1          Non-Interference. HT covenants and agrees that it shall cooperate with, and not interfere with (x) the operations of the Special Committee established pursuant to the Organizational Document Amendments, or (y) following a Trigger Event, (i) the operations of the Credit Parties’ respective boards of directors (other than HT), or (ii) the Sale/Refinancing Process.

 

3.2          Term Loan Priority Collateral. Subject to the terms of the Intercreditor Agreement, the Credit Parties acknowledge and agree that any proceeds of Term Loan Priority Collateral shall be held in a segregated account prior to payment over to the Agent and Lenders (unless such proceeds are otherwise reinvested in accordance with the terms of the Credit Agreement).

 

3.3          CRO Retention. On or before the two (2) week anniversary of the Fourth Amendment Effective Date, the Credit Parties shall have retained a designee of Grant Thornton LLP (or another firm acceptable to the Required Lenders) to serve as Chief Restructuring Officer on terms and conditions reasonably acceptable to, and pursuant to an engagement letter in form and substance reasonably acceptable to, the Required Lenders.

 

Failure of the Credit Parties to comply with the covenants and agreements set forth in this Article III shall constitute an immediate Event of Default.

 

Article IV.
CONDITIONS TO EFFECTIVENESS

 

4.1          Closing Conditions. This Amendment shall be deemed effective as of the date (the “Fourth Amendment Effective Date”) on which the following conditions shall have been satisfied:

 

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(1)      The Agent and the Lenders shall have received a copy of this Amendment duly executed by each of the Borrowers, the other Credit Parties, the Required Lenders and the Agent;

 

(2)       The Agent and the Lenders shall have received copies of the Revolving Loan Agreement and the Intercreditor Agreement, duly executed by the Revolving Agent and Lenders (as defined in the Revolving Loan Agreement) as applicable, in form and substance satisfactory to the Required Lenders;

 

(3)      The Agent and the Lenders shall have received evidence that the organizational documents of each of the Credit Parties shall have been amended in a manner acceptable to the Required Lenders (the “Organizational Document Amendments”), and such amendments shall have become effective;

 

(4)      The Credit Parties shall have appointed two (2) Special Directors satisfactory to the Required Lenders to the board of directors of each of HT, the Borrowers and the other Credit Parties;

 

(5)      The Credit Parties shall have (x) paid an amendment fee equal to 0.50% of the outstanding principal amount of the Obligations (calculated immediately prior to giving effect to this Amendment), which fee shall be fully earned and non-refundable on the Fourth Amendment Effective Date, and which shall be payable in cash in immediately available funds to the Lenders on a pro rata basis, and (y) made a voluntary prepayment of the Loans in an aggregate principal amount of $14,000,000 which prepayment shall be applied pro rata to the Loans and the principal repayment installments thereof in the inverse order of maturity;

 

(6)      The Credit Parties shall have paid all accrued and outstanding fees of the Agent and the Lenders in accordance with Section 14.9 of the Credit Agreement (including accrued and outstanding fees and expenses of King & Spalding LLP, counsel to the Lenders, FTI Consulting Inc., financial advisor to the Lenders, and Nixon Peabody LLP, counsel to the Agent); and

 

(7)      After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

 

Article V.
MISCELLANEOUS

 

5.1           Amended Terms. On and after the Fourth Amendment Effective Date, all references to the Credit Agreement in each of the Other Documents shall hereafter mean the Credit Agreement as amended by this Amendment. Except as specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.

 

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5.2          Representations and Warranties of the Credit Parties. Each Credit Party represents and warrants as follows:

 

(a)           It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.

 

(b)          This Amendment has been duly executed and delivered by such Credit Party and constitutes such Credit Party’s legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

 

(c)           No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by such Credit Party of this Amendment.

 

(d)          The representations and warranties set forth in the Credit Agreement are true and correct in all material respects as of the date hereof as if made on and as of such date (except to the extent any such representation or warranty relates to an earlier specified date, in which case they shall be true and correct in all material respects as of such earlier date).

 

(e)           After giving effect to this Amendment, no event has occurred and is continuing which constitutes a Default or an Event of Default.

 

5.3          Reaffirmation of Obligations. Each Credit Party hereby ratifies the Credit Agreement and the Other Documents and acknowledges and reaffirms (a) that it is bound by all terms of the Credit Agreement and the Other Documents applicable to it and (b) that it is responsible for the observance and full performance of its respective Obligations.

 

5.4          Credit Document. This Amendment shall constitute an Other Document under the terms of the Credit Agreement.

 

5.5          Expenses. The Borrowers agree to pay all reasonable costs and expenses of the Agent and the Lenders in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of King & Spalding LLP, counsel to the Lenders.

 

5.6          Further Assurances. The Credit Parties agree to promptly take such action, upon the request of the Agent or the Required Lenders, as is necessary to carry out the intent of this Amendment.

 

5.7          Entirety. The Credit Agreement (as modified by this Amendment) and the Other Documents embody the entire agreement among the parties hereto and supersede all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof.

 

5.8          Counterparts. This Amendment may be executed in original counterparts each of which counterpart shall be deemed an original document but all of which counterparts together shall constitute the same agreement. Execution and delivery via facsimile or PDF shall bind the parties.

 

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5.9          No Actions, Claims, Etc. As of the date hereof, each of the Credit Parties hereby acknowledges and confirms that it has no knowledge of any actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, against the Agent, the Lenders, or the Agent’s or the Lenders’ respective officers, employees, representatives, agents, counsel or directors arising from any action by such persons, or failure of such persons to act under the Credit Agreement on or prior to the date hereof.

 

5.10        Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

5.11        General Release. In consideration of the willingness of the Agent and the Lenders to enter into this Amendment, each Credit Party hereby releases and forever discharges the Agent, the Lenders and the Agent’s and the Lender’s respective predecessors, successors, assigns, officers, managers, directors, employees, agents, attorneys, representatives, and affiliates (hereinafter all of the above collectively referred to as the “Bank Group”), from any and all claims, counterclaims, demands, damages, debts, suits, liabilities, actions and causes of action of any nature whatsoever, including, without limitation, all claims, demands, and causes of action for contribution and indemnity, whether arising at law or in equity, whether known or unknown, whether liability be direct or indirect, liquidated or unliquidated, whether absolute or contingent, foreseen or unforeseen, and whether or not heretofore asserted, which any Credit Party on or prior the date hereof may have or claim to have against any of the Bank Group in any way related to or connected with the Credit Agreement, the Other Documents and the transactions contemplated thereby.

 

5.12        Governing Law; Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The governing law, jurisdiction, service of process and waiver of jury trial provisions set forth in Sections 14.1 and 11.8 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis.

 

5.13        Agent Authorization. Each of the undersigned Lenders, which together constitute the Required Lenders, hereby authorizes the Agent to execute and deliver this Amendment, the Intercreditor Agreement and the termination of the Deposit Account Control Agreement dated as of January 12, 2018, by and among Hudson Technologies Company, the Secured Parties (as defined therein) and PNC Bank, National Association relating to account numbers 8026583191, 8026583183, and 8026583167. By its execution below, each of the undersigned Lenders agrees to be bound by the terms and conditions of this Amendment and the Intercreditor Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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  BORROWERS:
   
  HUDSON TECHNOLOGIES COMPANY
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  HUDSON HOLDINGS, INC.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
     
  ASPEN REFRIGERANTS, INC.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO

 

Signature Page to Waiver and Fourth Amendment – Hudson Technologies 

 

 

 

  GUARANTORS:
   
  HUDSON TECHNOLOGIES, INC.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  Glacier International, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  Glacier Trading Corp.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  HFC International, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
     
  HFC Traders, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  RCT International, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO

 

Signature Page to Waiver and Fourth Amendment – Hudson Technologies

 

 

 

 

  RCTI Corp.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  RCTI Trading, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  RGIT, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  RGIT Trading Corp.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO
   
  RGT Enterprises, Inc.
   
  By: /s/ Brian F. Coleman
  Name: Brian F. Coleman
  Title: President, COO

 

Signature Page to Waiver and Fourth Amendment – Hudson Technologies

 

 

 

  AGENT:
   
  U.S. BANK NATIONAL ASSOCIATION,
  as the Agent
   
  By: /s/ Alexandra Rhyne
  Name: Alexandra Rhyne
  Title: Assistant Vice President

 

Signature Page to Waiver and Fourth Amendment – Hudson Technologies

 

 

 

  LENDERS:
   
  FS INVESTMENT CORPORATION II
   
  By: /s/ Jessica Woolf
  Name: Jessica Woolf
  Title: Authorized Signatory
   
  FS INVESTMENT CORPORATION III
   
  By: /s/ Jessica Woolf
  Name: Jessica Woolf
  Title: Authorized Signatory
   
  FS INVESTMENT CORPORATION IV
   
  By: /s/ Jessica Woolf
  Name: Jessica Woolf
  Title: Authorized Signatory
   
  FS KKR CAPITAL CORP.
   
  By: /s/ Jessica Woolf
  Name: Jessica Woolf
  Title: Authorized Signatory

 

Signature Page to Waiver and Fourth Amendment – Hudson Technologies

 

 

 

Schedule 1

 

Specified Defaults

 

(i) the Credit Parties’ failure to comply with the Total Leverage Ratio set forth in Section 6.5(a) of the Credit Agreement for the fiscal quarters ended June 30, 2019 and September 30, 2019, which such failure constitutes an Event of Default under Section 10.05 of the Credit Agreement; and

 

(ii) the Credit Parties’ failure to comply with the Minimum Liquidity covenant set forth in Section 6.5(b) of the Credit Agreement for the fiscal quarters ended June 30, 2019 and September 30, 2019, which such failure constitutes an Event of Default under Section 10.05 of the Credit Agreement.

 

 

 

 

Exhibit 10.4

 

FOURTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS FOURTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 19th day of December, 2019 by and between Hudson Technologies, Inc., P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965, Hudson Technologies Company, P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965 and Aspen Refrigerants, Inc., P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965 (hereinafter Hudson Technologies, Inc., Hudson Technologies Company and Aspen Refrigerants, Inc. are collectively referred to herein as “Hudson”) and Kevin J. Zugibe, residing at P.O. Box 754, Pearl River, New York 10965 (“Executive”).

 

WHEREAS, the Executive is a named executive officer of Hudson and currently holds the title of Chief Executive Officer and Chairman of the Board of Directors of Hudson Technologies, Inc. (the “Board”); and

 

WHEREAS, Hudson Technologies Company and Aspen Refrigerants, Inc. are each a separate, indirect wholly owned subsidiary of Hudson Technologies, Inc. and each is made a party to this Agreement for the purpose of implementing the terms of this Agreement; and

 

WHEREAS, the Executive and Hudson previously entered into a Third Amended and Restated Employment Agreement, made as of September 20, 2019 (the “Employment Agreement”); and

 

WHEREAS, Hudson and the Executive acknowledge that the Executive is one of the founders of Hudson and is a key Executive of Hudson, and that the Executive’s talents, knowledge and services to Hudson are of a special, unique, and extraordinary character and are of particular and peculiar benefit and importance to Hudson; and

 

WHEREAS, Hudson and the Executive acknowledge that, because the Executive’s duties and responsibilities will bring the Executive into contact with Hudson’s confidential information, Hudson must ensure that its valuable confidential information, as well as its customer relationships, are protected and can be entrusted to the Executive; and

 

WHEREAS, Hudson desires to ensure that it will receive the continued dedication, loyalty and service of, and the availability of objective advice and counsel, from the Executive, as well as assurances that the Executive will continue to devote his best efforts to his employment with Hudson and that he will not solicit other executives or employees of Hudson; and

 

WHEREAS, Hudson and the Executive desire to amend and restate the Employment Agreement on the terms contained herein.

 

NOW THEREFORE, in consideration of the continuation of the employment by Hudson of the Executive and the mutual covenants and conditions contained herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed that the Employment Agreement is hereby amended and restated as follows:

 

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1.                                AMENDMENT AND RESTATEMENT: This Agreement hereby amends, restates and supersedes in its entirety the Employment Agreement and each and every provision contained therein.

 

2.                                EMPLOYMENT: Hudson agrees to employ Executive in an executive capacity, and Executive accepts employment upon the terms and conditions set forth herein. Executive expressly acknowledges that he was advised that a condition to Executive’s entering into this Agreement was the Executive’s agreement to restrictions regarding Confidential Information, Intellectual Property, Non-Solicitation of Executives, and Covenants Not To Compete (all set out in more detail below), and that the additional rights and benefits contained herein constitute new and adequate consideration for this Agreement. Executive understands that subject to the provisions contained herein, from time to time he may be promoted, reassigned, or given different job titles and responsibilities at the sole discretion of Hudson, and that unless and until such time as a new agreement or amendment to this Agreement is executed in writing by Hudson and Executive, this Agreement shall remain binding upon Executive regardless of the job title or position held by Executive.

 

3.                                TERM: Subject to the provisions for termination as provided herein, the term of this Agreement shall expire as of the termination date of the Employment Agreement, which is March 9, 2022. This Agreement shall be automatically renewed for successive two (2) year terms unless either party gives notice of its intention not to renew no less than ninety (90) days prior to the expiration of the existing term.

 

4.                                COMPENSATION: As compensation for the services to be rendered by Executive, Hudson agrees to provide Executive with a base salary at the current annual rate of Five Hundred Thirty-Two Thousand, Eight Hundred dollars ($532,800). The Compensation Committee of the Board shall meet at least annually for the purpose of determining Executive’s annual base salary based upon the apparent value of his services. The payment of the above amounts shall constitute full satisfaction and discharge of Hudson’s obligations under this Agreement but are without prejudice to Executive’s rights under any Executive bonus or benefit plan heretofore or hereafter provided by Hudson.

 

Hudson may, but shall not be obligated to, pay the Executive, in addition to his base salary, a bonus. Payment of any such bonus, and the amount of any such bonus shall be at the sole discretion of the Board.

 

5.                                DUTIES: Executive shall serve as Chief Executive Officer of Hudson and shall assume such other duties as the Board may assign. The services to be performed by the Executive may be extended or curtailed from time to time at the direction of the Board.

 

Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms of this Agreement, to the reasonable satisfaction of Hudson. Such duties shall be rendered at Hudson’s headquarters currently located at Pearl River, New York and, except as otherwise provided herein, at such other place or places within or without the State of New York as Hudson shall in good faith require or as the interest, needs, business, or opportunities of Hudson shall require.

 

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Executive shall devote full, normal and regular business time, attention, knowledge and skill to the business and interest of Hudson, and Hudson shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for Hudson. Executive agrees that while Executive is employed by Hudson, Executive shall not directly or indirectly in any capacity engage in any business other than Hudson’s business without Hudson’s prior written consent, which consent will not be unreasonably withheld provided that such other business is (a) unrelated to the business of Hudson, (b) will in no way interfere with the performance of Executive’s duties to Hudson, (c) will not utilize Confidential Information or Intellectual Property of Hudson or of any client of Hudson, (d) will be conducted at times other than when Executive is required to work for Hudson, and at places other than Hudson’s business locations or those of Hudson’s customers, and (e) will not involve Hudson, other Executives of Hudson, any client of Hudson, or any supplier of Hudson, in the conduct or the financing of Executive’s business, or as customers, suppliers, investors, partners, joint venturers, or otherwise. Under no circumstances shall Executive render any services that are competitive with any of Hudson’s business, or that are for any other person, corporation or other entity that is engaged in any business competitive with or in the same business as any of Hudson’s business. Notwithstanding the foregoing, Executive shall have the right to make investments in businesses which engage in activities other than those engaged in by Hudson or its subsidiaries.

 

6.                              EXPENSES: Executive is authorized to incur reasonable expenses on behalf of Hudson in performing his duties, including expenses for general administration of Hudson’s office, travel, transportation, entertainment, gifts and similar items, which expenses shall be paid or reimbursed to Executive, by Hudson, provided that the Executive furnishes to Hudson appropriate supporting documentation of such expenses. In addition, Hudson will reimburse the Executive for all professional fees and expenses for professional organizations and continued education reasonably incurred by the Executive and reasonably related to the continued performance of his duties.

 

7.                                VACATIONS: Executive shall be entitled to the number of paid vacation, sick days, personal days and holidays as are specified, established and set forth in Hudson’s standard policies, provided, however, that Executive shall be entitled each calendar year to a vacation of no less than twenty (20) weekdays, no two of which need be consecutive. Hudson shall not be required to compensate Executive for vacation days, sick days or personal days not taken by the Executive in any given year, and the Executive cannot accrue and accumulate unused vacation days, sick days or personal days in subsequent years.

 

8.                                TERMINATION: The following payments and benefits (hereinafter “Severance Benefits”) will be provided to the Executive by Hudson in the event of a Termination of Employment (as hereinafter defined):

 

A.                               Executive will continue to receive his annual base salary, based upon his annual base salary as of the date of his Termination of Employment (as hereinafter defined), for a period of twenty-four (24) months (the “Severance Period”), with payroll to be made every two weeks, or at such other frequency based upon Hudson’s normal payroll practice. Hudson shall deduct from Executive’s continuing payroll all normal tax withholdings and deductions which Hudson is required by law to make. The initial payment shall be made within the forty-five (45) day period following the Executive’s Termination of Employment and the Executive shall have no right to designate the taxable year of payment.

 

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B.                               Executive will also receive an amount equal to 100% of the highest bonus earned by the Executive in any calendar year within the three (3) calendar years immediately preceding the date of Termination of Employment (the “Bonus”), which amount shall be paid to Executive in equal payments throughout the Severance Period made every two weeks, or at such other frequency based upon Hudson’s normal payroll practice. Hudson shall deduct from this bonus payment all normal tax withholdings and deductions which Hudson is required by law to make. The initial payment shall be made within the forty-five (45) day period following the Executive’s Termination of Employment and the Executive shall have no right to designate the taxable year of payment.

 

C.                               Within the forty-five (45) day period following the Executive’s Termination of Employment, Hudson will pay to the Executive a lump sum payment for the Executive’s unused vacation for the year in which the Termination of Employment occurs, equal to the number of pro rata unused vacation days on the date of Termination of Employment, as determined in accordance with Hudson’s standard vacation policy, multiplied by the Executive’s daily base salary on the date of the Termination of Employment. Hudson shall deduct from this payment all normal tax withholdings and deductions which Hudson is required by law to make. The Executive shall have no right to designate the taxable year of payment.

 

D.                               The Executive’s participation in life, health and dental insurance, disability insurance and any other benefits (the “Benefits”) provided by Hudson to the Executive as of the date of the Termination of Employment shall be continued, or essentially equivalent benefits provided by Hudson, for the entire Severance Period or until otherwise terminated by the Executive, on the same terms, conditions and costs as if the Executive continued in the employ of Hudson. To the extent Benefits include health and dental insurance, such Benefits shall be provided as COBRA continuation coverage, and not in addition to COBRA. Notwithstanding the foregoing, to the extent Benefit coverages provided to the Executive under this paragraph are taxable to the Executive, Hudson’s obligation hereunder shall not exceed the applicable dollar amount under Section 402(g)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”), determined as of the year in which the Executive’s “Separation of Service” occurs, which is exempt under Treas. Reg. Section 1.409A-1(b)(9)(v)(D)(Limited Payment).

 

E.                                All stock options, stock appreciation rights and any similar rights which the Executive holds on the date of Termination of Employment shall become fully vested and be exercisable on the date of Termination of Employment, and shall remain exercisable following the Termination of Employment until (i) expiration of the Severance Period, (ii) termination of Severance Benefits pursuant to paragraph “13” below, or (iii) expiration of the original term of the stock option, stock appreciation right, or similar right, whichever first occurs. No extension of an exercise period under this Agreement shall extend to a date that would cause such stock options, stock appreciation right, or similar right to be subject to Code Section 409A.

 

F.                               On the Executive’s last day of employment, Hudson will execute and deliver all documents necessary to assign to Executive ownership of any and all “Key Man” or other life insurance policies insuring the life of the Executive then in place and owned by Hudson (including, without limitation, the right to designate beneficiaries, terminate the policy and/or receive the full cash surrender value).

 

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G.                               For the purposes of this Agreement, the following definitions will apply:

 

(i)                “Termination of Employment” shall take place in the event that the Executive’s employment is terminated (a) by Hudson without Cause (as hereinafter defined), including for this purpose the failure to renew this Agreement, (b) by Hudson without Cause or for any reason by the Executive within sixty (60) days following a Fundamental Change (as hereinafter defined); or (c) by the Executive following an event constituting Good Reason (as hereinafter defined).

 

(ii)              “Cause” shall mean any of: (a) the Executive’s willful and continued refusal to perform, or the Executive’s willful and continued neglect of, the substantive duties of his position, (b) any willful act or omission by the Executive constituting dishonesty, fraud, or other malfeasance, (c) material nonconformance with Hudson’s standard business practices and policies, including but not limited to violation of Hudson’s Code of Business Conduct and Ethics or Hudson’s Substance Abuse Policy, (d) any act or omission by the Executive which has a material adverse effect upon the financial condition or business reputation of Hudson, (e) the Executive’s conviction of a felony, or any crime involving moral turpitude, dishonesty or theft, under the laws of the United States, or any state thereof, or any other jurisdiction in which Hudson conducts business, (f) breach of the provisions of paragraphs “11” or “12” of this Agreement, or (g) the resignation of Executive other than pursuant to the occurrence of an event constituting a Fundamental Change or Good Reason (as hereinafter defined).

 

(iii)            “Good Reason” shall mean the occurrence of any of the following: (a) at any time within a twenty-four (24) month period two individuals are elected to Hudson’s Board whose nominations were not approved by the then sitting members of the Board; (b) the Executive is assigned any duties or responsibilities, without his consent, that are materially inconsistent with his position, duties, responsibilities, or status; (c) Hudson requires the Executive, without his consent, to be based at a location which is more than fifty (50) miles from Hudson’s corporate headquarters, currently located at One Blue Hill Plaza, Pearl River, New York 10965; (d) except as provided in paragraph “8.J.” below, the Executive’s annual base salary is reduced, except to the extent that the annual base salaries of all Executive Officers (as defined below) are reduced due to the adverse financial condition of Hudson and further providing that the Executive’s annual base salary may not be reduced to a level that is less than ninety percent (90%) of the Executive’s annual base salary for the calendar year immediately prior to the Termination of Employment; (e) the Executive’s benefits are reduced and such reduction results in a material reduction in the Executive’s total compensation except to the extent that such reductions are made by Hudson on a company-wide basis and affect all Executive Officers that participate in such benefits; (f) except as provided in paragraph “8.J.” below, the Executive experiences in any year a reduction in bonus compensation or other incentive compensation, or a reduction in the ratio of the Executive’s incentive compensation, bonus or other such payments to his base compensation, or a reduction in the method of calculation of the Executive’s incentive compensation, bonus, or other such payments if these benefits or payments are calculated other than as a percentage of base salary, except to the extent such reduction applies equally or proportionally, as the case may be, to all Executive Officers of Hudson. Good Reason shall not be deemed to exist unless the Executive’s Termination of Employment for Good Reason occurs within ninety (90) days following the initial existence of one of the foregoing conditions, the Executive provides Hudson with written notice of the existence of such condition(s) within thirty (30) days after the initial existence of the condition(s) and Hudson fails to remedy the condition within thirty (30) days after its receipt of such notice. An isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Hudson within ten (10) days after Hudson’s receipt of notice thereof given by the Executive shall not constitute Good Reason.

 

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(iv)             “Executive Officer(s) shall mean the following: Hudson’s Chief Executive Officer (currently Kevin J. Zugibe); Hudson’s President and/or Chief Operating Officer (currently Brian Coleman); Hudson’s Chief Financial Officer (currently Nat Krishnamurti); and any other current or future officer of Hudson Technologies, Inc. that is subject to Section 16(a) of the Securities Exchange Act of 1934.

 

(v)               A “Fundamental Change” shall occur (a) if Hudson (or one or more of the companies making up Hudson) shall make a general assignment for the benefit of creditors, or a trustee, receiver or liquidator shall be appointed for Hudson or Hudson Technologies, Inc. or for a substantial part of its property; (b) upon commencement of any proceedings by Hudson (or one or more of the companies making up Hudson) under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt, receivership, liquidation or dissolution law or statute, or the commencement of any such proceedings without the consent of Hudson (or one or more of the companies making up Hudson), and such involuntary proceedings shall continue undischarged for a period of forty five (45) days; (c) upon the commencement of the dissolution or liquidation of Hudson (or one or more companies making up Hudson); or a (d) upon a Change in Control (as hereinafter defined).

 

(vi)             “Change in Control” shall mean the consummation of (a) a sale or other disposition of all or substantially all of the assets of Hudson; (b) a merger or consolidation in which Hudson Technologies, Inc. is not the surviving entity and in which the stockholders of Hudson Technologies, Inc. immediately prior to such consolidation or merger own less than 50% of the surviving entity’s voting power immediately after the transaction; (c) a reverse merger in which Hudson Technologies, Inc. is the surviving entity but the shares of common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, and in which the stockholders of the Hudson Technologies, Inc. immediately prior to such reverse merger own less than 50% of the Hudson Technologies, Inc.’s voting power immediately after the transaction; (d) a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of a majority of Hudson Technologies, Inc.’s (or one or more companies making up Hudson) then outstanding voting securities; or (e) Current Directors (as hereinafter defined) shall cease for any reason to constitute at least a majority of the members of the board of directors of Hudson (or one or more companies making up Hudson), as applicable. Notwithstanding the foregoing, a transaction shall not constitute a Change in Control if its purpose is to (A) change the jurisdiction of incorporation, or (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Hudson Technologies, Inc.’s securities immediately before such transaction.

 

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(vii)        “Current Director” shall mean any member of the board of directors of Hudson (or one or more companies making up Hudson) as of the date hereof and any successor of a Current Director whose election, or nomination for election by the Company’s stockholders, was approved by at least a majority of the applicable Current Directors then on such board of directors.

 

H.                               Hudson’s obligation to pay the compensation and to make the arrangements provided in this paragraph “8” shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, or other right which Hudson may have against the Executive or anyone else; provided, however, that as a condition to payment of amounts under this paragraph “8”, within sixty (60) days of the Executive’s Termination of Employment, the Executive shall have (i) executed and not revoked a general release and waiver, in form and substance reasonably satisfactory to Hudson and the Executive, of all claims relating to the Executive’s employment by Hudson and the termination of such employment, including, without limitation, discrimination claims (including, without limitation, age discrimination), employment-related tort claims, contract claims and claims under this Agreement (other than claims with respect to benefits under any tax-qualified retirement plans or continuation of coverage or benefits solely as required under ERISA) with such general release and waiver having become irrevocable and (ii) executed an agreement expressly acknowledging and reaffirming the covenants and restrictions contained in paragraphs “11” and “12” below, and the remedies available to Hudson under paragraph “13” below.

 

I.                                All amounts payable by Hudson pursuant to this paragraph “8” shall be paid without notice or demand. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made pursuant to this paragraph “8” and, except as provided in paragraph “13” below, the obtaining of any other employment shall not result in a reduction of Hudson’s obligation to make the payments, benefits and arrangements required to be made under this paragraph “8”.

 

J.                                Executive expressly acknowledges that the following shall not constitute “Good Reason” for purposes of this paragraph “8”:

 

(i)               Establishing a new or different bonus or incentive compensation plan(s) in any subsequent year based upon new or different criteria for calculating the applicability of, and the amount of any bonus or incentive compensation award due to the Executive, provided that any new or different bonus or incentive compensation plan, and any award under said plan, applies equally or proportionally, as the case may be, to all Executive Officers; except that Hudson may establish separate performance criteria and payment amounts for awards under such plan for each Executive Officer that are reasonably achievable and reasonably related to such Executive Officer’s normal duties and responsibilities;

 

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(ii)              A reduction of the Executive’s bonus compensation or other incentive compensation that (a) results from Hudson operating at a level of performance below Hudson’s budget, (b) results from the Executive’s failure or inability to attain, in whole or in part, any or all of the performance criteria established for the Executive under the said plan, (c) results from the application of the terms of such bonus or incentive compensation plan, or (d) is based upon the Executive’s performance or non-performance, of his normal duties and responsibilities during the period covered by the bonus or incentive compensation plan including, without limitation, due to the Executive’s Disability (as defined herein);

 

(iii)             A reduction of the Executive’s annual base salary based upon the Executive’s performance or non-performance of his normal duties and responsibilities, provided that the Executive’s annual base salary may not be reduced to a level that is less than ninety (90%) percent of the Executive’s annual base salary for the calendar year immediately prior to the Termination of Employment; or

 

(iv)             A reduction in the Executive’s annual base salary pursuant to the provisions of paragraph “10” below.

 

9.                                TERMINATION FOR CAUSE: Hudson may at any time terminate the employment of the Executive for Cause (as defined in paragraph “8” above) upon five (5) days prior written notice to Executive. If Executive is terminated for Cause, he shall be entitled to no Severance Benefits and shall be entitled to no bonus payment that might otherwise be owed to him if he worked for the entire year. In the event of termination under this paragraph, Hudson shall pay Executive all amounts which are then accrued but unpaid, including unpaid vacation as determined in accordance with Hudson’s’ standard vacation policy, within thirty (30) days after the date of notice. Hudson shall have no further or additional liability to Executive.

 

10.                              SICK LEAVE:

 

A.                               If with or without reasonable accommodation Executive is physically or mentally unable to perform his duties, or is otherwise absent for medical reasons, Hudson shall continue to pay base salary and provide benefits to the Executive (“Sick Leave”). However, if a continuous period of Sick Leave exceeds eight (8) consecutive weeks, Hudson’s obligation with regard to base salary upon the expiration of the eight (8) consecutive weeks shall be limited to paying 75% of base salary. If the Executive returns to full service, his full base salary shall be reinstated to the pre-adjustment amount. As a condition to the receipt of the foregoing base salary and benefits, the Executive agrees that he shall provide Hudson such information as Hudson may reasonably request from time to time to permit Hudson to make a determination that the Executive is entitled to sick pay under this provision. Hudson shall reduce the amount paid to the Executive during such Sick Leave by an amount equal to any disability payments or benefits actually received by Executive under or pursuant to any disability program or supplemental disability insurance plan(s) provided by Hudson at Hudson’s expense unless such reduction results in a violation of Code Section 409A.

 

B.                               Notwithstanding the foregoing, Hudson may terminate the employment of Executive at any time after Executive’s continuous period of Sick Leave exceeds 120 calendar days. Termination of the Executive after the said 120 calendar period shall not be deemed a Termination for Cause (as defined in paragraph “8” above) and shall entitle the Executive to receive the payments and benefits provided by paragraph “8” upon Termination of Employment based upon Executive’s full base salary, and for purposes of such payments and benefits, the Severance Period shall be deemed to commence as of the date of the Termination of Employment resulting under this paragraph “10.B.”.

 

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C.                               Notwithstanding anything to the contrary contained herein, in the event that during the period the Executive is on Sick Leave, and prior to any Termination of Employment pursuant to paragraph “10.B.”, there is deemed a “Separation from Service” (as that term is defined in Code Section 409A for purposes of a permissible payment event), Hudson and the Executive agree that such Separation of Service shall be treated as a Termination of Employment. Such termination shall not be deemed a Termination for Cause (as defined in paragraph “8” above) and shall entitle the Executive to receive the payments and benefits provided by paragraph “8” upon Termination of Employment based upon Executive’s full base salary, provided that, for purposes of such payments and benefits, the Severance Period shall commence as of the date of the Separation from Service as described in this paragraph “10.C.”, and shall be based upon Executive’s full base salary.

 

D.                               Notwithstanding anything to the contrary contained herein, in the event that during the period the Executive is on Sick Leave and prior to any Termination of Employment pursuant to paragraph “10.B.” or any Separation from Service pursuant to paragraph “10.C”, the Executive becomes “Disabled” (as defined in Code Section 409A for purposes of a permissible payment event) Hudson and the Executive agree that the Executive’s Disability shall entitle the Executive to receive the payments and benefits provided by paragraph “8” upon Termination of Employment based upon Executive’s full base salary. For purposes of such payments and benefits, the Severance Period shall commence as of the date of the Disability as described in this paragraph “10.D.”.

 

11.                              CONFIDENTIALITY:

 

A.                               Executive expressly acknowledges and agrees as follows:

 

(i)               Hudson expends a significant amount of funds annually on researching and developing solutions and proprietary techniques related to the products and services it offers or is seeking to offer, and has developed substantial confidential, proprietary and trade secret information, and this confidential, proprietary and trade secret information, if misused, disclosed, misappropriated, or used by others, would result in irreparable harm to Hudson.

 

(ii)              Hudson’s Confidential Information (as hereinafter defined) constitutes valuable commercial assets of Hudson and is not readily available to the general public or any persons not employed by or otherwise not associated in a position of trust with Hudson. Hudson keeps its Confidential Information confidential (other than to the extent filings are required for patents) by, among other things, restricting access to only those who need the information to perform their Hudson job function and prohibiting the use or disclosure of Confidential Information to anyone not authorized to receive or use the Confidential Information.

 

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(iii)            Executive’s position with Hudson will continue to provide Executive with access to or knowledge of Hudson’s Confidential Information.

 

(iv)             Hudson’s Confidential Information will become known to Executive only as a result of his employment with Hudson. To the extent that Executive was previously engaged, on his own or with others, in a business that provided the same or similar services as those provided by Hudson, Executive further acknowledges that such prior business knowledge and experience, and any familiarity with entities that are actual or potential customers for the business, shall not permit or allow Executive to contend that Hudson’s Confidential Information is not confidential or should not be protected from use or misappropriation.

 

B.                                In light of the foregoing, Executive acknowledges and agrees as follows:

 

(i)               All Confidential Information is the property of Hudson, and Executive shall not, without the express written consent of Hudson, directly or indirectly use, disseminate, disclose, or in any way reveal, either during Executive’s employment or at any time thereafter, all or any part of the Confidential Information, other than for the purposes authorized by Hudson, or only for the benefit of Hudson.

 

(ii)              Hudson shall be the sole owner of, and Executive hereby assigns to Hudson, any and all property rights to all Intellectual Property (as hereinafter defined) made, conceived, originated, devised, discovered, invented, or developed before, during, or after the term of Executive’s employment with Hudson, whether or not Executive was involved either alone or with others, if it was in whole or in part developed during the course of Executive’s employment or by Executive’s use of any property of Hudson. This ownership provision does not apply to creations of the Executive which are made in the Executive’s own time, without the use of any Hudson resources, and which do not relate in any way to Hudson’s business. Executive agrees to cooperate fully and assist Hudson or its designee in the performance of any lawful acts that Hudson at its discretion deems necessary, and to execute and deliver without charge any documents reasonably required by Hudson to secure any patent, copyright, trademark and other protection for Intellectual Property and improvements thereon, and to assign to and vest in Hudson the entire interest therein in the United States and all foreign countries.

 

(iii)            Upon request by Hudson at any time, or upon termination of employment with Hudson, whichever is sooner, Executive shall immediately deliver to Hudson any and all information and property of Hudson in whatever form it exists, including but not limited to all Confidential Information and all copies thereof or materials containing or derived from Confidential Information.

 

C.                               As used in this Agreement, “Confidential Information” means all information not publicly available (but including information that is publicly available as a result of a breach by Executive of paragraphs “11” and “12”) and not generally known or used by Hudson’s competitors or in the industry and which could be harmful to Hudson if disclosed to persons outside of Hudson and which includes, but is not limited to:

 

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(i)               Intellectual Property (as hereinafter defined);

 

(ii)              Technical information, such as, but not limited to: Hudson’s plant organization and designs; product formulation, manufacturing, performance and processing data; and research and development results and plans;

 

(iii)             Product information, such as, but not limited to: non-public details of Hudson’s products and services, including but not limited to, its existing refrigerant, decontamination, reclamation and recovery products and services, as well as those being developed; specialized equipment and training; product plans, drawings and specifications; and performance capabilities, strengths and weaknesses;

 

(iv)             Strategic information, such as, but not limited to: Hudson’s material costs; supplier and vendor information; overhead costs; pricing; profit margins; banking and financing information; and market penetration initiatives and strategies;

 

(v)              Organizational information such as, but not limited to: Hudson’s personnel and salary data; information concerning the utilization of facilities; merger, acquisition and expansion information; equipment utilization information; and Hudson manuals, policies and procedures;

 

(vi)             Marketing and sales information, such as, but not limited to: Hudson’s licensing, marketing and sales techniques and data; customer lists; customer data, such as, but not limited to, their personnel, project, financial and account status, individual needs, historical purchases and contact information; product development and delivery schedules; market research and forecasts; and marketing and advertising plans, techniques and budgets; and

 

(vii)           Advertising information, such as, but not limited to: Hudson’s overall marketing policies; the specific advertising programs and strategies utilized by Hudson; and the success or lack of success of those programs and strategies.

 

“Confidential Information” does not include general skills, experience or information that is generally available to the public, other than information which has become generally available as a result of Executive’s direct or indirect act or omission. “Confidential Information” also does not include information regarding Executive’s own pay and benefits, information as to the terms and conditions of employment, or information that is deemed not confidential under Section 7 of the National Labor Relations Act. Executive understands that nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupation Safety and Health Administration, the Securities and Exchange Commission, or any other federal, state, or local governmental agency or commission (“Government Agencies”). Executive further understands that this Agreement does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to Hudson. This Agreement does not limit Executive’s right to receive an award for information provided to any Government Agencies.

 

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D.                               As used in this Agreement, “Intellectual Property” means all information concerning the evaluation, design, engineering, construction, marketing and sales of the products and services provided by Hudson and which includes, but is not limited to: any and all patents, patents pending, trademarks, copyrights and any and all applications for same issued to and/or applied for by Hudson; any and all technological (including software), educational, operational and financial innovations, discoveries, inventions, designs and formulae; tests; performance data; process or production methods; improvements to all such property; and all recorded material defining, describing, illustrating, or documenting in any fashion, all such property, whether written or not and regardless of the medium in which the information is stored or recorded, without regard to whether such property is patentable, copyrightable, or subject to trade/service mark protection, and without regard to whether a patent, copyright, or trademark or service mark has been sought or obtained.

 

E.                                Notwithstanding anything in this Agreement, Executive is hereby advised that pursuant to the federal Defend Trade Secrets Act: (i) an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (ii) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (a) files any document containing the trade secret under seal and (b) does not disclose the trade secret, except pursuant to court order.

 

12.                              NON-COMPETITION / NON-SOLICITATION:

 

A.                              Executive expressly acknowledges and agrees as follows:

 

(i)               Hudson compensates its employees, among other things, to develop and to pursue, on Hudson’s behalf, good relationships and goodwill with all customers and potential customers, whether developed by Executive or others within the Hudson organization;

 

(ii)              Executive will be exposed to, acquire and develop knowledge of Confidential Information including, without limitation, Confidential Information related to Hudson’s customers, operations and its suppliers;

 

(iii)             Executive is able to be gainfully employed by other employers in a variety of other industries and businesses that are engaged in businesses that do not involve and are not competitive with any part of Hudson’s business.

 

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B.                               In light of the foregoing, Executive agrees, that while Executive is employed by Hudson, and continuing until the expiration of the Covenant Period (as hereinafter defined):

 

(i)               Executive shall not, within the Restricted Territory (as hereinafter defined), compete with Hudson, directly or indirectly, whether for Executive’s own behalf or on behalf of or in conjunction with any other person, persons, company, partnership, corporation, or business entity, whether for profit or not-for-profit, by being employed by, participating in, or otherwise being materially connected in the conduct of any business activity that involves providing products or services that are like or similar to, or competitive with, or would replace or be a substitute for, any one or more of the products and services provided by Hudson (hereinafter “Competitive Products”) if such employment, participation, or connection involves: (a) responsibilities similar to responsibilities Executive had or performed for Hudson at any time during the last eighteen (18) months of Executive’s employment with Hudson; (b) supervision of employees or other personnel in the provision of Competitive Products; (c) development or implementation of strategies or methodologies related to the provision of Competitive Products; (d) marketing or sale of Competitive Products; or (e) responsibilities in which Executive would utilize or disclose Confidential Information.

 

(ii)              Executive shall not compete with Hudson, directly or indirectly, whether for Executive’s own behalf or on behalf of or in conjunction with any other person, persons, company, partnership, corporation, or business entity, whether for profit or not-for-profit, by calling upon, contacting, diverting, soliciting, or doing business for or with any “Client” of Hudson (as hereinafter defined) for the purpose of offering or providing any Competitive Products.

 

(iii)             Executive shall not directly or indirectly, without the prior written consent of Hudson, (a) induce, solicit, entice, or encourage any officer, director, employee, or other individual to leave his or her employment with Hudson, (b) induce, solicit, entice, or encourage any officer, director, employee, or other individual to compete in any way with the products and services of Hudson, or to violate the terms of any employment, non-competition, confidentiality, or similar agreement with Hudson or (c) employ, offer to employ, contract with, offer to contract with, or do business with any officer, director, employee, or other individual who is employed by Hudson.

 

C.                               For purposes of this paragraph “12”, the Covenant Period shall be twenty-four (24) months after the Executive’s last day of active employment with Hudson, regardless of the reason underlying the termination of Executive’s employment.

 

D.                               Executive acknowledges that many of Hudson’s services are remedial in nature and, as such, its customers may utilize Hudson’s services on an infrequent basis over an extended period of time or following a protracted sales effort over an extended period of time. Executive also acknowledges that because of his position, he will likely have knowledge of Hudson’s customers through access to Confidential Information, whether or not located within the Restricted Territory (hereinafter defined). Accordingly, for purposes of this paragraph “12”, the term “Client” shall mean: (a) any customer or potential customer of Hudson upon whom Executive, during the last eighteen (18) months of Executive’s employment with Hudson, called upon or with whom Executive had any contact, or as to whom Executive was involved in regard to planning, marketing, conducting, or overseeing an offer to sell products or perform services; (b) any customer as to whom Executive assisted in selling products or providing services, or as to whom Executive was involved in regard to planning, marketing, conducting, or overseeing the offer to sell products or perform services if the customer received any products or services from Hudson during the last eighteen (18) months of Executive’s employment with Hudson; (c) any potential customer of Hudson whose identity Executive learned during the eighteen (18) months of Executive’s employment with Hudson or learned from Confidential Information at any time; or (d) any customer for whom Hudson has provided products or services to at any time during the thirty-six (36) months preceding the last day of the Executive’s employment with Hudson and whose identity as a Hudson customer Executive learned from Confidential Information at any time.

 

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E.                               Executive acknowledges that the nature of Hudson’s business is such that it provides its products and services to customers throughout the United States and Puerto Rico. Accordingly, the “Restricted Territory” includes each and every state of the United States, the District of Columbia and Puerto Rico.

 

F.                               In order to assure Hudson of the full twenty-four (24) months of the Covenant Period within which to protect its goodwill and to prevent Executive from unfairly benefiting by violations of this paragraph “12”, the provisions and requirements of this paragraph “12” shall be extended for a period of time beyond the Covenant Period equal in length to the total length of time during which Executive is in violation of any one or more provisions of this paragraph.

 

G.                               In the event it is determined by a court of competent jurisdiction that any provision or portion of a provision of this paragraph “12” is not enforceable under the law governing this Agreement, the unenforceable provision or portion thereof may be stricken, and the remainder of the provision and of this paragraph “12” shall be valid and fully enforceable, in all respects, as if the provision or portion of a provision deemed unenforceable had never been part of the Agreement. Further, if any provision of this Agreement is found to be overbroad or unenforceable, the court or any other authority with competent jurisdiction is expressly authorized to conform the provision to the extent necessary to remedy any deficiency and render it valid and enforceable.

 

13.                              REMEDIES:

 

A.                               In the event that the Executive breaches any term or provision of paragraphs “11” or “12” of this Agreement, Hudson shall be immediately, permanently and irreparably damaged and shall be entitled in addition to and without limiting Hudson’s rights to any and all other legal and equitable remedies and damages (i) to a temporary restraining order ex parte, to a preliminary injunction and to a permanent injunction to restrain Executive’s actions or the actions of others acting in conjunction with Executive or on Executive’s behalf, (ii) to terminate all future Severance Benefits through the remainder of the Severance Period and (iii) to recover from Executive all Severance Benefits actually paid to the Executive, including any costs or expenses actually incurred by Hudson in providing such Severance Benefits. Executive agrees that Executive will not be damaged by enforcement of this covenant as Executive can obtain many other types of gainful employment without violating the provisions of paragraphs “11” or “12”, so that no bond shall be required, and if the court requires a bond to be posted, it shall not exceed $500.00.

 

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B.                               All of Executive’s covenants and obligations under paragraphs “11” and “12” of this Agreement shall survive, and shall remain enforceable, for so long as Executive is employed and after termination of employment for any reason, and shall survive despite future promotions, raises, changes in position, or compensation, demotions and the execution of new agreements with Hudson, and shall inure to the benefit of Hudson’s successors and assigns, unless Hudson executes in writing an agreement expressly terminating the covenants of paragraphs “11” and “12” of this Agreement.

 

C.                               Hudson and Executive shall each bear and be responsible for their own attorneys’ fees, expenses and disbursements incurred in any litigation brought by either party to enforce or interpret any provision contained in paragraphs “11” or “12” of this Agreement.

 

14.                              NOTICES: All notices required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by certified mail, return receipt requested, to the Executive at his residence, and to Hudson at its principal office located at P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965, attention President, or at such other address as any party specifies by giving proper notice.

 

15.                              SUCCESSORS AND ASSIGNS: This Agreement shall be binding upon and shall inure to the benefit of the Executive and his estate. Neither this Agreement nor any rights hereunder shall be assignable by the Executive.

 

This Agreement shall be freely assignable by Hudson to, and shall inure to the benefit of, and be binding upon, any successor corporation or affiliate of a successor corporation, and all references in this Agreement to Hudson shall include its subsidiaries and affiliates and any successors, affiliates of successors, or assigns of Hudson. As used herein, the term “successor” shall mean any person, firm, corporation, or business entity or affiliate thereof which at any time, whether by merger, purchase, or otherwise, directly or indirectly acquires all or substantially all of the assets or the business of Hudson, including any entity that shall be the surviving corporation in a merger with Hudson.

 

16.                              INDEMNIFICATION: In the event that any litigation shall be brought to enforce or interpret any provision contained in paragraphs “8”, “9”, or “10” of this Agreement, then, provided that the Executive prevails to any extent, Hudson or any successor corporation shall reimburse or indemnify the Executive for the Executive’s reasonable attorneys’ fees, expenses and disbursements incurred in such litigation, including the costs of enforcement.

 

17.                              CHOICE OF LAW: This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

18.                              ENTIRE AGREEMENT: This Agreement contains the entire agreement of the parties. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought.

 

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19.                              WAIVER: The waiver of any breach of any provision of this Agreement by either party shall not operate or be construed as a subsequent waiver by either party of any term or condition of this Agreement.

 

20.                              HEADINGS: The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

 

21.                              SEVERABILITY: The parties intend and agree that each covenant and condition contained in this Agreement shall be a separate and distinct covenant. If any provision of this Agreement is found to be invalid, illegal, or unenforceable, the remaining provisions shall not be affected.

 

22.                              COMPLIANCE WITH CODE SECTION 409A:

 

A.                               It is the intention of Hudson and the Executive that the payments, benefits and rights to which the Executive could be entitled pursuant to this Agreement comply with Code Section 409A, the Treasury regulations and other guidance promulgated or issued thereunder (collectively for purposes of this paragraph “22”, “Section 409A”) to the extent that the requirements of Section 409A are applicable thereto, and after application of all available exemptions, including but not limited to the “short-term deferral rule” and “involuntary separation pay plan exception” and the provisions of this Agreement shall be construed in a manner consistent with that intention. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Executive to incur any additional tax or interest under Section 409A, Hudson shall, upon the specific request of the Executive, use its reasonable business efforts to in good faith reform such provision to comply with Section 409A; provided that, to the maximum extent practicable, the original intent and economic benefit to the Executive and Hudson of the applicable provision shall be maintained, but Hudson shall have no obligation to make any changes that could create any additional economic cost or loss of benefit to Hudson. Notwithstanding the preceding, Hudson shall indemnify the Executive with respect to tax obligations that result from the application of Section 409A with respect to the payments and/or benefits provided under this Agreement to the extent such tax obligations arise from the fact that the Employment Agreement did not reflect certain provisions of the First Amendment to the Amended and Restated Employment Agreement that were intended to be carried over without change. Any provision required for compliance with Section 409A that is omitted from this Agreement shall be incorporated herein by reference and shall apply retroactively, if necessary, and be deemed a part of this Agreement to the same extent as though expressly set forth herein.

 

B.                               With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expense eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.

 

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C.                               For purposes of applying the provisions of Section 409A to this Agreement, each separately identified amount to which the Executive is entitled under this Agreement shall be treated as a separate payment within the meaning of Section 409A. In addition, to the extent permissible under Section 409A, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

D.                               Neither Hudson nor the Executive, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A. If the consideration period (or revocation period, if applicable) for any general release and waiver extends across two (2) calendar years, the payments to the Executive shall begin in the second of the calendar years.

 

E.                                If and to the extent required to comply with Section 409A, a Termination of Employment, as defined above, shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits upon or following a Termination of Employment unless such termination is also a “Separation from Service” within the meaning of Section 409A and, for purposes of any provision of this Agreement, references to Termination of Employment, “termination,” “termination of employment”, or like terms shall mean “Separation from Service”.

 

F.                                If the Executive is deemed on the date of termination of his employment to be a “specified employee,” within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by Hudson from time to time, or if none, the default methodology under Section 409A, then with regard to any payment or the providing of any benefit subject to this Agreement and to the extent required to be delayed in compliance with Code Section 409A(a)(2)(B), and any other payment or the provision of any other benefit that is required to be delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of the Executive’s death. In this regard, it is the intention and understanding of Hudson and the Executive that payments made following a Termination of Employment under paragraph “8” shall be exempt under the “short-term deferral rule” and “involuntary separation pay plan exception”, and other applicable exceptions, from the requirements of Code Section 409A(a)(2)(B) and are not required and shall not be delayed. Absent such exception, on the first day of the seventh month following the date of Executive’s Separation from Service or, if earlier, on the date of his death, all payments delayed pursuant to this paragraph “22.F.” (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. The determination of whether the Executive is a “specified employee” shall be made by Hudson in good faith applying Section 409A.

 

23.                              SURVIVAL: Notwithstanding anything to the contrary contained herein, it is the intention of the parties that the provisions contained in paragraphs “8” and “10” of this Agreement, and each of the covenants, conditions, rights and obligations set forth therein, shall survive the expiration and/or termination of this Agreement pursuant to the provisions of paragraph “3” regardless of whether Executive remains in the employ of Hudson following such expiration and/or termination.

 

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IN WITNESS THEREOF, the parties have executed this Agreement as of the date written above.

 

  Hudson Technologies, Inc.

 

  By:   /s/ Brian Coleman

 

  Hudson Technologies Company

 

  By:   /s/ Brian Coleman

 

  Aspen Refrigerants, Inc.

 

  By:   /s/ Brian Coleman

 

    /s/ Kevin Zugibe

 

  Kevin Zugibe

 

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Exhibit 10.5

 

THIRD AMENDED AND RESTATED AGREEMENT

 

THIS THIRD AMENDED AND RESTATED AGREEMENT (“the Agreement”) is made as of the 19th day of December, 2019 by and between Hudson Technologies, Inc., P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965, Hudson Technologies Company, P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965 and Aspen Refrigerants, Inc., P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965 (hereinafter Hudson Technologies, Inc., Hudson Technologies Company and Aspen Refrigerants, Inc. are collectively referred to herein as “Hudson”) and Brian F. Coleman, residing at 41 Mountainview Avenue, Pearl River, New York 10965 (“Executive”).

 

WHEREAS, the Executive is a named executive officer of Hudson Technologies, Inc. and currently holds the title of President and Chief Operating Officer of Hudson Technologies, Inc.;

 

WHEREAS, Executive is also an employee of Hudson Technologies Company and Aspen Refrigerants, Inc. and currently holds the position of President and Chief Operating Officer with each such entity, and is employed at Hudson’s Pearl River, New York headquarters facility;

 

WHEREAS, Hudson Technologies Company and Aspen Refrigerants, Inc. are each a separate, indirect wholly-owned subsidiary of Hudson Technologies, Inc. and each is made a party to this Agreement for the purpose of implementing the terms of this Agreement;

 

WHEREAS, Hudson and the Executive previously entered into a Second Amended and Restated Agreement made as of September 20, 2019 (the “Prior Agreement”);

 

WHEREAS, Hudson and the Executive acknowledge that, because the Executive’s duties and responsibilities will bring the Executive into contact with Hudson’s confidential information, Hudson must ensure that its valuable confidential information, as well as its customer relationships, are protected and can be entrusted to the Executive;

 

WHEREAS, Hudson and the Executive acknowledge that the Executive’s talents, knowledge and services to Hudson are of a special, unique, and extraordinary character and are of particular and peculiar benefit and importance to Hudson;

 

WHEREAS, Hudson desires to ensure that it will receive the continued dedication, loyalty and service of, and the availability of objective advice and counsel from, the Executive, as well as assurances that the Executive will continue to devote his best efforts to his employment with Hudson and that he will not solicit other executives or employees of Hudson; and

 

WHEREAS, Hudson and the Executive desire to amend and restate the Prior Agreement on the terms contained herein.

 

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NOW, THEREFORE, in consideration of the continuation of the employment by Hudson of the Executive, the payments, rights and benefits granted, and the mutual covenants and conditions contained herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed that the Prior Agreement is hereby amended and restated as follows:

 

1.            TERMINATION: The following payments and benefits (hereinafter “Severance Benefits”) will be provided to the Executive by Hudson in the event of a Termination of Employment (as hereinafter defined):

 

A.           Executive will continue to receive his annual base salary, based upon his annual base salary as of the date of his Termination of Employment, for a period of eighteen (18) months (the “Severance Period”), with payroll to be made every two weeks, or at such other frequency based upon Hudson’s normal payroll practice. Hudson shall deduct from Executive’s continuing payroll all normal tax withholdings and deductions which Hudson is required by law to make. The initial payment shall be made within the forty-five (45) day period following the Executive’s Termination of Employment and the Executive shall have no right to designate the taxable year of payment.

 

B.            Executive will also receive an amount equal to 100% of the highest bonus earned by the Executive in any calendar year within the three (3) calendar years immediately preceding the date of Termination of Employment (the “Bonus”), which amount shall be paid to Executive in equal payments throughout the Severance Period made every two weeks, or at such other frequency based upon Hudson’s normal payroll practice. Hudson shall deduct from this bonus payment all normal tax withholdings and deductions which Hudson is required by law to make. The initial payment shall be made within the forty-five (45) day period following the Executive’s Termination of Employment and the Executive shall have no right to designate the taxable year of payment.

 

C.            Within the forty-five (45) day period following the Executive’s Termination of Employment, Hudson will pay to the Executive a lump sum payment for the Executive’s unused vacation for the year in which the Termination of Employment occurs, equal to the number of pro rata unused vacation days on the date of Termination of Employment, as determined in accordance with Hudson’s standard vacation policy, multiplied by the Executive’s daily base salary on the date of the Termination of Employment. Hudson shall deduct from this payment all normal tax withholdings and deductions which Hudson is required by law to make. The Executive shall have no right to designate the taxable year of payment.

 

D.           The Executive’s participation in life, health and dental insurance, disability insurance, and any other benefits (the “Benefits”) provided by Hudson to the Executive as of the date of the Termination of Employment shall be continued, or essentially equivalent benefits provided by Hudson, for the entire Severance Period or until otherwise terminated by the Executive, on the same terms, conditions and costs as if the Executive continued in the employ of Hudson. To the extent Benefits include health and dental insurance, such Benefits shall be provided as COBRA continuation coverage, and not in addition to COBRA. Notwithstanding the foregoing, to the extent Benefit coverages provided to the Executive under this paragraph are taxable to the Executive, Hudson’s obligation hereunder shall not exceed the applicable dollar amount under Section 402(g)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”), determined as of the year in which the Executive’s “Separation of Service” occurs, which is exempt under Treas. Reg. Section 1.409A-1(b)(9)(v)(D)(Limited Payment).

 

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E.           All stock options, stock appreciation rights, and any similar rights which the Executive holds on the date of Termination of Employment shall become fully vested and be exercisable on the date of Termination of Employment, and shall remain exercisable following the Termination of Employment until (i) expiration of the Severance Period, (ii) termination of Severance Benefits pursuant to paragraph “6” below, or (iii) expiration of the original term of the stock option, stock appreciation right or similar right, whichever first occurs. No extension of an exercise period under this Agreement shall extend to a date that would cause a stock option, stock appreciation right or similar right to be subject to Code Section 409A.

 

F.           For the purposes of this Agreement, the following definitions will apply:

 

(i)               “Termination of Employment” shall take place in the event that the Executive’s employment is terminated (a) by Hudson without Cause (as hereinafter defined), including for this purpose the failure to renew this Agreement, (b) by Hudson without Cause or for any reason by the Executive within sixty (60) days following a Fundamental Change (as hereinafter defined); or (c) by the Executive following an event constituting Good Reason (as hereinafter defined).

 

(ii)              “Cause” shall mean any of: (a) the Executive’s willful and continued refusal to perform, or the Executive’s willful and continued neglect of, the substantive duties of his position, (b) any willful act or omission by the Executive constituting dishonesty, fraud, or other malfeasance, (c) material nonconformance with Hudson’s standard business practices and policies, including but not limited to violation of Hudson’s Code of Business Conduct and Ethics or Hudson’s Substance Abuse Policy, (d) any act or omission by the Executive which has a material adverse effect upon the financial condition or business reputation of Hudson, (e) the Executive’s conviction of a felony, or any crime involving moral turpitude, dishonesty or theft, under the laws of the United States, or any state thereof, or any other jurisdiction in which Hudson conducts business, (f) breach of the provisions of paragraphs “4” or “5” of this Agreement, or (g) the resignation of Executive other than pursuant to the occurrence of an event constituting Good Reason or a Fundamental Change (as hereinafter defined).

 

(iii)             “Good Reason” shall mean the occurrence of any of the following: (a) at any time within a twenty-four (24) month period two individuals are elected to the Board of Directors of Hudson Technologies, Inc. (the “Board”) whose nominations were not approved by the then sitting members of the Board; (b) the Executive is assigned any duties or responsibilities, without his consent, that are materially inconsistent with his position, duties, responsibilities, or status; (c) Hudson requires the Executive, without his consent, to be based at a location which is more than fifty (50) miles from Hudson’s corporate headquarters, currently located at One Blue Hill Plaza, Pearl River, New York 10965; (d) except as provided in paragraph “1.I.” below, the Executive’s annual base salary is reduced, except to the extent that the annual base salaries of all Executive Officers (as defined below) are reduced due to the adverse financial condition of Hudson and further providing that the Executive’s annual base salary may not be reduced to a level that is less than ninety percent (90%) of the Executive’s annual base salary for the calendar year immediately prior to the Termination of Employment; (e) the Executive’s benefits are reduced and such reduction results in a material reduction in the Executive’s total compensation except to the extent that such reductions are made by Hudson on a company-wide basis and affect all Executive Officers that participate in such benefits; (f) except as provided in paragraph “1.I.” below, the Executive experiences in any year a reduction in bonus compensation or other incentive compensation, or a reduction in the ratio of the Executive’s incentive compensation, bonus or other such payments to his base compensation, or a reduction in the method of calculation of the Executive’s incentive compensation, bonus or other such payments if these benefits or payments are calculated other than as a percentage of base salary, except to the extent such reduction applies equally or proportionally, as the case may be, to all Executive Officers of Hudson. Good Reason shall not be deemed to exist unless the Executive’s Termination of Employment for Good Reason occurs within ninety (90) days following the initial existence of one of the foregoing conditions, the Executive provides Hudson with written notice of the existence of such condition(s) within thirty (30) days after the initial existence of the condition(s) and Hudson fails to remedy the condition within thirty (30) days after its receipt of such notice. An isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Hudson within ten (10) days after Hudson’s receipt of notice thereof given by the Executive shall not constitute Good Reason.

 

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(iv)             “Executive Officer(s) shall mean the following: Hudson’s Chief Executive Officer (currently Kevin J. Zugibe); Hudson’s President and/or Chief Operating Officer (currently Brian Coleman); Hudson’s Chief Financial Officer (currently Nat Krishnamurti); and any other current or future officer of Hudson Technologies, Inc. that is subject to Section 16(a) of the Securities Exchange Act of 1934.

 

(v)              A “Fundamental Change” shall occur (a) if Hudson (or one or more of the companies making up Hudson) shall make a general assignment for the benefit of creditors, or a trustee, receiver or liquidator shall be appointed for Hudson or Hudson Technologies, Inc. or for a substantial part of its property; (b) upon commencement of any proceedings by Hudson (or one or more of the companies making up Hudson) under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt, receivership, liquidation or dissolution law or statute, or the commencement of any such proceedings without the consent of Hudson (or one or more of the companies making up Hudson), and such involuntary proceedings shall continue undischarged for a period of forty five (45) days; (c) upon the commencement of the dissolution or liquidation of Hudson (or one or more companies making up Hudson); or a (d) upon a Change in Control (as hereinafter defined).

 

(vi)             “Change in Control” shall mean the consummation of (a) a sale or other disposition of all or substantially all of the assets of Hudson; (b) a merger or consolidation in which Hudson Technologies, Inc. is not the surviving entity and in which the stockholders of Hudson Technologies, Inc. immediately prior to such consolidation or merger own less than 50% of the surviving entity’s voting power immediately after the transaction; (c) a reverse merger in which Hudson Technologies, Inc. is the surviving entity but the shares of common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, and in which the stockholders of the Hudson Technologies, Inc. immediately prior to such reverse merger own less than 50% of the Hudson Technologies, Inc.’s voting power immediately after the transaction; (d) a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of a majority of Hudson Technologies, Inc.’s (or one or more companies making up Hudson) then outstanding voting securities; or (e) Current Directors (as hereinafter defined) shall cease for any reason to constitute at least a majority of the members of the board of directors of Hudson (or one or more companies making up Hudson), as applicable. Notwithstanding the foregoing, a transaction shall not constitute a Change in Control if its purpose is to (A) change the jurisdiction of incorporation, or (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Hudson Technologies, Inc.’s securities immediately before such transaction.

 

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(vii)            “Current Director” shall mean any member of the board of directors of Hudson (or one or more companies making up Hudson) as of the date hereof and any successor of a Current Director whose election, or nomination for election by the Company’s stockholders, was approved by at least a majority of the applicable Current Directors then on such board of directors.

 

G.           Hudson’s obligation to pay the compensation and to make the arrangements provided in this paragraph “1” shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment or other right which Hudson may have against the Executive or anyone else; provided, however that as a condition to payment of amounts under this paragraph “1”, within sixty (60) days of the Executive’s Termination of Employment, the Executive shall have (i) executed and not revoked a general release and waiver, in form and substance reasonably satisfactory to Hudson and the Executive, of all claims relating to the Executive’s employment by Hudson and the termination of such employment, including, without limitation, discrimination claims (including without limitation age discrimination), employment-related tort claims, contract claims and claims under this Agreement (other than claims with respect to benefits under any tax-qualified retirement plans or continuation of coverage or benefits solely as required under ERISA) with such general release and waiver having become irrevocable, and (ii) executed an agreement expressly acknowledging and reaffirming the covenants and restrictions contained in paragraphs “4” and “5” below, and the remedies available to Hudson under paragraph “6” below.

 

H.           All amounts payable by Hudson pursuant to this paragraph “1” shall be paid without notice or demand. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made pursuant to this paragraph “1” and, except as provided in paragraph “6” below, the obtaining of any other employment shall not result in a reduction of Hudson’s obligation to make the payments, benefits and arrangements required to be made under this paragraph “1”.

 

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I.            Executive expressly acknowledges that the following shall not constitute “Good Reason” for purposes of this paragraph “1”:

 

(i)              Establishing a new or different bonus or incentive compensation plan(s) in any subsequent year based upon new or different criteria for calculating the applicability of, and the amount of any bonus or incentive compensation award due to the Executive, provided that any new or different bonus or incentive compensation plan, and any award under said plan, applies equally or proportionally, as the case may be, to all Executive Officers; except that Hudson may establish separate performance criteria and payment amounts for awards under such plan for each Executive Officer that are reasonably achievable and reasonably related to such Executive Officer’s normal duties and responsibilities;

 

(ii)             A reduction of the Executive’s bonus compensation or other incentive compensation that (a) results from Hudson operating at a level of performance below Hudson’s budget, (b) results from the Executive’s failure or inability to attain, in whole or in part, any or all of the performance criteria established for the Executive under the said plan, (c) results from the application of the terms of such bonus or incentive compensation plan, or (d) is based upon the Executive’s performance or non-performance, of his normal duties and responsibilities during the period covered by the bonus or incentive compensation plan including, without limitation, due to the Executive’s Disability (as defined herein);

 

(iii)            A reduction of the Executive’s annual base salary based upon the Executive’s performance or non-performance, of his normal duties and responsibilities, provided that the Executive’s annual base salary may not be reduced to a level that is less than ninety (90%) percent of the Executive’s annual base salary for the calendar year immediately prior to the Termination of Employment; or

 

(iv)            A reduction in the Executive’s annual base salary pursuant to the provisions of paragraph “3” below.

 

2.           TERMINATION FOR CAUSE: Hudson may at any time terminate the employment of the Executive for Cause (as defined in paragraph “1” above) upon five (5) days prior written notice to Executive. If Executive is terminated for Cause, he shall be entitled to no Severance Benefits and shall be entitled to no bonus payment that might otherwise be owed to him if he worked for the entire year. In the event of termination under this paragraph, Hudson shall pay Executive all amounts which are then accrued but unpaid, including unpaid vacation as determined in accordance with Hudson’s’ standard vacation policy, within thirty (30) days after the date of notice. Hudson shall have no further or additional liability to Executive.

 

3.           SICK LEAVE:

 

A.           If with or without reasonable accommodation Executive is physically or mentally unable to perform his duties, or is otherwise absent for medical reasons, Hudson shall continue to pay base salary and provide benefits to the Executive (“Sick Leave”). However, if a continuous period of Sick Leave exceeds eight (8) consecutive weeks, Hudson’s obligation with regard to base salary upon the expiration of the eight (8) consecutive weeks shall be limited to paying 75% of base salary. If the Executive returns to full service, his full base salary shall be reinstated to the pre-adjustment amount. As a condition to the receipt of the foregoing base salary and benefits, the Executive agrees that he shall provide Hudson such information as Hudson may reasonably request from time to time to permit Hudson to make a determination that the Executive is entitled to sick pay under this provision. Hudson shall reduce the amount paid to the Executive during such Sick Leave by an amount equal to any disability payments or benefits actually received by Executive under or pursuant to any disability program or supplemental disability insurance plan(s) provided by Hudson at Hudson’s expense unless such reduction results in a violation of Code Section 409A.

 

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B.           Notwithstanding the foregoing, Hudson may terminate the employment of Executive at any time after Executive’s continuous period of Sick Leave exceeds 120 calendar days. Termination of the Executive after the said 120 calendar period shall not be deemed a Termination for Cause (as defined in paragraph “1” above) and shall entitle the Executive to receive the payments and benefits provided by paragraph “1” upon Termination of Employment based upon Executive’s full base salary, and for purposes of such payments and benefits, the Severance Period shall be deemed to commence as of the date of the Termination of Employment resulting under this paragraph “3.B.”.

 

C.           Notwithstanding anything to the contrary contained herein, in the event that during the period the Executive is on Sick Leave, and prior to any Termination of Employment pursuant to paragraph “3.B.”, there is deemed a “Separation from Service” (as that term is defined in Code Section 409A for purposes of a permissible payment event), Hudson and the Executive agree that such Separation of Service shall be treated as a Termination of Employment. Such termination shall not be deemed a Termination for Cause (as defined in paragraph “1” above) and shall entitle the Executive to receive the payments and benefits provided by paragraph “1” upon Termination of Employment based upon Executive’s full base salary, provided that, for purposes of such payments and benefits, the Severance Period shall commence as of the date of the Separation from Service as described in this paragraph “3.C.”, and shall be based upon Executive’s full base salary.

 

D.           Notwithstanding anything to the contrary contained herein, in the event that during the period the Executive is on Sick Leave, and prior to any Termination of Employment pursuant to paragraph “3.B.” or any Separation from Service pursuant to paragraph “3.C.”, the Executive becomes “Disabled”, (as defined in Code Section 409A for purposes of a permissible payment event) Hudson and the Executive agree that the Executive’s Disability shall entitle the Executive to receive the payments and benefits provided by paragraph “1” upon Termination of Employment based upon Executive’s full base salary. For purposes of such payments and benefits, the Severance Period shall commence as of the date of the Disability as described in this paragraph “3.D.”.

 

4.            CONFIDENTIALITY:

 

A.           Executive expressly acknowledges and agrees as follows:

 

(i)               Hudson expends a significant amount of funds annually on researching and developing solutions and proprietary techniques related to the products and services it offers or is seeking to offer, and has developed substantial confidential, proprietary, and trade secret information, and this confidential, proprietary and trade secret information, if misused, disclosed, misappropriated or used by others, would result in irreparable harm to Hudson.

 

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(ii)              Hudson’s Confidential Information (as hereinafter defined) constitutes valuable commercial assets of Hudson and is not readily available to the general public or any persons not employed by or otherwise not associated in a position of trust with Hudson. Hudson keeps its Confidential Information confidential (other than to the extent filings are required for patents) by, among other things, restricting access to only those who need the information to perform their Hudson job function and prohibiting the use or disclosure of Confidential Information to anyone not authorized to receive or use the Confidential Information.

 

(iii)             Executive’s position with Hudson will continue to provide Executive with access to or knowledge of Hudson’s Confidential Information.

 

(iv)             Hudson’s Confidential Information will become known to Executive only as a result of his/her employment with Hudson. To the extent that Executive was previously engaged, on his own or with others, in a business that provided the same or similar services as those provided by Hudson, Executive further acknowledges that such prior business knowledge and experience, and any familiarity with entities that are actual or potential customers for the business, shall not permit or allow Executive to contend that Hudson’s Confidential Information is not confidential or should not be protected from use or misappropriation.

 

B.            In light of the foregoing, Executive acknowledges and agrees as follows:

 

(i)               All Confidential Information is the property of Hudson, and Executive shall not, without the express written consent of Hudson, directly or indirectly use, disseminate, disclose, or in any way reveal, either during Executive’s employment or at any time thereafter, all or any part of the Confidential Information, other than for the purposes authorized by Hudson, or only for the benefit of Hudson.

 

(ii)              Hudson shall be the sole owner of, and Executive hereby assigns to Hudson, any and all property rights to all Intellectual Property (as hereinafter defined) made, conceived, originated, devised, discovered, invented, or developed before, during or after the term of Executive’s employment with Hudson, whether or not Executive was involved either alone or with others, if it was in whole or in part developed during the course of Executive’s employment or by Executive’s use of any property of Hudson. This ownership provision does not apply to creations of the Executive which are made in the Executive’s own time, without the use of any Hudson resources, and which do not relate in any way to Hudson’s business. Executive agrees to cooperate fully and assist Hudson or its designee in the performance of any lawful acts that Hudson at its discretion deems necessary, and to execute and deliver without charge any documents reasonably required by Hudson, to secure any patent, copyright, trademark, and other protection for Intellectual Property and improvements thereon, and to assign to and vest in Hudson the entire interest therein in the United States and all foreign countries.

 

(iii)             Upon request by Hudson at any time, or upon termination of employment with Hudson, whichever is sooner, Executive shall immediately deliver to Hudson any and all information and property of Hudson in whatever form it exists, including but not limited to all Confidential Information and all copies thereof or materials containing or derived from Confidential Information.

 

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C.           As used in this Agreement, “Confidential Information” means all information not publicly available (but including information that is publicly available as a result of a breach by Executive of paragraphs “4” and “5”) and not generally known or used by Hudson’s competitors, or in the industry, and which could be harmful to Hudson if disclosed to persons outside of Hudson and which includes, but is not limited to:

 

(i)               Intellectual Property (as hereinafter defined);

 

(ii)             Technical information, such as, but not limited to: Hudson’s plant organization and designs; product formulation, manufacturing, performance and processing data; and research and development results and plans;

 

(iii)            Product information, such as, but not limited to: non-public details of Hudson’s products and services, including but not limited to, its existing refrigerant, decontamination, reclamation and recovery products and services, as well as those being developed; specialized equipment and training; product plans, drawings and specifications; and performance capabilities, strengths and weaknesses;

 

(iv)             Strategic information, such as, but not limited to: Hudson’s material costs; supplier and vendor information; overhead costs; pricing; profit margins; banking and financing information; and market penetration initiatives and strategies;

 

(v)              Organizational information such as, but not limited to: Hudson’s personnel and salary data; information concerning the utilization of facilities; merger, acquisition and expansion information; equipment utilization information; and Hudson manuals, policies and procedures;

 

(vi)             Marketing and sales information, such as, but not limited to: Hudson’s licensing, marketing and sales techniques and data; customer lists; customer data, such as, but not limited to, their personnel, project, financial and account status, individual needs, historical purchases, and contact information; product development and delivery schedules; market research and forecasts; and marketing and advertising plans, techniques and budgets; and

 

(vii)           Advertising information, such as, but not limited to: Hudson’s overall marketing policies; the specific advertising programs and strategies utilized by Hudson; and the success or lack of success of those programs and strategies.

 

“Confidential Information” does not include general skills, experience or information that is generally available to the public, other than information which has become generally available as a result of Executive’s direct or indirect act or omission. “Confidential Information” also does not include information regarding Executive’s own pay and benefits, information as to the terms and conditions of employment, or information that is deemed not confidential under Section 7 of the National Labor Relations Act. Executive understands that nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupation Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). Executive further understands that this Agreement does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to Hudson. This Agreement does not limit Executive’s right to receive an award for information provided to any Government Agencies.

 

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D.          As used in this Agreement, “Intellectual Property” means all information concerning the evaluation, design, engineering, construction, marketing, and sales of the products and services provided by Hudson and which includes, but is not limited to: any and all patents, patents pending; trademarks, copyrights, and any and all applications for same issued to and/or applied for by Hudson; any and all technological (including software), educational, operational, and financial innovations, discoveries, inventions, designs, and formulae; tests; performance data; process or production methods; improvements to all such property; and all recorded material defining, describing, illustrating, or documenting in any fashion, all such property, whether written or not and regardless of the medium in which the information is stored or recorded; without regard to whether such property is patentable, copyrightable, or subject to trade/service mark protection, and without regard to whether a patent, copyright, or trademark or service mark has been sought or obtained.

 

E.           Notwithstanding anything in this Agreement, Executive is hereby advised that pursuant to the federal Defend Trade Secrets Act: (i) an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (ii) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.

 

5.            NON-COMPETITION / NON-SOLICITATION:

 

A.          Executive expressly acknowledges and agrees as follows:

 

(i)               Hudson compensates its employees, among other things, to develop and to pursue, on Hudson’s behalf, good relationships and goodwill with all customers and potential customers, whether developed by Executive or others within the Hudson organization;

 

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(ii)              Executive will be exposed to, acquire and develop knowledge of Confidential Information including, without limitation, Confidential Information related to Hudson’s customers, operations, and its suppliers;

 

(iii)             Executive is able to be gainfully employed by other employers in a variety of other industries and businesses that are engaged in businesses that do not involve and are not competitive with any part of Hudson’s business.

 

B.            In light of the foregoing, Executive agrees, that while Executive is employed by Hudson, and continuing until the expiration of the Covenant Period (as hereinafter defined):

 

(i)               Executive shall not, within the Restricted Territory (as hereinafter defined), compete with Hudson, directly or indirectly, whether for Executive’s own behalf or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business entity, whether for profit or not-for-profit, by being employed by, participating in, or otherwise being materially connected in the conduct of any business activity that involves providing products or services that are like or similar to, or competitive with, or would replace or be a substitute for, any one or more of the products and services provided by Hudson (hereinafter “Competitive Products”) if such employment, participation, or connection involves: (a) responsibilities similar to responsibilities Executive had or performed for Hudson at any time during the last eighteen (18) months of Executive’s employment with Hudson; (b) supervision of employees or other personnel in the provision of Competitive Products; (c) development or implementation of strategies or methodologies related to the provision of Competitive Products; (d) marketing or sale of Competitive Products; or (e) responsibilities in which Executive would utilize or disclose Confidential Information.

 

(ii)              Executive shall not compete with Hudson, directly or indirectly, whether for Executive’s own behalf or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business entity, whether for profit or not-for-profit, by calling upon, contacting, diverting, soliciting, or doing business for or with any “Client” of Hudson (as hereinafter defined) for the purpose of offering or providing any Competitive Products.

 

(iii)             Executive shall not directly or indirectly, without the prior written consent of Hudson, (a) induce, solicit, entice, or encourage any officer, director, employee or other individual to leave his or her employment with Hudson, (b) induce, solicit, entice, or encourage any officer, director, employee or other individual to compete in any way with the products and services of Hudson, or to violate the terms of any employment, non-competition, confidentiality or similar agreement with Hudson; or (c) employ, offer to employ, contract with, offer to contract with, or do business with any officer, director, employee or other individual who is employed by Hudson.

 

C.            For purposes of this paragraph “5”, the Covenant Period shall be eighteen (18) months after the Executive’s last day of active employment with Hudson, regardless of the reason underlying the termination of Executive’s employment.

 

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D.           Executive acknowledges that many of Hudson’s services are remedial in nature and, as such, its customers may utilize Hudson’s services on an infrequent basis over an extended period of time, or following a protracted sales effort over an extended period of time. Executive also acknowledges that because of his position, he will likely have knowledge of Hudson’s customers through access to Confidential Information, whether or not located within the Restricted Territory (hereinafter defined). Accordingly, for purposes of this paragraph “5”, the term “Client” shall mean (a) any customer or potential customer of Hudson upon whom Executive, during the last eighteen (18) months of Executive’s employment with Hudson, called upon or with whom Executive had any contact, or as to whom Executive was involved in regard to planning, marketing, conducting, or overseeing an offer to sell products or perform services; (b) any customer as to whom Executive assisted in selling products or providing services, or as to whom Executive was involved in regard to planning, marketing, conducting, or overseeing the offer to sell products or perform services if the customer received any products or services from Hudson during the last eighteen (18) months of Executive’s employment with Hudson; (c) any potential customer of Hudson whose identity Executive learned during the eighteen (18) months of Executive’s employment with Hudson or learned from Confidential Information at any time; or (d) any customer for whom Hudson has provided products or services to at any time during the thirty-six (36) months preceding the last day of the Executive’s employment with Hudson and whose identity as a Hudson customer Executive learned from Confidential Information at any time.

 

E.           Executive acknowledges that the nature of Hudson’s business is such that provides its products and services to customers throughout the United States of America and Puerto Rico. Accordingly, the “Restricted Territory” includes each and every state of the United States of America (including the District of Columbia) and Puerto Rico.

 

F.            In order to assure Hudson of the full eighteen (18) months of the Covenant Period within which to protect its goodwill and to prevent Executive from unfairly benefiting by violations of this paragraph “5”, the provisions and requirements of this paragraph “5” shall be extended for a period of time beyond the Covenant Period equal in length to the total length of time during which Executive is in violation of any one or more provisions of this paragraph.

 

G.           In the event it is determined by a court of competent jurisdiction that any provision or portion of a provision of this paragraph “5” is not enforceable under the law governing this Agreement, the unenforceable provision or portion thereof may be stricken, and the remainder of the provision and of this paragraph “5” shall be valid and fully enforceable, in all respects, as if the provision or portion of a provision deemed unenforceable had never been part of the Agreement. Further, if any provision of this Agreement is found to be overbroad or unenforceable, the court or any other authority with competent jurisdiction is expressly authorized to conform the provision to the extent necessary to remedy any deficiency and render it valid and enforceable.

 

6.            REMEDIES:

 

A.           In the event that the Executive breaches any term or provision of paragraphs “4” or “5” of this Agreement, Hudson shall be immediately, permanently and irreparably damaged and shall be entitled, in addition to and without limiting Hudson’s rights to, any and all other legal and equitable remedies and damages, (i) to a temporary restraining order ex parte, to a preliminary injunction, and to a permanent injunction, to restrain Executive’s actions or the actions of others acting in conjunction with Executive or on Executive’s behalf, (ii) to terminate all future Severance Benefits through the remainder of the Severance Period, and (iii) to recover from Executive all Severance Benefits actually paid to the Executive, including any costs or expenses actually incurred by Hudson in providing such Severance Benefits. Executive agrees that Executive will not be damaged by enforcement of this covenant as Executive can obtain many other types of gainful employment without violating the provisions of paragraphs “4” or “5”, so that no bond shall be required, and if the court requires a bond to be posted, it shall not exceed $500.00.

 

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B.            All of Executive’s covenants and obligations under paragraphs “4” and “5” of this Agreement shall survive, and shall remain enforceable, for so long as Executive is employed and after termination of employment for any reason, and shall survive despite future promotions, raises, changes in position or compensation, demotions and the execution of new agreements with Hudson, and shall inure to the benefit of Hudson’s successors and assigns, unless Hudson executes in writing an agreement expressly terminating the covenants of paragraphs “4” and “5” of this Agreement.

 

C.            Hudson and Executive shall each bear and be responsible for their own attorneys’ fees, expenses and disbursements incurred in any litigation brought by either party to enforce or interpret any provision contained in paragraphs “4” or “5” of this Agreement.

 

7.             NOTICES: All notices required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by certified mail, return receipt requested, to the Executive at his residence, and to Hudson at its principal office located at P.O. Box 1541, One Blue Hill Plaza, Pearl River, New York 10965, attention Chief Executive Officer, or at such other address as any party specifies by giving proper notice.

 

8.             SUCCESSORS: This Agreement shall be binding upon and shall inure to the benefit of the Executive and his estate. Neither this Agreement nor any rights hereunder shall be assignable by the Executive.

 

This Agreement shall be freely assignable by Hudson to, and shall inure to the benefit of, and be binding upon, any successor corporation or affiliate of a successor corporation, and all references in this Agreement to Hudson shall include its subsidiaries and affiliates and any successors, affiliates of successors or assigns of Hudson. As used herein, the term “successor” shall mean any person, firm, corporation or business entity or affiliate thereof which at any time, whether by merger, purchase, or otherwise, directly or indirectly acquires all or substantially all of the assets or the business of Hudson, including any entity that shall be the surviving corporation in a merger with Hudson.

 

9.             EMPLOYMENT AT WILL; CONSEQUENCES OF TERMINATION: Nothing herein shall be deemed to create an agreement for employment of Executive for any specified term or period of time. Hudson expressly agrees that at any time the Executive may resign or otherwise terminate his or her employment with Hudson, for any reason or for no reason, subject to the provisions contained herein. Likewise, the Executive expressly agrees that at any time Hudson may terminate the employment of the Executive for any reason or for no reason, subject to the provisions contained herein.

 

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10.          INDEMNIFICATION: In the event that any litigation shall be brought to enforce or interpret any provision contained in paragraphs “1”, “2”, or “3” of this Agreement, then, provided that the Executive prevails to any extent, Hudson or any successor corporation shall reimburse or indemnify the Executive for the Executive’s reasonable attorneys’ fees, expenses and disbursements incurred in such litigation, including the costs of enforcement.

 

11.          CONTROLLING LAW: This Agreement and all other issues regarding the employment of the Executive shall be governed by the laws of the State of New York, without reference to its conflicts of law principles.

 

12.          ENTIRE AGREEMENT: This Agreement represents the entire agreement and understanding of the parties regarding the employment of the Executive, and all prior or contemporaneous agreements, representations, or understandings are expressly superseded by, and do not survive this Agreement. Executive has not relied upon any inducement, promise, representation, or assurance, other than those expressly set out herein. Except as expressly permitted herein, this Agreement may not be modified or amended except in writing signed by all parties hereto.

 

13.          WAIVER: The waiver of any breach of any provision of this Agreement by either party shall not operate or be construed as a subsequent waiver by either party of any term or condition of this Agreement.

 

14.          HEADINGS: The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

 

15.          SEVERABILITY: The parties intend and agree that each covenant and condition contained in this Agreement shall be a separate and distinct covenant. If any provision of this Agreement is found to be invalid, illegal, or unenforceable, the remaining provisions shall not be affected.

 

16.          COMPLIANCE WITH CODE SECTION 409A:

 

A.           It is the intention of Hudson and the Executive that the payments, benefits and rights to which the Executive could be entitled pursuant to this Agreement comply with Code Section 409A, the Treasury regulations and other guidance promulgated or issued thereunder (collectively for purposes of this paragraph 16, “Section 409A”), to the extent that the requirements of Section 409A are applicable thereto, and after application of all available exemptions, including but not limited to, the “short-term deferral rule” and “involuntary separation pay plan exception” and the provisions of this Agreement shall be construed in a manner consistent with that intention. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Executive to incur any additional tax or interest under Section 409A, Hudson shall, upon the specific request of the Executive, use its reasonable business efforts to in good faith reform such provision to comply with Section 409A; provided, that to the maximum extent practicable, the original intent and economic benefit to the Executive and Hudson of the applicable provision shall be maintained, but Hudson shall have no obligation to make any changes that could create any additional economic cost or loss of benefit to Hudson. Hudson shall not have any liability to the Executive with respect to tax obligations that result from the application of Section 409A and makes no representation with respect to the tax treatment of the payments and/or benefits provided under this Agreement. Any provision required for compliance with Section 409A that is omitted from this Agreement shall be incorporated herein by reference and shall apply retroactively, if necessary, and be deemed a part of this Agreement to the same extent as though expressly set forth herein.

 

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B.            With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expense eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of the Executive's taxable year following the taxable year in which the expense was incurred.

 

C.            For purposes of applying the provisions of Section 409A to this Agreement, each separately identified amount to which the Executive is entitled under this Agreement shall be treated as a separate payment within the meaning of Section 409A. In addition, to the extent permissible under Section 409A, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

D.            Neither Hudson nor the Executive, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A. If the consideration period (or revocation period, if applicable) for any general release and waiver extends across two (2) calendar years, the payments to the Executive shall begin in the second of the calendar years.

 

E.            If and to the extent required to comply with Section 409A, a Termination of Employment, as defined above, shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits upon or following a Termination of Employment unless such termination is also a “Separation from Service” within the meaning of Section 409A and, for purposes of any provision of this Agreement, references to Termination of Employment, “termination,” “termination of employment” or like terms shall mean “Separation from Service.”.

 

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F.            If the Executive is deemed on the date of termination of his employment to be a “specified employee,” within the meaning of that term under Section 409A(a)(2)(B) and using the identification methodology selected by Hudson from time to time, or if none, the default methodology under Section 409A, then with regard to any payment or the providing of any benefit subject to this Agreement and to the extent required to be delayed in compliance with Section 409A(a)(2)(B), and any other payment or the provision of any other benefit that is required to be delayed in compliance with Section 409A(a)(2)(B), such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of the Executive’s death. In this regard, it is the intention and understanding of Hudson and the Executive that payments made following a Termination of Employment under paragraph “1” shall be exempt under the “short-term deferral rule” and “involuntary separation pay plan exception”, and other applicable exceptions, from the requirements of Section 409A(a)(2)(B) and are not required and shall not be delayed. Absent such exception, on the first day of the seventh month following the date of Executive’s Separation from Service or, if earlier, on the date of his death, all payments delayed pursuant to this paragraph “16.F.” (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. The determination of whether the Executive is a “specified employee” shall be made by Hudson in good faith applying Section 409A.

 

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IN WITNESS THEREOF, the parties have executed this Agreement as of the date written above.

 

  Hudson Technologies, Inc.
   
  By: /s/ Kevin Zugibe
   
   
  Hudson Technologies Company
   
  By: /s/ Kevin Zugibe

 

 

  Aspen Refrigerants, Inc.
   
  By: /s/ Kevin Zugibe
   
   
  /s/ Brian F. Coleman
  Brian F. Coleman

 

  17  

 

Exhibit 99.1

 

HUDSONTECH.JPG

 

HUDSON TECHNOLOGIES ENTERS INTO NEW REVOLVING CREDIT FACILITY AND

ANNOUNCES DEFINITIVE AMENDMENTS TO EXISTING TERM LOAN CREDIT FACILITY

 

PEARL RIVER, NY – December 19, 2019 – Hudson Technologies, Inc. (NASDAQ: HDSN) today announced that it has entered into a new revolving credit facility with Wells Fargo Bank, National Association, which provides up to $60 million in borrowing capacity from time to time, subject to a borrowing base. In conjunction with entry into the Wells Fargo credit facility, the Company repaid in full its revolving loans from PNC Bank, National Association and the revolving credit facility with PNC Bank was terminated. Furthermore, on December 19, 2019 Hudson entered into a Waiver and Fourth Amendment to its Term Loan Credit and Security Agreement (the “Fourth Amendment”).

 

Kevin Zugibe, Chairman and CEO of Hudson Technologies, stated, “We are pleased to have entered into a new revolving credit facility as well as to have successfully amended our existing term loan facility. We appreciate the support of our new and existing lending partners and the patience of our shareholders as we finalized these agreements and we look forward to driving improved operating performance as we enter 2020.”

 

The Fourth Amendment waived financial covenant defaults at June 30, 2019 and September 30, 2019 and amended the Term Loan Credit and Security Agreement to reset the maximum total leverage ratio financial covenant through December 31, 2021; reset the minimum liquidity requirement; and added a minimum LTM adjusted EBITDA covenant.

 

Additional details regarding the new revolving credit facility, the Fourth Amendment to the term loan facility, and related matters, will be provided in a Form 8-K to be filed with the Securities and Exchange Commission.

 

About Hudson Technologies

 

Hudson Technologies, Inc. is a leading provider of innovative and sustainable solutions for optimizing performance and enhancing reliability of commercial and industrial chiller plants and refrigeration systems. Hudson's proprietary RefrigerantSide® Services increase operating efficiency, provide energy and cost savings, reduce greenhouse gas emissions and the plant’s carbon footprint while enhancing system life and reliability of operations at the same time. RefrigerantSide® Services can be performed at a customer's site as an integral part of an effective scheduled maintenance program or in response to emergencies. Hudson also offers SMARTenergy OPS®, which is a cloud-based Managed Software as a Service for continuous monitoring, Fault Detection and Diagnostics and real-time optimization of chilled water plants. In addition, the Company sells refrigerants and provides traditional reclamation services for commercial and industrial air conditioning and refrigeration uses. For further information on Hudson, please visit the Company's web site at www.hudsontech.com

 

     

 

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

 

Statements contained herein which are not historical facts constitute forward-looking statements. These include statements regarding management’s intentions, plans, beliefs, expectations or forecasts for the future including, without limitation, Hudson’s expectations with respect to the benefits, costs and other anticipated financial impacts of the ARI transaction; future financial and operating results of the Company; the Company’s ability to remain in compliance with the financial covenants in its credit agreements; and the Company’s plans, objectives, expectations and intentions with respect to future operations and services. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, but are not limited to, changes in the laws and regulations affecting the industry, changes in the demand and price for refrigerants (including unfavorable market conditions adversely affecting the demand for, and the price of, refrigerants), the Company's ability to source refrigerants, regulatory and economic factors, seasonality, competition, litigation, the nature of supplier or customer arrangements that become available to the Company in the future, adverse weather conditions, possible technological obsolescence of existing products and services, possible reduction in the carrying value of long-lived assets, estimates of the useful life of its assets, potential environmental liability, customer concentration, the ability to obtain financing, any delays or interruptions in bringing products and services to market, the timely availability of any requisite permits and authorizations from governmental entities and third parties as well as factors relating to doing business outside the United States, including changes in the laws, regulations, policies, and political, financial and economic conditions, including inflation, interest and currency exchange rates, of countries in which the Company may seek to conduct business, the Company’s ability to successfully integrate ARI’s operations and any assets it acquires from other third parties into its operations, and other risks detailed in the Company's 10-K for the year ended December 31, 2018 and other subsequent filings with the Securities and Exchange Commission. Examples of such risks and uncertainties specific to the ARI transaction include, but are not limited to, the possibility that the expected benefits will not be realized, or will not be realized within the expected time period. The words "believe", "expect", "anticipate", "may", "plan", "should" and similar expressions identify forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

 

Investor Relations Contact:
John Nesbett/Jennifer Belodeau

IMS Investor Relations
(203) 972-9200

jnesbett@institutionalms.com

Company Contact:
Brian F. Coleman, President & COO
Hudson Technologies, Inc.
(845) 735-6000
bcoleman@hudsontech.com