Common use of Determination of Borrowing Base Clause in Contracts

Determination of Borrowing Base. (a) Subject to Section 2.2(b) and Section 2.3(c), Revolving Loans shall not in aggregate principal amount exceed the lesser of: (i) The lesser of (A) the Total Commitments then in effect and (B) the aggregate amount permitted by the Senior Secured Note Indenture to be outstanding under the Credit Agreement minus, in each case, the sum of (x) the Letter of Credit Obligations and (y) the Borrower’s exposure (as determined by the applicable counterparty and notified to the Agent or, if no such notification is received, as determined by the Agent) under any Permitted Hedge Agreements; and (ii) the amount then equal to: (A) Eighty-five percent (85%) of the Eligible Accounts Receivable, plus (B) the lesser of (x) sixty percent (60%) of the net book value of Eligible Inventory, (y) eighty-five percent (85%) of the appraised net orderly liquidation value of the Eligible Inventory, based on the most recent appraisal delivered to, and approved by, the Agent and (z) sixty percent (60%) of the total Borrowing Base (the amount in this clause (z), the “Inventory Sublimit”) and minus (C) the Borrower’s exposure (as determined by the applicable counterparty and notified to the Agent or, if no such notification is received, as determined by the Agent) under any Permitted Hedge Agreements; and minus (D) the Letter of Credit Obligations. The sum of the amounts calculated in accordance with clauses (ii)(A), (B) and (C) above is hereinafter referred to as the “Borrowing Base.” The Agent at any time shall be entitled to (i) establish and increase or decrease reserves against Eligible Accounts Receivable and Eligible Inventory, (ii) reduce the advance rates under Section 2.2(a)(ii)(A) or (B) or restore such advance rates to any level equal to or below the advance rates stated in Section 2.2(a)(ii)(A) or (B), and (iii) impose additional restrictions (or eliminate the same) to the standards of “Eligible Accounts Receivable” and “Eligible Inventory,” in the exercise of its Permitted Discretion. The Agent may but shall not be required to rely on each Borrowing Base Certificate and any other schedules or reports delivered to it in connection herewith in determining the then eligibility of Accounts and Inventory. Reliance thereon by the Agent from time to time shall not be deemed to limit the right of the Agent to revise advance rates or standards of eligibility as provided in this Section 2.2(b).

Determination of Borrowing Base. (ai) Subject The Lenders agree, subject to Section 2.2(b) the terms and Section 2.3(cconditions of this Credit Agreement, from time to time, to make loans and advances to the Borrowers hereunder on a revolving basis. Such loans and advances to the Borrowers (each, a "Revolving Loan"; and collectively, the "Revolving Loans"), Revolving Loans together with the Letter of Credit Obligations outstanding, shall not in the aggregate principal amount exceed the lesser of: (iA) the Revolving Credit Committed Amount then in effect; or (B) the following amount (the "Borrowing Base") calculated as follows: (1) an amount equal to up to 85% of the then Eligible Accounts Receivable; plus (2) an amount equal to the sum of (a) up to 45% of the Eligible Inventory consisting of Mom and Pops country hams, plus (b) up to 55% of the Eligible Inventory consisting of Pierre Foods/Claremont location raw materials, plus (c) up to 65% of the Eligible Inventory consisting of Pierre Foods/Cincinnati location raw materials, plus (d) up to 55% of the Eligible Inventory consisting of Smokehouse finished goods, plus (e) up to 50% of the Eligible Inventory consisting of Pierre Foods/Claremont location bakery finished goods, plus (f) up to 65% of the Eligible Inventory consisting of Pierre Foods/Cincinnati location finished goods; plus (3) an amount equal to up to 70% of the Eligible Equipment and Eligible Real Property determined as of its initial inclusion into the Borrowing Base; provided, however, that on the last day of each calendar quarter such initial amount shall be reduced by an amount equal to 1/28th of such initial amount; and provided, further, that no more than $2,500,000 shall be included in the Borrowing Base with respect to Approved Restaurants during each of the first two years following the Closing Date; minus (4) reserves established by the Agent from time to time in its reasonable discretion, including, without limitation, reserves against the Unsecured Letters of Credit. Subject to the relevant terms and provisions set forth herein, the Agent at all times shall be entitled to reduce or increase the advance rates (but not in excess of the advance rates set forth in clauses (1) through (3) immediately above) and standards of eligibility under this Credit Agreement, in each case in its reasonable discretion. (ii) No Lender shall be obligated at any time to make available to the Borrowers its Revolving Credit Commitment Percentage of any requested Revolving Loan if such amount plus its Revolving Credit Commitment Percentage of all Revolving Loans and its Revolving Credit Commitment Percentage of all Letter of Credit Obligations then outstanding would exceed such Lender's Revolving Credit Commitment at such time. The lesser aggregate balance of Revolving Loans and the aggregate amount of all Letter of Credit Obligations outstanding shall not at any time exceed the Revolving Credit Committed Amount. No Lender shall be obligated to make available, nor shall the Agent make available, any Revolving Loans to any of the Borrowers to the extent such Revolving Loan when added to the then outstanding Revolving Loans and all Letter of Credit Obligations would cause the aggregate outstanding Revolving Loans and all Letter of Credit Obligations to exceed the Borrowing Base. The Borrowers shall promptly repay to the Agent for the account of the Lenders from time to time the full amount of the excess, if any of (A) the Total Commitments then in effect amount of all Revolving Loans and (B) the aggregate amount permitted by the Senior Secured Note Indenture to be outstanding under the Credit Agreement minus, in each case, the sum of (x) the Letter of Credit Obligations and (y) the Borrower’s exposure (as determined by the applicable counterparty and notified to the Agent or, if no such notification is received, as determined by the Agent) under any Permitted Hedge Agreements; and (ii) the amount then equal to: (A) Eighty-five percent (85%) of the Eligible Accounts Receivable, plus outstanding over (B) the lesser of (x1) sixty percent (60%) of the net book value of Eligible Inventory, (y) eighty-five percent (85%) of the appraised net orderly liquidation value of the Eligible Inventory, based on the most recent appraisal delivered to, and approved by, the Agent Revolving Credit Committed Amount and (z) sixty percent (60%) of the total Borrowing Base (the amount in this clause (z), the “Inventory Sublimit”) and minus (C2) the Borrower’s exposure (as determined by the applicable counterparty and notified to the Agent or, if no such notification is received, as determined by the Agent) under any Permitted Hedge Agreements; and minus (D) the Letter of Credit Obligations. The sum of the amounts calculated in accordance with clauses (ii)(A), (B) and (C) above is hereinafter referred to as the “Borrowing Base.” The Agent at any time shall be entitled to (i) establish and increase or decrease reserves against Eligible Accounts Receivable and Eligible Inventory, (ii) reduce the advance rates under Section 2.2(a)(ii)(A) or (B) or restore such advance rates to any level equal to or below the advance rates stated in Section 2.2(a)(ii)(A) or (B), and (iii) impose additional restrictions (or eliminate the same) to the standards of “Eligible Accounts Receivable” and “Eligible Inventory,” in the exercise of its Permitted Discretion. The Agent may but shall not be required to rely on each Borrowing Base Certificate and any other schedules or reports delivered to it in connection herewith in determining the then eligibility of Accounts and Inventory. Reliance thereon by the Agent from time to time shall not be deemed to limit the right of the Agent to revise advance rates or standards of eligibility as provided in this Section 2.2(b).

Determination of Borrowing Base. (ai) Subject Lenders' loans and advances to Section 2.2(bor for the benefit of Borrowers (each, a "Loan"; and collectively, the "Loans") and Section 2.3(c)together with the outstanding Letter of Credit Obligations shall be made subject to the terms hereof, Revolving Loans on a revolving basis, but shall not in the aggregate principal exceed at any time an amount exceed (the "Borrowing Base") equal to the lesser of: (A) the Committed Amount then in effect; or (B) the aggregate of the following amounts: (1) an amount equal to the sum of (a) 85% of Eligible Accounts Receivable; plus (b) the lesser of (i) $250,000 and (ii) 85% of Eligible Canadian Accounts Receivable; plus (2) an amount equal to the lesser of (a) the Inventory Sublimit, or (b) an amount equal to the sum of (i) 55% of Eligible Inventory comprised of paper raw material, plus (ii) 50% of Eligible Inventory comprised of ink raw material; plus (iii) 35% of Eligible Inventory comprised of other raw material; plus (3) the Equipment Availability; minus (4) the Bond Reserve; minus (5) the Customer Rebate Reserve; minus (6) the Availability Reserve. (ii) Agent shall have the right, in its sole, but reasonable discretion, to establish reserves (in addition to the establishment of Bond Reserve and the Customer Rebate Reserve) from time to time against the Borrowing Base with respect to such matters, events or contingencies and in such amounts as Agent may determine. All references to the Borrowing Base in this Credit Agreement shall mean the amount calculated under the definition of Borrowing Base less any reserves then in existence. (iii) The lesser advance rate in clause (i)(B)(1) above shall be reduced by 1.0% for each 1.0% by which the Dilution Rate for the Accounts exceeds 5.0%. If Borrowers implement a perpetual inventory system that is reasonably satisfactory to Agent (as indicated in writing by Agent to Borrower Agent), then the percentage set forth in Section 2.1(b)(i)(B)(2)(b)(i) shall increase to 60%. (iv) No Lender shall be obligated at any time to make available to Borrowers its Commitment Percentage of any requested Loan if such amount plus its Commitment Percentage of all Loans and its Commitment Percentage of all Letter of Credit Obligations then outstanding would exceed such Lender's Commitment at such time. The aggregate balance of Loans and the aggregate amount of all Letter of Credit Obligations outstanding shall not at any time exceed the Borrowing Base. No Lender shall be obligated to make available, any Loans to Borrowers to the extent such Loan, when added to the then outstanding Loans and all Letter of Credit Obligations, would cause the aggregate outstanding Loans and all Letter of Credit Obligations to exceed the Borrowing Base. Borrowers shall repay to Agent on demand for the account of Lenders from time to time the full amount of the excess, if any, of (A) the Total Commitments then in effect amount of all Loans and Letter of Credit Obligations outstanding over (B) the aggregate amount permitted by the Senior Secured Note Indenture to be outstanding under the Credit Agreement minus, in each case, the sum Borrowing Base. Any excess of (x) the Loans and Letter of Credit Obligations over the Borrowing Base shall constitute in any event Obligations and (y) the Borrower’s exposure (as determined shall be secured by the applicable counterparty and notified to the Agent or, if no such notification is received, as determined by the Agent) under any Permitted Hedge Agreements; andCollateral. (iiv) Borrowers shall have the amount then equal to: right at any time and from time to time, upon ten (A10) Eighty-five percent Business Days prior written notice to Agent to permanently reduce, without premium or penalty (85%but subject to Section 2.3(c) and Section 4.11 of the Eligible Accounts Receivable, plus (B) the lesser of (x) sixty percent (60%) of the net book value of Eligible Inventory, (y) eighty-five percent (85%) of the appraised net orderly liquidation value of the Eligible Inventory, based on the most recent appraisal delivered to, and approved by, the Agent and (z) sixty percent (60%) of the total Borrowing Base (the amount in this clause (zAgreement), the “Inventory Sublimit”) Committed Amount in the minimum amount of $3,000,000 and minus (C) integral multiples of $1,000,000 in excess thereof. Upon the Borrower’s exposure (as determined by the applicable counterparty and notified to the Agent oreffectiveness of such notice, if no such notification is received, as determined by the Agent) under any Permitted Hedge Agreements; and minus (D) the Letter of Credit Obligations. The sum of the amounts calculated each Lender's Commitment shall be reduced in accordance with clauses (ii)(A), (Beach Lender's Commitment Percentage of the amount specified in the notice. Agent shall promptly notify Lenders of its receipt of such notice. Any notice to reduce the Committed Amount pursuant to this Section 2.1(b)(v) and (C) above is hereinafter referred to as the “Borrowing Base.” The Agent at any time shall be entitled permanent and may not be revoked. In the event of any such reduction, outstanding Obligations in an amount in excess of the Committed Amount, as so reduced, shall be paid on the effective date together with interest accrued on the amount so paid (subject to (i) establish and increase or decrease reserves against Eligible Accounts Receivable and Eligible Inventory, (ii) reduce the advance rates under Section 2.2(a)(ii)(A) or (B) or restore such advance rates to any level equal to or below the advance rates stated in Section 2.2(a)(ii)(A) or (B), and (iii) impose additional restrictions (or eliminate the same4.11 of this Agreement) to the standards date of “Eligible Accounts Receivable” and “Eligible Inventory,” in the exercise of its Permitted Discretion. The Agent may but shall not be required to rely on each Borrowing Base Certificate and any other schedules or reports delivered to it in connection herewith in determining the then eligibility of Accounts and Inventory. Reliance thereon by the Agent from time to time shall not be deemed to limit the right of the Agent to revise advance rates or standards of eligibility as provided in this Section 2.2(b)reduction.