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 Based on the most recent Borrowing Base Certificate delivered by the Borrower to the Agent and on other information available to the Agent, the Agent shall in its Credit Judgment determine which Inventory of the Borrower shall be deemed to be “Eligible Inventory” of the Borrower for purposes of this Agreementdetermining the amounts, 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 Dateif any, 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 be advanced to the approval of Borrower under the Supermajority Lenders in Revolving Credit Loan and the case of adjustmentsSwing Line Loan. Without limiting the foregoing, 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 thatthe Borrower: (i) that is not owned by the Collateral 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 the Borrower’s performance with respect to that Inventory), except the Liens in favor of the Agent, on behalf of Secured Parties, does not have a first priority itself and exclusive perfected Lien on such Inventorythe Lenders; (ii) that is (i) not located on premises in United States owned, leased or Canada; (iii) (A) is located on premises leased operated by the Borrower or (ii) stored with a Borrowing Base Guarantorbailee, unless warehouseman or similar Person, unless, commencing ninety (90) days after the Effective Date, either, at Borrower’s election, (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 100,000; (xiii) a reasonably satisfactory mortgagee waiver has been delivered to that is placed on consignment, is in transit or is otherwise not located on premises owned, leased or operated by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoBorrower; (iv) is placed on consignment (other than Eligible Consigned Inventory); (v) that 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 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; (viv) that in the Agent’s reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged damaged, imperfect or unfit for sale; (viiivi) is slow moving (in excess of 1-year supply); (ix) that consists of display items, samples or promotional materials, 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; (xvii) that consists of goods which have been returned by the buyer; (viii) that is not of a type held for sale in the ordinary course of the Borrower’s business; (ix) that consists of discontinued or any Borrowing Base Guarantor’sslow-moving items (over 90 days old), goods of substandard quality or goods classified as applicable, business“clearance inventory”; (x) that is xxxx-and-hold inventory or that is evidenced by an account; (xi) breaches as to which the Agent’s Lien, on behalf of itself and the Lenders, therein is not a first priority perfected Lien; (xii) 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; (xiixiii) that consists of any costs associated with “freight-in” charges; (xiv) that consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available;; or (xiiixv) that 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 acceptable to the licensor or otherAgent.

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 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 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 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 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 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 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 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 xxxx 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 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 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 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 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 Xxxxxxx & Xxxxxxx 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 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 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 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 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; (iii) 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 location, unless Agent (or, in the case of Canadian Borrower or a Borrowing Base Guarantorand its Wholly-Owned Subsidiaries, Canadian 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 Agentsuch Agent in accordance with Section 2.6, or (2y) 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 Borrower’s or any Borrowing Base Guarantor’s, as applicable, such Credit Party's 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 On any date of determination of the Borrowing Base, all of the Inventory owned by Borrower and each Borrowing Base Guarantor, as applicable, and reflected in the most recent Borrowing Base Certificate delivered by Borrower to the Co-Collateral Agents and Administrative 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 Administrative Agent Co-Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmenttheir Permitted 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 Inventory, in its reasonable credit judgmentPermitted Discretion, subject to the approval terms of the Supermajority Lenders Section 11.05 in the case of adjustments, new criteria, criteria or 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 Administrative Agent, on behalf of Secured Parties, does not have a first priority and exclusive perfected Lien on such InventoryInventory and such Inventory shall be free and clear of all Liens other than Permitted Collateral Liens; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased stored at a location not owned by Borrower or a Borrowing Base Guarantor, unless (x) at such location Guarantor where the aggregate value of Inventory exceeds $250,000, 750,000 unless Administrative Agent has given its prior consent thereto and (y) unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Personal Property Collateral Access Agreement has been delivered to Administrative Agent (it being agreed that the Collateral Agentexisting Landlord Waiver and Consent Agreements listed on Schedule 1.01D, copies of which have been delivered to the Agents, are satisfactory with respect to locations covered by such agreements), or (2y) Reserves reasonably satisfactory to the Administrative Agent but in no event to exceed the aggregate of three (3) months’ rent with respect to each such location have been established with respect thereto or (B) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 750,000 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 but in no event to exceed the aggregate of three (3) months’ rent with respect to each such location 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 Administrative Agent where the aggregate value of Inventory exceeds $250,000 750,000 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 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 Administrative 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 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; (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 or replacement parts it is not excluded being understood that nothing in accordance with other criteria set forth herein, unless otherwise determined by the Administrative Agent this clause (vii) shall be construed to exclude pulp and chemicals (provided such chemicals are sealed in its reasonable credit judgment)unopened containers) from Eligible Inventory; (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 Credit 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 5.045.05; (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 Administrative Agent, or any Person selling the Inventory on behalf of Collateral Administrative Agent, to sell such Inventory in enforcement of the Collateral Administrative Agent’s Liens, without further consent or payment to the licensor or other; or (xiii) is not located in the United States of America or Canada or was previously owned by the Canadian Subsidiary.

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 which has been converted into Eligible Raw Materials, 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 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 raw materials in form and substance satisfactory to the approval Administrative Agent, (Y) the Administrative Agent has reduced the value of such raw materials 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 of determination 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 raw materials to a second location where the Administrative Agent has taken all steps necessary to obtain a perfected security interest in raw materials at such location, and has been in transit for a period of less than ten (10) days, (b) 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 (c) 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 work-in-process in form and substance satisfactory to the Administrative Agent, (Y) the Administrative Agent has reduced the value of such work-in-process 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 work-in-process to a second location where the Administrative Agent has taken all steps necessary to obtain a perfected security interest in such work-in-process 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 (S)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 (S)7.17(a). EPA. See (S)7.17.

Eligible Inventory. For Based on the most recent 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 criteria set forth belowsuch criteria, 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 thatBorrower: (ia) that 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), except the Liens in favor of Collateral Agent, on behalf of Secured Partiesitself, does not have a first priority Agent and exclusive perfected Lien on such InventoryLenders; (b) that is (i) not located on premises owned, leased or operated by such Borrower or (ii) is not located on premises in United States stored with a bailee, warehouseman or Canada; (iii) (A) is located on premises leased by Borrower 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 thereto100,000; (ivc) that is placed on consignment (other than Eligible Consigned Inventoryconsignment, is in transit or is otherwise not located on premises owned or leased by such Borrower, provided that, if a bailee letter satisfactory to Agent has been provided by Liposome and Xxxxxxxxxx Healthcare Services Inc. with respect to Inventory of Liposome located at Xxxxxxxxxx Healthcare Services Inc.'s facility at 0 Xxxxxxx Xxxxxx, New Castle, Delaware, such Inventory shall not be deemed to be ineligible pursuant to this Section 1.6(c); (vd) 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; (vie) that in Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viiif) is slow moving (in excess of 1-year supply); (ix) that 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) that consists of goods which have been returned by the buyer; (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 Collateral 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 DocumentsBorrowers 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 5.04acceptable to Agent; (xivn) that consists of custom made Inventory goods which is are not saleable authorized (pursuant to any other customer applicable law, regulation, expiration date, court order or in ordinary course; (xvinjunction, administrative order or otherwise) is in transitto be sold, used or distributed after a period of one year from the date of the most recent Borrowing Base Certificate delivered to Agent pursuant to the terms hereof; 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 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 criteria, to adjust advance rates, to establish Reserves, and to adjust the applicable advance rate modify Reserves 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 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 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 100,000, or (xv) is located at any outside processing facility or is otherwise in the custody of third parties for processing or manufacture, including any Inventory that, upon its sale or delivery, would constitute an Eligible Unbilled Account, unless, with respect to such Inventory that is in the custody of the entity to be created in accordance with the transaction described in Disclosure Schedule (6.2) for processing at Itron's facility located at E. 00000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx, (A) such entity shall have executed a reasonably satisfactory mortgagee waiver has been delivered bailee letter in form and substance acceptable to Agent, (B) such Inventory shall be segregated from the other Inventory of such entity, and (C) such Borrower shall have complied with such other criteria as Agent may establish from time to time in its reasonable credit judgment; provided, that Inventory that otherwise complies with the criteria set forth in clauses (A) through (C) of this clause (v) shall only constitute Eligible Inventory to the Collateral Agent or (y) Reserves reasonably satisfactory extent that the book value of such Inventory, when added to the Administrative Agent have been established with respect theretobook value of all other Inventory that constitutes Eligible Inventory pursuant to such criteria, does not exceed $10,000,000; (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 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 items, samples items or packing or shipping materials, manufacturing supplies supplies, items used for repairs or replacement parts (it being understood that Eligible Inventory shall not exclude maintenance or 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)Inventory; (xg) consists of goods that have been returned by the buyer, unless such goods are inspected by such Borrower and returned unopened in their original packaging; (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) 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; (xivn) is subject to licensing or distribution agreements unless Agent has obtained all consents, approvals and other documents required, in its 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; (o) consists of custom made Inventory which is not saleable goods delivered by such Borrower pursuant to any other customer the Duquesne Agreement, the Houston Agreement or in ordinary course; (xv) is in transitthe Philadelphia Agreement; 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 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 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 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 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. In addition, the applicable Collateral Agents and the Canadian Administrative Agent reserves reserve the right, upon two (2) Business Day’s prior written notice to the Administrative 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 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. 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; (ii) is not located on premises in United States or Canada; (iii) (A1) is located on premises stored at a 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) xxxx 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 All of the Inventory owned by each Credit Party and properly reflected as “Eligible Inventory”, or “Eligible In-Transit Inventory” in the most recent Borrowing Base Certificate delivered by Borrower Representative to Agent shall Table of Contents be “Eligible Inventory” or “Eligible In-Transit Inventory”, as applicable for purposes of this Agreement, Eligible Inventory shall exclude except any Inventory to which any of the exclusionary criteria set forth below or in the component definitions herein 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 Effective Date, to adjust any of the applicable criteria set forth below, and to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, and/or Eligible In-Transit Inventory in each case in its reasonable credit judgmentPermitted Discretion, subject to the approval of the Supermajority Required Lenders in the case of adjustments, adjustments or new criteria, changes in the applicable advance rate or the elimination of Reserves which criteria that have the effect of making more credit availableincreasing the Borrowing Base. Eligible Inventory shall not include any the following Inventory of Borrower or any Borrowing Base Guarantor a Credit Party that: (a) is not owned by such Credit Party 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 Credit Party’s performance with respect to that Inventory), except (i) Qualified Liens described in clause (iv) of the Collateral Agent, on behalf definition thereof (provided that Reserves may be established with respect thereto in accordance with this Agreement) and (ii) Permitted Liens in favor of Secured Parties, does not have a first priority landlords and exclusive perfected Lien on such Inventorybailees (provided that Reserves may be established with respect thereto in accordance with this Agreement); (iib) (i) is not located on premises owned, leased or rented by such Credit Party and set forth in United States Schedule 3.21, such schedule to be updated from time to time, or Canada; (iii) (Aii) is located on premises stored at a leased by Borrower or a Borrowing Base Guarantor, unless location either (x) at such location the aggregate value of Inventory exceeds $250,000, and (y) either (1) with respect to which a reasonably satisfactory Landlord Lien Waiver and Access Agreement collateral access agreement has been delivered to the Collateral Agent, or (2y) Reserves reasonably satisfactory to the Administrative Agent have been may be established with respect thereto in accordance with this Agreement 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 may be established with respect theretothereto in accordance with this Agreement, 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 placed, purchased or sold on consignment (other than Eligible Consigned Inventory)Inventory up to an aggregate maximum amount of $2,000,000) or is in transit, except for Inventory in transit between locations of Credit Parties as to which Agent’s Liens have been perfected at origin and destination, and except for Eligible In-Transit Inventory up to an aggregate maximum amount of $5,000,000; (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 Qualified Liens described in favor clause (iv) of the Collateral Agent and the Lenders and landlords, carriers, bailees and warehousemen if clause definition thereof (iii) above has been complied withprovided that Reserves may be established with respect thereto in accordance with this Agreement); (vi) is to be returned to suppliers; (viie) is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year two year’s supply), unsalable, unrentable, shopworn, seconds, damaged, defective, unfit for sale, is being repaired, is not of good or merchantable quality or does not meet all standards imposed Table of Contents by any Governmental Authority having regulatory authority over such goods, their use, lease or sale; (ixf) consists of display items, samples items or packing or shipping materials, parts, 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 hereinInventory, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)replacement parts, prototypes or consists of unfinished goods; (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 Credit Party’s or any Borrowing Base Guarantor’s, as applicable, business; (xii) breaches is not subject to a first priority lien in favor of Agent on behalf of itself and Secured Party, subject to (i) Qualified Liens described in clause (iv) of the definition thereof (provided that Reserves may be established with respect thereto in accordance with this Agreement) and (ii) Permitted Liens as set forth in clause (d) of subsection 5.1 (provided that Reserves may be established with respect thereto in accordance with this Agreement); (j) does not conform to 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 required by Section 5.04the Loan Documents; (xiv) consists of custom made Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvim) is subject to any licensing arrangement Patent or Trademark IP 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; or (n) in the case of an Australian Credit Party, without further consent which does not meet all standards imposed by any Australian federal or payment state government authority, including relating to the licensor its production, acquisition or otherimportation for inventory located in Australia or which does not consist of raw materials or finished goods for inventory located in Australia.

Eligible Inventory. For purposes of this AgreementFinished goods, Eligible Inventory shall exclude work in progress and raw materials (including saleable scrap) owned by 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. Borrower (other than Metalsco); provided that Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor that: inventory (i) the Collateral Agentwhich constitute stores and supplies, on behalf of Secured Parties, does not have a first priority and exclusive perfected Lien on such Inventory; (ii) is held on consignment, or not located on premises in United States otherwise owned by such Borrower, or Canada; of a type no longer sold by such Borrower, (iii) which has been returned by a customer or is damaged or subject to any legal encumbrance other than Permitted Liens, (iv) which is not in the possession or control of such Borrower or Approved Party, at Permitted Inventory Locations unless it is (A) is located on premises leased by Borrower or a Borrowing Base Guarantorin transit from one Permitted Inventory Location within the United States of America to another Permitted Inventory Location within the United States of America, 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 In-Transit Alumina, (v) as to which either (A) appropriate UCC financing statements showing such Borrower as debtor and the Agent as secured party have not been filed in the proper filing office or offices in order to provide the Agent with a bailee valid and perfected first priority security interest therein or warehouseman where (B) all documents of title relating to such Inventory have been consigned to the aggregate value Agent in a manner reasonably acceptable to the Agent and the Agent or an Approved Customs Broker is in possession of Inventory exceeds $250,000 unless either all documents of title relating to such goods, (xvi) a reasonably satisfactory, acknowledged bailee waiver letter which has been received by the Collateral Agent or (y) Reserves reasonably satisfactory shipped to the Administrative Agent have been established with respect theretoa customer of such Borrower regardless of whether such shipment is on a consignment basis, 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) which is obsoletenot located within the United States of America, unsalable, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (any inventory located at the Hawesville Facility, unless, the Agent has received a Non-Setoff Agreement in excess the form of 1-year supply); Exhibit K hereto or (ix) consists which the Agent reasonably deems to be obsolete or not marketable. Employee Benefit Plan. Any employee benefit plan within the meaning of display items, samples ss.3(3) of ERISA maintained 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 contributed to 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, Borrowers 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 ss.7.18(a). EPA. See ss.7.18(b).

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 may, in its Reasonable Credit Judgment, establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmenttime. In addition, the Administrative Collateral Agent reserves the rightmay, in its Reasonable Credit Judgment, 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 or 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 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 in its Reasonable Credit Judgment shall have been established with respect thereto or thereto, (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 in its Reasonable Credit Judgment shall 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 in its Reasonable Credit Judgment shall 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 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 DocumentsDocuments in any material respect (unless such representation or warranty contains a standard of materiality, in which case any breach of such representation or warranty shall render such Inventory ineligible); (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 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 otherother Person.

Eligible Inventory. For All of the Inventory owned by the Borrower Parties 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 its reasonable credit judgmentjudgment reflecting changes in the salability or realization values of Inventory arising or discovered by Agent after the Closing Date, subject to the approval of the Agent and 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 Party that: (ia) is not owned by such Borrower 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 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 Liens in favor of the Term Loan Agent, and exclusive perfected Lien on such InventoryPermitted Liens (subject to Reserves established by Agent in its reasonable discretion); (iib) (i) is not located on premises in United States owned, leased or Canada; rented by such Borrower Party and set forth on Schedule 3.13, or (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 (other than Eligible Consigned Inventory)x) between domestic locations of Credit Parties as to which Agent’s Liens have been perfected at origin and destination and (y) to a domestic location of a customer so long as (1) the freight on such shipment has been paid, (2) the title to such Inventory has not passed to such customer and (3) as to which Agent’s Liens have been perfected; (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 or unfit for sale, but only to the extent that any such Inventory has not been effectively removed from the Borrowing Base in accordance with the calculation of Net Orderly Liquidation Value; (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 or replacement parts; (g) consists of goods which have been returned by the buyer (other than goods that are undamaged and resalable in such Borrower Party’s normal course of business without any repackaging (other than minor repackaging in accordance with other criteria set forth hereincustomer requirements, unless otherwise determined by the Administrative Agent cost of which is minimal and in its reasonable credit judgmentthe ordinary course of such Borrower Party’s business)); (xh) is not of a type held for sale in the ordinary course of Borrowersuch Borrower 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 Liens as set forth in clause (e) of the definition thereof (subject to reserves satisfactory to Agent) and Prior Statutory Claims; (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 to any licensing arrangement patent or trademark license requiring the effect payment of which would be to limit royalties or fees (other than with respect royalties or fees that are (i) payable solely after the ability sale of Collateral Agent, or any Person selling the Inventory on behalf of Collateral Agent, to sell such Inventory in enforcement and (ii) constitute unsecured claims against the applicable Borrower Party) or requiring the 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 each Borrower to Lender and on other information available to Lender, Lender 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 Lender 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 Lender 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 thatBorrower: (ia) that 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 and exclusive perfected Lien on such InventoryLender; (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 Lender 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 Lender, or (y) Reserves reasonably satisfactory to the Administrative Agent Lender 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 50,000 at all times during the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect theretoyear; (ivc) that is placed on consignment (other than Eligible Consigned Inventory)consignment, is in transit or is otherwise not located on premises owned or leased by such Borrower; (vd) 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 withLender; (vie) that in Lender's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viiif) is slow moving (in excess of 1-year supply); (ix) that consists of display items, samples items or packing or shipping materialsmaterials (other than commodity packaging acceptable to Lender in its discretion in an amount not to exceed $500,000 in the aggregate) manufacturing supplies, 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)or replacement parts; (xg) that consists of goods which have been returned by the buyer; (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 Lender's Lien 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 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 5.04; (xiv) consists of custom made Inventory which is not saleable acceptable to any other customer or in ordinary course; (xv) is in transitLender; or (xvim) 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 Lender 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 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 and Co-Collateral Agent shall have the right to establish, modify modify, or eliminate Reserves against Eligible Inventory from time to time in its their reasonable credit judgment. In addition, the Administrative Agent reserves and Co-Collateral Agent reserve 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, below and to establish new criteria and to adjust the applicable advance rate rates with respect to Eligible Inventory, Inventory in its their reasonable credit judgmentjudgment reflecting changes in the salability or realization values of Inventory arising or discovered by Agent and Co-Collateral Agent after the Restatement Date, subject to the approval of the Supermajority Requisite 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: (a) 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), except (i) the Collateral 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 (ii) Liens described in clauses (a) or (e) of the definition of Permitted Encumbrances; (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 (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; obsolete, slow moving (vii) is obsoletein excess of one year’s supply, excluding new products), 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 defective 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 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 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 (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 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 purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgmenttheir Permitted Discretion. In addition, the Collateral Agents and 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 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 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, that any reduction in the applicable advance rate with respect to Eligible Inventory shall require the consent of the Administrative Borrower. Eligible Inventory shall not include any Inventory of Borrower US Borrowers or any US Borrowing Base Guarantor that: (i) the applicable Collateral AgentAgents, on behalf of Secured Parties, does do not have a first priority and exclusive perfected Lien on such 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 rented location where the aggregate value of 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 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 US 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 any of the Collateral Agents and the Senior Note Collateral Agent where the aggregate value of 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 US 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 US Borrower or US Borrowing Base Guarantor as consignee or (other than Eligible Consigned 2) is placed on consignment by any US Borrower or US Borrowing Base Guarantor as consignor with any third party as consignee, unless a valid consignment agreement which is reasonably satisfactory to applicable Collateral Agents 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 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, 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 hereinInventory, unless otherwise determined by the Administrative Agent in its reasonable credit judgment)replacement parts or spare parts; (xviii) is not of a type finished goods held for sale in the ordinary course of US Borrower’s or any US 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 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 US Borrower’s business; (xiii) xxxx and hold goods; (xiv) consists of custom made Inventory which is not saleable to any other customer unserviceable or in ordinary courseslow moving 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 Inventory on behalf of such Collateral Agent, to sell such 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 Borrower to Administrative Agent and on other information available to it, Administrative Agent shall in its reasonable credit judgment determine which Inventory of Borrower, Heartland or other Guarantor (other than Holdings) shall not constitute "Eligible Inventory" for purposes of this Agreement. In determining whether any particular Inventory constitutes Eligible Inventory, Eligible Inventory Administrative Agent shall exclude not include any such Inventory to which any of the exclusionary criteria set forth below appliesapplies unless otherwise approved in writing by Administrative Agent. 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, Inventory in its reasonable credit judgment, subject to the approval of the Supermajority Requisite 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 availableavailable in excess of $3,000,000 of additional credit. Eligible Inventory shall not include any Inventory of Borrower Borrower, Heartland or any Borrowing Base other Guarantor (other than Holdings) unless otherwise approved in writing by Administrative Agent 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 Administrative Agent, on behalf of Secured Partiesitself, does not have a first priority Documentation Agent 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, Credit Party 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 other than with respect to Heartland, 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 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) in Administrative Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for salesale to the extent not previously covered by reserves on such Credit Party's balance sheet; (viii) is slow moving (in excess of 1-year supply); (ixf) consists of display items, samples items (excluding Heartland display items and other Inventory that are or will be for sale in the ordinary course of business) or packing or shipping materials, manufacturing supplies 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 resaleable in the ordinary course of business; (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 Credit Party's business; (xii) breaches as to which Administrative Agent's Lien, on behalf of itself, Documentation 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 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 5.04; (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 (xvim) which, as to prospective (but not the then existing) Inventory, 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 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 Inventory in 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 type referred to in Section 1.8(a)) shall not be deemed to be Inventory or Eligible Inventory for any licensing arrangement purpose. D. For purposes of determining the effect Borrowing Base pursuant to each of which would be to limit the ability of Collateral Agentclauses A, or any Person selling the Inventory on behalf of Collateral AgentB, and C above, to sell the extent that payment of an Account has been received in Borrower's or its domestic Subsidiary's Lock Box, such Inventory in enforcement Account shall cease to be an Eligible Account, regardless of whether or when the Collateral proceeds of that Account are transferred to Agent’s Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For purposes of this Agreement, Eligible Inventory shall mean any finished goods Inventory held for sale in the ordinary course, work-in-process Inventory and raw materials, in each case owned a Borrower, but 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 a Borrower or any Borrowing Base Guarantor that: (i) the Collateral Agent, on behalf of Secured Parties, does not have a first priority and exclusive valid, perfected First Priority Lien on such Inventory; (ii1) 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 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 (B2) 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 which is in form and substance satisfactory to the Collateral Agent and the Administrative Agent has been received by the Collateral Agent or (y) Reserves reasonably satisfactory to the Administrative Collateral Agent 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 Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory mortgagee waiver which is in form and substance satisfactory to the Collateral Agent and the Administrative Agent 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 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; (xviii) 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; (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 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 Collateral Agent and the Administrative Agent reserves reserve the right, at any time and from time to time after the Original Closing Third Amendment Effective 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 materialsmaterials (excluding specialty packing and shipping materials used to ship products to customers with an aggregate value not to exceed $8.0 million at any time during the months of August, September, October, November and December and $6.0 million at any other time), 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 Xxxxx & Xxxxx 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 availableavailable (other than alcoholic beverages to the extent determined in the most recent Inventory Appraisal to be capable of being liquidated by the Collateral Agent); (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 Schaublin. All of the Inventory owned by Schaublin and reflected in the most recent Schaublin Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible Inventory – Schaublin” 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 – Schaublin 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 (including pursuant to Collateral audits conducted 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 Schaublin’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 – Schaublin shall not include any Inventory of Borrower or any Borrowing Base Guarantor Schaublin that: (i) is not owned by Schaublin 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 Schaublin’s performance with respect to that Inventory), except Liens described in clause (e) 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; (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 any site if the aggregate book value of Inventory exceeds at any such location is less than the Dollar Equivalent of $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 50,000 or (B) is stored located at any site other than a warehouse with respect to which a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter Swiss Warehouse Control Agreement 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 theretoexecuted and delivered; (iviii) is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (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 (iii) above has been complied withLenders; (viv) 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); (ixvi) 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); (xvii) is not of a type held for sale in the ordinary course of BorrowerSchaublin’s or any Borrowing Base Guarantor’s, as applicable, business; (xiviii) is not subject to a first priority Lien in favor of Agent, on behalf of itself and Lenders, or the first priority Lien created by the Foreign Collateral Documents, subject to Permitted Encumbrances; (ix) breaches in any material respect any of the representations or warranties pertaining to Inventory set forth in the Loan Documents; (xiix) consists of any costs associated with “freight-in” charges; (xi) consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available;; or (xiiixii) 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 Based on the most recent Borrowing Base Certificate delivered by the Borrowers to Revolving Credit Agent and on other information available to Revolving Credit Agent, Revolving Credit 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 Revolving Credit 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 Revolving Credit Agent reserves the right, at any time and from time to time after the Original Closing Date, upon not less than two Business Days' notice to the Borrowers, 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 availableavailable than would otherwise be available hereunder based upon the eligibility criteria, advance rates, and Reserves established on the Closing Date. Eligible Inventory shall not include any Inventory of any Borrower or any Borrowing Base Guarantor that: a. is not owned by such Borrower free and clear of all Liens and rights of any other Person (i) 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 the Lenders, and Permitted Encumbrances in favor of Secured Partieslandlords, does warehouseman, and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Revolving Credit Agent in accordance with Section 5.9 hereof), and inchoate Liens for monies not have a first priority yet due and exclusive perfected Lien on such Inventorypayable; b. is (iii) 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 Revolving Credit 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 Revolving Credit Agent, or (y) Reserves reasonably satisfactory to the Administrative Revolving Credit 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 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; (iv) c. is placed on consignment (other than Eligible Consigned Inventory)or is in transit; (v) d. 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 inchoate Liens for monies not yet due and warehousemen if clause (iii) above has been complied withpayable; (vi) e. in Revolving Credit 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); (ix) f. consists of display items, samples items or packing or shipping materials, manufacturing supplies 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 for Equipment of any Borrower; g. consists of goods which have been returned by the Administrative Agent in its reasonable credit judgment)buyer; (x) 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; i. as to which Agent's Lien, on behalf the Lenders, therein is not a first priority perfected Lien (xi) breaches except that Inventory may be subject to inchoate Liens for monies not yet due and payable); 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 in any material respect; (xii) k. consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiii) l. 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 transitRevolving Credit Agent; or (xvi) m. 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 Revolving Credit 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 FBS Ag Credit shall have the right, in the ------------------ exercise of FBS Ag Credit'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 FBS Ag Credit'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 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 agency or any department or division thereof 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) the Collateral Agentat a location shown on Exhibit 3.B, on behalf of Secured Partiesfor which FBS Ag Credit has received a bailee letter satisfactory ----------- to FBS Ag Credit, does not have a first priority and exclusive perfected Lien on executed by such Inventory; third party, or (ii) is not located on premises in United States covered by negotiable warehouse receipts or Canada; (iii) negotiable bills of lading issued by either: (A) is located on premises leased a warehouseman licensed and bonded by Borrower the United States Department of Agriculture or a Borrowing Base Guarantorany state's Department of Agriculture, 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 recognized carrier having an office in the United States and in a financial condition reasonably acceptable to FBS Ag Credit, which receipts or warehouseman where bills of lading designate FBS Ag Credit directly or by endorsement as 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 only Person to which or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, order of which the warehouseman or carrier is legally obligated to deliver such goods; and (Cd) is located at an owned location Inventory which in FBS Ag Credit's opinion may be subject to a mortgage liens or conflicting claims of ownership, whether such liens or conflicting claims are asserted or could be asserted by any Person. In the event that Inventory previously included in favor of a lender the Borrowing Base ceases to be Eligible Inventory, Borrower shall promptly pay to FBS Ag Credit an amount sufficient to ensure that the Liabilities, 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 Liabilities evidenced by the Administrative Agent in its reasonable credit judgment); (x) is not Line of a type held for sale in Credit Note, shall at no time exceed the ordinary course of Borrower’s or any then current 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 otherBase.

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 With respect to Eligible Inventorythe Borrower and its Subsidiaries, in all inventory owned by the Borrower and 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. Subsidiaries; PROVIDED that Eligible Inventory shall not include any Inventory of inventory (a) held on consignment, or not otherwise owned by the Borrower or such Subsidiary, or of a type no longer sold by the Borrower or such Subsidiary, (b) which is damaged or subject to any Borrowing Base Guarantor that: legal encumbrance other than Permitted Liens, (c) which is held by the Borrower or a Subsidiary of the Borrower on property leased by the Borrower or such Subsidiary if the aggregate book value of all Inventory located on such property is greater than $1,000,000, 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, (d) as to which, as applicable, (i) appropriate Uniform Commercial Code financing statements showing the Collateral Borrower or such 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, on behalf of Secured Parties, does not have a first priority and exclusive perfected Lien on such Inventory; (ii) is appropriate steps have not located on premises in United States or Canada; been taken by UK Holdings, the UK Subsidiary and/or the direct Subsidiaries of the UK Subsidiary (iii) (A) is located on premises leased including, without limitation, the execution and delivery by Borrower or a Borrowing Base Guarantor, unless (x) at each 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 Person 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 debenture in favor of the Collateral Agent and the Lenders and landlordsregistration thereof with the Company's Registration Office pursuant to Section 395 of the Company's Act of 1955) to create a valid charge in favor of the Agent over all such Person's inventory, carriers, bailees and warehousemen if clause or (iii) above has appropriate financing statements showing the Canadian Subsidiary as debtor have not been complied with; filed in the proper filing office or offices under the Personal Property Security Act in order to perfect the Agent's security interest therein, or (vie) which in the aggregate exceeds $3,000,000 and is located outside of the United States of America, England, Wales or the Dominion of Canada. EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of SECTION 3(3) of ERISA maintained or contributed 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 Borrower or any Borrowing Base Guarantor’sERISA Affiliate, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory other than a Multiemployer Plan. ENVIRONMENTAL LAWS. As set forth in the Loan Documents; (xiiSECTION 8.18(A) 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 otherhereof.

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 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 Tessco shall be "Eligible Inventory" for purposes of this Agreement; provided, however, that, notwithstanding anything in this section or this Agreement to the contrary, no Inventory of Tessco shall constitute Eligible Inventory from and after the earlier of June 30, 1998 and the completion of the Tessco Liquidation. In determining whether any particular Inventory of Borrower or Tessco constitutes 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, 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. Unless Agent shall have otherwise agreed in writing, Eligible Inventory shall not include any Inventory of Borrower or any Borrowing Base Guarantor thatTessco: (ia) that is not owned by Borrower or Tessco 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 Tessco'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; (i) that is located at a premises at which Borrower maintains Inventory having an aggregate book value of less than $100,000 or (ii) is not located on premises in United States or Canada; (iii) (A) that is located on premises leased which are not owned and operated by Borrower or Tessco, or stored with a Borrowing Base Guarantorbailee, warehouseman or similar Person, or located on premises that are leased to Borrower or Tessco, or located on premises which are owned by Borrower or Tessco and subject to a Lien securing Indebtedness of Borrower or Tessco, unless in any such case under this clause (b)(ii), (x) at such location the aggregate value of Inventory exceeds $250,000a satisfactory bailee letter, and (y) either (1) a reasonably satisfactory Landlord Lien Waiver and Access Agreement landlord waiver or mortgagee's 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 (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; (ivc) that is placed on consignment or is in transit (other than Eligible Consigned InventoryInventory which is in transit for not more than ten (10) days from Tessco to Borrower or Borrower to Tessco in the ordinary course of business or in connection with the Tessco Liquidation); (vd) 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; (vie) that in Agent's reasonable determination, is to be returned to suppliers; (vii) is excess, obsolete, unsalable, shopworn, seconds, damaged or unfit for sale; (viiif) is slow moving (in excess of 1-year supply); (ix) that consists of display itemsitems or packing, samples or packing labels, inserts 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; (h) that is not of a type held for sale in the ordinary course of Borrower’s 's or any Borrowing Base Guarantor’s, as applicable, Tessco'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) to the extent that it consists of any costs associated with "freight-in" charges; (l) to the extent that it consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiim) to the extent that it is not covered by casualty insurance maintained as required by Section 5.04acceptable to Agent; (xivn) consists of custom made Inventory which to the extent that it is not saleable to any other customer physically counted annually or in ordinary course; (xv) is in transitquarterly and carried forward on the perpetual inventory as constant until the next physical count; or (xvio) 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 extent reserves are established with respect to it for variances resulting from physical inventory counts or otherstandard cost adjustments. (p) that is otherwise unacceptable to Agent in its reasonable credit judgment.

Eligible Inventory. For On any date of determination of the Borrowing Base, all of the Inventory owned by Borrower or its Subsidiary Guarantors and reflected in the most recent Borrowing Base Certificate delivered by Borrower to Administrative 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 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 thatinclude: (i) the any Inventory on which Collateral Agent, on behalf of the Secured Parties, does not have a perfected, first priority and exclusive perfected Lien on such Inventorysubject to no other Liens that are pari passu or prior to the Liens securing the Secured Obligations (other than inchoate or other Liens (including tax Liens) arising by operation of law); (ii) any Inventory that is not located on premises in United States or Canada; stored (iii) (A) is located on premises leased by Borrower or a Borrowing Base Guarantor, unless (xa) at such a leased location where the aggregate value of Inventory exceeds $250,000, and (y) 100,000 unless either (1x) a reasonably satisfactory Landlord Lien Waiver and Access Agreement has been delivered to the Collateral Agent, Administrative Agent or (2y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto or thereto, (Bb) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 100,000 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 have been established with respect thereto, or (Cc) is located at an owned any location subject to a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory is less than $100,000 and for which no bailee letters or Landlord Access Agreements have been obtained or no rent Reserves have been taken, but only to the extent the value of such Inventory at all such locations in the aggregate exceeds $250,000 500,000 (and for the avoidance of doubt, only with respect to such excess amount); (iii) any Inventory that is placed on consignment, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to the Collateral Agent or (y) Reserves valid consignment agreement which is reasonably satisfactory to the Administrative Agent have been established is in place with respect theretoto such Inventory; (iv) any Inventory that is placed on consignment not located in the United States or Canada or is in transit (other than except for Eligible Consigned In-Transit Inventory); (v) any Inventory that is covered by a negotiable document of title, unless such document has been delivered to the Collateral Administrative Agent or any customs broker or other carrier who is then subject to an effective Customs Broker Agreement with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agent and the Lenders Agent, other Permitted Liens and landlords, carriers, bailees and warehousemen if clause (iiiii) above has been complied with; (vi) any Inventory that is to be returned to suppliers; (vii) any Inventory that is obsolete, unsalable, slow-moving, shopworn, seconds, damaged or unfit for sale; (viii) is slow moving (in excess of 1-year supply); (ix) any Inventory that 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) any Inventory that is not of a type held for sale in the ordinary course of Borrower’s or any Borrowing Base Guarantor’s, as applicable, its Subsidiary Guarantors’ business; (xix) any Inventory that breaches any of the representations or warranties pertaining to Inventory set forth in the Loan DocumentsDocuments in any material respect (or, with respect to representations or warranties that are qualified by materiality, after giving effect to such qualification, breaches any of such representations and warranties); (xiixi) any Inventory that 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 any Inventory which is not saleable to any other customer or in ordinary course; (xv) is in transit; or (xvi) that is subject to any licensing arrangement the effect of which would be to limit the ability of Collateral Administrative Agent, or any Person selling the Inventory on behalf of Collateral Administrative 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; or (xiii) any Inventory that is not covered by casualty insurance maintained as required by Section 5.04.

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, adjustments or new criteria, criteria or changes in the applicable advance rate rates (subject to Section 11.2(c)(vii)) or the elimination of Reserves (except no such approval shall be required with respect to the reduction or elimination of Reserves which may be established and maintained from time to time by Agent with respect to Rate Protection Obligations under Rate Protection Agreements) 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) is not located on premises owned, leased or rented by such Borrower and set forth in United States Disclosure Schedule (3.2) or Canada; identified pursuant to Section 6.15, or (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) 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 thereto, or (v) other than with respect to 3 locations which Borrowers may designate in writing to Agent from time to time, is located at any site if the aggregate book value of Inventory at any such location is less than $100,000; or (vi) is located outside of the United States of America, its territories or Canada; (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, secondsseconds (excluding cores), 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, work in process Inventory 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 consist of (i) cores or (ii) goods which have been restored to Inventory as first quality, saleable merchandise; (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; (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 or favorable purchase price variances; (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 Agent’s Liens, without further licensor for a sale thereof by Agent (where such consent or payment has not been obtained); or (o) is otherwise unacceptable to the licensor or otherAgent in its 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 each case, in its reasonable credit judgmentPermitted Discretion, subject to the approval of the Supermajority all 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 7.01(c) hereof) perfected Lien on such Inventoryupon; (ii) is not located on premises in United States or Canada; (iii) (A) is located on premises leased stored at a location not owned by Borrower a Loan Party unless the Collateral Agent has given its prior consent thereto or a Borrowing Base Guarantor, 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 (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) Landlord Lien Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto, or (CB) is located at an owned location subject to stored with a mortgage in favor of a lender other than the Collateral Agent where the aggregate value of Inventory exceeds $250,000 bailee or warehouseman unless either (x) a reasonably satisfactory mortgagee acknowledged bailee waiver letter has been delivered to received by the Collateral Agent Agent, or (y) Landlord Lien Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; but only to the extent the aggregate amount of Inventory otherwise excluded pursuant to this paragraph (iii) exceeds $1,000,0000; (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 such Inventory (x) is purchased under documentary Letters of Credit and 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) is 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 sale, in each case, as determined in the ordinary course of business by the Loan Parties; (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’sthe Loan Parties’, as applicable, business; (xiix) 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 (xvix) is subject to any licensing arrangement or any other trademark or other proprietary rights of any Person, 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, Liens without further consent or payment to the licensor or othersuch other Person (unless such consent has then been obtained); (xi) is not covered by casualty insurance maintained as required by Section 6.07; or (xii) is acquired in a Permitted Acquisition, unless the Administrative Agent shall have received or conducted (1) within 45 days after the consummation of such Permitted Acquisition, appraisals, from appraisers reasonably satisfactory to the Administrative Agent, of such Inventory to be acquired in such Permitted 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 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 's or any Borrowing Base Guarantor’s's, as applicable, business; (xi) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents;; 77 (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 's Liens, without further consent or payment to the licensor or other.

Eligible Inventory. For All of the Inventory owned by the 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 In addition to Reserves established on the Closing Date, following notice by Agent to Borrower given reasonably in advance, Agent shall have the right to establish, establish or modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable good faith credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time judgment based on its analysis of facts or events 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, reflect changes in the applicable advance rate salability of Inventory arising or discovered by Agent after the elimination of Reserves which have the effect of making more credit availableClosing 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, on behalf of Secured Partiesitself and Lenders, does not have a first priority and exclusive perfected Lien on such Inventoryexcept the Permitted Encumbrances described in clause (a), clause (e) and clause (l) of the definition of the term “Permitted Encumbrances”; (iib) (i) is not located on premises owned, leased or rented by such Credit Party and set forth in United States Schedule 5.12 (as Schedule 5.12 may be updated from time to time in writing by listing additional locations or Canada; deleting existing locations delivered by Borrower to Agent on or prior to each such change of locations), (iii) (Aii) is located stored at a leased location, unless listed on premises leased by Schedule 5.12 or Agent has received prior written notice thereof from Borrower or a Borrowing Base Guarantor, 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 AgentAgent or no statutory or contractual landlord lien exists with respect to such Inventory, 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 satisfactory 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 Secured Notes Trustee, unless either (x) a reasonably satisfactory mortgagee waiver has been delivered to Agent, (v) is located at any site if the Collateral Agent aggregate book value of Inventory at any such location is less than $50,000, or (yvi) Reserves reasonably satisfactory to is located on the Administrative Agent have been established with respect theretopremises of, or is in the possession of, a processor; (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 withthe Senior Secured Notes Trustee; (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; (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 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 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 required to be maintained as required by under Section 5.04; (xiv) consists 2.2 of custom made Inventory which is not saleable this Agreement or otherwise reasonably acceptable to any other customer or in ordinary course; (xv) is in transitAgent; or (xvim) is subject with respect to any licensing arrangement which Agent does not have the effect of which would be to limit the ability of Collateral right, in Agent, or any Person selling the Inventory on behalf of Collateral Agent’s reasonable determination, to sell such freely transfer Inventory in enforcement or complete the production of Inventory without the Collateral Agent’s Liensneed for any license, without further sublicense or consent or payment to the licensor or otherwhich has not been obtained.

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 purposes To constitute "Eligible Inventory," inventory ------------------ must be set forth on the most recent Schedule of this Agreement, Eligible Inventory shall exclude any Inventory to which any and must meet each and every one 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 following 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) The inventory must be owned by Borrower, must be located in the Collateral AgentUnited States, 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 must be subject to a mortgage perfected first priority security interest in favor of a lender other than Agent for the Collateral Agent where the aggregate value benefit 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 titleLenders, unless such document has been delivered to the Collateral Agent with all necessary endorsements, and must be free and clear of all Liens and rights of others, except those Producers' Liens, if any. (b) The inventory must consist of bulk wine or bottled wine in favor of cases. (c) If the Collateral inventory is bottled wine, it must either be (i) located on premises owned by Borrower; (ii) located on premises which are leased by Borrower and for which Agent has received a landlord notification letter from Borrower in form and the Lenders and landlords, carriers, bailees and warehousemen if clause substance reasonably satisfactory to Agent; (iii) above stored in a public warehouse for which Agent has been complied withreceived a notification letter from Borrower in form and substance reasonably acceptable to Agent. (d) If the inventory consists of bulk wine, it must either be: (i) located on premises owned by Borrower; (ii) located on premises which are leased by Borrower and for which Agent has received a notification letter from Borrower in form and substance reasonably satisfactory to Agent; or (iii) stored at a facility for which Agent has received a notification letter from Borrower in form and substance reasonably acceptable to Agent. (e) If the inventory consists of bottled wine, the age of such bottled wine shall not exceed the time periods set forth below for the types of wine set forth below: (i) white zinfandel 18 months (ii) chardonnay 36 months (iii) other white wines 24 months (iv) proprietors reserve red 84 months (v) European imported red 84 months (vi) other red wines 48 months In determining the age of bottled wines, Agent may permit Borrower to use such estimation procedures as Agent, in its discretion, considers appropriate. (f) If the inventory has been purchased by Borrower from a third party that was in possession of the inventory at the time it was sold to Borrower and the purchase by Borrower is not accompanied by an immediate delivery of possession of the inventory to Borrower followed by an actual and continued change of possession of the inventory, such inventory shall not be returned to suppliersEligible Inventory unless: (i) Borrower's purchase of the bulk wine is evidenced by a written contract or purchase order; (viiii) With respect to each purchase, a xxxx of sale or other evidence of the transfer, which shall be substantially in the form of Exhibit I, must be executed by both Borrower and the seller and such document must be duly recorded in the book of official records of the county recorder of all counties in which any portion of the bulk wine is obsolete, unsalable, shopworn, seconds, damaged or unfit for salelocated prior to the time that title to the bulk wine has passed to Borrower; (viiiiii) All conditions to transfer of title from seller to Borrower must have been fulfilled and Borrower must have delivered written notice to the seller that the bulk wine has been accepted (or whatever similar terminology is slow moving (in excess of 1-year supplyrequired by the contract); (ixiv) consists With respect to each entity from whom Borrower purchases bulk wine, Borrower shall have filed a financing statement fulfilling the requirements 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 judgmentSection 3440.1(h); (x1) 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 California Civil Code and shall have published a notice of intended transfer fulfilling the Loan Documents; (xii) consists requirements 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.3440.1(h)

Eligible Inventory. For All of the Inventory owned by Borrowers 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 Permitted Discretion; provided that, no Reserves in effect on the Closing Date (other than the AMI Reserve (as defined in the initial Borrowing Base Certificate delivered to Agent on the Closing Date)) shall be eliminated or modified so as to make more credit judgmentavailable following the Closing Date without the approval of the Supermajority Lenders (it being understood that Agent shall have the right to eliminate or modify the AMI Reserve in its Permitted 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, in its reasonable credit judgmentPermitted Discretion reflecting changes in the salability or realization values of Inventory arising or discovered by 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; provided that the approval of the Supermajority Lenders shall not be required in the case of adjustments or new criteria which have the effect of making more credit available which have been implemented following Agent’s imposition of adjustments or new criteria which have had the effect of making less credit available in a like or greater amount. Eligible Inventory shall not include any include: (a) seventy-five (75%) of Inventory of any Borrower that consists of goods which have been returned by the applicable buyer, which constitutes “dry room” inventory; (b) Inventory of any Borrower that consists of display items or packing or shipping materials, manufacturing supplies, work-in-process Inventory, equipment or replacement parts; (c) the amount of Inventory equal to the monthly “shrink” which the Borrowers accrue for; (d) (i) fifty percent (50%) of non-cigarette Inventory on hand over 180 days but less than 360 days; (ii) one hundred percent (100%) of non-cigarette Inventory on hand over 360 days; or (iii) twenty-five percent (25%) of cigarette Inventory on hand over 180 days; (e) Inventory of any Borrowing Base Guarantor that:Borrower which constitutes U.S. cigarette tax stamps of a jurisdiction in which such Borrower has a cigarette tax liability greater than the amount of a surety bond or other similar arrangement backing such liability, provided that such Inventory shall be ineligible under this clause (e) only to the extent of any such shortfall; (f) fifty percent (50%) of Inventory consisting of novelty items; (g) seventy-five percent (75%) of the portion of Inventory of any Borrower that represents the difference between the standard cost and discounted purchase price of such Inventory due to discounts, rebates, allowances and manufacturer incentives; (h) $500,000 of Perishable Inventory (it being understood that such amount represents Borrowers’ good faith estimate of the Borrowers’ Perishable Inventory as of the Closing Date and Borrowers make no representations or warranties as to the actual amount of such Perishable Inventory, and neither Agent nor Lenders shall have any obligation to advance on Perishable Inventory following the Closing Date); (i) Inventory of any Borrower subject to an unreconciled variance between such Borrower’s general ledger and perpetual records; (j) the Collateral amount of Inventory of any Borrower that represents a price adjustment related to cigarette price increases due to discontinuation of vendor rebate or discount programs; (k) any portion of Inventory of any Borrower, the value of which is attributable to intercompany profits among the Borrowers and their Subsidiaries; (l) the amount of Inventory of any Borrower which represents an unreconciled variance between the book accounts and the physical Inventory counts conducted by the Agent or its representatives in accordance with this Agreement; (m) Inventory of any Borrower that is placed on consignment or is in transit; provided that Inventory in an amount not to exceed $500,000 (or such greater amount which may be consented by Agent in its sole discretion) which is in transit between Borrowers or divisions of Borrowers shall constitute Eligible Inventory; (n) Inventory of any Borrower that 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 (unless collateralized in a manner reasonably satisfactory to Agent) to assure such Borrower’s performance with respect to that Inventory), except (i) the Liens in favor of Agent, on behalf of Secured Partiesitself and Lenders, does not have a first (ii) Permitted 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) encumbrances described in clause (a) of the definition of Permitted Encumbrances, (iv) encumbrances described in clause (e) of the definition of Permitted Encumbrances (subject to Reserves established by Agent in its Permitted Discretion) and (v) the second priority and exclusive perfected Lien on such InventoryLiens (junior to the Liens in favor of the Agent) securing Subordinated Debt evidenced by the Subordinated Debt Documents and, in the case of Liens securing the Tranche B Loan Facility, subject to the Intercreditor Agreement; (iio) Inventory of any Borrower that (i) is not located on premises owned, leased or rented by such Borrower and set forth in United States or Canada; Disclosure Schedule (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 Agent3.2), 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 delivered to Agent to the Collateral Agent extent not otherwise addressed to Agent’s reasonable satisfaction in the Confirmation Order or the Confirmation Recognition Order, as applicable, 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 to the extent not otherwise addressed to Agent’s reasonable satisfaction in the Confirmation Order or the Confirmation Recognition Order, as applicable, 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 Agent to the Collateral Agent extent not otherwise addressed to Agent’s reasonable satisfaction in the Confirmation Order or the Confirmation Recognition Order, as applicable, or (y) Reserves reasonably satisfactory to the Administrative Agent have been established with respect thereto; (ivv) is placed on consignment located at any site if the aggregate book value of Inventory at any such location is less than $100,000 (other than Eligible Consigned Inventoryunless otherwise consented to by Agent in its sole discretion); (vp) Inventory of any Borrower 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 landlordsthe second priority Liens (junior to the Liens in favor of the Agent) securing Subordinated Debt evidenced by the Subordinated Debt Documents and, carriersin the case of the Tranche B Loan Facility, bailees and warehousemen if clause (iii) above has been complied withsubject to the Intercreditor Agreement; (viq) is to be returned to suppliers; (vii) Inventory of any Borrower that is obsolete, slow moving (in excess of one year’s supply), unsalable, shopworn, seconds, damaged or unfit for sale; (viiir) is slow moving (in excess Inventory of 1-year supply); (ix) consists of display items, samples or packing or shipping materials, manufacturing supplies or replacement parts (it being understood any Borrower 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; (xiis) Inventory of any Borrower that consists of any costs associated with “freight-in” charges; (t) Inventory of any Borrower that consists of Hazardous Material Materials or goods that can be transported or sold only with licenses that are not readily available; (xiiiu) Inventory of any Borrower that is not covered by casualty insurance maintained as required by Section 5.04reasonably acceptable to Agent; (xivv) consists Inventory of custom made Inventory which any Borrower that is not saleable subject to any other customer patent or in ordinary course; (xv) is in transittrademark license requiring the payment of royalties or fees or requiring the consent of the licensor for a sale thereof by Agent; or (xviw) Inventory of any Borrower that is subject to any licensing arrangement derivative or forward contract that can be terminated based upon the effect bankruptcy filing 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 otherBorrower.

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, adjustments or new criteria, criteria or changes in the applicable advance rate rates (subject to Section 11.2(c)(vii)) or the elimination of Reserves (except no such approval shall be required with respect to the reduction or elimination of Reserves which may be established and maintained from time to time by Agent with respect to Rate Protection Obligations under Rate Protection Agreements) 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; identified pursuant to Section 6.15, or (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) 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 thereto, or (v) other than with respect to 3 locations which Borrowers may designate in writing to Agent from time to time, is located at any site if the aggregate book value of Inventory at any such location is less than $100,000; or (vi) is located outside of the United States of America, its territories or Canada; (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, secondsseconds (excluding cores), 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, work in process Inventory 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 consist of (i) cores or (ii) goods which have been restored to Inventory as first quality, saleable merchandise; (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; (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 or favorable purchase price variances; (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 Agent’s Liens, without further licensor for a sale thereof by Agent (where such consent or payment has not been obtained); or (o) is otherwise unacceptable to the licensor or otherAgent in its 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 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.