Common use of Eligible Inventory Clause in Contracts

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (i) the Collateral Agent, on behalf of Secured Parties, does not have a first priority and exclusive perfected Lien on such Inventory; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establishsole right, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentsole discretion, in Good Faith to determine which Inventory is eligible (the "Eligible Inventory"). In additionWithout limiting Agent's discretion, the Administrative following Inventory shall not be Eligible Inventory: (i) Inventory which is obsolete, not in good condition, or not either currently usable or currently salable in the ordinary course of such Borrower's business; (ii) Inventory which Agent reserves determines, in the right, at any time exercise of Agent's sole discretion and from time to time after the Original Closing Datein accordance with Agent's customary business practices, to adjust any of the criteria set forth belowbe unacceptable due to age, type, category and/or quantity; (iii) Inventory which is not subject to establish new criteria internal control and management procedures acceptable to adjust the applicable advance rate Agent, in Agent's sole discretion; (iv) Inventory with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (i) the Collateral Agent, on behalf of Secured Parties, Agent does not have a first priority and exclusive valid fully perfected Lien security interest; (v) Inventory of a Borrower which is stored or placed with a bailee, warehouseman, supplier, lessor or similar party other than Inventory with warehousemen, bailees or lessors as to which such Borrower has notified Agent in writing and which have signed an agreement in favor of Agent in form and substance satisfactory to Agent; (vi) Inventory delivered to a Borrower on consignment; (vii) Inventory sold by a Borrower on consignment, other than such Inventory; Inventory consisting of railcar wheels furnished on consignment (iieach, a "Permitted Consignment"), provided that (a) such Borrower has notified Agent in writing of such consignment and the location thereof, (b) Agent has received a written agreement signed by the consignor thereof as to Agent's rights in and to such Inventory which agreement is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000form and substance satisfactory to Agent, and (yc) either the amount (1valued as provided in Subsection 2.4) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where of such Inventory does not exceed $1,500,000 in the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with for all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; Borrowers; (viii) is slow moving (in excess of 1-year supply); Inventory constituting supplies; and (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement located at one of the locations designated on Schedule 6.5 (other than Permitted Consignments). In the event that previously scheduled Inventory ceases to be Eligible Inventory under the above-described criteria, and as a result there has been a material net decrease in the aggregate amount of Eligible Inventory since that last reported in the preceding Collateral Agent’s LiensReport, without further consent or payment to the licensor or otherBorrower experiencing such decrease shall notify Agent and each Lender thereof immediately after such Borrower has obtained knowledge thereof.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right, in the exercise of the Agent’s reasonable discretion, to determine whether Inventory is eligible for inclusion in the Borrowing Base at any particular time (such eligible inventory being referred to as “Eligible Inventory”). Without limiting the Agent’s right to establish, modify or eliminate Reserves against Eligible determine that Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to does not constitute Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible following Inventory shall not include be Eligible Inventory: (a) Inventory reasonably determined by the Agent to be out-of-condition or otherwise unmerchantable, including, without limitation, Inventory deemed to be out-of-condition or otherwise unmerchantable by the United States Department of Agriculture, any Inventory state’s Department of Agriculture, or any other Governmental Authority having regulatory authority over Borrower or any Borrowing Base Guarantor that: of Borrower’s assets or activities; (b) Inventory for which a prepayment has been received; (c) Inventory in the possession of third parties, unless it is Inventory: (i) at a location disclosed to the Collateral Agent in accordance with Section 6.5 and/or Section 7.3 or (ii) covered by negotiable warehouse receipts or negotiable bills of lading issued by either: (A) a warehouseman licensed and bonded by the United States Department of Agriculture or any state’s Department of Agriculture, or (B) a recognized carrier having an office in the United States and in a financial condition reasonably acceptable to the Agent, on behalf which receipts or bills of Secured Partieslading designate the Agent directly or by endorsement as the only Person to which or to the order of which the warehouseman or carrier is legally obligated to deliver such Goods; (d) Inventory in which the Agent does not, does not for any reason, have a first priority and exclusive perfected Lien on such Inventory; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, security interest; and (ye) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to Inventory which in the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location ’s opinion may be subject to a mortgage in favor liens or conflicting claims of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either ownership (x) a reasonably satisfactory mortgagee waiver has been delivered except with regard to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded Producer Payables deducted in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’scomputation), as applicable, business; (xi) breaches whether such liens or conflicting claims are asserted or could be asserted by any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherPerson.

Eligible Inventory. For All of the Inventory owned by the Borrower or any Secured Guarantor and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentjudgment to reflect issues with respect to the salability of Inventory arising or discovered by Agent after the Effective Date. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Effective Date, to adjust any of the criteria set forth below, below or to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgmentjudgment to reflect changes in the Borrower's or the applicable Secured Guarantor's business operations or salability of Inventory, subject to the approval of the Supermajority Requisite Revolving Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Secured Guarantor that: (ia) is not owned by Borrower or any Secured Guarantor free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's or a Secured Guarantor's performance with respect to that Inventory), except Liens described in clauses (a), (d), (e) and (g) of the definition of Permitted Encumbrances and the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (i) is not located on premises owned, leased or rented by Borrower or any Secured Guarantor and set forth in Disclosure Schedule (3.2), (ii) is not located on premises in United States acquired or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agentany Secured Guarantor in connection with any Permitted Acquisition, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with at a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 leased location, unless Agent has given its prior consent thereto and unless either (x) a reasonably satisfactory, acknowledged bailee satisfactory landlord waiver letter has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is stored with a bailee or warehouseman unless a reasonably satisfactory, acknowledged bailee letter has been received by Agent and Reserves reasonably satisfactory to Agent have been established with respect thereto, or (iv) is located at an a location owned location by Borrower or any Secured Guarantor subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $50,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; excess, obsolete, slow moving (vii) is obsoletein excess of 2-years' supply), unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies supplies, custom-made Inventory which is not subject to an outstanding purchase order that is not revocable by its terms or replacement parts (it being understood that Eligible Inventory shall is not exclude sold in the ordinary course of business, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgmentor replacement parts (excluding Component Parts and Purchased Parts); (xg) is not of a type held for sale in the ordinary course of Borrower’s 's or any Borrowing Base the applicable Secured Guarantor’s, as applicable, 's business; (xih) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (i) breaches in any material respect any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiij) consists of any costs associated with "freight-in" charges; (k) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available;; or (xiiil) is not covered by casualty insurance maintained as required by in accordance with Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other5.4.

Eligible Inventory. For All of the inventory owned by the Borrower and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (ia) is not owned by Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iii) is not located on premises owned, leased or rented by Borrower and set forth in United States Disclosure Schedule (3.2) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or and/or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter and other documentation as required by Agent has been received by the Collateral Agent or (y) and, if required by Agent, Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoto all past-due amounts owing to any such bailee or warehouseman, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment or is in transit, except for Inventory in transit between domestic locations (other than Eligible Consigned Inventory)including leased locations and domestic port locations with respect to which a Bailee Letter has been delivered to Agent) of Credit Parties as to which Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; obsolete, slow moving (vii) is obsoletein excess of one year's supply), unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies supplies, stores or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)parts; (xg) consists of goods which have been returned by the buyer unless such returned goods have been inspected by Borrower and determined to be free of defect or damage and have been returned to finished goods Inventory for sale; (h) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges, except those charges that are customary in, and consistent with, Borrower's historical accounting practices; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject to any licensing arrangement patent or trademark license requiring the effect payment of which would be to limit royalties or fees or requiring the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement consent of the Collateral licensor for a sale thereof by Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For Based on the most recent Revolving Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of Borrower shall be "ELIGIBLE INVENTORY" for purposes of this Agreement. In determining whether any particular Inventory of Borrower constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the such criteria set forth below, and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventorycriteria, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (ia) is not owned by Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in SECTION 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises in United States owned or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Bii) is stored with a bailee bailee, warehouseman or warehouseman where the aggregate value of Inventory exceeds $250,000 similar Person, unless either Agent has given its prior consent thereto and unless (x) a reasonably satisfactory, acknowledged satisfactory bailee letter or landlord waiver letter has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) in Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) breaches as to which Agent's Lien, on behalf of itself and Lenders, therein is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsBorrower Security Agreement is untrue; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists meeting the requirements of custom made Inventory which is not saleable to any this Agreement or the other customer or in ordinary course; (xv) is in transitLoan Documents; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be Agent in its reasonable credit judgment relating to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherInventory.

Eligible Inventory. For All of the Inventory owned by each Borrower and reflected in the most recent Borrowing Base Certificate delivered by such Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iii) is not located on premises owned, leased or rented by such Borrower and set forth in United States or Canada; Disclosure Schedule 5.12, (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than Agent or the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Senior Notes Trustee, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalableunsaleable, clearance, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)parts; (xg) omitted; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) whose standard cost is less than $2.00 or consisting of an item of which there are less than 200 such items; (n) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvio) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. " shall be Inventory owned by Borrower; provided that Eligible Inventory shall not include any Inventory inventory (a) held on consignment, or not otherwise owned by Borrower, (b) which is damaged or is subject to any legal encumbrance other than Permitted Encumbrances, (c) which is not in the possession of Borrower or any Borrowing Base Guarantor that: unless (i) Agents have received a waiver from the Collateral Agentparty in possession (including, on behalf without limitation, with respect to all consolidator locations) of Secured Parties, does not have a first priority such inventory in form and exclusive perfected Lien on such Inventory; substance reasonably satisfactory to Agents or (ii) such inventory is in transit from one Permitted Inventory Location to another Permitted Inventory Location, and the total duration of such transit time is not more than three (3) Business Days, (d) which is subject to any lien, encumbrance or security interest which is prior to the liens granted to Agent (other than landlord's or lessor's liens under leases to which Borrower is a party provided no amount secured by such lien has become due and payable and not been paid), (e) as to which appropriate Uniform Commercial Code financing statements showing Borrower as debtor and Agent as secured party have not been filed in the proper filing office or offices in order to perfect Agent's security interest therein, (f) which has been shipped to a customer of Borrower regardless of whether such shipment is on a consignment basis, (g) which is not located on premises at a Permitted Inventory Location unless such Inventory is in United States or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of transit from one Permitted Inventory exceeds $250,000Location to another Permitted Inventory Location, and the total duration of such transit time is not more than three (y3) either Business Days, (1h) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) which consists of display items, samples items or packing or shipping materials, manufacturing supplies supplies, work-in process Inventory or replacement parts parts, (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (xi) which is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s's business, as applicable, business; (xij) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) which consists of Hazardous Material Materials or goods that can only be transported or sold only with licenses that are not readily available; , or (xiiik) which is not covered by casualty insurance maintained as required acceptable to Agents. General criteria for Eligible Inventory may be established and revised by Section 5.04; Agents from time to time if Agents reasonably determine that there has been a substantive change in the shrinkage, character, composition or mix, markdowns or retail markons and markups inconsistent with prior period practice, industry standards or current business plans. Agents may in their Permitted Discretion from time to time, upon three (xiv3) consists days' prior notice to Borrower establish Reserves with respect to Eligible Inventory to the extent that Agents reasonably determine that (A) the liquidation value of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral AgentEligible Inventory, or any Person selling category thereof, has decreased , or (B) the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement nature of the Collateral Agent’s Liensinventory has changed. In determining whether to establish Reserves with respect to Eligible Inventory, without further consent Agents may consider events, conditions, contingencies or payment to the licensor or otherrisks which are also considered in determining Eligible Inventory.

Eligible Inventory. For All of the Inventory owned by each Borrower Group and properly reflected as “Eligible Inventory” in the most recent applicable Borrowing Base Certificate delivered by Borrower Representative to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except (x) any Inventory to which any of the exclusionary criteria set forth below appliesor in the component definitions herein applies and (y) any Inventory of the Camrose Borrowers prior to the completion of a field examination and an Inventory appraisal with respect thereto, in each case, to the reasonable satisfaction of Agent, including the establishment of Reserves required in Agent’s or Co-Collateral Agent’s respective Permitted Discretion. The Administrative Each of Agent and Co-Collateral Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentrespective Permitted Discretion. In addition, the Administrative each of Agent and Co-Collateral Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowapplicable criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgmentrespective Permitted Discretion, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any the following Inventory of Borrower or any Borrowing Base Guarantor thata Borrower: (ia) Damaged/Unsaleable. Inventory that is damaged, unsaleable or otherwise unfit for sale and that is outside the Collateral Agent, on behalf range of Secured Parties, does not have a first priority and exclusive perfected Lien on tolerances that are customarily accepted by customers of such InventoryBorrower or has been specifically rejected by any customer; (iib) is not located on premises in United States or Canada; (iii) (A) Locations < $100,000. Inventory that is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto100,000; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right after notice to Borrower Representative to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, after notice to Borrower Representative, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Requisite Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders and other junior Liens that are expressly permitted hereunder; (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (5.12) or Canada; (iii) (Aii) is located stored at a leased location (other than those as to which Agent has given its prior consent thereto) unless on premises leased by Borrower or a Borrowing Base Guarantor, unless after the ninetieth (90th) day following the Closing Date (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent up to three months’ rent for such location have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent up to three months’ rent or storage charges (as applicable) for such location have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent’s Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to used (other than trade-ins and other than returns that have been restocked and can be returned to suppliers; (vii) is resold as new), excess, obsolete, unsalableunsaleable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth hereinor replacement parts (excluding from the foregoing, unless otherwise determined by the Administrative Agent in its reasonable credit judgmenthowever, readily saleable golf club components); (xg) consists of goods which have been returned by the buyer (other than trade-ins and other than returns that have been restocked and can be resold as new); (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with “freight-in” charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) may not be sold without violation or infringement of the intellectual property rights of others; or (o) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For All of the Inventory owned by Borrower and its ------------------ domestic or Canadian Subsidiaries and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" ------------------ for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Requisite Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor its domestic or Canadian Subsidiaries that: (ia) is not owned by Borrower or one of its domestic or Canadian Subsidiaries free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's or one of its domestic or Canadian Subsidiary's performance with respect to that Inventory and the rights of unpaid suppliers (other than another Credit Party) under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority or, in favor of Agent and exclusive perfected Lien on such InventoryLenders, as applicable, and Prior Claims (excluding the rights of unpaid suppliers (other than another Credit Party) under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), subject to Permitted Encumbrances described in clauses (a) and (e) of the definition thereof; (iib) is (i) not located on premises in United States owned, leased or Canada; (iii) (A) is located on premises leased rented by such Borrower or a Borrowing Base Guarantordomestic or Canadian Subsidiary and set forth in Disclosure ---------- Schedule 3.2 or is (ii) stored at a leased location or with a bailee, ------------ warehouseman or similar Person, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement bailee letter or landlord waiver has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or is (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 unless either (x) 50,000 or a reasonably satisfactory mortgagee waiver has been delivered to the Collateral lesser minimum amount determined by Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoin its reasonable credit judgment; (ivc) is placed on consignment (other than unless Agent's Liens are fully perfected in its sole and absolute discretion) or is in transit except, in Agent's discretion, Eligible Consigned Inventory)In-Transit Inventory that has been shipped to the United States that is "on the water"; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) in Agent's reasonable determination, is to be returned to suppliers; (vii) is discontinued Inventory, excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples or other promotional items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts for Equipment; (xg) consists of goods which have been returned by the buyer unless the same have been inspected by Borrower or its domestic or Canadian Subsidiaries, as applicable, with satisfactory results and returned to finished goods; (h) is not of a type held for sale in the ordinary course of Borrower’s 's or any Borrowing Base Guarantor’sits domestic or Canadian Subsidiaries' business; (i) is not subject to a first priority Lien in favor of Agent on behalf of itself and Lenders or in favor of Agent and Lenders, as applicable, businesssubject to Permitted Encumbrances in accordance with clauses (a) and (e) of the definition thereof; (xij) breaches consists of any of the representations or warranties pertaining to Inventory set forth in the Loan Documentscosts associated with "freight-in" charges; (xiik) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiil) is not covered by casualty insurance maintained as required by Section 5.04acceptable to Agent; (xivm) consists of custom made Inventory which is does not saleable to any other customer or in ordinary coursemeet all standards imposed by Governmental Authorities; (xv) is in transit; or (xvin) is subject to any licensing arrangement the effect of agreement which would be to limit the restricts Agent's ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell or dispose of such Inventory; (o) bears a Reebok trademark unless Agent determines that such Inventory can be quickly and cost-effectively converted to "Pro Form" or other Borrower branded Inventory and sold by Agent without restrictions; or (p) is otherwise unacceptable to Agent in enforcement its reasonable credit judgment. Borrower agrees that a reserve against Borrowing Availability attributable to Eligible Inventory equal to sales, goods and services and harmonized sales taxes payable upon the sale of such Inventory, a Reserve in the Collateral Agent’s Liensamount of intercompany profit attributable to sales of Inventory among Borrower and its Subsidiaries, a Reserve in the amount of warranty repair costs and, without further consent or payment to duplication, a Reserve in the licensor or otheramount of Prior Claims are reasonable exercises of Agent's credit judgment.

Eligible Inventory. For All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, new criteria, changes in the applicable advance rate rates or the elimination of Reserves (other than the elimination of Reserves established prior to the Closing Date pursuant to Section 5.9 in the event Borrowers obtain landlord or mortgagee agreements, access agreements or bailee letters, in form and substance satisfactory to Agent, after the Closing Date or the elimination of Reserves established after the Closing Date, which elimination in each case shall be at Agent's sole discretion) which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iii) other than with respect to Eligible Energy Product Inventory, is not located on premises owned, leased or rented by such Borrower and set forth in United States or Canada; Disclosure Schedule (iii) 3.2), (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Bii) is stored with at a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 leased location, unless Agent has given its prior consent thereto and unless either (x) a reasonably satisfactory, acknowledged bailee satisfactory landlord waiver letter has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is stored with a bailee or warehouseman unless a reasonably satisfactory, acknowledged bailee letter has been received by Agent and Reserves reasonably satisfactory to Agent have been established with respect thereto, or (iv) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established aggregate book value of Inventory at any such location is less than $100,000 (except with respect theretoto HVAC equipment, if the aggregate book value of Inventory at any such location is less than $25,000); (ivc) consists of perishable agricultural commodities subject to PACA; (d) is subject to Exchange Agreements, but only to the extent such Inventory is subject to Exchange Agreements; (e) is placed on consignment (other than Eligible Consigned or is in transit except for Eligible-in-Transit Inventory); (vf) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vig) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged damaged, customized (but only with respect to customized Inventory consisting of bags produced by the Apex Bag division) or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixh) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded or replacement parts (except to the extent such replacement parts are held out for sale in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgmentordinary course of business of such Borrower's energy product business); (xi) consists of goods which have been returned by the buyer, unless such goods can be sold in the ordinary course of such Borrower's business; (j) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xik) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances; (l) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiim) consists of any costs associated with additional "freight-in" charges; (n) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiio) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvip) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Collateral Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Collateral Agent and the Administrative Agent reserves reserve the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its their collective reasonable credit judgment, subject to the approval of the Supermajority Required Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate criteria or the elimination of Reserves which have the effect of making more credit availableavailable and, in the case of any increase in the applicable advance rates, the Supermajority Lenders. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Subsidiary Guarantor that: (i) the Collateral Agent, on behalf of Secured Parties, does not have a first priority and exclusive perfected Lien on such InventoryInventory subject to Permitted Liens described in Sections 6.02(a), 6.02(b) and 6.02(e); (ii) (a) that is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or stored at a Borrowing Base Guarantor, unless (x) at such location where the aggregate value of Inventory exceeds $250,000, 50,000 unless the Collateral Agent has given its prior consent thereto and (y) unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto or (Bb) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 50,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto, or (Cc) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 50,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto; (iviii) is placed on consignment, unless a valid consignment (other than Eligible Consigned agreement which is reasonably satisfactory to Collateral Agent is in place with respect to such Inventory); (viv) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (viv) is to be returned to suppliers; (viivi) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixvii) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with (excluding deferred growing costs for BCO and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Operations, Inc. for the current year harvest, and excluding other criteria set forth herein, unless otherwise determined by work-in-process that the Administrative Collateral Agent determines in its reasonable credit judgment)judgment should not be excluded from “Eligible Inventory” as a consequence of its work-in-process status) or replacement parts; (xviii) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base such Subsidiary Guarantor’s, as applicable, business; (xiix) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan DocumentsDocuments in any material respect (without duplication of any materiality qualifier contained therein); (xiix) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiiixi) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvixii) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For All of the Inventory owned by any Credit Party and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Applicable Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude further described in Schedule 1 to Exhibit 6.1(d), except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Applicable Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentjudgment acting in good faith. In addition, the Administrative Applicable Agent reserves the right, at any time and from time to time after the Original Closing DateDate and, absent an Event of Default upon three (3) Business Days’ prior notice to applicable Borrower Representative, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in each case, in its reasonable credit judgmentjudgment acting in good faith, subject to the approval of the Supermajority Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Credit Party that: (ia) is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory and the rights of suppliers under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), except the Liens in favor of Applicable Agent, on behalf of Secured Partiesthe Lenders and Prior Claims that are unregistered and that secure amounts that are not yet due and payable (other than the claims of suppliers under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), does not have a first priority except the Liens in favor of Applicable Agent, on behalf of itself and exclusive perfected Lien on the applicable Lenders and other Permitted Encumbrances described in clauses (a), (b), (c), (e) and (f)(3) in such Inventorydefinition; (iib) (i) is not located on premises owned, leased or rented by such Credit Party and set forth in United States Disclosure Schedule (3.14) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless (x) at such location the aggregate value of Inventory exceeds $250,000Applicable Agent has given its prior consent thereto, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Applicable Agent, or (2z) Reserves reasonably satisfactory to the Administrative Applicable Agent have been established with respect thereto or in an amount not to exceed three (B3) months rent, (iii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Applicable Agent or (y) Reserves reasonably satisfactory to the Administrative Applicable Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Applicable Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Applicable Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment or is in transit, except for Inventory in transit between United States and Canadian locations of Credit Parties as to which the Applicable Agent’s Liens have been perfected at origin and destination; and except for (i) Inventory in transit between domestic locations of Credit Parties, (ii) work-in-progress inventory of the type and in the amounts specified in clause (p) of this section, and (iii) consigned Inventory that arises with respect to goods that are delivered on a ▇▇▇▇ and hold, cash on delivery basis or placed on consignment, guaranteed sale or other than Eligible Consigned terms by reason of which the payment by the Account Debtor is or may be conditional, provided that in the case of such consigned Inventory, (A) as to each consignee (it being understood that for the purposes of this paragraph (c), the term consignee shall include any Person to whom such Credit Party has provided possession of Inventory prior to the consummation of an irrevocable sale of such Inventory to such Person), the applicable Credit Party has, at such Credit Party’s cost and expense (i) conducted Code, PPSA, tax lien and judgment searches against such consignee, (ii) filed UCC-1 financing statements against such consignee naming such Credit Party as secured party and Applicable Agent as assignee of secured party, and (iii) provided to each secured party of record that has filed a financing statement against such consignee (whether or not such Inventory is Inventory in the hands of such consignee) a notice, in form and substance reasonably satisfactory to Applicable Agent, pursuant to Section 9-324 of the Code or similar provision of the PPSA of such Credit Party’s intent to provide purchase money financing to such consignee and (iv) obtained from such consignee a letter agreement, in form and substance reasonably satisfactory to Applicable Agent, in which such consignee acknowledges the Lien of Applicable Agent and agrees that to the extent that such consignee has not paid the purchase price of any item of Inventory, Applicable Agent can take possession of and remove such item of Inventory upon an Event of Default and (B) such Credit Party holds a perfected first priority security interest against such consignee, such security interest having been assigned of record to Applicable Agent; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Applicable Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Applicable Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withapplicable Lenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalableunsaleable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)parts; (xg) consists of goods which have been returned by the buyer and are not capable of readily being resold to another buyer; (h) is not of a type held for sale in the ordinary course of Borrowersuch Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority lien in favor of the Applicable Agent on behalf of itself and the applicable Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with “freight-in” charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Applicable Agent; (xivn) is otherwise unacceptable to Applicable Agent in its reasonable credit judgment acting in good faith; (o) consists of custom made Inventory which is work-in-progress inventory except that work-in-progress inventory in an amount not saleable to any other customer or in ordinary course; (xv) is in transitexceed $6,500,000 shall not be excluded; or (xvip) is subject consists of raw materials in transit, except raw materials in transit that are adequately insured and in which such Credit Party has perfected title under Applicable Law in such raw materials in an amount not to any licensing arrangement exceed $1,000,000 in the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otheraggregate.

Eligible Inventory. For All of the Inventory owned by each Credit Party and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agents shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent Agent, with respect to all Credit Parties other than Canadian Borrower and its Wholly-Owned Subsidiaries, and Canadian Agent, with respect to the Canadian Borrower and its Wholly-Owned Subsidiaries, shall have the right to establish, establish or modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentjudgment (as to Reserves imposed after the Closing Date, based on its analysis of facts or events first occurring, or first discovered by Agent or Canadian Agent, after the Closing Date). In addition, the Administrative Agent Agent, with respect to all Credit Parties other than Canadian Borrower and its Wholly-Owned Subsidiaries, and Canadian Agent, with respect to Canadian Borrower and its Wholly-Owned Subsidiaries, reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgmentjudgment (based on its analysis of material facts or events first occurring, or first discovered by Agent or Canadian Agent, after the Closing Date), subject to the approval of the Supermajority Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Agent and Canadian Agent acknowledge that as of the Closing Date they do not know of any circumstance or condition with respect to the Inventory that would require the imposition of a Reserve which has not been imposed as of the Closing Date. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Credit Party that: (ia) is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Credit Party’s performance with respect to that Inventory), except the Liens in favor of Agent (or, in the case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent, ) on behalf of Secured Partiesitself and the applicable Lenders and Permitted Encumbrances described in clauses (a), does not have a first priority (b), (c) and exclusive perfected Lien on (e) of such Inventorydefined term; (iib) (i) is not located on premises in United States owned, leased or Canada; rented by such Credit Party (iiior a consignee, bailee or warehouseman of a Credit Party) and set forth on Schedule 5.12 (Aas it may be updated from time to time by delivery of a new Schedule 5.12 by Borrower Representative to Agent), (ii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless (x) at such location Agent (or, in the aggregate value case of Inventory exceeds $250,000Canadian Borrower and its Wholly-Owned Subsidiaries, and Canadian Agent) has given its prior consent thereto, (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agentsuch Agent in accordance with Section 2.6, or (2z) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or pursuant to Section 2.6, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, an acknowledged bailee waiver letter has been received by Agent (or, in the Collateral Agent case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent) in accordance with Section 2.6 or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretothereto pursuant to Section 2.6, or (Civ) is located at an a location owned location by a Credit Party subject to a mortgage in favor of a lender other than Agent (or, in the Collateral Agent where the aggregate value case of Inventory exceeds $250,000 Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent), unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral such Agent in accordance with Section 2.6 or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretothereto pursuant to Section 2.6, or (v) is located at any site if the aggregate book value of Inventory at any such location is less than $100,000 or the Dollar Equivalent thereof; (ivc) is placed on consignment by a Credit Party or is in transit, except for (other than Eligible Consigned Inventory)i) Inventory in transit between domestic locations of Credit Parties and (ii) consigned Inventory as to which the applicable Credit Party has taken all steps necessary to perfect its ownership interest in such consigned Inventory against claims by the consignee and secured creditors of the consignee; (vd) is covered by a negotiable document of title, unless such document has been delivered to Agent (or, in the Collateral Agent case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent), with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral such Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalableunsaleable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) is not of a type held for sale in the ordinary course of Borrowersuch Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xih) breaches any is not subject to a first priority lien in favor of Agent (or, in the case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent), on behalf of itself and the Lenders, subject to Permitted Encumbrances, or does not otherwise conform to the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiii) consists of any costs associated with “freight-in” charges; (j) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available, excluding any inventory products (including FIFRA regulated products, insecticides, herbicides, pesticides, fungicides and rodenticides) carried by the Credit Parties as of the Closing Date and new or additional inventory products consisting of “next generation” versions of such products or consistent with the general scope and type of such products; (xiiik) is not covered by casualty insurance maintained as required by Section 5.04; reasonably acceptable to Agent (xiv) consists or, in the case of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transitCanadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent); or (xvil) is subject to any licensing arrangement the effect of licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would be require any consent of any third party for the sale or disposition of that Inventory (which consent has not been obtained) or the payment of any monies to limit the ability of Collateral Agent, any third party upon such sale or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment other disposition (to the licensor or otherextent of such monies).

Eligible Inventory. For All of the inventory owned by the Borrower and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentPermitted Discretion. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that, without duplication: (ia) is not owned by Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders and except for Liens described in clause (d) of the definition of the term “Permitted Encumbrances” (subject to Reserves in the Permitted Discretion of the Agent); (iib) (i) is not located on premises owned, leased or rented by Borrower and set forth in United States Disclosure Schedule (3.2) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, Agent or (2y) Rent Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter Bailee Letter has been received by the Collateral Agent or (y) and, if required by Agent, Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoto all past-due amounts owing to any such bailee or warehouseman, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver or a collateral access agreement referred to in Section 6.3(a)(ix) has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment or is in transit, except for Inventory in transit between domestic locations (other than Eligible Consigned Inventory)including leased locations and domestic port locations with respect to which a Bailee Letter has been delivered to Agent) of Credit Parties as to which Agent’s Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; obsolete, slow moving (vii) is obsoletein excess of one year’s supply), unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies supplies, stores or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)parts; (xg) consists of goods which have been returned by the buyer unless such returned goods have been inspected by Borrower and determined to be free of defect or damage and have been returned to finished goods Inventory for sale; (h) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan DocumentsDocuments in any material respect; (xiik) consists of any costs associated with “freight-in” charges, except those charges that are customary in, and consistent with, Borrower’s historical accounting practices; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject to any licensing arrangement patent or trademark license requiring the effect payment of which would be to limit royalties or fees or requiring the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement consent of the Collateral licensor for a sale thereof by Agent’s Liens. If Agent deems any Inventory ineligible in its Permitted Discretion based on a new criterion other than the criteria set forth above, without further consent then Agent shall give Borrower at least three (3) Business Days’ prior notice (oral or payment to the licensor written or otherby Electronic Transmission) thereof unless an Event of Default exists, in which case no notice shall be required.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of Borrower shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (ia) is not owned by Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (b) is (i) not located on premises owned by Borrower or (ii) is not located on premises in United States stored with a bailee, warehouseman or Canada; (iii) (A) is similar Person or located on premises leased by Borrower or a Borrowing Base GuarantorBorrower, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement bailee letter or landlord waiver has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) in Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items bearing a customer's name, logo or product name or otherwise dedicated to specific customer orders (unless such items are subject to a sales contract with a customer of Borrower containing terms and conditions satisfactory to Agent), or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) breaches as to which Agent's Lien, on behalf of itself and Lenders, therein is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsSecurity Agreement is untrue; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For All of the inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by Borrower Representative on behalf of the applicable Borrower Group (i.e., US Borrowers or Canadian Borrowers) to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate rates or the elimination of Reserves imposed as of the Closing Date which have the effect of making more credit availableavailable (it being understood that Agent may in its reasonable credit judgment eliminate Reserves established by it in its reasonable credit judgment after the Closing Date without the necessity of obtaining the approval of Supermajority Lenders or Requisite Lenders). The other Credit Parties hereby acknowledge and agree that only Inventory owned by the Borrowers, and no Inventory owned by any other Credit Party, may constitute Eligible Inventory. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does and in the case of Inventory of any Canadian Borrower, Prior Claims that are unregistered and that secure amounts that are not have a first priority yet due and exclusive perfected Lien on such Inventorypayable; (iib) (i) other than as provided in clause (vi) below, is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (3.2) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, Applicable Agent or (2y) Reserves reasonably Reserves, if determined in Agent’s reasonable credit judgment, satisfactory to the Administrative Applicable Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Applicable Agent or (y) or, if determined in Agent’s reasonable credit judgment, Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage (or similar lien under applicable law) in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 any Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Applicable Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (v) is located at any site if the aggregate book value of Inventory at any such location is less than U.S. $100,000 (or the Dollar Equivalent Amount thereof), or (vi) is located on premises owned, leased or rented by a customer of any Borrower, unless Agent has given its prior consent thereto, such Inventory of such Borrower is clearly segregated from all Inventory of such customer, all UCC filings deemed necessary or desirable by Agent have been made, and a satisfactory collateral access agreement has been delivered to the Applicable Agent by such customer; (ivc) is placed on consignment consignment, except as expressly provided in Section 1.7(b)(vi) (other than Eligible Consigned Inventoryand subject to compliance with all of the requirements of Section 1.7(b)(vi)), is located at any customer location, or is in transit, to the extent the value of such Inventory consists of costs associated with “freight-in” charges, if any, except for Inventory in transit between domestic or Canadian locations of Credit Parties as to which the Applicable Agent’s Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Applicable Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral either Agent and Lenders and, in the Lenders case of any Canadian Borrower, Prior Claims that are unregistered and landlords, carriers, bailees that secure amounts that are not yet due and warehousemen if clause (iii) above has been complied withpayable; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority lien in favor of the Applicable Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with “freight-in” charges, warehouseman’s salaries or any other item classified as “full absorption”; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivn) consists the value of custom made Inventory which is has not saleable to any other customer or been converted into Dollars in ordinary course; (xv) is the applicable Borrowing Base Certificate in transitaccordance herewith; or (xvio) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentPermitted Discretion. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible InventoryInventory and to adjust advance rates, in its reasonable credit judgmentPermitted Discretion, subject to the approval of the Supermajority Required Lenders in the case of adjustments, new criteria, changes criteria or increases in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit availableavailable then would have been available if the standards in effect on the Closing Date had continued to be in effect. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor the Loan Parties that: (i) is not solely owned by a Loan Party, or is leased by or is on consignment to a Loan Party, or the Loan Parties do not have title thereto; (ii) the Collateral Agent, on behalf of the Secured Parties, does not have a first priority and exclusive (except, such Liens as permitted by Section 6.02(a) or (g) hereof) perfected Lien on such Inventoryupon; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or stored at a Borrowing Base Guarantor, unless (x) at such location where the aggregate value of Inventory exceeds $250,000, and (y) 1,000,000 unless the Collateral Agent has given its prior consent thereto or unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2y) Landlord Lien Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto thereto, or (B) is stored with a bailee or warehouseman where the aggregate value of the Inventory exceeds $250,000 1,000,000 unless either (x) a reasonably satisfactory, satisfactory acknowledged bailee waiver letter has been received by the Collateral Agent Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Landlord Lien Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) (A) is placed on consignment, unless a valid consignment agreement which is reasonably satisfactory to Collateral Agent is in place with respect to such Inventory or (other than Eligible Consigned B) is in transit (except to the extent (x) purchased under documentary Letters of Credit, is in transit (1) from any location in the United States for receipt by a Loan Party within fifteen (15) days of the date of determination or (2) any location outside of the United States for receipt by a Loan Party within 60 days of the date of determination), for which the document of title, to the extent applicable, reflects a Loan Party as consignee (along with delivery to a Loan Party of the documents of title, to the extent applicable, with respect thereto), and as to which the Collateral Agent has control over the documents of title, to the extent applicable, which evidence ownership of the subject Inventory), or (y) in transit between locations leased, owned or occupied by a Loan Party; (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those Liens in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for salesale as determined in the ordinary course of business by the Loan Parties; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xix) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’sthe Loan Parties’, as applicable, business; (xix) breaches any of except as otherwise agreed by the Administrative Agent, does not conform in all material respects to the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvixi) is subject to any licensing arrangement the effect of which would be to limit the ability of the Collateral Agent, or any Person selling the Inventory on behalf of the Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or othersuch other Person (unless such consent has then been obtained); (xii) is not covered by casualty insurance maintained as required by Section 5.04; or (xiii) is acquired in a Permitted Acquisition, unless (A) such Inventory is of a similar type as other then Eligible Inventory, and (B) the Administrative Agent shall have received or conducted (1) within 45 days after the consummation of the Permitted Acquisition, appraisals, from appraisers reasonably satisfactory to the Administrative Agent, of such Inventory to be acquired in such Acquisition and (2) prior to the consummation of such Permitted Acquisition, a commercial finance examination and such other due diligence as the Agents may reasonably require in order to determine the appropriate advance rate against such Inventory, all of the results of the foregoing to be reasonably satisfactory to the Agents. As long as the Administrative Agent has received reasonable prior notice of such Permitted Acquisition and the Loan Parties reasonably cooperate (and cause the Person being acquired to reasonably cooperate) with the Administrative Agent, the Administrative Agent shall use reasonable best efforts to complete such due diligence and commercial finance examination on or prior to the closing date of such Permitted Acquisition.

Eligible Inventory. For All of the Inventory owned by the Borrower and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agents shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Inventory and Receivables Security Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Inventory and Receivables Security Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate Advance Rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the (a) Supermajority Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit availableavailable and (b) all Lenders in the case of increases in any Advance Rate, the Inventory Cap or the Liquidation Percentage. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (ia) is not owned by Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's performance with respect to that Inventory) other than the Liens in favor of the Collateral Agent, on behalf of Secured Parties, does not have a first priority certain secured parties granted pursuant to the Junior Current Asset Security Agreement and exclusive perfected Lien Liens in favor of the Inventory and Receivables Security Agent on such Inventorybehalf of Agents and Lenders granted pursuant to the Senior Current Asset Security Agreement; (iii) is not located on premises owned, leased or rented by Borrower and set forth in United States or Canada; Schedule 1.2, (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and Receivables Security Agent has given its prior consent thereto or (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Inventory and Receivables Security Agent, or (2) and in each case Reserves reasonably satisfactory to the Administrative Inventory and Receivables Security Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Inventory and Receivables Security Agent or (y) and Reserves reasonably satisfactory to the Administrative Inventory and Receivables Security Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage (other than mortgages in favor of other secured parties evidenced by the Mortgages) in favor of a lender party other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Inventory and Receivables Security Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document located at any site if the aggregate book value of title, unless Inventory at any such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withlocation is less than $150,000; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For All of the Inventory at Borrowers cost owned by Borrowers and reflected in the most recent Borrowing Base Certificate delivered by the Borrower Representative to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except without duplication any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, establish or modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable reasonable, good faith credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable reasonable, good faith credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory other than Inventory relating to Perishables), except the Liens in favor of Agent, the Supplemental Real Estate Facility Agent, the Trade Lien Collateral Agent, on behalf and Permitted Encumbrances in favor of Secured Parties, does not have a first priority landlords and exclusive perfected Lien on such Inventorybailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (3.2(a)), as amended in accordance with Section 6.15 from time to time, or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves for rent reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves for rent reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than Agent (excluding the Supplemental Real Estate Facility Agent or the Trade Lien Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent) unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or unless otherwise waived by Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $50,000; (ivc) is placed on consignment, unless (i) a reasonably satisfactory consignment agreement among Borrower, the Agent and the consignee has been delivered to Agent, (ii) Borrower’s and Agent’s interest in the consigned inventory is fully perfected under the Code by the filing of appropriate financing statements or other action required by Agent, (iii) prior to delivery of such consigned Inventory to the consignee any Person holding a security interest in Goods of such consignee has been properly notified of Borrower’s and Agent’s interest in the consigned Inventory in accordance with section 9-324(b) of the Code, and (iv) such Inventory is located in the United States at a location of the consignee satisfactory to the Agent and as to which the requirements of Section 1.7(b) have been satisfied; (d) is in transit (other than Eligible Consigned InventoryInventory of Borrowers which is in transit in the ordinary course of business within the United States between locations owned by the Credit Parties or with respect to which Agent has received a satisfactory landlord waiver or bailee letter, as applicable); (ve) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vi) is to be returned to suppliers; (viif) is obsolete, unsalable, shopworn, seconds, damaged damaged, past expiration date or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixg) consists of display items, samples items or packing or shipping materialsmaterials (but only to the extent such packing or shipping materials are either (i) not located in warehouses with respect to which the Agent has received a duly executed landlord waiver, mortgagee agreement or bailee letter pursuant to Section 5.9, (ii) branded or otherwise marked by logos, service marks or other source of business identifiers, or (iii) not located in original shipping containers), manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded Inventory, ▇▇▇▇-and-hold Inventory, raw materials (unless unopened in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent original shipping containers and in its reasonable credit judgment)marketable condition) or replacement parts; (xh) consists of goods which have been returned by the buyer unless otherwise fit for resale; (i) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xij) is not subject to a first priority Lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances; (k) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan DocumentsDocuments (except as such representations expressly relate to an earlier date); (xiil) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily availableavailable (unless such licenses have been obtained and have been pledged to Lenders); (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivn) consists is located in Borrowers’ warehouses equal to 50% of custom made the value of general merchandise Inventory plus 100% of the value of all other Inventory (including grocery, frozen, meat, dairy products and the like but excluding frozen turkey and frozen shrimp products), which is not saleable in each case was received more than 120 days prior to any other customer or in ordinary coursethe date of determination consistent with prior practices; (xvo) is in transitthe amount of Inventory equal to the monthly “shrink” at Borrowers’ stores and warehouses for which Borrowers accrue; (p) is the amount of ▇▇▇▇-up added to the Inventory applied by Borrowers when Borrowers transfer such Inventory to retail grocery stores; or (xviq) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral AgentAgent in its reasonable, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or othergood faith credit judgment.

Eligible Inventory. For All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, establish or modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (3.2), or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $75,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged damaged, or unfit for sale; sale or is used or has been used by any customer of any Borrower pursuant to a service contract or otherwise (viii) is slow moving (in excess regardless of 1-year supplycondition); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of Borrower and the other Credit Parties (other than Parent) shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor thatsuch Credit Party: (ia) that is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments, the rights of a surety that has issued a bond to assure such Credit Party's performance with respect to that Inventory and the rights of unpaid suppliers under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), except the Liens in favor of Agent, on behalf of Secured Parties, does itself and Lenders and Prior Claims that are unregistered and otherwise unperfected and that secure amounts that are not have a first priority yet due and exclusive perfected Lien on such Inventorypayable; (iib) that is (i) not located on premises in United States or Canada; (iii) owned and operated by such Credit Party, unless (A) is located on premises leased by Borrower stored with a bailee, warehouseman or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, similar Person and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement Agent has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect given its prior consent thereto or (B) is stored with a bailee or warehouseman where located on premises leased and operated by such Credit Party and unless, in the aggregate value case of Inventory exceeds $250,000 unless either clauses (A) and (B), (x) a reasonably satisfactorysatisfactory bailee letter or landlord waiver, acknowledged bailee waiver letter as the case may be, for such premises or storage location has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Cii) is located at an owned any site if the aggregate book value of Inventory at any such location subject to a mortgage in favor of a lender is less than $200,000 (other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either sites listed on Disclosure Schedule (x1.6(b)) provided that a reasonably satisfactory mortgagee waiver bailee letter for such site has been delivered to the Collateral Agent Agent), or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above located in a foreign country other than Canada (excluding (1) the provinces of Newfoundland, Nova Scotia, Prin▇▇ ▇▇▇▇▇▇ ▇▇▇and, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick and the North West Territories and Yukon and (2) the province of Quebec unless the Credit Party has been complied with; (vi) is delivered to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale duly executed hypothec substantially in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any form of the representations or warranties pertaining Canadian Hypothecs, an officer's certificate to Inventory set forth in which are attached the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained Credit Party's constating documents, by-laws and authorizing resolutions and certifying as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement incumbency of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.officers of such Credit Party

Eligible Inventory. For All of the Inventory owned by the Borrower or any of its Domestic Subsidiaries and reflected in the most recent Borrowing Base Certificate delivered by the Borrower to the Administrative Agent shall be "Eligible Inventory" for purposes of this REVOLVING CREDIT AGREEMENT [DAYTON SUPERIOR CORPORATION] Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentPermitted Discretion. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgmentPermitted Discretion exercised in good faith, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of the Borrower or any Borrowing Base Guarantor a Domestic Subsidiary that: (ia) is not owned by the Collateral Borrower or a Domestic Subsidiary free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure the Borrower's or a Domestic Subsidiary's performance with respect to that Inventory), except the Liens in favor of the Administrative Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iii) except in the case of Inventory on lease to customers in the ordinary course of business (w) is not located on premises located in a state of the United States or Canada; (iii) (A) is located on premises the District of Columbia owned, leased or rented by the Borrower or a Borrowing Base GuarantorDomestic Subsidiary and set forth in Schedule 4.16, unless (x) is stored at such location a leased location, unless the aggregate value of Inventory exceeds $250,000, Administrative Agent has given its prior consent thereto and (y) either unless (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement satisfactory, landlord waiver has been delivered to the Collateral Administrative Agent, or (2) Reserves reasonably satisfactory in an amount equal to the Administrative Agent three months rent have been established with respect thereto or thereto, (By) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 or is in a processor or converter facility unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter or subordination of all Liens and claims by the bailee, warehouseman, processor or converter has been received by the Collateral Administrative Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Cz) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Administrative Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Administrative Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (ii) is located at any site if the aggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Loan Parties as to which the Administrative Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Administrative Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Administrative Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalableunsaleable, shopworn, seconds, damaged or damaged, unfit for salesale or customized inventory; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded to the extent such work-in-process Inventory in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)aggregate exceeds $5,000,000 or replacement parts; (xg) is not of a type held for sale or lease in the ordinary course of the Borrower’s 's or any Borrowing Base Guarantor’s, as applicable, a Domestic Subsidiary's business; REVOLVING CREDIT AGREEMENT [DAYTON SUPERIOR CORPORATION] (h) is not subject to a first priority lien in favor of the Administrative Agent on behalf of itself and Lenders subject to no other Lien other than Permitted Liens that are junior to the Lien of the Administrative Agent securing the Obligations; (xii) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiij) consists of any costs associated with "freight-in" charges, to the extent such "freight-in" charges can be determined by the Loan Parties; (k) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiil) is not covered by casualty insurance maintained as required by in accordance with Section 5.047.5; (xivm) consists of custom made Inventory which is being leased to a third party as lessee subject to a lease that is not saleable owned by the Borrower or a Domestic Subsidiary or is subject to any a lease owned by the Borrower or a Domestic Subsidiary that is subject to a Lien (other customer or in ordinary course; (xv) is in transitthan a Permitted Lien); or (xvin) is subject being leased to any licensing arrangement the effect of a third party as lessee (i) which would be to limit the ability of Collateral Agent, has commenced a voluntary case or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment has consented to the licensor entry of an order for relief in an involuntary case or otherto the conversion of an involuntary case to a voluntary case, under the Bankruptcy Code or (ii) with respect to which a court has entered a decree or order for relief in an involuntary case under the Bankruptcy Code.

Eligible Inventory. For All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Restatement Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, criteria or changes in the applicable advance rate rates or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (3.2), or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination and Inventory in transit to a purchaser, which Inventory (other than i) is fully insured, (ii) is subject to a first priority security interest in and lien upon such goods in favor of Agent (except for any possessor lien upon such goods in the possession of a freight carrier or shipping company securing only the freight charges for the transportation of such goods to such Borrowers), (iii) if required by Agent, is evidenced or deliverable pursuant to documents, notices, instruments, statements and bills of lading that have been delivered to Agent or an agent acting on its behalf, and (iv) is otherwise deemed to be "Eligible Consigned Inventory)" hereunder; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; excess, obsolete, slow moving (vii) is obsoletein excess of one year's supply), unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer except for such goods which are in saleable "as new" condition in the ordinary course of business; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances as set forth in clause (e) of the definition thereof (subject to reserves satisfactory to Agent); (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivn) consists is that portion of custom made total Inventory which that is more than sixty (60) days old and is in excess of the greater of (i) $2,500,000 or (ii) the sum of Inventory (A) specifically reserved for by such Borrower in its financial statements; (B) covered by an existing stock buy-back arrangement and (C) covered by a then-existing purchase order; provided, that, in any event, Eligible Inventory shall not saleable to include any other customer or Inventory of any Borrower that is more than ninety (90) days old and not specifically reserved for by such Borrower in ordinary courseits financial statements; (xv) is in transit; or (xvio) is subject to any licensing arrangement patent or trademark license requiring the effect payment of which would be to limit royalties or fees or requiring the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement consent of the Collateral licensee for a sale thereof by Agent’s Liens, without further consent or payment ; or (p) is otherwise unacceptable to the licensor or otherAgent in its reasonable credit judgment.

Eligible Inventory. For All of the Inventory owned by any Credit Party and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Applicable Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude further described in Schedule 1 to Exhibit 6.1(d), except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Applicable Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentjudgment acting in good faith. In addition, the Administrative Applicable Agent reserves the right, at any time and from time to time after the Original Closing DateDate and, absent an Event of Default upon three (3) Business Days’ prior notice to applicable Borrower Representative, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in each case, in its reasonable credit judgmentjudgment acting in good faith, subject to the approval of the Supermajority Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Credit Party that: (ia) is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory and the rights of suppliers under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), except the Liens in favor of Applicable Agent, on behalf of Secured Partiesthe Lenders and Prior Claims that are unregistered and that secure amounts that are not yet due and payable (other than the claims of suppliers under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), does not have a first priority except the Liens in favor of Applicable Agent, on behalf of itself and exclusive perfected Lien on the applicable Lenders and other Permitted Encumbrances described in clauses (a), (b), (c), (e) and (f)(3) in such Inventorydefinition; (iib) (i) is not located on premises owned, leased or rented by such Credit Party and set forth in United States Disclosure Schedule (3.14) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless (x) at such location the aggregate value of Inventory exceeds $250,000Applicable Agent has given its prior consent thereto, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Applicable Agent, or (2z) Reserves reasonably satisfactory to the Administrative Applicable Agent have been established with respect thereto or in an amount not to exceed six (B6) months rent, (iii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Applicable Agent or (y) Reserves reasonably satisfactory to the Administrative Applicable Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Applicable Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Applicable Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment or is in transit, except for Inventory in transit between United States and Canadian locations of Credit Parties as to which the Applicable Agent’s Liens have been perfected at origin and destination; and except for (i) Inventory in transit between domestic locations of Credit Parties and (ii) consigned Inventory that arises with respect to goods that are delivered on a ▇▇▇▇ and hold, cash on delivery basis or placed on consignment, guaranteed sale or other than Eligible Consigned terms by reason of which the payment by the Account Debtor is or may be conditional, provided that in the case of such consigned Inventory, (A) as to each consignee (it being understood that for the purposes of this paragraph (c), the term consignee shall include any Person to whom such Credit Party has provided possession of Inventory prior to the consummation of an irrevocable sale of such Inventory to such Person), the applicable Credit Party has, at such Credit Party’s cost and expense (i) conducted Code, PPSA, tax lien and judgment searches against such consignee, (ii) filed UCC-1 financing statements against such consignee naming such Credit Party as secured party and Applicable Agent as assignee of secured party, and (iii) provided to each secured party of record that has filed a financing statement against such consignee (whether or not such Inventory is Inventory in the hands of such consignee) a notice, in form and substance reasonably satisfactory to Applicable Agent, pursuant to Section 9-324 of the Code or similar provision of the PPSA of such Credit Party’s intent to provide purchase money financing to such consignee and (iv) obtained from such consignee a letter agreement, in form and substance reasonably satisfactory to Applicable Agent, in which such consignee acknowledges the Lien of Applicable Agent and agrees that to the extent that such consignee has not paid the purchase price of any item of Inventory, Applicable Agent can take possession of and remove such item of Inventory upon an Event of Default and (B) such Credit Party holds a perfected first priority security interest against such consignee, such security interest having been assigned of record to Applicable Agent; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Applicable Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Applicable Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withapplicable Lenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalableunsaleable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)parts; (xg) consists of goods which have been returned by the buyer and are not capable of readily being resold to another buyer; (h) is not of a type held for sale in the ordinary course of Borrowersuch Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority lien in favor of the Applicable Agent on behalf of itself and the applicable Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with “freight-in” charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitApplicable Agent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Applicable Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment acting in good faith.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Collateral Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentPermitted Discretion. In addition, the Collateral Agent and the Administrative Agent reserves reserve the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgmenttheir Permitted Discretion, subject to the approval of the Supermajority Required Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit availableavailable then would have been available if the standards in effect on the Closing Date had continued to be in effect. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (i) the Collateral Agent, on behalf of the Secured Parties, does not have a first priority and exclusive (except, with respect to exclusivity, such Liens as permitted by Section 6.02(a) or (g) hereof) perfected Lien on such Inventoryupon; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or stored at a Borrowing Base Guarantor, unless (x) at such location where the aggregate value of Inventory exceeds $250,000, 500,000 unless the Collateral Agent has given its prior consent thereto and (y) unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 500,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 500,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto; (iviii) is placed on consignment, unless a valid consignment agreement which is reasonably satisfactory to Collateral Agent is in place with respect to such Inventory or is in transit (other than Eligible Consigned Inventoryexcept to the extent purchased under documentary Letters of Credit or in transit between distribution centers); (viv) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (viv) is to be returned to suppliers; (viivi) is obsolete, unsalable, shopworn, seconds, damaged or unfit for salesale as determined in the ordinary course of business by the Borrower or any Borrowing Base Guarantor; (viii) is slow moving (in excess of 1-year supply); (ixvii) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xviii) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xiix) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiix) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiiixi) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvixii) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherother Person unless such consent has been obtained.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by each Borrower to Administrative Agent and determined based upon the salability, at retail, of the Eligible Inventory or which reflects such other factors as effects the marketability of the Eligible Inventory and on other information available to Administrative Agent, Administrative Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Eligible Inventory Administrative Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Initial Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and and, except as set forth in Section 11.2(f), to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustmentsadjustments or new criteria or, new criteriaexcept as set forth in Section 11.2(f), changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Without limiting the generality of the foregoing, Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor thatBorrower: (ia) that is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Administrative Agent, on behalf of Secured Partiesitself, does not have a first priority the other Agent and exclusive perfected Lien on such InventoryLenders and Permitted Encumbrances; (iib) that is (i) not located on premises in United States owned, leased or Canada; (iii) (A) is located on premises leased operated by such Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Bii) is stored with a bailee bailee, warehouseman or warehouseman where the aggregate value of Inventory exceeds $250,000 similar Person, unless either Administrative Agent has given its prior consent thereto and unless (x) a reasonably satisfactory, acknowledged satisfactory bailee letter or landlord waiver letter has been received by the Collateral Agent delivered to Administrative Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 100,000, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoin each case such Inventory is Eligible In-Transit Inventory; (ivc) that is placed on consignment or is in transit (other than Eligible Consigned InventoryIn-Transit Inventory or inventory in transit between warehouses and the store locations or between the store locations); (vd) that is covered by a negotiable document of title, unless such document has been delivered to the Collateral Administrative Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withor other Persons acceptable to it; (vie) that in accordance with the audits, appraisals and reports conducted and/or delivered pursuant to Annex F, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for salesale or due to changes in the mix, composition, balance shrink, or markup/markdown; provided, however that to the extent any of the foregoing items occur outside of the Borrowers' ordinary course of business, the extent of such items shall be as reasonably determined by the Administrative Agent; (viiif) is slow moving (in excess of 1-year supply); (ix) that consists of samples, display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) that consists of goods which have been returned by the buyer because of any damage or imperfection; (h) that is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) breaches as to which Administrative Agent's Lien, on behalf of itself, the other Agent and Lenders, therein is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsSecurity Agreement is untrue; (xiik) consists of any costs associated with advertising load, unearned discounts; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable acceptable to any other customer or in ordinary course; (xv) is in transitAdministrative Agent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Administrative Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For All of the inventory owned by one or more of the Eligible Credit Parties and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate rates or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Eligible Credit Party that: (ia) is not owned by such Eligible Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure the performance of such Eligible Credit Party with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iib) (i) is not located on premises owned, leased or rented by such Eligible Credit Party and set forth in United States Disclosure Schedule (3.2) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent’s Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is delisted, excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of Borrowersuch Eligible Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority Lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances described in clause (e) of the definition of Permitted Encumbrances and Liens securing the obligations under the Second Lien Credit Agreement, as long as such Liens are subject to the Second Lien Intercreditor Agreement; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with “freight-in” charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivn) if such Inventory is music related, it has been produced or published by anyone other than one of the Major Labels; (o) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transitowned independent music; or (xvip) the Agent does not have the right, in Agent’s reasonable determination, to freely transfer without the need for any license, sublicense or consent which has not been obtained; or is subject otherwise unacceptable to Agent in its reasonable credit judgment for reasons relating to any licensing arrangement Credit Party, any Credit Party’s business or industry and/or the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent ability to collect or payment to realize the licensor or otherfull value of any Collateral.

Eligible Inventory. For purposes of this Agreement, Eligible Canadian Inventory shall exclude any Canadian Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent applicable Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Canadian Inventory from time to time in its reasonable credit judgmenttheir Permitted Discretion, upon five (5) Business Day’s prior written notice to the Administrative Borrower. In addition, the applicable Collateral Agents and the Canadian Administrative Agent reserves reserve the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Canadian Inventory, in its reasonable credit judgmenttheir Permitted Discretion, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available; provided, however, that (i) any changes to the eligibility criteria with respect to Eligible Canadian Inventory will be made upon five (5) Business Day’s prior written notice to the Administrative Borrower and (ii) any reduction in the applicable advance rate with respect to Eligible Canadian Inventory shall require the consent of the Administrative Borrower. Eligible Canadian Inventory shall not include any Canadian Inventory of Canadian Borrower or any of the Canadian Borrowing Base Guarantor Guarantors that: (i) the applicable Collateral AgentAgents, on behalf of Secured Parties, does do not have a first priority and exclusive perfected Lien on such Canadian Inventory; (ii1) is not located on premises in United States stored at a leased or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such rental location where the aggregate value of Canadian Inventory exceeds $250,000, and (y) 250,000 unless the applicable Collateral Agents have given their prior consent thereto or unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Access Agreement in respect of such location has been delivered to the applicable Collateral AgentAgents, or (2y) Reserves reasonably satisfactory to the Administrative Agent applicable Collateral Agents have been established with respect thereto or (B2) is stored with a bailee or warehouseman where the aggregate value of Canadian Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, an acknowledged bailee waiver letter which is in form and substance satisfactory to the applicable Collateral Agents and the Canadian Administrative Agent has been received by the applicable Collateral Agent Agents or (y) Reserves reasonably satisfactory to the Administrative Agent applicable Collateral Agents have been established with respect thereto, or (C3) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agents and the Senior Note Collateral Agent where the aggregate value of such Canadian Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver which is in form and substance satisfactory to the applicable Collateral Agents and the Canadian Administrative Agent has been delivered to the applicable Collateral Agent Agents or (y) Reserves reasonably satisfactory to the Administrative Agent applicable Collateral Agents have been established with respect thereto; (iviii) (1) is placed on consignment by a third party consignor with any Canadian Borrower or any Canadian Borrowing Base Guarantor as consignee or (other than Eligible Consigned 2) is placed on consignment by any Canadian Borrower or Canadian Borrowing Base Guarantor as consignor with any third party as consignee, unless a valid consignment agreement which is reasonably satisfactory to applicable Collateral Agent is in place with respect to such Canadian Inventory); (viv) is covered by a negotiable document of title, unless such document has been delivered to one of the applicable Collateral Agent Agents with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent Agents and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (viv) is to be returned to suppliers; (viivi) is obsolete, unsalable, shopworn, seconds, defective, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixvii) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth hereinCanadian Inventory, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)replacement or spare parts; (xviii) is not of a type finished goods held for sale in the ordinary course of Canadian Borrower’s or any of the Canadian Borrowing Base Guarantor’s, as applicable, business; (xiix) breaches any of the representations or warranties pertaining to Canadian Inventory set forth in the Loan Documents; (xiix) consists of Hazardous Material or goods that that, in either case, can be transported or sold only with licenses that are not readily available; (xiiixi) is not covered by casualty insurance maintained as required by Section 5.04; (xii) supplies used or consumed in Canadian Borrower’s business; (xiii) ▇▇▇▇ and hold goods; (xiv) consists of custom made Inventory which is not saleable to any other customer unserviceable or in ordinary courseslow moving Canadian Inventory; (xv) inventory returned by retail customers that is in transitnot held for resale; (xvi) inventory subject to deposit made by retail customers for sale of Inventory that have not been delivered to the extent of such deposits; or (xvixvii) is subject to any licensing arrangement the effect of which would be to limit the ability of any Collateral Agent, or any Person person selling the Canadian Inventory on behalf of such Collateral Agent, to sell such Canadian Inventory in enforcement of the such Collateral Agent’s Liens, without further consent or payment to the licensor or otherother person.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by the Borrowers to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the such criteria set forth below, and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgmentjudgment with respect to circumstances arising after the Closing Date (to the extent practicable under the circumstances, Agent shall provide prior notice to Borrowers of any such adjustment), subject to the approval of the Supermajority Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor thatBorrower: (ia) that is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments, the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory and the right of any Person under the Federal Perishable Agricultural Commodities Act), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders and Permitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 and subject to Reserves; (iib) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) that is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withAgent; (vic) is to be returned to suppliers; (vii) that in Agent's reasonable determination, is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viiid) is slow moving (in excess that consists of 1-year supply)goods which have been returned by the buyer; (ixe) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xif) breaches as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsSecurity Agreement is untrue; (xiig) that consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available;; or (xiiih) that is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Collateral Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Collateral Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate Advance Rate with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, new criteria, changes in the applicable advance rate Advance Rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (i) the Collateral Agent, on behalf of Secured Parties, does not have a first priority and exclusive or, with respect to Inventory at a leased or subleased location otherwise meeting the eligibility requirements hereunder, superior perfected Lien on such Inventory; (ii) is not located on premises in the United States or Canada; (iii) (Aa) is located on premises stored at a location leased or subleased by Borrower or a Borrowing Base Guarantor, Loan Party unless the Collateral Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto or (Bb) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee or warehouseman waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto, or (Cc) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver or subordination has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto; provided, however, that in no event shall Eligible Inventory include any Inventory stored at a location owned, leased or subleased by a Loan Party where the aggregate value of such Inventory is equal to or less than $250,000 unless the Collateral Agent has given its prior consent thereto; (iv) is placed on consignment (other than Eligible Consigned Consignment Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude mining supplies, work-in-process Inventory if it or replacement parts or is not excluded coal or other mineral rights before extraction unless the same is either As-Extracted Collateral (as defined in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)Security Agreement) or Eligible Pit Inventory; (xix) is not of a type held for sale in the ordinary course of any Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xix) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiixi) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiiixii) is not covered by casualty insurance maintained as required by Section 5.045.04 (unless such Inventory is Coal); (xivxiii) consists of custom made is Inventory purchased from another Person (other than a Borrower) which is not saleable in the possession of a Borrower or has not been received by a Borrower or a customer of a Borrower (otherwise referred to any other customer or in ordinary course; (xv) is in as "brokered coal in-transit"); or (xvixiv) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s 's Liens, without further consent or payment to the licensor or otherother Person.

Eligible Inventory. For All of the Inventory owned by the Borrower or any Secured Guarantor and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "ELIGIBLE INVENTORY" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentjudgment to reflect issues with respect to the salability of Inventory arising or discovered by Agent after the Closing Date. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below or to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgmentjudgment to reflect changes in the Borrower's or the applicable Secured Guarantor's business operations or salability of Inventory, subject to the approval of the Supermajority Requisite Revolving Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Secured Guarantor that: (ia) is not owned by Borrower or any Secured Guarantor free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's or a Secured Guarantor's performance with respect to that Inventory), except Liens described in CLAUSES (a), (d), (e) and (g) of the definition of Permitted Encumbrances and the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (b) (i) is not located on premises owned, leased or rented by Borrower or any Secured Guarantor and set forth in DISCLOSURE SCHEDULE (3.2), (ii) is not located on premises in United States acquired or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agentany Secured Guarantor in connection with any Permitted Acquisition, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with at a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 leased location, unless Agent has given its prior consent thereto and unless either (x) a reasonably satisfactory, acknowledged bailee satisfactory landlord waiver letter has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is stored with a bailee or warehouseman unless a reasonably satisfactory, acknowledged bailee letter has been received by Agent and Reserves reasonably satisfactory to Agent have been established with respect thereto, or (iv) is located at an a location owned location by Borrower or any Secured Guarantor subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $50,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; excess, obsolete, slow moving (vii) is obsoletein excess of 2-years' supply), unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies supplies, custom-made Inventory which is not subject to an outstanding purchase order that is not revocable by its terms or replacement parts (it being understood that Eligible Inventory shall is not exclude sold in the ordinary course of business, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgmentor replacement parts (excluding Component Parts and Purchased Parts); (xg) is not of a type held for sale in the ordinary course of Borrower’s 's or any Borrowing Base the applicable Secured Guarantor’s, as applicable, 's business; (xih) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (i) breaches in any material respect any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; 13 (j) consists of any costs associated with "freight-in" charges; (xiik) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available;; or (xiiil) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otheraccordance with SECTION 5.4.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment exercised in good faith determine which Inventory of Borrower and its domestic Subsidiaries shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate establish reserves with respect to Eligible Inventory, Inventory in its reasonable credit judgmentjudgment exercised in good faith, subject including without limitation reserves equal to the approval amount of the Supermajority Lenders any Permitted Encumbrances that are senior to Agent's security interests in the case of adjustments, new criteria, changes in Eligible Inventory. In no event shall the applicable advance rate or the elimination of Reserves which have the effect of making criteria set forth below be changed to make more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor domestic Subsidiary of Borrower that: (ia) is not owned by Borrower or a domestic Subsidiary of Borrower free and clear of all Liens and rights of any other person, except the Collateral Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such Inventoryencumbrances set forth in clause (v) or (vi) of the definition of Permitted Encumbrances; (iii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased owned by Borrower or one of its domestic Subsidiaries or (ii) is stored at leased premises or with a Borrowing Base Guarantorbailee, warehouseman or similar Person, unless (x) at such location the aggregate value of Inventory exceeds $250,000in each case, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, bailee letter or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee landlord waiver has been delivered to the Collateral Agent Agent, or (y) Reserves reasonably reserves satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (vc) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withAgent; (vid) is to be returned to suppliers; (vii) in Agent's reasonable opinion, is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixe) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process progress Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts for production equipment; (xf) consists of discontinued or slow-moving items or finished goods of substandard quality; (g) is placed by Borrower or one of its domestic Subsidiaries on consignment; (h) is not of a type held for sale in the ordinary course of Borrower’s 's or any Borrowing Base Guarantor’s, as applicable, one of its domestic Subsidiaries' business; (xii) breaches as to which Agent's interest, on behalf of itself and Lenders, therein is not a first priority perfected security interest; (j) as to which any of the representations or warranties pertaining to Inventory set forth in the Agreement or any of the other Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) Documents is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to untrue in any other customer or in ordinary course; (xv) is in transitmaterial respect; or (xvik) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement transit; provided, however, the amount of Eligible Inventory shall be reduced by the amount of, without limitation, any freight-in charges which Agent reasonably determines are otherwise included in Eligible Inventory, and provided further, that inventory that is not owned by Borrower or one of its domestic Subsidiaries or in which the Agent does not have a first and prior perfected security interest (subject only to Permitted Encumbrances of the Collateral Agent’s Liens, without further consent type referred to in Section 1.8(a)) shall not be deemed to be Inventory or payment to the licensor or otherEligible Inventory for any purpose.

Eligible Inventory. For Based on the most recent Borrowing Base ------------------ Certificate delivered by each Borrower to Agents and determined based upon the salability, at retail, of the Eligible Inventory or which reflects such other factors as effects the marketability of the Eligible Inventory and on other information available to Agents, Agents shall in their reasonable credit judgment determine which Inventory of each Borrower shall be "Eligible -------- Inventory" for purposes of this Agreement. In determining whether any --------- particular Inventory of any Borrower constitutes Eligible Inventory, Eligible Inventory Agents shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves Agents reserve the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Requisite Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Without limiting the generality of the foregoing, Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor thatBorrower: (ia) that is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Administrative Agent, on behalf of Secured Partiesitself, does not have a first priority the other Agent and exclusive perfected Lien on such InventoryLenders and Permitted Encumbrances; (iib) that is (i) not located on premises in United States owned, leased or Canada; (iii) (A) is located on premises leased operated by such Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Bii) is stored with a bailee bailee, warehouseman or warehouseman where the aggregate value of Inventory exceeds $250,000 similar Person, unless either Administrative Agent has given its prior consent thereto and unless (x) a reasonably satisfactory, acknowledged satisfactory bailee letter or landlord waiver letter has been received by the Collateral Agent delivered to Administrative Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent Agents have been established with respect thereto, or (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 100,000, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoin each case such Inventory is Eligible In-Transit Inventory; (ivc) that is placed on consignment or is in transit (other than Eligible Consigned In-Transit Inventory); (vd) that is covered by a negotiable document of title, unless such document has been delivered to the Collateral Administrative Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withor other Persons acceptable to it; (vie) that in accordance with the audits, appraisals and reports conducted and/or delivered pursuant to Annex F, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, ------- shopworn, seconds, damaged or unfit for salesale or due to changes in the mix, composition, balance shrink, or markup/markdown; provided, however that to the -------- extent any of the foregoing items occur outside of the Borrowers' ordinary course of business, the extent of such items shall be as reasonably determined by the Agents; (viiif) is slow moving (in excess of 1-year supply); (ix) that consists of samples, display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) that consists of goods which have been returned by the buyer because of any damage or imperfection; (h) that is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) breaches as to which Administrative Agent's Lien, on behalf of itself, the other Agent and Lenders, therein is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsSecurity Agreement is untrue; (xiik) consists of any costs associated with advertising load, unearned discounts; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable acceptable to any other customer or in ordinary course; (xv) is in transitAgents; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agents in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or othertheir reasonable credit judgment.

Eligible Inventory. For Based on the most recent Borrowing Base ------------------ Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall in its reasonable judgment determine which Inventory of Borrower and Callaway Golf Ball Company shall be "Eligible Inventory" for ------------------ purposes of this Agreement. References in this Section 1.7 to Callaway Golf ----------- Ball Company shall be disregarded until such time as the Inventory of Callaway Golf Ball Company is eligible for inclusion in the Borrowing Base in accordance with the proviso to the definition of "Borrowing Base" in Annex A. In ------- ------- determining whether any particular Inventory constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Effective Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of (x) each Lender in the case of an increase in the percentage advance rate and (y) Supermajority Revolving Lenders in the case of adjustments, any adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Callaway Golf Ball Company that: (a) is not owned by Borrower or Callaway Golf Ball Company free and clear of all Liens (other than Permitted Encumbrances described in clause (a), (e) or (i) of the Collateral definition thereof) and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's or Callaway Golf Ball Company's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iib) is (i) not located on premises in United States owned or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, Callaway Golf Ball Company or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Bii) is stored with a bailee bailee, warehouseman or warehouseman where the aggregate value of Inventory exceeds $250,000 similar Person, unless either Agent has given its prior consent thereto and unless (x) a reasonably satisfactory, acknowledged satisfactory bailee letter or landlord waiver letter has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) in Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or damaged, unfit for salesale or otherwise no longer used or useful in Borrower's or Callaway Golf Ball Company's business; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of customized product, demonstration equipment, display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of Borrower’s 's or any Borrowing Base Guarantor’s, as applicable, Callaway Golf Ball Company's business; (xii) breaches as to which Agent's Lien, on behalf of itself and Lenders, therein is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement, the Loan DocumentsBorrower Security Agreement or the Subsidiaries Security Agreement (as applicable) is untrue; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable judgment.

Eligible Inventory. For All of the Inventory owned by Borrower and its domestic or Canadian Subsidiaries and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Requisite Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor its domestic or Canadian Subsidiaries that: (ia) is not owned by Borrower or one of its domestic or Canadian Subsidiaries free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower's or one of its domestic or Canadian Subsidiary's performance with respect to that Inventory and the rights of unpaid suppliers (other than another Credit Party) under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority or, in favor of Agent and exclusive perfected Lien on such InventoryLenders, as applicable, and Prior Claims (excluding the rights of unpaid suppliers (other than another Credit Party) under Section 81.1 of the Bankruptcy and Insolvency Act (Canada)), subject to Permitted Encumbrances described in clauses (a) and (e) of the definition thereof; (iib) is (i) not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule 3.2 or Canada; is (iiiii) (A) is located on premises stored at a leased by Borrower location or with a Borrowing Base Guarantorbailee, warehouseman or similar Person, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement bailee letter or landlord waiver has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or is (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 unless either (x) 50,000 or a reasonably satisfactory mortgagee waiver has been delivered to the Collateral lesser minimum amount determined by Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoin its reasonable credit judgment; (ivc) is placed on consignment or (other than Eligible Consigned Inventory)unless Agent is fully perfected in its sole and absolute discretion) is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) in Agent's reasonable determination, is to be returned to suppliers; (vii) is discontinued Inventory, excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples or other promotional items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts for Equipment; (xg) consists of goods which have been returned by the buyer unless the same have been inspected by Borrower with satisfactory results and returned to finished goods; (h) is not of a type held for sale in the ordinary course of Borrower’s 's business; (i) is not subject to a first priority Lien in favor of Agent on behalf of itself and Lenders or any Borrowing Base Guarantor’sin favor of Agent and Lenders, as applicable, businesssubject to Permitted Encumbrances in accordance with clauses (a) and (e) of the definition thereof; (xij) breaches consists of any of the representations or warranties pertaining to Inventory set forth in the Loan Documentscosts associated with "freight-in" charges; (xiik) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiil) is not covered by casualty insurance maintained as required by Section 5.04acceptable to Agent; (xivm) consists of custom made Inventory which is does not saleable to any other customer or in ordinary coursemeet all standards imposed by Governmental Authorities; (xv) is in transit; or (xvin) is subject to any licensing arrangement the effect of agreement which would be to limit the restricts Agent's ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell or dispose of such Inventory; (o) bears a Reebok trademark unless Agent determines that such Inventory can be quickly and cost-effectively converted to "Pro Form" or other Borrower branded Inventory and sold by Agent without restrictions; or (p) is otherwise unacceptable to Agent in enforcement its reasonable credit judgment. Borrower agrees that a reserve against Borrowing Availability attributable to Eligible Inventory equal to sales taxes payable upon the sale of such Inventory and a Reserve in the Collateral amount of intercompany profit attributable to sales of Inventory among Borrower and its Subsidiaries are reasonable exercises of Agent’s Liens, without further consent or payment to the licensor or other's credit judgment.

Eligible Inventory. For On any date of determination of the Borrowing Base, all of the Inventory owned by each Borrower and reflected in the most recent Borrowing Base Certificate delivered by the Borrowers to the Administrative Agent and the Collateral Agent shall be “Eligible Inventory” for the purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The In addition, the Administrative Agent or the Collateral Agent shall have the right from time to time in their reasonable credit judgment to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing DateInventory, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, any adjustment of criteria or establishment of new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: (i) the Collateral Administrative Agent, on behalf of Secured Parties, does not have a perfected, first priority and and, other than the second priority Lien securing the Term Loan Indebtedness, exclusive perfected Lien on such Inventoryupon; (iia) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or stored at a Borrowing Base Guarantor, unless (x) at such location where the aggregate value of Inventory exceeds $250,000, 250,000 unless the Administrative Agent and (y) the Collateral Agent have given their prior consent thereto and unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Administrative Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent and the Collateral Agent have been established with respect thereto or (Bb) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Administrative Agent or (y) Reserves reasonably satisfactory to the Administrative Agent and the Collateral Agent have been established with respect thereto, or (Cc) is located at an owned location subject to a mortgage in favor of a lender other than the Administrative Agent or the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Administrative Agent or (y) Reserves reasonably satisfactory to the Administrative Agent and the Collateral Agent have been established with respect thereto; (iviii) is placed on consignment, unless a valid consignment agreement which is reasonably satisfactory to Administrative Agent and the Collateral Agent is in place with respect to such Inventory; (other than iv) is in transit, unless such Inventory constitutes Eligible Consigned In-Transit Inventory); (v) is covered by a negotiable document of titletitle (other than Eligible In-Transit Inventory), unless such document has been delivered to the Collateral Administrative Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Administrative Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xix) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, Borrowers’ business; (xix) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiixi) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiiixii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvixiii) is subject to any licensing arrangement acquired as part of a Permitted Acquisition unless and until the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of Administrative Agent and the Collateral Agent’s Liens, without further consent or payment Agent shall be satisfied as to the licensor or otherits eligibility.

Eligible Inventory. For All of the inventory owned by one or more of the Eligible Credit Parties and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate rates or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Eligible Credit Party that: (ia) is not owned by such Eligible Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure the performance of such Eligible Credit Party with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iii) is not located on premises owned, leased or rented by such Eligible Credit Party and set forth in United States Disclosure Schedule (3.2) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, such Eligible Credit Party's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivn) unless such Inventory is computer software, has been produced or published by anyone other than one of the Major Labels; (o) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transitthe "reserve for inventory valuation" on the general ledger of such Eligible Credit Party; or (xvip) is subject otherwise unacceptable to Agent in its reasonable credit judgment for reasons relating to any licensing arrangement Credit Party, any Credit Party's business or industry and/or the effect Agent's ability to collect or realize the full value of any Collateral." 10.4 The first sentence of Section 6.1 of the Credit Agreement is hereby amended and restated to read in its entirety as follows: "Without the prior written consent of the Agent (which would consent may be to limit provided or withheld in the ability Agent's sole discretion), no Credit Party shall directly or indirectly, by operation of Collateral Agentlaw or otherwise, (a) form or acquire any Subsidiary, (b) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person, or (c) other than purchases of Inventory and licenses of Intellectual Property, in each case in the ordinary course of business consistent with practices as in effect on the date hereof, purchase assets from any Person selling if (i) such purchase is not a Capital Expenditure or (ii) the Inventory on behalf of Collateral Agentamount paid for such purchase does not reduce the EBITDA, to sell during the period such Inventory in enforcement purchase is made and by the amount paid for such purchase, of the Collateral Agent’s LiensCredit Party which makes such purchase; provided, without however that (A) the Borrower may form Encore Acquisition and (B) Encore Acquisition may acquire the assets of Encore Software pursuant to and in accordance with the Encore Purchase Agreement; provided, further consent or payment that (A) the Borrower may form BCI Eclipse and (B) BCI Eclipse may acquire the assets of BCI Eclipse, LLC, a New York limited liability company pursuant to and in accordance with the licensor or otherBCI Eclipse Purchase Documents." 10.5 Each time that the dollar amount "$10,000,000" is set forth in Section 6.1(x) and Section 6.1(xi) of the Credit Agreement, such dollar amount is hereby amended to read "$20,000,000." 10.6 Section 6.2 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

Eligible Inventory. For All of the Inventory owned by the Borrower and AET Canada and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right (upon prior or contemporaneous notice to Borrower) to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the rightright (upon prior or contemporaneous notice to Borrower), at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor AET Canada that: (ia) is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Credit Party's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Credit Party and set forth in United States Disclosure Schedule (3.2), or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee processor, ▇▇▇▇▇▇ or toll converter, warehouseman where the aggregate value of Inventory exceeds $250,000 or other bailee, unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $50,000; (ivc) is placed on consignment, unless (i) a reasonably satisfactory consignment agreement among the Borrower, the Agent and the consignee has been delivered to Agent, (ii) the Borrower's and Agent's interest in the consigned inventory is fully perfected under the Code by the filing of appropriate financing statements or other action required by Agent, (iii) prior to delivery of such consigned Inventory to the consignee any Person holding a security interest in Goods of such consignee has been properly notified of the Borrower's and Agent's interest in the consigned Inventory in accordance with section 9-324(b) of the Code, and (iv) such Inventory is located in the United States at a location of the consignee satisfactory to the Agent and as to which the requirements of Section 1.7(b) have been satisfied; (d) is in transit (other than Eligible Consigned Inventory)Inventory of Borrower or AET Canada which is in transit in the ordinary course of business within or between the United States and Canada between locations owned by the Borrower or AET Canada or with respect to which Agent has received a satisfactory landlord waiver or bailee letter, as applicable; (ve) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vif) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixg) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xh) consists of goods which have been returned by the buyer unless such Inventory is not excess, obsolete, unsalable, shopworn, damaged or unfit for sale; (i) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, such Credit Party's business; (xij) breaches is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances; (k) as to which any of the representations or warranties pertaining to Inventory set forth in Section 4(g) of the Loan DocumentsSecurity Agreement are untrue; (xiil) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For All of the Inventory owned by Borrowers and reflected in the most recent Borrowing Base Certificate delivered by Borrower Representative, on behalf of itself and each other Borrower, to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria criteria, and to adjust the applicable advance rate rates with respect to Eligible Inventory, in each case in its reasonable credit judgment, subject in order to the approval of the Supermajority Lenders in the case of adjustments, new criteria, reflect changes in the applicable advance rate salability or realization values of Inventory arising or discovered by Agent after the elimination of Reserves Closing Date which have the effect of making more or less credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof) and other Permitted Encumbrances; (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States or Canada; Schedule (iii3.2) (Aas may be amended from time to time), or (ii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000a reasonably satisfactory landlord waiver has been delivered to Agent, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered the Interim Order or the Final Order provides for collateral access to the Collateral reasonable satisfaction of Agent, or (2z) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto thereto, or (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or Agent, (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretothereto or (z) either the Interim Order or the Final Order provides for collateral access to the reasonable satisfaction of Agent, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to Agent, or either the Collateral Agent Interim Order or the Final Order provides for collateral access to the reasonable satisfaction of Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent’s Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vi) is to be returned to suppliers; (viie) is obsolete, unsalableslow moving (in excess of one year’s supply), unsaleable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders (subject to Permitted Encumbrances) unless subject to reserves established by Agent in the exercise of its reasonable credit judgment; (j) breaches in any material respect (but without duplication of any materiality qualifier contained therein) any of the representations or warranties pertaining made with respect to such Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with “freight-in” charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses Licenses that are not readily available; (xiiim) is otherwise unacceptable to Agent in its reasonable credit judgment; (n) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvio) is subject to any licensing arrangement patent or trademark License requiring the effect payment of which would be to limit royalties or fees or requiring the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement consent of the Collateral Agent’s Liens, without further Licensor for a sale thereof by Agent unless the applicable Borrower has delivered to Agent a consent or payment sublicenses agreement from such licensor in form and substance reasonably satisfactory to Agent; or (p) is subject to any derivative or forward contract that can be terminated based upon the licensor or otherbankruptcy filing of any Borrower.

Eligible Inventory. For All of the inventory owned by one or more of the Eligible Credit Parties and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate rates or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Eligible Credit Party that: (ia) is not owned by such Eligible Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure the performance of such Eligible Credit Party with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such InventoryLenders; (iii) is not located on premises owned, leased or rented by such Eligible Credit Party and set forth in United States Disclosure Schedule (3.2) or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 Agent, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer; (h) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, such Eligible Credit Party's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivn) unless such Inventory is computer software, has been produced or published by anyone other than one of the Major Labels; (o) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transitthe "reserve for inventory valuation" on the general ledger of such Eligible Credit Party; or (xvip) is subject otherwise unacceptable to Agent in its reasonable credit judgment for reasons relating to any licensing arrangement Credit Party, any Credit Party's business or industry and/or the effect Agent's ability to collect or realize the full value of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherCollateral."

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by Borrower Representative to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of the Borrowers shall be “Eligible Inventory” for purposes of this Agreement. In determining whether any particular Inventory constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of a Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral Agentrights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), on behalf except the Liens in favor of Secured Parties, does not have a first priority any Lender and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted by Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) is (i) not located on premises in United States owned or Canada; (iii) (A) is located on premises leased by such Borrower and operated by such Borrower, (ii) stored with a bailee, warehouseman or a Borrowing Base Guarantorsimilar Person, unless Agent has given its prior consent thereto and unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement bailee letter or landlord waiver has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Ciii) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where any site if the aggregate book value of Inventory exceeds at any such location is less than $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto50,000; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has and evidence of acceptable insurance covering such Inventory have been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens Liens, except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withAgent; (vie) in Agent’s reasonable determination, is to be returned to suppliersexcess, obsolete, morgue, unsalable, damaged, unfit for sale or within 60 days of its expiration date; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is or replacement parts; (g) consists of goods which have been returned by the buyer that have not excluded been restocked for resale in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)applicable laws; (xh) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) breaches as to which Agent’s Lien is not a first priority perfected Lien; (j) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsSecurity Agreement is untrue; (xiik) consists of any costs associated with “freight-in” charges; (l) consists of Hazardous Material Materials except FDA approved pharmaceuticals or goods that can be transported or sold only with licenses that are not readily available, except for any required pharmaceutical licenses; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04acceptable to Agent; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xvn) is otherwise unacceptable to Agent in transitits reasonable credit judgment; or (xvio) is subject that has given rise to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otheran Account.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by each Borrower to Agent and on any other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "ELIGIBLE INVENTORY" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing DateDate in its reasonable credit judgment, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and criteria, to adjust the applicable advance rate rates, to establish and modify Reserves with respect to Eligible Inventory, in its reasonable credit judgment, each case subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, new criteria, changes in the applicable advance rate event any such adjustments or the elimination establishment of such new criteria or Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to such Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in SECTION 5.9 (subject to Reserves established by Agent in accordance with SECTION 5.9); (iii) is not located on premises owned or leased by such Borrower or stored at a public warehouse, in each case located within the United States or Canada; of America and referenced in DISCLOSURE SCHEDULE (3.2), (ii) is located at a public warehouse, unless (A) the warehouseman has executed a bailee letter in form and substance acceptable to Agent and (B) Agent has determined the amount of, and is maintaining, a Reserve against the Borrowing Base with respect to the Inventory located at such public warehouse, (iii) is located at one of such Borrower's owned or leased locations, unless either (A) is located on premises leased by Borrower the mortgagee or landlord, as applicable, has executed a mortgagee's waiver or a Borrowing Base Guarantorlandlord's waiver, unless (x) at such location as the aggregate value of Inventory exceeds $250,000case may be, in form and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered substance acceptable to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) Agent has determined the amount of, and is stored maintaining, a Reserve against the Borrowing Base with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory respect to the Administrative Agent have been established with respect theretoInventory located at such owned or leased location, or (Civ) is located at an owned any site if the aggregate book value of Inventory at any such location subject is less than $100,000; PROVIDED, that Inventory located at up to a mortgage in favor of a lender other than the Collateral Agent five sites where the aggregate book value of Inventory exceeds at any such location is greater than $250,000 unless either 75,000 and less than $100,000 shall constitute Eligible Inventory, (xv) is located at a reasonably satisfactory mortgagee waiver has been delivered to store listed in DISCLOSURE SCHEDULE (1.7) or that is otherwise in the Collateral Agent process of being closed, or (yvi) Reserves reasonably satisfactory to is located at any outside processing facility or is otherwise in the Administrative Agent have been established with respect theretocustody of third parties for processing or manufacture; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent on behalf of itself and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) in Agent's reasonable determination is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display or promotional items, samples or samples, packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth hereinor replacement parts; (g) consists of goods that (i) have been returned by the buyer, unless such goods are (A) in a form in which the vendor that sold such goods to such Borrower would accept returned goods from such Borrower and (B) otherwise determined by the Administrative acceptable to Agent in its reasonable credit judgment), or (ii) have been specifically ordered by a customer and paid for in full at the time such order is placed; (xh) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) breaches is not subject to a first priority perfected Lien in favor of Agent, on behalf of itself and Lenders; (j) does not comply with any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04acceptable to Agent; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xvn) is subject to licensing or distribution agreements unless Agent has obtained all consents, approvals and other documents required, in transitits sole discretion, to provide Agent with the ability under such licensing or distribution agreements and applicable laws and regulations to sell or dispose of such Inventory; or (xvio) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by Borrowers to Agent and Revolving Credit Agent shall be "ELIGIBLE Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent and Revolving Credit Agent shall have the right to establish, establish or modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves and Revolving Credit Agent reserve the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its their reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, criteria or changes in the applicable advance rate or the elimination of Reserves rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person, except the Collateral Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in SECTION 5.9 hereof (subject to Reserves established by Agent in accordance with SECTION 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States DISCLOSURE SCHEDULE (3.2), or Canada; (iiiii) (A) has a value in excess of $100,000 and which is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless either (x) at such location the aggregate value of Inventory exceeds $250,000Agent, in Agent's sole and absolute discretion, has given its prior consent thereto, (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2z) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoAgent; (ivc) is placed on consignment (other than Eligible Consigned Inventory)or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, materials or manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)supplies; (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory With respect to which the Borrower or any of its Restricted ------------------ Subsidiaries, finished goods, work in progress and raw materials and component parts inventory owned by the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify Borrower or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. such Restricted Subsidiary; provided -------- that Eligible Inventory shall not include any Inventory inventory (a) held on consignment, or not otherwise owned by the Borrower or such Restricted Subsidiary, or of a type no longer sold by the Borrower or such Restricted Subsidiary, (b) which has been returned by a customer or is damaged or subject to any legal encumbrance other than Permitted Liens, (c) which is not in the possession of the Borrower or such Restricted Subsidiary unless the Agent has received a waiver from the party in possession of such inventory in form and substance satisfactory to the Agent, (d) which is held by the Borrower or such Restricted Subsidiary on property leased by the Borrower or a Restricted Subsidiary, unless the Agent has received a waiver from the lessor of such leased property and, if any, sublessor thereof in form and substance satisfactory to the Agent, (e) as to which appropriate Uniform Commercial Code financing statements showing the Borrower or such Restricted Subsidiary as debtor and the Agent as secured party have not been filed in the proper filing office or offices in order to perfect the Agent's security interest therein (except with respect to inventory located in Canada or in countries in Europe in an aggregate amount not to exceed $3,000,000), (f) which has been shipped to a customer of the Borrower or such Restricted Subsidiary regardless of whether such shipment is on a consignment basis, (g) which is not located within the United States of America (other than inventory located in Canada or in countries in Europe in an aggregate amount not to exceed $3,000,000), or (h) which the Agent reasonably deems to be obsolete or not marketable. Employee Benefit Plan. Any employee benefit plan within the meaning of --------------------- (S)3(3) of ERISA maintained of contributed to by the Borrower or any Borrowing Base Guarantor that: (i) the Collateral AgentERISA Affiliate, on behalf of Secured Parties, does not have other than a first priority and exclusive perfected Lien on such Inventory; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower Guaranteed Pension Plan or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherMultiemployer Plan.

Eligible Inventory. For All of the Inventory owned by each Credit Party and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agents shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent Agent, with respect to all Credit Parties other than Canadian Borrower and its Wholly-Owned Subsidiaries, and Canadian Agent, with respect to the Canadian Borrower and its Wholly-Owned Subsidiaries, shall have the right to establish, establish or modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmentjudgment (as to Reserves imposed after the Closing Date, based on its analysis of facts or events first occurring, or first discovered by Agent or Canadian Agent, after the Closing Date). In addition, the Administrative Agent Agent, with respect to all Credit Parties other than Canadian Borrower and its Wholly-Owned Subsidiaries, and Canadian Agent, with respect to Canadian Borrower and its Wholly-Owned Subsidiaries, reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in its reasonable credit judgmentjudgment (based on its analysis of material facts or events first occurring, or first discovered by Agent or Canadian Agent, after the Closing Date), subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Agent and Canadian Agent acknowledge that as of the Closing Date they do not know of any circumstance or condition with respect to the Inventory that would require the imposition of a Reserve which has not been imposed as of the Closing Date. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor Credit Party that: (ia) is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Credit Party’s performance with respect to that Inventory), except the Liens in favor of Agent (or, in the case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent, ) on behalf of Secured Partiesitself and the applicable Lenders and Permitted Encumbrances described in clauses (a), does not have a first priority (b), (c) and exclusive perfected Lien on (e) of such Inventorydefined term; (iib) (i) is not located on premises in United States owned, leased or Canada; rented by such Credit Party (iiior a consignee, bailee or warehouseman of a Credit Party) and set forth on Schedule 5.12 (Aas it may be updated from time to time by delivery of a new Schedule 5.12 by Borrower Representative to Agent), (ii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless (x) at such location Agent (or, in the aggregate value case of Inventory exceeds $250,000Canadian Borrower and its Wholly-Owned Subsidiaries, and Canadian Agent) has given its prior consent thereto, (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agentsuch Agent in accordance with Section 2.6, or (2z) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or pursuant to Section 2.6, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, an acknowledged bailee waiver letter has been received by Agent (or, in the Collateral Agent case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent) in accordance with Section 2.6 or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretothereto pursuant to Section 2.6, or (Civ) is located at an a location owned location by a Credit Party subject to a mortgage in favor of a lender other than Agent (or, in the Collateral Agent where the aggregate value case of Inventory exceeds $250,000 Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent), unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral such Agent in accordance with Section 2.6 or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretothereto pursuant to Section 2.6, or (v) is located at any site if the aggregate book value of Inventory at any such location is less than $100,000 or the Dollar Equivalent thereof; (ivc) is placed on consignment by a Credit Party or is in transit, except for (other than Eligible Consigned Inventory)i) Inventory in transit between domestic locations of Credit Parties and (ii) consigned Inventory as to which the applicable Credit Party has taken all steps necessary to perfect its ownership interest in such consigned Inventory against claims by the consignee and secured creditors of the consignee; (vd) is covered by a negotiable document of title, unless such document has been delivered to Agent (or, in the Collateral Agent case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent), with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral such Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalableunsaleable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) is not of a type held for sale in the ordinary course of Borrowersuch Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xih) breaches any is not subject to a first priority lien in favor of Agent (or, in the case of Canadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent), on behalf of itself and the Lenders, subject to Permitted Encumbrances, or does not otherwise conform to the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiii) consists of any costs associated with “freight-in” charges; (j) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available, excluding any inventory products (including FIFRA regulated products, insecticides, herbicides, pesticides, fungicides and rodenticides) carried by the Credit Parties as of the Closing Date and new or additional inventory products consisting of “next generation” versions of such products or consistent with the general scope and type of such products; (xiiik) is not covered by casualty insurance maintained as required by Section 5.04; reasonably acceptable to Agent (xiv) consists or, in the case of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transitCanadian Borrower and its Wholly-Owned Subsidiaries, Canadian Agent); or (xvil) is subject to any licensing arrangement the effect of licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would be require any consent of any third party for the sale or disposition of that Inventory (which consent has not been obtained) or the payment of any monies to limit the ability of Collateral Agent, any third party upon such sale or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment other disposition (to the licensor or otherextent of such monies).

Eligible Inventory. For Based on the most recent Revolving Borrowing Base Certificate delivered by each Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "ELIGIBLE INVENTORY" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the such criteria set forth below, and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventorycriteria, in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves criteria which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in SECTION 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises in United States owned or Canada; (iii) (A) is located on premises leased by such Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Bii) is stored with a bailee bailee, warehouseman or warehouseman where the aggregate value of Inventory exceeds $250,000 similar Person, unless either Agent has given its prior consent thereto and unless (x) a reasonably satisfactory, acknowledged satisfactory bailee letter or landlord waiver letter has been received by the Collateral Agent delivered to Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment); (x) is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For All of the Inventory owned by each Borrower and reflected in the most recent Borrowing Base Certificate delivered by Borrower Representative to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, below and to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in each case, in its reasonable credit judgment. Unless otherwise agreed by Agent in writing, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) unless consented to in writing by Agent, (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States or Canada; Disclosure Schedule (iii) 3.2), (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $500,000; (ivc) is placed on consignment or is in transit (other than Eligible Consigned Inventoryunless consented to in writing by Agent); (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vi) is to be returned to suppliers; (viie) is obsolete, slow moving (in excess of one year’s supply), unsalable, shopworn, seconds, damaged (that is outside the range of tolerances that are customarily accepted by customers of the Borrowers or have been specifically rejected by any customer) or unfit for sale; provided, at Agent’s sole discretion, Eligible Inventory may include excess prime Inventory; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, stores, work-in-process Inventory if it is not excluded in accordance with (other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)than Semi-Finished Goods) or replacement parts; (xg) consists of goods which have been returned by the buyer that are not either currently usable or currently saleable in the ordinary course of such Borrower’s business; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) is not subject to a first-priority, perfected Lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances as set forth in clause (e) of the definition thereof (subject to Reserves satisfactory to Agent); (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiil) is not covered by casualty insurance maintained as to the extent required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transitthis Agreement; or (xvim) is subject to any licensing arrangement patent or trademark license requiring the effect payment of which would be to limit royalties or fees or requiring the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement consent of the Collateral licensor for a sale thereof by Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For Based on the most recent Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall in its reasonable credit judgment determine which Inventory of each Borrower shall be "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory of any Borrower constitutes Eligible Inventory, Eligible Inventory Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth belowsuch criteria, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, new criteria, criteria or changes in advance rates which have the applicable effect of making more credit available (except that such requirement of approval of the Supermajority Lenders shall not apply in the case of Agent in its discretion modifying or eliminating Reserves, new criteria or advance rate or rates established by Agent pursuant to the elimination of Reserves immediately preceding sentence against Eligible Inventory from time to time which have the effect of making more credit available). Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor thatBorrower: (i) that is not owned by such Borrowers free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (ii) that is (A) not located on premises in United States owned or Canada; (iii) (A) is located on premises leased by such Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, Agent has given its prior consent thereto and (y) either (1) unless a reasonably satisfactory Landlord access and offset and Lien Waiver and Access Agreement waiver, has been delivered to the Collateral Agent, or (2) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, (B) stored at a lease location, unless Agent has given its prior consent thereto and unless either (x) a reasonably satisfactory landlord waiver has been delivered to Agent, or (y) Reserves reasonably satisfactory to Agent have been established with respect thereto, or (C) is located at an owned location subject to stored with a mortgage in favor of a lender other than the Collateral bailee, warehouseman or similar Person, unless Agent where the aggregate value of Inventory exceeds $250,000 has given its prior consent thereto and unless either (x) a reasonably satisfactory mortgagee bailee letter or landlord waiver has been delivered to the Collateral Agent Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (D) located at any site if the aggregate book value of Inventory at any such location is less than $100,000; (iii) that is placed on consignment or is in transit, except for Inventory in transit between eligible domestic locations of Borrowers as to which Agent's Liens have been perfected at origin and destination; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) that is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (viv) that, in Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viiivi) is slow moving (in excess of 1-year supply); (ix) that consists of (A) display items, samples items or packing or shipping materialsmaterials or manufacturing supplies, manufacturing supplies or (B) parts Inventory which is not held by such Borrower for sale to third party customers in the ordinary course of business or which is held primarily as replacement parts (it being understood that Eligible Inventory shall not exclude work-in-process Inventory if it is not excluded in accordance with other criteria set forth hereinfor any Borrower's machinery, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)equipment or operations; (xvii) that consists of goods which have been returned by the buyer; (viii) that is not of a type held for sale sale, lease or rental in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xiix) breaches that is not subject to a first priority Lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances as set forth in clause (e) of the definition thereof (subject to Reserves satisfactory to Agent); (x) as to which any of the representations or warranties pertaining to Inventory set forth in this Agreement or the Loan DocumentsSecurity Agreement is untrue; (xiixi) that consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiixii) that is not covered by casualty insurance maintained as required by Section 5.04acceptable to Agent; (xiii) that is located outside of the United States or Canada; (xiv) consists of custom made Inventory which that is not saleable otherwise unacceptable to any other customer or Agent in ordinary courseits reasonable credit judgment; (xv) that is in transitsubject to any patent or trademark license requiring the payment of royalties or fees or requiring the consent of the licensor thereof by Agent; or (xvi) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement extent of the Collateral Agent’s Liens, without further consent Dollar amount of the portion of any customer deposit or advance payment to the licensor which is not excluded from or otherreserved against Eligible Accounts under Section 1.6 (such amounts shall be held ineligible from work-in-process).

Eligible Inventory. For All of the Inventory owned by the Borrower and AET Canada and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible Inventory” for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right (upon prior or contemporaneous notice to Borrower) to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the rightright (upon prior or contemporaneous notice to Borrower), at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor AET Canada that: (ia) is not owned by such Credit Party free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Credit Party’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Credit Party and set forth in United States Disclosure Schedule (3.2), or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee processor, ▇▇▇▇▇▇ or toll converter, warehouseman where the aggregate value of Inventory exceeds $250,000 or other bailee, unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent Agent, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $50,000; (ivc) is placed on consignment, unless (i) a reasonably satisfactory consignment agreement among the Borrower, the Agent and the consignee has been delivered to Agent, (ii) the Borrower’s and Agent’s interest in the consigned inventory is fully perfected under the Code by the filing of appropriate financing statements or other action required by Agent, (iii) prior to delivery of such consigned Inventory to the consignee any Person holding a security interest in Goods of such consignee has been properly notified of the Borrower’s and Agent’s interest in the consigned Inventory in accordance with section 9-324(b) of the Code, and (iv) such Inventory is located in the United States at a location of the consignee satisfactory to the Agent and as to which the requirements of Section 1.7(b) have been satisfied; (d) is in transit (other than Eligible Consigned Inventory)Inventory of Borrower or AET Canada which is in transit in the ordinary course of business within or between the United States and Canada between locations owned by the Borrower or AET Canada or with respect to which Agent has received a satisfactory landlord waiver or bailee letter, as applicable; (ve) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vif) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixg) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xh) consists of goods which have been returned by the buyer unless such Inventory is not excess, obsolete, unsalable, shopworn, damaged or unfit for sale; (i) is not of a type held for sale in the ordinary course of Borrowersuch Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xij) breaches is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances; (k) as to which any of the representations or warranties pertaining to Inventory set forth in Section 4(g) of the Loan DocumentsSecurity Agreement are untrue; (xiil) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.

Eligible Inventory. For purposes of this AgreementEligible Finished Goods Inventory, Eligible Inventory shall exclude Work-in-Process and Eligible Raw Materials. ELIGIBLE RAW MATERIALS. On any Inventory date, an amount equal to the Dollar Equivalent of the gross book value, determined in accordance with the first-in, first-out method of inventory accounting, as reflected on the Borrower's or a Subsidiary Guarantor's books in accordance with generally accepted accounting principles consistently applied, of raw materials used to produce the Borrower's or one of the Subsidiary Guarantor's inventory, including any finished goods inventory returned by a customer or no longer sold by the Borrower or the Subsidiary Guarantors and (a) which has been converted into Eligible Raw Materials, (b) which is (i) located on property owned by the Borrower or the Subsidiary Guarantors, (ii) held by the Borrower or a Subsidiary Guarantor on properties leased by the Borrower or the Subsidiary Guarantors as to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves has received a waiver from the rightlessor of such property in form and substance satisfactory to the Administrative Agent, at any time and from time unless the relevant date of determination is on or prior to time thirty (30) days after the Original Closing Effective Date, to adjust any (iii) not in the possession of the criteria set forth below, to establish new criteria Borrower or the Subsidiary Guarantors and to adjust is not in transit and (X) the applicable advance rate with respect to Eligible Inventory, Administrative Agent has received a waiver from the party in its reasonable credit judgment, subject possession of such inventory in form and substance satisfactory to the approval Administrative Agent, (Y) the Administrative Agent has reduced the value of such inventory by reserves reasonably deemed adequate by the Administrative Agent, and in any event in an amount equal to all obligations of the Supermajority Borrower and its Subsidiaries to the party in possession or (Z) the relevant date is on prior to thirty (30) days after the Effective Date or (iv) is in transit from one location in which the Administrative Agent had a perfected security interest in such inventory to a second location where the Administrative Agent has taken all steps necessary to obtain a perfected security interest in inventory at such location, and has been in transit for a period of less than ten (10) days, (c) as to which the Borrower or one of the Subsidiary Guarantors has acquired title and the Administrative Agent has a valid and perfected first-priority security interest under all applicable law, and (d) as to which the Borrower has furnished reasonably detailed information to the Lenders in a Borrowing Base Report, after taking into account all charges and liens (other than those of the case of adjustmentsAdministrative Agent and carrier, new criteriawarehouse, changes customs and similar statutory liens arising in the applicable advance rate or ordinary course of business) of all kinds against such raw materials. Without limiting the elimination generality of Reserves which have the effect of making more credit available. foregoing, Eligible Inventory Raw Materials shall not include any Inventory raw materials covered by a document of Borrower or any Borrowing Base Guarantor that: (i) title until the Collateral Agent, on behalf document of Secured Parties, does not have a first priority and exclusive perfected Lien on such Inventory; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement title has been delivered to the Collateral Agent, Administrative Agent or (2) Reserves reasonably satisfactory to which the Administrative Agent have been established with respect thereto reasonably deems to be obsolete or (B) is stored with a bailee not useable raw materials. Raw material immediately loses the status of Eligible Raw Material if and when the Borrower or warehouseman where one of the aggregate value Subsidiary Guarantors sells it, otherwise passes title thereto, consumes it, or materially changes it in the course of Inventory exceeds $250,000 unless either (x) a reasonably satisfactoryprocessing the same, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been releases or transfers its security interest therein. Notwithstanding the foregoing, but without duplication, Eligible Raw Materials shall be reduced by the amount of any specific reserve established by the Borrower with respect thereto, or (C) is located at an owned location subject to a mortgage in favor of a lender any Eligible Raw Materials other than the Collateral Agent where LIFO reserve maintained by the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered Borrower in accordance with generally accepted accounting principles. ELIGIBLE WORK-IN-PROCESS On any date, an amount equal to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor Dollar Equivalent of the Collateral Agent and gross book value, as reflected on the Lenders and landlordsBorrower's or a Subsidiary Guarantor's books in accordance with generally accepted accounting principles consistently applied, carriers, bailees and warehousemen if clause (iii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude usable work-in-process Inventory if it is not excluded of the Borrower and the Subsidiary Guarantors and as to which the Borrower has furnished reasonably detailed information to the Lenders in accordance a Borrowing Base Report in connection with other criteria set forth herein, unless otherwise determined by the Administrative Agent in manufacture of its reasonable credit judgment); (x) is not of a type held for sale products in the ordinary course of Borrower’s its business, including any finished goods inventory returned by a customer or any Borrowing Base Guarantor’sno longer sold by the Borrower or the Subsidiary Guarantors and which has been converted into Eligible Work-in-Process, which is (a) (i) located on property owned by the Borrower or the Subsidiary Guarantors, (ii) held by the Borrower or a Subsidiary Guarantor on properties leased by the Borrower or the Subsidiary Guarantors as applicableto which the Administrative Agent has received a waiver from the lessor of such property in form and substance satisfactory to the Administrative Agent, business; unless the relevant date of determination is on or prior to thirty (xi30) breaches any days after the Effective Date, (iii) not in the possession of the representations Borrower or warranties pertaining to Inventory set forth in the Loan Documents; (xii) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiii) Subsidiary Guarantors and is not covered in transit and (X) the Administrative Agent has received a waiver from the party in possession of such inventory in form and substance satisfactory to the Administrative Agent, (Y) the Administrative Agent has reduced the value of such inventory by casualty insurance maintained as required reserves reasonably deemed adequate by Section 5.04; the Administrative Agent, and in any event in an amount equal to all obligations of the Borrower and the Subsidiary Guarantors to the party in possession or (xivZ) consists the relevant date of custom made Inventory which determination is not saleable on or prior to any other customer thirty (30) days after the Effective Date or in ordinary course; (xviv) is in transit; or transit from one location in which the Administrative Agent had a perfected security interest in such inventory to a second location where the Administrative Agent has taken all steps necessary to obtain a perfected security interest in such inventory at such location, and has been in transit for a period of less than ten (xvi10) is subject days, and (b) as to which the Borrower or one of the Subsidiary Guarantors has title and the Administrative Agent has a valid and perfected first-priority security interest. Without limiting the generality of the foregoing, Eligible Work-in-Process shall not include work-in-process which the Administrative Agent reasonably deems to be obsolete or not marketable. Work-in-process immediately loses the status of Eligible Work-in-Process if and when the Borrower or one of the Subsidiary Guarantors sells it, otherwise passes title thereto, consumes it, or the Administrative Agent releases or transfers its security interest therein. Notwithstanding the foregoing, but without duplication, Eligible Work-in-Process shall be reduced by the amount of any specific reserves established by the Borrower with respect to any licensing arrangement Eligible Work-in-Process other than the effect LIFO reserve maintained by the Borrower in accordance with generally accepted accounting principles. EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of which would be Section 3(3) of ERISA maintained or contributed to limit by the ability of Collateral Agent, Borrower or any Person selling the Inventory on behalf of Collateral AgentERISA Affiliate, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent other than a Guaranteed Pension Plan or payment to the licensor or othera Multiemployer Plan. ENVIRONMENTAL LAWS. See Section 7.16(a).

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Collateral Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Collateral Agent reserves the right, at any time and from time to time after the Original Closing Restatement Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate Advance Rate with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Revolving Lenders in the case of adjustments, new criteria, changes in the applicable advance rate Advance Rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (i) the Collateral Agent, on behalf of Secured Parties, does not have a first priority and exclusive or, with respect to Inventory at a leased or subleased location otherwise meeting the eligibility requirements hereunder, superior perfected Lien on such Inventory; (ii) is not located on premises in the United States or Canada; (iii) (Aa) is located on premises stored at a location leased or subleased by Borrower or a Borrowing Base Guarantor, Loan Party unless the Collateral Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto or (Bb) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee or warehouseman waiver letter has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto, or (Cc) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver or subordination has been delivered to the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent have been established with respect thereto; provided, however, that in no event shall Eligible Inventory include any Inventory stored at a location owned, leased or subleased by a Loan Party where the aggregate value of such Inventory is equal to or less than $250,000 unless the Collateral Agent has given its prior consent thereto; (iv) is placed on consignment (other than Eligible Consigned Consignment Inventory); (v) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (vi) is to be returned to suppliers; (vii) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude mining supplies, work-in-process Inventory if it or replacement parts or is not excluded coal or other mineral rights before extraction unless the same is either As-Extracted Collateral (as defined in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)Security Agreement) or Eligible Pit Inventory; (xix) is not of a type held for sale in the ordinary course of any Borrower’s or any Borrowing Base Guarantor’s, as applicable, business; (xix) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiixi) consists of Hazardous Material or goods that can be transported or sold only with licenses that are not readily available; (xiiixii) is not covered by casualty insurance maintained as required by Section 5.045.04 (unless such Inventory is Coal); (xivxiii) consists of custom made is Inventory purchased from another Person (other than a Borrower) which is not saleable in the possession of a Borrower or has not been received by a Borrower or a customer of a Borrower (otherwise referred to any other customer or in ordinary course; (xv) is in as “brokered coal in-transit”); or (xvixiv) is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherother Person.

Eligible Inventory. For All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be "Eligible Inventory" for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Original Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, criteria or changes in the applicable advance rate rates or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: (ia) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the Collateral rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower's performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such InventoryPermitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof); (iib) (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (3.2), or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantorlocation, unless Agent has given its prior consent thereto and unless either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or (Biii) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter has been received by the Collateral Agent or (y) and Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (Civ) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent Agent, or (yv) Reserves reasonably satisfactory to is located at any site if the Administrative Agent have been established with respect theretoaggregate book value of Inventory at any such location is less than $100,000; (ivc) is placed on consignment or is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent's Liens have been perfected at origin and destination and Inventory in transit to a purchaser, which Inventory (other than i) is fully insured, (ii) is subject to a first priority security interest in and lien upon such goods in favor of Agent (except for any possessor lien upon such goods in the possession of a freight carrier or shipping company securing only the freight charges for the transportation of such goods to such Borrowers), (iii) if required by Agent, is evidenced or deliverable pursuant to documents, notices, instruments, statements and bills of lading that have been delivered to Agent or an agent acting on its behalf, and (iv) is otherwise deemed to be "Eligible Consigned Inventory)" hereunder; (vd) is covered by a negotiable document of title, unless such document has been delivered to the Collateral Agent with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause (iii) above has been complied withLenders; (vie) is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items or packing or shipping materials, manufacturing supplies or replacement parts (it being understood that Eligible Inventory shall not exclude supplies, work-in-process Inventory if it is not excluded in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)or replacement parts; (xg) consists of goods which have been returned by the buyer except for such goods which are in saleable "as new" condition in the ordinary course of business; (h) is not of a type held for sale in the ordinary course of such Borrower’s or any Borrowing Base Guarantor’s, as applicable, 's business; (xii) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances; (j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiik) consists of any costs associated with "freight-in" charges; (l) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) is not covered by casualty insurance maintained as required by Section 5.04; (xiv) consists of custom made Inventory which is not saleable reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvin) is subject otherwise unacceptable to any licensing arrangement the effect of which would be to limit the ability of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory Agent in enforcement of the Collateral Agent’s Liens, without further consent or payment to the licensor or otherits reasonable credit judgment.