Modifications of Eligibility Criteria. Administrative Agents retain the right to (a) establish Contra Reserves; (b) from time to time, after reasonable notice to Reseller, establish reserves against the Borrowing Base in such amounts as Administrative Agents shall in the exercise of their Permitted Discretion deem necessary or appropriate, with respect to (i) wages owed to Reseller’s non-exempt employees pursuant to the Fair Labor Standards Act, as amended, (ii) material changes in the levels of price adjustments, damages, unearned discounts, returned products or other matters for which credit memoranda are issued in the ordinary course of Reseller’s business; (iii) material increases in dilution related to Accounts as determined in the most recent audit conducted by Administrative Agents (provided that, to the extent reserves have already been established under clause (ii) above relating to dilution, such reserves shall not be taken under this clause (ii), and provided further that the determination of a material increase in dilution shall be in Administrative Agents’ sole discretion) and (iv) slow moving Inventory; and (c) if a material adverse change in the value of the Collateral occurs that comprises the Borrowing Base, and, to the extent not already reflected in the computation of the Borrowing Base, to modify any standards of eligibility set forth in the definition of “Eligible Account” in Section 3.1.6.
