Common use of Eligible Inventory Clause in Contracts

Eligible Inventory. Eligible Inventory" (a) shall be valued at the lesser of cost or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i) Debtor’s "work-in-process" inventory, supplies and packaging, consigned goods, Inventory located outside the United States of America or Canada, (ii) Inventory covered by or subject to a seller's right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventory.

Eligible Inventory. Inventory owned by a Borrower that is deemed by Agent, in its Permitted Discretion, to be Eligible Inventory" ; provided that, no Inventory shall be Eligible Inventory unless it (a) shall be valued is located at the lesser a Borrower’s principal place of cost business or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or any other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished facility storing cased goods inventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly and/or bulk wine that complies with all Debtor's such Borrower’s related representations and warranties to Bank set forth contained in this Agreement, the Security Agreement (b) is not used, returned, obsolete, spoiled, inadequately sealed, packaged or stored, or otherwise unmerchantable, consigned, demonstrative or custom inventory, supplies (other than bulk wine), packing or shipping materials, (c) is bulk wine at cost or wholesale “FOB” cased wine, that is not older than three years following December 31 of its vintage year for white wine and any other agreement(s) between Debtor and Bank, but excluding that is either (i) Debtor’s "work-in-process" inventory, supplies and packaging, consigned goods, Inventory located outside the United States not older than four years following December 31 of America its vintage year for red wine or Canada, (ii) Inventory covered by is four years or older following December 31 of its vintage year for red wine but does not exceed $5,000,000 in the aggregate in Value of such red wine; (d) is not held on consignment, nor subject to any deposit or down payment; (e) meets all standards imposed by any Governmental Authority; (f) conforms with the covenants and representations herein; (g) is subject to Agent’s duly perfected, first priority Lien, and no other Lien (other than (x) any Lien permitted pursuant to PACA or any other similar agricultural law or regulation with respect to which Agent has established a seller's Grower’s Reserve, (y) non-consensual Permitted Liens arising by operation of law which are junior to the Agent’s Lien, or (z) any other Lien with respect to which Agent has establish an appropriate reserve its Permitted Discretion); (h) is within the continental United States, is not in transit (except (x) between locations of Borrowers, or (y) to another location disclosed to Agent with respect to which Agent has received an appropriate Lien Waiver or established an appropriate reserve in its Permitted Discretion, and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts such Borrower’s or Agent’s right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession dispose of such Inventory, and (vii) Inventory that Bank, acting unless Agent has received an appropriate Lien Waiver or established an appropriate reserve in its sole discretionPermitted Discretion; (k) is not located on leased premises or in the possession of a warehouseman, after having notified Debtorprocessor, excludes. repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; (l) is reflected in the details of a current perpetual inventory report; or (m) if it is Inventory owned by a target acquired in connection with a Permitted Acquisition, an appraisal and field examination with respect to such Inventory have been completed and are reasonably satisfactory to Agent (which is at any time Eligible Inventory, but which subsequently fails appraisal and field examination may be conducted prior to meet any the closing of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventorysuch Permitted Acquisition).

Eligible Inventory. Unless stated otherwise in paragraph 13 below, "Eligible Inventory" (a) shall be valued at the lesser of cost or present market value of Debtor’s 's Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as ) determined in accordance with generally accepted accounting principles, consistently applied (“"GAAP”"), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “"work-in-process" or "raw materials” " or as “"finished goods inventory” " under and in accordance with GAAP, provided, however, that "work-in-process" advances based on Inventory shall not exceed $350,000, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i1) Debtor’s "work-in-process" inventory, supplies and packaging, consigned goods, Inventory inventory located outside the United States of America or Canada, (ii2) Inventory covered by or subject to a seller's right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii3) Inventory that Bank, acting in its sole reasonable discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventory.

Eligible Inventory. The second sentence of the definition of Eligible Inventory" (a) shall be valued at Inventory is hereby deleted and replaced with the lesser of cost or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i) Debtor’s following: "work-in-process" inventory, supplies and packaging, consigned goods, Inventory located outside the United States of America that a Revolving Loan Borrower has acquired in accordance with the terms of the purchase arrangements between such Revolving Loan Borrower and a supplier and as to which such Revolving Loan Borrower has obtained legal title and that would otherwise be determined by Lender to be Eligible Inventory in all respects which is in transit to the premises of a Customs Broker in the United States of America which is an Eligible Inventory Location or Canadasuch other Eligible Inventory Location in the United States of America; provided, that, (a) Lender has a first priority perfected security interest in and lien upon such Inventory, (b) Lender has possession of not less than two (2) of a total of three (3) originals of the documents of title with respect to such Inventory and all of the terms and conditions of Section 8 of the Twenty-Seventh Amendment to Loan Agreement, dated as of October 31, 2003, among Lender, Borrowers and Guarantors shall have been satisfied, (c) Lender shall have received (i) a Notification and Acknowledgment Agreement, duly authorized, executed and delivered by either or both of the Customs Broker and Freight Forwarder, as the case may be, handling the shipping and delivery of such Inventory, (ii) Inventory covered by or subject a copy of the certificate of marine cargo insurance in connection therewith in which it has been named as an additional insured and loss payee in a manner acceptable to a seller's right to repurchaseLender, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, and (iii) Inventory consisting a copy of raw materials or purchased parts not in saleable form or conditionthe invoice, packing slip and manifest with respect thereto, (ivd) defective such Inventory or Inventory under repairis not subject to any Letter of Credit Accommodation, (ve) Inventory not insured and/or without a lender's loss payable provision in favor the aggregate amount of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in the Value of such Inventory and permits Bank access to and possession of such Inventory, and (vii) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease deemed to be Eligible Inventory shall not at any time exceed $1,000,000, and (f) such Inventory shall be immediately deducted from the calculation of Eligible Inventorynot have been in transit for more than sixty (60) days."

Eligible Inventory. Inventory owned by Borrower that Agent, in its discretion, reasonably exercised, deems to be Eligible Inventory" . Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) shall be valued at the lesser of cost is finished goods (other than food, magazines or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”books), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i) Debtor’s "work-in-process" inventory, supplies packaging or shipping materials, labels, samples, display items, replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or downpayment; (c) is in new and packagingsaleable condition and is not damaged, consigned shopworn or otherwise unfit for sale; (d) is not slow-moving, defective, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, and does not constitute hazardous materials under any Environmental Law, and has not been produced in violation of the FLSA (as it may be reasonably determined by Agent) if such violation could reasonably be expected to result in any prohibition in the sale of such Inventory located outside by Borrower or Agent; (f) conforms with the covenants and representations herein; (g) is subject to Agent’s duly perfected, first priority Lien, and no other Lien; (h) is within the continental United States of America or Canada, is not in transit except between locations of Borrower, and is not consigned to any Person; (iii) Inventory covered by or is not subject to a seller's any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts Borrower’s or Agent’s right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession dispose of such Inventory, unless Agent has received an appropriate Lien Waiver; (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person (other than an Obligated Party), unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established, provided that in the case of leased locations, a Lien Waiver or an appropriate Rent and Charges Reserve will only be required for (i) the location in Van Nuys, California and (viiii) Inventory that Bankleased locations if, acting and only if, the lessor has, by law, a statutory landlord’s lien on any property of Borrower located at such premises; and (l) is reflected in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any the details of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventorya current perpetual inventory report.

Eligible Inventory. Inventory owned by a Borrowing Base Obligor that Agent, in its discretion, deems to be Eligible Inventory" . Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) shall be valued at the lesser of cost or present market value of Debtor’s Inventory is finished goods, “brite” goods (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to timefinished goods which have not been labeled), as determined in accordance with generally accepted accounting principlessemi-finished frozen goods or can, consistently applied can stock and plastic container raw materials (“GAAP”other than Cold Storage Pears), and as may be adjusted by Bank, in Bank's discretion, for age not work-in-process (other than “brite” goods and seasonality or other factors affecting the value of such Inventorysemi-finished frozen goods); and (b) shall mean all of Debtor's Inventory which is not held on consignment, nor subject to any deposit or down payment; (c) is in good and merchantable condition, free from all material defects, which saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving (i.e., older than two pack seasons), obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAPunmerchantable, and which does not constitute returned or repossessed goods, unless such goods are suitable for resale; (e) meets all standards imposed by any Governmental Authority, has not been acquired from a Person subject to any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein; (g) is subject to Agent’s duly perfected, first priority Lien, except a first priorityPermitted Lien; (h) is within the continental United States or Canada, properly perfected security interest is not in favor transit except between locations of BankBorrowing Base Obligors, and which strictly complies with all Debtor's representations and warranties is not consigned to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding Person; (i) Debtoris not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts such Borrowing Base Obligor’s "work-in-process" inventoryor Agent’s right to dispose of such Inventory, supplies unless Agent has received an appropriate Lien Waiver (other than in respect of Excluded License Agreements); (k) (i) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and packaging, consigned goods, Inventory located outside the United States of America or CanadaCharges Reserve has been established, (ii) Inventory covered is not located at a facility owned by or a Borrowing Base Obligor subject to a seller's right to repurchasemortgage unless the mortgagee of such Real Estate shall have entered into a Mortgagee Consent, or (iii) is located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or is located at a facility owned by a Borrowing Base Obligor but subject to a mortgage and for which a Lien Waiver or Mortgagee Consent, as applicable, has not been obtained, provided that the amount of Inventory that may be Eligible Inventory under this clause (iii) of this clause (k) will not at any consensual or nonconsensual lien or security interest (includingtime exceed 10% of all Inventory of the Borrowing Base Obligors in the aggregate, subject to the maintenance of Rent and Charges Reserves with respect thereto, it being understood, however, that the Agent anticipates, without limitationlimiting the generality of the Agent’s discretion with respect to the maintenance of additional Rent and Charges Reserves, purchase money security intereststhat the Rent and Charges Reserves will include an amount equal to the amount of rent, mortgage payments, fees and equivalent amounts that are payable by the Borrowing Base Obligors for a period of 90 days with respect to any location (A) other than referenced in this clause (iii) of this clause (k) and (B) for which the landlord, warehouseman or mortgagee with respect thereto has not waived or subordinated any rights it may have in the Collateral to the rights of the Agent; (l) has not been sold to any Borrowing Base Obligor; (m) was not purchased from a Person that has a pending PACA Claims asserted against a Borrowing Base Obligor or any Subsidiary at the time that the Eligible Inventory is being determined; and (n) is not subject to a Lien in favor of Bank, whether senior a seller of farm products or junior to Bank's security interest, (iii) Inventory consisting a secured creditor of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor seller of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, farm products pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible InventoryFood Security Act.

Eligible Inventory. With respect to S&H, finished goods owned by such Borrower; PROVIDED that Eligible Inventory" Inventory shall not include any inventory (ai) shall be valued at the lesser held on consignment, or not otherwise owned by such Borrower, or of cost a type no longer sold by such Borrower; (ii) which has been returned by a customer or present market value of Debtor’s Inventory is damaged or subject to any legal encumbrance other than Permitted Liens; (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (biii) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAP, and which the possession of such Borrower unless (A) such inventory is subject to a documentary letter of credit issued by a lender approved by the Administrative Agent and the Administrative Agent has possession of and a first priority, properly perfected security interest in favor the documents of Bank, and which strictly complies with all Debtor's representations and warranties title relating to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i) Debtor’s "work-in-process" such inventory, supplies and packaging, consigned goods, (B) such inventory is in transit from one Permitted Inventory located outside Location of such Borrower within the United States of America to another Permitted Inventory Location of such Borrower within the United States of America or Canada(C) the aggregate gross book value of such inventory does not exceed $6,000,000 with respect to inventory located at such Borrower's distribution center and warehouse located at 8145 ▇▇▇▇▇▇ ▇▇▇▇▇, Florence, Kentucky and operated by The Discovery Channel Store, Inc. pursuant to the Cooperation and Services Agreement between The Discovery Channel Store, Inc. and such Borrower, and $1,750,000 with respect to all other inventory locations and the Administrative Agent has received (iix) Inventory covered by or subject to a seller's right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement waiver in form and substance acceptable satisfactory to Bank is the Administrative Agent from the possessor of such inventory, (y) financing statements in place, pursuant form and substance satisfactory to which the Administrative Agent executed and delivered by such lessor, Borrower as secured party/bail▇▇ ▇▇▇ the possessor of such inventory as debtor/bailee, warehouseman or other third party acknowledges Bank's security interest for filing in such Inventory and permits Bank access to and possession of such Inventorythe appropriate jurisdictions PROVIDED, and (vii) Inventory HOWEVER, that Bank, acting the Administrative Agent may in its sole discretion, after having notified Debtorwaive the foregoing requirement with respect to financing statements, excludes. Inventory and (z) an assignment in form and substance satisfactory to the Administrative Agent by the secured party/bail▇▇ ▇▇ the Administrative Agent of the aforementioned financing statements; (iv) in which the Administrative Agent does not have a valid and perfected first priority security interest; (v) which has been shipped to a customer of such Borrower regardless of whether such shipment is on a consignment basis; (vi) which is not located at any time Eligible Inventorya Permitted Inventory Location of such Borrower within the United States of America, but unless (A) such inventory is subject to a documentary letter of credit issued by a lender approved by the Administrative Agent and the Administrative Agent has possession of and a first priority, perfected security interest in the documents of title relating to such inventory or (B) such inventory is in transit from one Permitted Inventory Location of such Borrower within the United States of America to another Permitted Inventory Location of such Borrower within the United States of America; (vii) which subsequently fails the Majority Lenders reasonably deem to meet any be obsolete or not marketable; (viii) which is located in California unless the Administrative Agent has received a legal opinion in form and substance satisfactory to the Administrative Agent that the Loan Documents comply with the provisions of ss.9102(5)(b) of the foregoing requirementsUniform Commercial Code as in effect in California, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation or (ix) which consists of Eligible Inventorylive plantings.

Eligible Inventory. Inventory owned by a Borrower that Lender, in its Permitted Discretion, deems to be Eligible Inventory" . Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) shall be valued at the lesser of cost is finished goods or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”)raw materials, and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i) Debtor’s "work-in-process" inventory, supplies packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or down payment; (c) is in new and packagingsaleable condition and is not damaged, consigned defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, Inventory located outside has not been acquired from an entity that is the target of any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms, in all material respects, with the covenants and representations herein; (g) is subject to Lender’s duly perfected, first priority Lien, and no other Lien other than Permitted Liens that do not have priority over the Lender’s Lien; (h) is within the continental United States of America or Canada, is not in transit except between locations of Borrowers, and is not consigned to any Person; (iii) Inventory covered by or is not subject to a seller's any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts such Borrower’s or Lender’s right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession dispose of such Inventory, unless Lender has received an appropriate Lien Waiver; (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; and (viil) Inventory that Bank, acting is reflected in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any the details of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventorya current perpetual inventory report.

Eligible Inventory. Based on the most recent Borrowing Base ------------------ Certificate delivered by Borrower to Revolving Credit Agent and on other information available to Revolving Credit Agent, Revolving Credit Agent shall in its sole discretion determine which Inventory of Borrower shall be "Eligible -------- Inventory" for purposes of this Agreement. Revolving Credit Agent reserves the --------- right, at any time and from time to time after the Closing Date, to adjust any such criteria, to establish new criteria and to adjust advance rates with to Eligible Inventory in its sole discretion, subject to the approval of Requisite Lenders in the case of adjustments, or new criteria or changes in advance rates which have the effect of making more credit available. Without limiting the generality of the foregoing, no Inventory shall be Eligible Inventory unless: (a) shall be valued at the lesser of cost it is raw materials or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and finished goods; (b) shall mean all of Debtor's Inventory which it is in good good, new and merchantable saleable condition, free from all material defects, which ; (c) it is not slow-moving, obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under unmerchantable; (d) it meets all standards imposed by any Governmental Authority; (e) it conforms in all respects to the warranties and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement; (f) it is owned by Borrower and is at all times subject to Agent's duly perfected, first priority security interest and no other Lien except a Permitted Lien; (g) it is in Borrower's possession and control, situated at a location in compliance with the Security Agreement and any other agreement(sis not in transit or outside the continental United States; (h) between Debtor it is not covered by a negotiable document of title, unless such document has been delivered to Agent with all necessary endorsements, free and Bank, but excluding clear of all Liens except those in favor of Agent and Lenders; (i) Debtor’s "work-in-process" inventory, supplies and packaging, consigned goods, Inventory located outside it does not consist of goods which have been returned by the United States buyer; (j) it consists of America goods held for sale or Canada, utilized in the ordinary course of Borrower's business; and (iik) Inventory it is covered by or subject to a seller's right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance casualty insurance acceptable to Bank is in place, pursuant Agent and to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible InventoryRevolving Credit Agent.

Eligible Inventory. Unless stated otherwise in paragraph 13 below, "Eligible Inventory" (a) shall be valued at the lesser of the cost or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as ) determined in accordance with generally accepted accounting principles, consistently applied (“"GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; ") and (b) shall mean all of only the Debtor's Inventory which is inventory of spas (“Spas”) that are in good and merchantable condition, free from all material defects, which is are not obsolete or discontinued, which would be properly classified as “raw materials” or as “"finished goods inventory” " under and in accordance with GAAP, and are located at Debtor’s facilities (“Facilities”) located in Miami, Jacksonville, Melbourne, and Tampa, Florida and which is are subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i1) Debtor’s "work-in-process" process inventory, supplies and packaging, consigned goods, Inventory inventory located outside the United States of America or Canada, (ii2) Inventory covered by or subject to a seller's right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii3) Inventory consisting of raw materials or purchased parts all other inventory at the Facilities, including, but not in saleable form or conditionlimited to, (iv) defective Inventory or Inventory under repairtubs, (v) Inventory Vita Bath products, accessories, parts, and all other inventory that could not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventorybe classified as Spas, and (vii4) Inventory inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventory.

Eligible Inventory. All Eligible Inventory is of good and merchantable quality, free from defects. As to each item of Eligible Inventory" , such Inventory is (a) shall be valued at the lesser owned by Borrower free and clear of cost or present market value all Liens other than Liens in favor of Debtor’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time to time), as determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and Lender, (b) shall mean all either located at one of Debtor's the locations set forth on Schedule E-1 or in transit from one such location to another such location, provided, however, that in the case of Eligible In-Transit Inventory, such Inventory which (i) is currently in good transit from a location not set forth on Schedule E-1 to a location on Schedule E-1, (ii) title to such Inventory has passed to Borrower, and merchantable condition(iii) such Inventory otherwise conforms with the definition of Eligible In-Transit Inventory, (c) not located on real property leased by Borrower, free from all material defectsin a contract warehouse, which or other location that is not obsolete or discontinuedowned by Borrower, which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAPeach case, and which is unless subject to a first priorityCollateral Access Agreement executed by the lessor, properly perfected security interest in favor of Bankthe warehouseman, or other third party, as the case may be, and which strictly complies with all Debtorunless segregated or otherwise separately identifiable from goods of others, if any, stored on the premises, (d) not goods that have been returned or rejected by Borrower's representations and warranties to Bank set forth in this Agreementcustomers, (e) not goods that are obsolete or slow moving, the Security Agreement and any other agreement(s) between Debtor and Bankrestrictive or custom items, but excluding (i) Debtor’s "work-in-process" inventory, or that constitute spare parts, packaging and shipping materials, supplies used or consumed in Borrower's business, ▇▇▇▇ and packaging, consigned hold goods, defective goods, "seconds," or Inventory acquired on consignment, and (f) not subject to the rights of other Persons (including rights associated with trademarks, patents, or copyrights) that would expose Lender to any liability (including the payment of any royalty or other sum) or prevent the sale of such goods, as determined by Lender in its Permitted Discretion; provided that up to $500,000 (of value—which shall be the lower of cost or fair market value) of Inventory on consignment with Atlantic Research Corporation shall be included in Eligible Inventory if (x) it satisfies the criteria for Eligible Inventory set forth in the definition of Eligible Inventory (other than such consigned inventory is not located outside at one of the United States of America or Canada, locations set forth on Schedule E-1) and (ii) Inventory covered by or subject to a seller's right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor Borrower has complied with the provisions of Bank, whether senior or junior to Bank's security interestSection 9114(1)(a), (iii) Inventory consisting of raw materials or purchased parts not in saleable form or conditionb), (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventoryc), and (viid) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirementsCode (as in effect prior to July 1, shall forthwith cease to be Eligible Inventory 2001), or Section 9324(b) of the Code (as in effect on and shall be immediately deducted from the calculation of Eligible Inventoryafter July 1, 2001).

Eligible Inventory. Unless stated otherwise in paragraph 13 below, “Eligible Inventory" ” (a) shall be valued at the lesser of the cost or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial CodePersonal Property Security Act (Ontario), as amended and in effect from time to time), as ) determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's ’s Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as ”, “finished goods inventoryInventory”, or “work-in-process Inventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i1) Debtor’s "work-in-process" inventory, supplies and packaging, consigned goods, Inventory located outside the United States of America or Canada, (ii2) Inventory covered by or subject to a seller's ’s right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's ’s security interest, (iii3) Inventory consisting subject to creditors’ rights under Section 81.1 of raw materials or purchased parts not in saleable form or conditionthe Bankruptcy and Insolvency Act (Canada), (iv) defective Inventory or Inventory under repair, (v4) Inventory stored, warehoused or located at a site for which Debtor has not insured and/or without provided to Bank a lender's loss payable provision in favor of Banklandlord, (vi) Inventory located bailee or stored at leased premises mortgagee waiver or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii5) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventory.

Eligible Inventory. All of the inventory owned by the Borrower and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Bank shall be “Eligible Inventory" ” for purposes of this Agreement, Eligible Inventory shall not include any Inventory of Borrower that: (a) shall be valued at is not owned by Borrower free and clear of all liens and rights of any other person (including the lesser rights of cost or present market value a purchaser that has made progress payments and the rights of Debtora surety that has issued a bond to assure Borrower’s Inventory (as defined in the Michigan Uniform Commercial Code, as amended and in effect from time performance with respect to timethat Inventory), as determined except the liens in accordance with generally accepted accounting principles, consistently applied (“GAAP”), favor of Bank and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and Permitted Liens; (b) shall mean all (i) is located on premises owned or leased by Borrower and is not encumbered by a mortgage or deed of Debtor's Inventory which trust, in each case in favor of Lender, or (ii) is located at an owned or leased location subject to a mortgage in favor of a person other than Lender; (c) is placed on consignment or is in good and merchantable conditiontransit; (d) obsolete, free from all material defectsslow moving (in excess of one year’s supply), unsalable, damaged or unfit for sale; however, Reserve Seed Inventory that otherwise qualifies shall be deemed Eligible Inventory; (e) consists of display items or packing or shipping materials, manufacturing supplies, stores or replacement parts; (f) consists of goods which have been returned by the buyer; (g) is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventory” under and of a type held for sale in accordance with GAAP, and which the ordinary course of Borrower’s business; (h) is not subject to a first priority, properly perfected security interest priority lien in favor of Bank, and which strictly complies with all Debtor's Lender; (i) breaches any of the representations and or warranties pertaining to Bank Inventory set forth in this Agreement, the Security Agreement and Loan Documents in any other agreement(smaterial respect; (j) between Debtor and Bank, but excluding (i) Debtor’s "workconsists of any costs associated with “freight-in-process" inventory” charges, supplies except those charges that are customary in, and packagingconsistent with, consigned goods, Inventory located outside the United States Borrower’s historical accounting practices; (k) consists of America Hazardous Materials or Canada, goods that can be transported or sold only with licenses that are not readily available; (iil) Inventory is not covered by or casualty insurance reasonably acceptable to Lender; or (m) is subject to a seller's right to repurchase, any patent or any consensual trademark license requiring the payment of royalties or nonconsensual lien fees or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's security interest, (iii) Inventory consisting of raw materials or purchased parts not in saleable form or condition, (iv) defective Inventory or Inventory under repair, (v) Inventory not insured and/or without a lender's loss payable provision in favor of Bank, (vi) Inventory located or stored at leased premises or with a bailee, warehouseman or other third party without Bank's prior written requiring the consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventorylicensor for a sale thereof by Lender which has not been obtained.

Eligible Inventory. Unless stated otherwise in paragraph 13 below, “Eligible Inventory" ” (a) shall be valued at the lesser of the cost or present market value of Debtor’s Inventory (as defined in the Michigan Uniform Commercial CodePersonal Property Security Act (Ontario), as amended and in effect from time to time), as ) determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”), and as may be adjusted by Bank, in Bank's discretion, for age and seasonality or other factors affecting the value of such Inventory; and (b) shall mean all of Debtor's ’s Inventory which is in good and merchantable condition, free from all material defects, which is not obsolete or discontinued, which would be properly classified as “raw materials” or as “finished goods inventoryInventory” under and in accordance with GAAP, and which is subject to a first priority, properly perfected security interest in favor of Bank, and which strictly complies with all Debtor's representations and warranties to Bank set forth in this Agreement, the Security Agreement and any other agreement(s) between Debtor and Bank, but excluding (i1) Debtor’s "work-in-process" inventory, supplies and packagingprocess Inventory, consigned goods, Inventory inventory located outside the United States of America or Canada, (ii2) Inventory covered by or subject to a seller's ’s right to repurchase, or any consensual or nonconsensual lien or security interest (including, without limitation, purchase money security interests) other than in favor of Bank, whether senior or junior to Bank's ’s security interest, (iii3) Inventory consisting subject to creditors’ rights under Section 81.1 of raw materials or purchased parts not in saleable form or conditionthe Bankruptcy and Insolvency Act (Canada), (iv) defective Inventory or Inventory under repair, (v4) Inventory stored, warehoused or located at a site for which Debtor has not insured and/or without provided to Bank a lender's loss payable provision in favor of Banklandlord, (vi) Inventory located bailee or stored at leased premises mortgagee waiver or with a bailee, warehouseman or other third party without Bank's prior written consent and unless a lessor's agreement, collateral access agreement, bailment agreement or other similar agreement in form and substance acceptable to Bank is in place, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank's security interest in such Inventory and permits Bank access to and possession of such Inventory, and (vii5) Inventory that Bank, acting in its sole discretion, after having notified Debtor, excludes. Inventory which is at any time Eligible Inventory, but which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be Eligible Inventory and shall be immediately deducted from the calculation of Eligible Inventory.