Document:

Exhibit 10.4

 

STOCK GRANT AGREEMENT

 

This Agreement is made as of this                            day of                         , 20     by and between Courier Corporation, a Massachusetts corporation (“Courier”) and                                  (“Employee”).

 

WITNESSETH THAT :

 

WHEREAS, Employee is a key employee of Courier or a subsidiary thereof; and

 

WHEREAS, Courier has instituted a program entitled “Courier Corporation 2011 Stock Option and Incentive Plan” (the “Plan”), pursuant to which from time to time awards of Courier Common Stock are made to certain key employees of Courier or its subsidiaries so that they may have a direct proprietary interest in Courier’s success and as an incentive to encourage greater efforts to be rendered Courier and its subsidiaries by their key employees;

 

NOW, THEREFORE, in consideration of the premises and the promises herein contained, it is agreed:

 

1.                                       Stock Award.  In consideration of future services to be rendered to Courier or a subsidiary thereof by Employee, Courier hereby awards to Employee pursuant to the Plan                shares of its Common Stock, $1.00 par value (the “Awarded Shares”).  The Awarded Shares shall be issued and held by the Company’s transfer agent in book entry form until the Awarded Shares have become nonforfeitable in accordance with Section 2 of this Agreement.

 

2.                                       Vesting.  The Awarded Shares shall vest as follows:

 

	
 
    	
 
    	
Incremental
    	
 
    	
Cumulative
    	
 
    
	
Date
    	
 
    	
Amount
    	
 
    	
Amount
    	
 
    
	
On or after 
    	
 
    	
 
    	
%
    	
 
    	
%
    
	
On or after 
    	
 
    	
 
    	
%
    	
 
    	
%
    
	
On or after 
    	
 
    	
 
    	
%
    	
 
    	
%
    
	
On or after 
    	
 
    	
 
    	
%
    	
 
    	
%
    

 

In the event that Employee’s employment with Courier or its subsidiary terminates before the Awarded Shares vest in accordance with the above schedule,  Employee shall forfeit the Awarded Shares to Courier and shall receive no compensation therefore; provided, however, that the Awarded Shares shall become nonforfeitable upon the occurrence of either of the following events before the vesting dates listed above and during Employee’s employment by Courier or its subsidiary: (a) Employee’s retirement with the consent of his employer at any time after he has

 

 

attained the age of fifty-five (55), or (b) action by the Compensation and Management Development Committee of the Courier Board of Directors (the “Committee”) to accelerate vesting of the Awarded Shares, on account of a “Sale Event” of Courier as defined in the Plan, or under such other circumstances as the Committee, in its sole discretion, may consider appropriate.  To facilitate the implementation of this Section 2, Employee agrees to execute and deliver to Courier herewith a blank stock power with respect to the Awarded Shares.

 

3.                                       Restrictions on Transfer.  Employee shall not transfer, pledge, or otherwise dispose of any of the Awarded Shares or any interest therein while the Awarded Shares remain subject to forfeiture under the terms of Section 2 of this Agreement, and any attempted transfer, pledge or other disposition during that period shall be void and without effect.  Employee agrees that after the Awarded Shares have become nonforfeitable, he will give written advance notice to Courier of his intention to effect any transfer, pledge or disposition of any of the Awarded Shares or any interest therein, describing the method and terms of the proposed transfer, pledge or disposition.  Upon receipt by Courier of such notice, if in the opinion of counsel to Courier the proposed transfer, pledge or disposition may be effected, Employee shall thereupon be entitled to transfer, pledge or dispose of the same in accordance with the terms of such notice.  Employee will indemnify Courier for any liability (including all reasonable costs, expenses and attorney’s fees incident thereto) which it may sustain by reason of any violation of the Securities Act of 1933, as amended or any other applicable securities statute occasioned by any act on Employee’s part with respect to the Awarded Shares.

 

4.                                       Stop Transfer Legends.  Employee authorizes Courier to place a stop transfer order with its stock transfer agent covering the Awarded Shares and agrees that the Awarded Shares shall be legended in substantially the following form:

 

“The shares are subject to restrictions contained in a Stock Grant Agreement dated                        , 20    , a copy of which is available at the principal office of the issuer.”

 

5.                                       Withholding Taxes.  Employee hereby agrees, as a condition to this grant of Awarded Shares, to provide to the Company an amount sufficient to satisfy its minimum obligation to withhold certain federal, state and local taxes arising by reason of the vesting of such Awarded Shares (the “Withholding Amount”), by (a) authorizing the Company to withhold the Withholding Amount from her/his cash compensation, (b) remitting the Withholding Amount to the Company in cash, or (c) paying the Withholding Amount in whole or in part in the form of shares of Common Stock by authorizing the Company to withhold from the shares to be released from restrictions in accordance with Section 15(b) of the Plan; provided that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Awarded Shares to be released from restrictions that

 

2

 

number of shares of Common Stock having a fair market value, on the date of exercise, sufficient to eliminate any deficiency in the Withholding Amount.

 

6                                          Employment Rights.  Nothing herein contained shall be construed as altering the present employment relationship between Employee and Courier and its subsidiaries or imposing any obligation upon Courier or its subsidiaries to continue the employment of Employee or upon Employee to continue in such employment.

 

7.                                       Miscellaneous.  As to matters of law, this Agreement is to be governed and construed in accordance with the laws of the Commonwealth of Massachusetts.  As to all matters of interpretation of the Plan and the rights of the parties hereto under the Plan, the determination of the Courier Board of Directors or the Committee shall be final, binding and conclusive.  This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and the successors and assigns of Courier and the heirs, executors and administrators of Employee.

 

IN WITNESS THEREOF, Courier has caused this Agreement to be executed by its duly authorized officer and the Employee has hereunto set his hand.

 

	
(Corporate Seal)
    	
 
    	
COURIER   CORPORATION
    
	
 
    	
 
    	
 
    
	
Attest:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By
    	
 
    
	
Assistant Clerk
    	
 
    	
 
    	
Chairman,   President and CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Employee:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

3Exhibit 4.13

 

 

 

CREDIT AGREEMENT

 

Dated as of November 12, 2010

 

among

 

SALLY HOLDINGS LLC 

BEAUTY SYSTEMS GROUP LLC

SALLY BEAUTY SUPPLY LLC

AS Domestic Borrowers

 

BEAUTY SYSTEMS GROUP (CANADA), INC.

as Canadian Borrower

 

SBH FINANCE B.V.

as Foreign Borrower

 

The Guarantors From Time to Time Party Hereto

 

BANK OF AMERICA, N.A.

as Administrative Agent and Collateral Agent,

 

BANK OF AMERICA, N.A. (acting through its Canada branch)

as Canadian Agent

 

The Other Lenders Party Hereto

 

JPMORGAN CHASE BANK, N.A., 

as Documentation Agent

 

WELLS FARGO CAPITAL FINANCE, LLC,

as Syndication Agent

 

BANC OF AMERICA SECURITIES LLC

WELLS FARGO CAPITAL FINANCE, LLC

as Joint Lead Arrangers

and Joint Book Managers

 

 

 

 

TABLE OF CONTENTS

 

	
Section
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
1.01
    	
Defined Terms
    	
 
    	
1
    
	
1.02
    	
Other Interpretive Provisions
    	
 
    	
59
    
	
1.03
    	
Accounting Terms
    	
 
    	
60
    
	
1.04
    	
Rounding
    	
 
    	
61
    
	
1.05
    	
Times of Day
    	
 
    	
61
    
	
1.06
    	
Letter of Credit Amounts
    	
 
    	
61
    
	
1.07
    	
Currency Equivalents Generally
    	
 
    	
61
    
	
1.08
    	
Québec Matters
    	
 
    	
61
    
	
1.09
    	
Dutch Matters
    	
 
    	
61
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS
    	
 
    	
62
    
	
 
    	
 
    	
 
    
	
2.01
    	
Committed Loans; Reserves
    	
 
    	
62
    
	
2.02
    	
Borrowings, Conversions and Continuations of Committed   Loans
    	
 
    	
64
    
	
2.03
    	
Letters of Credit
    	
 
    	
67
    
	
2.04
    	
Swing Line Loans
    	
 
    	
76
    
	
2.05
    	
Prepayments
    	
 
    	
80
    
	
2.06
    	
Termination or Reduction of Commitments
    	
 
    	
82
    
	
2.07
    	
Repayment of Loans
    	
 
    	
83
    
	
2.08
    	
Interest
    	
 
    	
83
    
	
2.09
    	
Fees
    	
 
    	
84
    
	
2.10
    	
Computation of Interest and Fees
    	
 
    	
84
    
	
2.11
    	
Evidence of Debt
    	
 
    	
86
    
	
2.12
    	
Payments Generally; Administrative Agent’s Clawback
    	
 
    	
86
    
	
2.13
    	
Sharing of Payments by Lenders
    	
 
    	
88
    
	
2.14
    	
Settlement Amongst Lenders
    	
 
    	
89
    
	
2.15
    	
Increase in Commitments
    	
 
    	
90
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY;   APPOINTMENT OF PARENT
    	
 
    	
92
    
	
 
    	
 
    	
 
    
	
3.01
    	
Taxes
    	
 
    	
92
    
	
3.02
    	
Illegality
    	
 
    	
93
    
	
3.03
    	
Inability to Determine Rates
    	
 
    	
94
    
	
3.04
    	
Increased Costs; Reserves on LIBOR Rate Loans
    	
 
    	
94
    
	
3.05
    	
Compensation for Losses
    	
 
    	
95
    
	
3.06
    	
Mitigation Obligations; Replacement of Lenders
    	
 
    	
96
    
	
3.07
    	
Survival
    	
 
    	
96
    
	
3.08
    	
Designation of Parent as Borrowers’ Agent
    	
 
    	
96
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
    	
 
    	
97
    
	
 
    	
 
    	
 
    
	
4.01
    	
Conditions of Initial Credit Extension
    	
 
    	
97
    
	
4.02
    	
Conditions to all Credit Extensions
    	
 
    	
101
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V REPRESENTATIONS AND WARRANTIES
    	
 
    	
101
    
	
 
    	
 
    	
 
    
	
5.01
    	
Existence, Qualification and Power
    	
 
    	
101
    
	
5.02
    	
Authorization; No Contravention
    	
 
    	
102
    

 

i

 

	
5.03
    	
Governmental Authorization; Other Consents
    	
 
    	
102
    
	
5.04
    	
Binding Effect
    	
 
    	
102
    
	
5.05
    	
Financial Statements; No Material Adverse Effect
    	
 
    	
103
    
	
5.06
    	
Litigation
    	
 
    	
103
    
	
5.07
    	
No Default
    	
 
    	
104
    
	
5.08
    	
Ownership of Property; Liens
    	
 
    	
104
    
	
5.09
    	
Environmental Compliance
    	
 
    	
104
    
	
5.10
    	
Insurance
    	
 
    	
105
    
	
5.11
    	
Taxes
    	
 
    	
105
    
	
5.12
    	
Plans
    	
 
    	
105
    
	
5.13
    	
Subsidiaries; Equity Interests
    	
 
    	
107
    
	
5.14
    	
Margin Regulations; Investment Company Act
    	
 
    	
107
    
	
5.15
    	
Disclosure
    	
 
    	
107
    
	
5.16
    	
Compliance with Laws
    	
 
    	
108
    
	
5.17
    	
Intellectual Property; Licenses, Etc.
    	
 
    	
108
    
	
5.18
    	
Labor Matters
    	
 
    	
108
    
	
5.19
    	
Security Documents
    	
 
    	
109
    
	
5.20
    	
Solvency
    	
 
    	
109
    
	
5.21
    	
Deposit Accounts; Credit Card Arrangements
    	
 
    	
109
    
	
5.22
    	
Brokers
    	
 
    	
109
    
	
5.23
    	
Customer and Trade Relations
    	
 
    	
109
    
	
5.24
    	
Casualty
    	
 
    	
109
    
	
5.25
    	
Senior Indebtedness
    	
 
    	
110
    
	
5.26
    	
Anti-Terrorism
    	
 
    	
110
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI AFFIRMATIVE COVENANTS
    	
 
    	
110
    
	
 
    	
 
    	
 
    
	
6.01
    	
Financial Statements
    	
 
    	
110
    
	
6.02
    	
Certificates; Other Information
    	
 
    	
111
    
	
6.03
    	
Notices
    	
 
    	
114
    
	
6.04
    	
Payment of Obligations
    	
 
    	
115
    
	
6.05
    	
Preservation of Existence, Etc.
    	
 
    	
116
    
	
6.06
    	
Maintenance of Properties
    	
 
    	
116
    
	
6.07
    	
Maintenance of Insurance
    	
 
    	
116
    
	
6.08
    	
Compliance with Laws
    	
 
    	
116
    
	
6.09
    	
Books and Records; Accountants
    	
 
    	
116
    
	
6.10
    	
Inspection Rights
    	
 
    	
117
    
	
6.11
    	
Additional Loan Parties
    	
 
    	
118
    
	
6.12
    	
Cash Management
    	
 
    	
119
    
	
6.13
    	
Information Regarding the Collateral
    	
 
    	
120
    
	
6.14
    	
Physical Inventories
    	
 
    	
121
    
	
6.15
    	
Environmental Laws
    	
 
    	
121
    
	
6.16
    	
Further Assurances
    	
 
    	
122
    
	
6.17
    	
Compliance with Terms of Leaseholds
    	
 
    	
122
    
	
6.18
    	
Maintenance of New York Process Agent
    	
 
    	
122
    
	
6.19
    	
Canadian Pension Benefit Plans
    	
 
    	
122
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII NEGATIVE COVENANTS
    	
 
    	
123
    
	
 
    	
 
    	
 
    
	
7.01
    	
Liens
    	
 
    	
123
    
	
7.02
    	
Investments
    	
 
    	
123
    
	
7.03
    	
Secured Indebtedness
    	
 
    	
123
    
	
7.04
    	
Fundamental Changes
    	
 
    	
123
    

 

ii

 

	
7.05
    	
Dispositions
    	
 
    	
124
    
	
7.06
    	
Restricted Payments
    	
 
    	
124
    
	
7.07
    	
Prepayments of Indebtedness
    	
 
    	
125
    
	
7.08
    	
Change in Nature of Business
    	
 
    	
125
    
	
7.09
    	
Use of Proceeds
    	
 
    	
125
    
	
7.10
    	
Amendment of Material Documents
    	
 
    	
125
    
	
7.11
    	
Fiscal Year
    	
 
    	
126
    
	
7.12
    	
Deposit Accounts; Credit Card Processors
    	
 
    	
126
    
	
7.13
    	
Consolidated Fixed Charge Coverage Ratio
    	
 
    	
126
    
	
7.14
    	
Limitations on Currency, Commodity and Other Hedging   Transactions
    	
 
    	
127
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
    	
 
    	
127
    
	
 
    	
 
    	
 
    
	
8.01
    	
Events of Default
    	
 
    	
127
    
	
8.02
    	
Remedies Upon Event of Default
    	
 
    	
130
    
	
8.03
    	
Application of Funds
    	
 
    	
130
    
	
8.04
    	
Waivers By Loan Parties
    	
 
    	
135
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX ADMINISTRATIVE AGENT
    	
 
    	
135
    
	
 
    	
 
    	
 
    
	
9.01
    	
Appointment and Authority
    	
 
    	
135
    
	
9.02
    	
Rights as a Lender
    	
 
    	
136
    
	
9.03
    	
Exculpatory Provisions
    	
 
    	
136
    
	
9.04
    	
Reliance by Agents
    	
 
    	
137
    
	
9.05
    	
Delegation of Duties
    	
 
    	
138
    
	
9.06
    	
Resignation of Agents
    	
 
    	
138
    
	
9.07
    	
Non-Reliance on Agents and Other Lenders
    	
 
    	
139
    
	
9.08
    	
No Other Duties, Etc.
    	
 
    	
139
    
	
9.09
    	
Agents May File Proofs of Claim
    	
 
    	
139
    
	
9.10
    	
Collateral and Guaranty Matters
    	
 
    	
140
    
	
9.11
    	
Notice of Transfer
    	
 
    	
140
    
	
9.12
    	
Reports and Financial Statements
    	
 
    	
140
    
	
9.13
    	
Agency for Perfection
    	
 
    	
141
    
	
9.14
    	
Indemnification of Agents
    	
 
    	
141
    
	
9.15
    	
Relation among Lenders
    	
 
    	
142
    
	
9.16
    	
Defaulting Lender
    	
 
    	
142
    
	
9.17
    	
Risk Participation
    	
 
    	
143
    
	
9.18
    	
Parallel Debt   Provisions
    	
 
    	
143
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE X MISCELLANEOUS
    	
 
    	
146
    
	
 
    	
 
    	
 
    
	
10.01
    	
Amendments, Etc.
    	
 
    	
146
    
	
10.02
    	
Notices; Effectiveness; Electronic Communications
    	
 
    	
148
    
	
10.03
    	
No Waiver; Cumulative Remedies
    	
 
    	
149
    
	
10.04
    	
Expenses; Indemnity; Damage Waiver
    	
 
    	
150
    
	
10.05
    	
Payments Set Aside
    	
 
    	
151
    
	
10.06
    	
Successors and Assigns
    	
 
    	
151
    
	
10.07
    	
Treatment of Certain Information; Confidentiality
    	
 
    	
155
    
	
10.08
    	
Right of Setoff
    	
 
    	
156
    
	
10.09
    	
Interest Rate Limitation
    	
 
    	
156
    
	
10.10
    	
Counterparts; Integration; Effectiveness
    	
 
    	
156
    
	
10.11
    	
Survival
    	
 
    	
156
    
	
10.12
    	
Severability
    	
 
    	
157
    
	
10.13
    	
Replacement of Lenders
    	
 
    	
157
    

 

iii

 

	
10.14
    	
Governing Law; Jurisdiction; Etc.
    	
 
    	
158
    
	
10.15
    	
Waiver of Jury Trial
    	
 
    	
158
    
	
10.16
    	
No Advisory or Fiduciary Responsibility
    	
 
    	
159
    
	
10.17
    	
USA PATRIOT Act Notice; Proceeds of Crime Act
    	
 
    	
159
    
	
10.18
    	
Foreign Asset Control Regulations
    	
 
    	
160
    
	
10.19
    	
Time of the Essence
    	
 
    	
160
    
	
10.20
    	
Designation as Senior Debt
    	
 
    	
160
    
	
10.21
    	
Press Releases
    	
 
    	
160
    
	
10.22
    	
Additional Waivers
    	
 
    	
160
    
	
10.23
    	
Judgment Currency
    	
 
    	
162
    
	
10.24
    	
No Strict Construction
    	
 
    	
162
    
	
10.25
    	
Attachments
    	
 
    	
162
    
	
10.26
    	
Language
    	
 
    	
163
    
	
 
    	
 
    	
 
    	
 
    
	
SIGNATURES
    	
 
    	
S-1
    

 

iv

 

SCHEDULES

 

	
1.01
    	
Guarantors
    
	
1.02
    	
Existing   Letters of Credit
    
	
2.01
    	
Commitments   and Applicable Percentages
    
	
5.01
    	
Loan   Parties Organizational Information
    
	
5.06
    	
Litigation
    
	
5.08(b)(1)
    	
Owned   Real Estate
    
	
5.08(b)(2)
    	
Leased   Real Estate
    
	
5.09
    	
Environmental   Matters
    
	
5.10
    	
Insurance
    
	
5.13
    	
Subsidiaries;   Other Equity Investments
    
	
5.17
    	
Intellectual   Property Matters
    
	
5.18
    	
Collective   Bargaining Agreements
    
	
5.21(a)
    	
DDAs
    
	
5.21(b)
    	
Credit   Card Arrangements
    
	
6.02
    	
Financial   and Collateral Reporting
    
	
7.01
    	
Existing   Liens
    
	
7.02
    	
Existing   Investments
    
	
7.03
    	
Existing   Indebtedness
    
	
10.02
    	
Administrative   Agent’s Office; Certain Addresses for Notices
    

 

EXHIBITS

 

	
 
    	
Form of
    
	
 
    	
 
    
	
A-1
    	
Domestic   Committed Loan Notice
    
	
A-2
    	
Canadian   Committed Loan Notice
    
	
B-1
    	
Domestic   Swing Line Loan Notice
    
	
B-2
    	
Canadian   Swing Line Loan Notice
    
	
C-1
    	
Domestic   Revolving Note
    
	
C-2
    	
Canadian   Revolving Note
    
	
C-3
    	
Domestic   Swing Line Note
    
	
C-4
    	
Canadian   Swing Line Note
    
	
C-5
    	
Foreign   Note - Domestic
    
	
C-6
    	
Foreign   Note - Canada
    
	
D
    	
Assignment   and Assumption
    
	
E
    	
Borrowing   Base Certificate
    
	
F
    	
Compliance   Certificate
    

 

v

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of November 12, 2010, among

 

SALLY HOLDINGS LLC, a Delaware limited liability company, BEAUTY SYSTEMS GROUP, LLC, a Delaware limited liability company, and SALLY BEAUTY SUPPLY, LLC, a Delaware limited liability company (collectively, the “Domestic Borrowers”);

 

BEAUTY SYSTEMS GROUP (CANADA), INC., a New Brunswick corporation (the “Canadian Borrower”),

 

SBH FINANCE B.V., a private limited liability company, incorporated under the laws of the Netherlands (the “Foreign Borrower”),

 

the Persons named on Schedule 1.01 hereto (collectively, with each other Person that from time to time becomes a “Guarantor” hereunder, the “Guarantors”);

 

each Lender from time to time party hereto;

 

BANK OF AMERICA, N.A., as Administrative Agent, and Collateral Agent;

 

BANK OF AMERICA, N.A. (acting through its Canada branch), as Canadian Agent,

 

WELL FARGO CAPITAL FINANCE, LLC, as Syndication Agent; and

 

JPMORGAN CHASE BANK, N.A., as Documentation Agent.

 

The Borrowers have requested that the Lenders provide a revolving credit facility, and the Lenders have indicated their willingness to lend and the L/C Issuer has indicated its willingness to issue Letters of Credit, in each case on the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

ARTICLE I
 DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined Terms.  As used in this Agreement, the following terms shall have the meanings set forth below:

 

“Accommodation Payment” as defined in Section 10.22(d).

 

“Account” means “accounts” as defined in the UCC and in the PPSA, (or to the extent governed by the Civil Code of Québec, defined as “claims” for the purposes of the Civil Code of Québec) and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, or (c) arising out of the use of a credit or charge card or information contained on or for use with the card.

 

“Accounts Receivable Reporting Requirement” means, at the time of determination (i) Excess Availability is less than 40% of the Loan Cap or (ii) Eligible Trade Receivables multiplied by the Receivables Advance Rate comprise greater than 12.5% of the Combined Borrowing Base.

 

1

 

“ACH” means automated clearing house transfers.

 

“Acquisition” means, with respect to any Person (a) an Investment in, or a purchase of a Controlling interest in, the Equity Interests of any other Person, (b) a purchase or other acquisition of all or substantially all of the assets or properties of, another Person or of any business unit of another Person, (c) any merger, amalgamation or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a Controlling interest in the Equity Interests, of any Person, or (d) any acquisition of any Store locations of any Person, in each case in any transaction or group of transactions which are part of a common plan (other than the acquisition of any Store locations of any franchisees in the ordinary course of business).

 

“Acquisition/Investment Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, that (a) no Default or Event of Default then exists or would arise as a result of entering into such transaction or the making of such payment, and (b) if after giving pro forma effect to such transaction or payment, Excess Availability for the 45 day period immediately preceding, and on the date of, such transaction or payment was equal to or greater than 15% of the Loan Cap.  If after giving pro forma effect to such transaction or payment, Excess Availability would be equal to or less than 50% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such transaction or payment which is subject to the Acquisition/Investment Payment Conditions, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements, no less than five (5) Business Days prior to the consummation of any such transaction or payment.

 

“Additional Commitment Lender” shall have the meaning provided in Section 2.15.

 

“Adjusted LIBOR Rate” means, with respect to any LIBOR Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of one percent (1%)) equal to the LIBOR Rate for such Interest Period multiplied by the Statutory Reserve Rate.  The Adjusted LIBOR Rate will be adjusted automatically as to all LIBOR Borrowings then outstanding as of the effective date of any change in the Statutory Reserve Rate.

 

“Adjustment Date” means the first day of each Fiscal Quarter, commencing April 1, 2011.

 

“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Parent and the Lenders.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person, (i) another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, (ii) any director, officer, managing member, partner, trustee, or beneficiary of that Person, (iii) any other Person directly or indirectly holding 10% or more of any class of the Equity Interests of that Person, and (iv) any other Person 10% or more of any class of whose Equity Interests is held directly or indirectly by that Person.

 

“Agent(s)” means, individually, the Administrative Agent or the Canadian Agent, and collectively means all of them.

 

2

 

“Agent Parties” shall have the meaning specified in Section 10.02(c).

 

“Aggregate Total Commitments” means, at any time of calculation, without duplication, the sum of the Domestic Total Commitments and the Canadian Total Commitments.  As of the Closing Date, the Aggregate Total Commitments are $400,000,000.

 

“Agreement” means this Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.22(d).

 

“Applicable Lenders” means the Required Lenders, all affected Lenders, or all Lenders, as the context may require.

 

“Applicable Margin” means:

 

(a)           From and after the Closing Date until the first Adjustment Date, the percentages set forth in Level II of the pricing grid below; and

 

(b)           From and after the first Adjustment Date and on each Adjustment Date thereafter, the Applicable Margin shall be determined from the following pricing grid based upon the Average Daily Availability as of the Fiscal Quarter ended immediately preceding such Adjustment Date; provided, however, that until the Adjustment Date which is April 1, 2011, the Applicable Margin shall not be established at Level I (even if Average Daily Availability for Level I has been met); provided further that notwithstanding anything to the contrary set forth herein, upon the occurrence of an Event of Default, the Administrative Agent may, and at the direction of the Required Lenders shall, immediately increase the Applicable Margin to that set forth in Level III (even if the Average Daily Availability requirements for a different Level have been met) and interest shall accrue at the Default Rate; provided further if any Borrowing Base Certificates are at any time restated or otherwise revised (including as a result of an audit) or if the information set forth in any Borrowing Base Certificates otherwise proves to be false or incorrect such that the Applicable Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Default or Event of Default arising as a result thereof, interest due under this Agreement shall be immediately and retroactively recalculated at such higher rate for any applicable periods and shall be due and payable on demand.

 

	
Level
    	
 
    	
Average Daily
   Availability
    	
 
    	
LIBOR Margin/BA
   Rate Margin/Euribor
   Rate Margin
    	
 
    	
Domestic Prime Rate
   Margin/US Index Rate
   Margin/Canadian Prime
   Rate Margin
    	
 
    
	
I
    	
 
    	
Greater than or equal to $275,000,000
    	
 
    	
2.25
    	
%
    	
1.25
    	
%
    
	
II
    	
 
    	
Greater than or equal to $150,000,000 but less than $275,000,000
    	
 
    	
2.50
    	
%
    	
1.50
    	
%
    
	
III
    	
 
    	
Less than $150,000,000
    	
 
    	
2.75
    	
%
    	
1.75
    	
%
    

 

3

 

“Applicable Percentage” means with respect to (a) any Domestic Lender at any time, the percentage (carried out to the ninth decimal place) of the Domestic Total Commitments represented by such Domestic Lender’s Domestic Commitment at such time, (b) any Canadian Lender at any time, the percentage (carried out to the ninth decimal place) of the Canadian Total Commitments represented by such Canadian Lender’s Canadian Commitment at such time, and (c) any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Total Commitments represented by such Lender’s Commitment at such time.  If the Domestic Commitments and/or Canadian Commitments of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 2.06 or Section 8.02 or if the Aggregate Total Commitments have expired, then the Applicable Percentages of each Lender shall be determined based on the Applicable Percentages of such Lender most recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentages of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

 

“Applicable Rate” means, at any time of calculation, the Applicable Margin for Loans which are LIBOR Rate Loans.

 

“Appraised Value” means the appraised orderly liquidation value, net of costs and expenses to be incurred in connection with any such liquidation, which value is expressed as a percentage of Cost of Eligible Inventory as set forth in the inventory stock ledger of the Domestic Loan Parties and the Canadian Borrower, which value shall be determined from time to time by the most recent appraisal undertaken by an independent appraiser engaged by the Administrative Agent.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender (c) an entity or an Affiliate of an entity that administers or manages a Lender, or (d) the same investment advisor or an advisor under common control with such Lender, Affiliate or advisor, as applicable.

 

“Arrangers” mean Banc of America Securities LLC and Wells Fargo Capital Finance, LLC, in their capacities as joint lead arrangers and joint book managers.

 

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease, agreement or instrument were accounted for as a capital lease.

 

4

 

“Audited Financial Statements” means the audited consolidated balance sheet of the Parent and its Subsidiaries for the fiscal year ended September 30, 2009, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such fiscal year of the Parent and its Subsidiaries, including the notes thereto.

 

“Auto-Extension Letter of Credit” shall have the meaning specified in Section 2.03(b)(iii).

 

“Availability Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Total Commitments pursuant to Section 2.06, and (c) the date of termination of the Commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Availability Reserves” means such reserves as the Administrative Agent from time to time determines in its Permitted Discretion as being appropriate (a) to reflect the impediments to the Agents’ ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the realization upon the Collateral, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Domestic Borrowing Base, Canadian Borrowing Base or Distribution Borrowing Base or the assets, business, financial performance or financial condition of any Loan Party, or (d) to reflect that a Default or an Event of Default then exists. Without limiting the generality of the foregoing, Availability Reserves may include, in the Administrative Agent’s Permitted Discretion, (but are not limited to) reserves based on: (i) (A) rent for any Store locations, and (B) for each distribution center leased by a Loan Party unless the applicable lessor has delivered to the Collateral Agent or the Canadian Agent, as applicable, a Collateral Access Agreement; (ii) customs duties, and other costs to release Inventory which is being imported into the United States or Canada; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, claims of the PBGC and other Taxes which may have priority over the interests of the Collateral Agent or the Canadian Agent in any Collateral; (iv) salaries, wages, vacation pay and benefits due and owing to employees of any Loan Party, (v) Customer Credit Liabilities, (vi) customer deposits, (viii) reserves for reasonably anticipated changes in the Appraised Value of Eligible Inventory between appraisals, (viii) warehousemen’s, carrier’s or bailee’s charges and other Permitted Encumbrances which may have priority over the interests of the Collateral Agent or the Canadian Agent in any Collateral, (ix) amounts due to vendors on account of consigned goods (x) the Agents’ estimate of Canadian Priority Payable Reserves, (xi) reserves to reflect the liabilities and obligations of the Loan Parties with respect to Bank Products then provided or outstanding, and (xii) reserves to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.  The amount of any Reserve established by the Administrative Agent hereunder shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve.  All such Reserves shall be established in good faith and without duplication for items already excluded from “Eligible Credit Card Receivables”, “Eligible Inventory” and “Eligible Trade Receivables” as set forth in the lettered clauses in the definitions thereof or reserves or criteria deducted in computing the Appraised Value of Eligible Inventory or the imposition of Inventory Reserves.  To the extent required pursuant to Section 2.01(e), the Administrative Agent shall give the Borrowers three (3) Business Days prior written notice of the imposition of any Reserve and, upon delivery of such notice, the Administrative Agent shall be available to discuss the proposed Availability Reserves and the Borrowers may take such action as may be required so that the event, condition or other matter that is the basis for the Availability Reserve no longer exists or has been otherwise adequately addressed by the Borrowers to the reasonable satisfaction of the Administrative Agent.

 

“Average Daily Availability” shall mean the average daily Excess Availability for the immediately preceding Fiscal Quarter.

 

5

 

“BA Equivalent Loan” means any Canadian Loan in CD$ bearing interest at a rate determined by reference to the BA Rate in accordance with the provisions of Article II.

 

“BA Equivalent Loan Borrowing” means any Committed Borrowing comprised of BA Equivalent Loans.

 

“BA Rate” means, for the Interest Period of each BA Equivalent Loan, the rate of interest per annum equal to the annual rates applicable to CD$ bankers’ acceptances having an identical or comparable term as the proposed BA Equivalent Loan displayed and identified as such on the display referred to as the “CDOR Page” (or any display substituted therefor) of Reuter Monitor Money Rates Service as at approximately 10:00 A.M. (Toronto time) on such day (or, if such day is not a Business Day, as of 10:00 A.M. (Toronto time) on the immediately preceding Business Day), plus five (5) basis points; provided that if such rates do not appear on the CDOR Page at such time on such date, the rate for such date will be the annual discount rate (rounded upward to the nearest whole multiple of 1/100 of 1%) as of 10:00 A.M. on such day at which a Canadian chartered bank listed on Schedule 1 of the Bank Act (Canada) as selected by the Canadian Agent is then offering to purchase CD$ bankers’ acceptances accepted by it having such specified term (or a term as closely as possible comparable to such specified term), plus five (5) basis points.

 

“Bank of America” means Bank of America, N.A. and its successors.

 

“Bank of America-Canada Branch” means Bank of America, N.A. (acting through its Canada branch), a banking corporation carrying on business under the Bank Act (Canada).

 

“Bank of Canada Overnight Rate” means, on any date of determination, the rate of interest charged by the Bank of Canada on one-day Canadian dollar loans to financial institutions, for such date.

 

“Bank Products” means any services or facilities provided to the Parent or any of its Subsidiaries by the Administrative Agent, the Canadian Agent, any Lender, or any of their respective branches or Affiliates, including, without limitation, on account of (a) Swap Contracts and (b) leasing, but excluding Cash Management Services.

 

“Blocked Account” has the meaning provided in Section 6.12(a)(ii).

 

“Blocked Account Agreement” means, with respect to an account established by a Loan Party, an agreement, in form and substance satisfactory to the Administrative Agent and (if a party thereto) the Canadian Agent, establishing control (as defined in the UCC or other applicable Law) of such Blocked Account by the Administrative Agent (for the benefit of itself and the other Credit Parties) or the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties) and whereby the bank maintaining such account agrees, upon the occurrence and during the continuance of a Trigger Event, to comply only with the instructions originated by the Administrative Agent or the Canadian Agent, as applicable, without the further consent of any Loan Party.

 

“Blocked Account Bank” means each bank with whom deposit accounts are maintained in which any funds of any of the Loan Parties from one or more DDAs are concentrated and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

 

“Borrower Materials” has the meaning specified in Section 6.02.

 

“Borrowers” means, collectively, the Domestic Borrowers, the Canadian Borrower and the Foreign Borrower.

 

6

 

“Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the context may require.

 

“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit E hereto (with such changes therein as may be required by the Administrative Agent to reflect the components of and reserves against the Domestic Borrowing Base as provided for hereunder from time to time, and as may be required by the Canadian Agent to reflect the components of and reserves against the Canadian Borrowing Base as provided for hereunder from time to time), executed and certified as being accurate and complete, by a Responsible Officer of the Parent (with respect to the Domestic Borrowing Base) and the Canadian Borrower (with respect to the Canadian Borrowing Base) which shall include appropriate exhibits, schedules, supporting documentation, and additional reports as reasonably requested in advance by the Administrative Agent (with respect to the Domestic Borrowing Base) or the Canadian Agent (with respect to the Canadian Borrowing Base).

 

“Business Day” means (a) any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, (b) if such day relates to any LIBOR Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank market and the applicable Optional Currency in the relevant Eurocurrency Interbank Market, and (c) with respect to any Loan to be made in an Optional Currency, a day on which dealings in the relevant Optional Currency can be carried on in the principal financial center of the country in which such currency is legal tender, provided further that when used in connection with any Loan by a Canadian Lender, the term “Business Day” shall also exclude any day on which banks are authorized or required by law to be closed in Toronto, Ontario, Canada, provided, however, that, with respect to notices and determinations in connection with, and payments of principal and interest on, Loans denominated in Euros, such day is also a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) (or, if such clearing system ceases to be operative, such other clearing system (if any) determined by the Administrative Agent to be a suitable replacement) is open for settlement of payment in Euros.

 

“Canadian Agent” means Bank of America- Canada Branch, for its own benefit and the benefit of the other Canadian Credit Parties, or any successor Canadian agent.

 

“Canadian Agent’s Office” means the Canadian Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Canadian Agent may from time to time notify the Canadian Borrower and the Canadian Lenders.

 

“Canadian Availability” means, as of any date of determination thereof, the result, if a positive number, of:

 

(a)           the Canadian Loan Cap

 

minus

 

(b)          the Canadian Total Outstandings on such date.

 

In calculating Canadian Availability at any time and for any purpose under this Agreement any amount calculated or referenced in Dollars shall also refer to the Equivalent Amount in CD$.

 

“Canadian Borrower” has the meaning specified in the introductory paragraph hereto and, subject to the terms of this Agreement, includes the Foreign Borrower.

 

7

 

“Canadian Borrowing” means a Canadian Committed Borrowing made to the Canadian Borrower or the Foreign Borrower (to the extent based on Canadian Availability) or a Swing Line Borrowing made to the Canadian Borrower or the Foreign Borrower (to the extent based on Canadian Availability), as the context may require.

 

“Canadian Borrowing Base” means, at any time of calculation, an Equivalent Amount in Dollars equal to:

 

(a)           the face amount of Eligible Credit Card Receivables of the Canadian Borrower multiplied by 90%;

 

plus

 

(b)           the Cost of Eligible Inventory of the Canadian Borrower, net of Inventory Reserves, multiplied by 85% multiplied by the Appraised Value of Eligible Inventory of the Canadian Borrower;

 

plus

 

(c)           the face amount of Eligible Trade Receivables of the Canadian Borrower multiplied by the Receivables Advance Rate;

 

minus

 

(d)           the then amount of all Availability Reserves relating to the Canadian Borrower.

 

“Canadian Committed Borrowing” means a borrowing consisting of simultaneous Canadian Committed Loans of the same Type and, in the case of BA Equivalent Loans or LIBOR Rate Loans, having the same Interest Period made by each of the Canadian Lenders pursuant to Section 2.01.

 

“Canadian Committed Loan” means any loan at any time made by any Canadian Lender pursuant to Section 2.01.

 

“Canadian Commitments” means, as to each Canadian Lender, its obligation to (a) make Canadian Committed Loans to the Canadian Borrower pursuant to Section 2.01(b), (b) make Canadian Committed Loans to the Foreign Borrower pursuant to Section 2.01(c), (c) purchase participations in Canadian L/C Obligations, and (d) purchase participations in Swing Line Loans made to the Canadian Borrower and the Foreign Borrower (to the extent based on Canadian Availability), in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Canadian Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Canadian Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Canadian Concentration Account” has the meaning provided in Section 6.12(c).

 

“Canadian Credit Extensions” mean each of the following: (a) a Canadian Borrowing and (b) a Canadian L/C Credit Extension.

 

“Canadian Credit Party” or “Canadian Credit Parties” means (a) individually, (i) each Canadian Lender and its branches and Affiliates, (ii) the Canadian Agent and its Affiliates, (iii) each L/C Issuer of any Canadian Letter of Credit, (iv) the Arrangers, (v) each beneficiary of any indemnification obligation

 

8

 

undertaken by any Loan Party under any Loan Document with respect to the Canadian Liabilities, (vi) each holder of any Other Canadian Liabilities, and (vii) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

 

“Canadian L/C Borrowing” means an extension of credit resulting from a drawing under any Canadian Letter of Credit which has not been reimbursed on or prior to the date required to be reimbursed by the Canadian Borrower or the Foreign Borrower, as applicable, pursuant to Section 2.03(c)(i) or refinanced as a Canadian Committed Borrowing.

 

“Canadian L/C Credit Extension” means, with respect to any Canadian Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“Canadian L/C Obligations” means, as at any date of determination and without duplication, the aggregate Stated Amount of all outstanding Canadian Letters of Credit plus the aggregate of all Unreimbursed Amounts under Canadian Letters of Credit, including all Canadian L/C Borrowings.

 

“Canadian Lenders” means the Lenders having Canadian Commitments from time to time or at any time.  Any Person may be a Canadian Lender only if it is a financial institution that is listed on Schedule I, II or III of the Bank Act (Canada), has received an approval to have a financial establishment in Canada pursuant to Section 522.21 of the Bank Act (Canada) or is not a foreign bank for purposes of the Bank Act (Canada), and if such financial institution is not resident in Canada and is not deemed to be resident in Canada for purposes of the Income Tax Act (Canada), then such financial institution deals at arm’s length with each Canadian Loan Party for purposes of the Income Tax Act (Canada).

 

“Canadian Letter of Credit” means each Letter of Credit issued hereunder for the account of the Canadian Borrower or the Foreign Borrower.

 

“Canadian Letter of Credit Sublimit” means an amount equal to $10,000,000.  The Canadian Letter of Credit Sublimit is part of, and not in addition to, the Canadian Total Commitments.  A permanent reduction of the Canadian Total Commitments shall not require a corresponding pro rata reduction in the Canadian Letter of Credit Sublimit; provided, however, that if the Canadian Total Commitments are reduced to an amount less than the Canadian Letter of Credit Sublimit, then the Canadian Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Canadian Borrower’s option, less than) the Canadian Total Commitments.

 

“Canadian Liabilities” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Canadian Loan Party arising under any Loan Document or otherwise with respect to any Canadian Loan or Canadian Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Canadian Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, (b) any Other Canadian Liabilities, and (c) the Foreign Liabilities to the extent of any direct Borrowing by the Foreign Borrower or issuance of any Letter of Credit for the account of the Foreign Borrower based on Canadian Availability, in accordance with Section 2.01(c).

 

“Canadian Loan” means an extension of credit by a Canadian Lender to the Canadian Borrower or the Foreign Borrower (to the extent based on Canadian Availability) under Article II in the form of a Committed Loan or a Swing Line Loan.

 

9

 

“Canadian Loan Cap” means, at any time of determination, the lesser of (a) the Canadian Total Commitments and (b) the Canadian Borrowing Base.

 

“Canadian Loan Parties” means, collectively, the Canadian Borrower, the Foreign Borrower and each Canadian Subsidiary that is a Guarantor of the Canadian Liabilities.  “Canadian Loan Party” means any one of such Persons.

 

“Canadian Note” means a promissory note made by the Canadian Borrower in favor of a Canadian Lender evidencing Canadian Loans made by such Canadian Lender, substantially in the form of Exhibit C-1.

 

“Canadian Overadvance” means a Canadian Credit Extension to the extent that, immediately after the making of such Canadian Credit Extension, the aggregate principal balance of all Canadian Credit Extensions then outstanding exceeds the Canadian Loan Cap as then in effect.

 

“Canadian Pension Plan” means a pension plan that is registered under the Pension Benefits Act (Ontario) or other applicable pension benefits standards legislation of another Canadian province or territory and the Income Tax Act (Canada) and that is (a) maintained or sponsored by any Canadian Loan Party or any Canadian Subsidiary for its employees, (b) maintained pursuant to a collective bargaining agreement, or other arrangement under which more than one employer makes contributions and to which any Canadian Loan Party or any Canadian Subsidiary is making or accruing an obligation to make contributions, or (c) a plan with respect to which any Canadian Loan Party has incurred or may incur liability, including contingent liability either to such plan or to any Person or Governmental Authority, including the FSCO. For purposes of clarity, “Canadian Pension Plan” shall not include the group registered retirement savings plan in which the employees of any Canadian Loan Party or any Canadian Subsidiary participate and which is not subject to any pension benefits standards legislation or the registered pension plan provisions of the Income Tax Act (Canada).

 

“Canadian Prime Rate” means, for any day, the greater of (i) a fluctuating rate of interest per annum equal to the rate of interest in effect for such day as publicly announced from time to time by Bank of America-Canada Branch as its reference rate of interest for loans made in CD$ and designated as its “prime” rate being a rate set by Bank of America-Canada Branch based upon various factors, including Bank of America-Canada Branch’s costs and desired return, general economic conditions and other factors and is used as a reference point for pricing some loans, provided that in the event that the Bank of America-Canada Branch (including any successor or assignor) does not at any time publicly announce a prime rate, such rate shall be the “prime rate” publicly announced by a Schedule 1 chartered bank in Canada selected by the Canadian Agent, (ii) the Bank of Canada Overnight Rate, plus 0.50%, and (iii) the BA Rate for a one month Interest Period as determined on such day, plus 1.0%.   Any change in the prime rate announced by the Bank of America-Canada Branch shall take effect at the opening of business on the day specified in the public announcement of such change.  Each interest rate based on the Canadian Prime Rate hereunder, shall be adjusted simultaneously with any change in the Canadian Prime Rate.

 

“Canadian Prime Rate Loan” means a Loan that bears interest based on the Canadian Prime Rate.

 

“Canadian Priority Payable Reserves” means, at any time, without duplication, the obligations, liabilities and indebtedness at such time which have, or would in any proceeding have, a trust, deemed trust, right of garnishment, right of distress, charge or statutory Lien imposed to provide for payment or Liens ranking or capable of ranking senior to or pari passu with Liens securing the Canadian Liabilities on any of the Collateral under federal, provincial, state, county, territorial, municipal, or local law including, to the extent that there is such a trust, statutory Liens or Liens in respect of the specified item that has or is capable of having such rank, claims for unremitted and accelerated rents, utilities, taxes

 

10

 

(including sales taxes and goods and services taxes (“GST”) and harmonized sales taxes (“HST”), value added taxes, amounts deducted or withheld or not paid and remitted when due under the Income Tax Act (Canada), excise taxes, taxes payable pursuant to Part IX of the Excise Tax Act (Canada) or similar provincial or territorial Law), the claims of a clerk, servant, travelling salesperson, labourer or worker (whether full-time or part-time) who is owed wages (including any amounts protected by the Wage Earner Protection Program Act (Canada)), salaries, commissions, disbursements, compensation or other amounts (such as union dues payable on behalf of employees) by the Loan Parties (but only to the extent that the claims of such parties may rank or be capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral), vacation pay, severance pay, employee source deductions, workers’ compensation obligations, government royalties or pension fund obligations (including claims of FSCO and all amounts currently or past due and not contributed, remitted or paid to any Canadian Pension Plan)  (but only to the extent ranking or capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral), together with the aggregate value, determined in accordance with GAAP, of all Eligible Inventory which may be or may become subject to a right of a supplier to recover possession thereof or to exercise rights of revendication with respect thereto under any federal, provincial, state, county, municipal, territorial or local law, where such supplier’s right may have priority over Liens securing the Obligations including Eligible Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the BIA or the Civil Code of Québec.

 

“Canadian Security Documents” means each General Security Agreement, Deed of Hypothec and each other security agreement or other instrument or document executed and delivered by any Canadian Loan Party to the Canadian Agent pursuant to this Agreement or any other Loan Document granting a Lien on assets of any Canadian Loan Party for the benefit of the Canadian Credit Parties, as security for the Canadian Liabilities.

 

“Canadian Subsidiary” means any Subsidiary that is organized under the laws of Canada or any province or territory thereof.

 

“Canadian Swing Line Note” means the promissory note of the Canadian Borrower substantially in the form of Exhibit C-3, payable to the order of the applicable Swing Line Lender, evidencing the Swing Line Loans made by the Swing Line Lender to the Canadian Borrower or to the Foreign Borrower (to the extent based on Canadian Availability).

 

“Canadian Swing Line Sublimit” means an amount equal to the lesser of (a) $10,000,000 and (b) the Canadian Total Commitments. The Canadian Swing Line Sublimit is part of, and not in addition to, the Canadian Total Commitments.

 

“Canadian Total Commitments” means the aggregate of the Canadian Commitments of all Canadian Lenders.  On the Closing Date, the Canadian Total Commitments are $25,000,000.

 

“Canadian Total Outstandings” means, without duplication, the aggregate Outstanding Amount of all Canadian Loans and all Canadian L/C Obligations.

 

“Capital Expenditures” means, with respect to any Person for any period, (a) all expenditures made (whether made in the form of cash or other property) or costs incurred for the acquisition or improvement of fixed or capital assets of such Person (excluding normal replacements and maintenance which are properly charged to current operations), in each case that are (or should be) set forth as capital expenditures in a Consolidated statement of cash flows of such Person for such period, in each case prepared in accordance with GAAP, and (b) Capital Lease Obligations incurred by a Person during such period.

 

11

 

“Capital Lease Obligations” means, with respect to any Person for any period, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as liabilities on a balance sheet of such Person under GAAP and the amount of which obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Cash Collateral Account” means (i) in the case of the Domestic L/C Obligations, an account established by one or more of the Domestic Borrowers with the Administrative Agent, for its own benefit and the benefit of the other Domestic Credit Parties, at Bank of America under the sole and exclusive dominion and control of the Administrative Agent, in the name of the Administrative Agent or as the Administrative Agent shall otherwise direct, in which deposits are required to be made by the Domestic Borrowers in respect of the Domestic L/C Obligations in accordance with Section 2.03(g) or 8.02(c); and (ii) in the case of the Canadian L/C Obligations, an account established by the Canadian Borrower with the Canadian Agent, for its own benefit and the benefit of the other Canadian Credit Parties, at Bank of America-Canada Branch under the sole and exclusive dominion and control of the Canadian Agent, in the name of the Canadian Agent or as the Canadian Agent shall otherwise direct, in which deposits are required to be made by the Canadian Borrower in respect of the Canadian L/C Obligations in accordance with Section 2.03(g) or 8.02(c).

 

“Cash Collateralize” has the meaning specified in Section 2.03(g). Derivatives of such term have corresponding meanings.

 

“Cash Management Services” means any cash management services or facilities provided to the Parent or any of its Subsidiaries by the Administrative Agent, the Canadian Agent or any Lender or any of their respective branches or Affiliates, including, without limitation, on account of: (a) ACH transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange facilities, (d) credit card processing services, (e) purchase cards (f) electronic payables, and (g) credit or debit cards.

 

“CD$” or “Canadian Dollars” means lawful money of Canada.

 

“CD&R” means Clayton, Dubilier & Rice, Inc.

 

“CD&R Investors” means the collective reference to (i) CDRS Acquisition LLC, a Delaware limited liability company, and any successor thereto (“CDRS Acquisition LLC”), (ii) Clayton, Dubilier & Rice Fund VII, L.P., a Cayman Islands exempted limited partnership, or any successor thereto, (iii) CD&R Parallel Fund VII, L.P., a Cayman Islands exempted limited partnership, or any successor thereto, and (iv) any Affiliate of any CD&R Investor.

 

“CDRS Acquisition LLC” as defined in the definition of “CD&R Investors.”

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System maintained by the United States Environmental Protection Agency.

 

“CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule,

 

12

 

regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided  however, for purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines or directives in connection therewith are deemed to have gone into effect and been adopted after the Closing Date.

 

“Change of Control” means an event or series of events by which:

 

(a)           any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, shall be, directly or indirectly, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)) of shares of Voting Stock having more than 50% of the total voting power of all outstanding shares of Holdings (taking into account all such Equity Interests that such “person” or “group” has the right to acquire pursuant to any option right); or

 

(b)           the Continuing Directors shall cease to constitute a majority of the members of the Board of Directors of Holdings; or

 

(c)           any “change in control” as defined in the Senior Term Loan Credit Agreement or either Notes Indenture; or

 

(d)           Holdings fails at any time to own, directly or indirectly, 100% of the Equity Interests of the Parent free and clear of all Liens, except where such failure is as a result of a transaction permitted by the Loan Documents; or

 

(e)           the Parent fails at any time to own, directly or indirectly, 100% of the Equity Interests of each other Loan Party free and clear of all Liens (other than the Liens in favor of the Collateral Agent or the Canadian Agent, as the case may be), except where such failure is as a result of a transaction permitted by the Loan Documents.

 

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

 

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as amended and in effect.

 

“Collateral” means any and all “Collateral” as defined in any applicable Security Document and all other property of any Loan Party that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Collateral Agent (for the benefit of itself and the other Credit Parties) or the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties), as applicable.

 

“Collateral Access Agreement” means an agreement reasonably satisfactory in form and substance to the Agents executed by (a) a bailee or other Person in possession of Collateral, or (b) any landlord of Real Estate leased by any Loan Party, pursuant to which such Person (i) acknowledges the Collateral Agent’s or Canadian Agent’s, as applicable, Lien on the Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral held by such Person or located on such Real Estate, (iii) provides the applicable Agent with access to the Collateral held by such bailee or other Person or located in or on such Real Estate, (iv) as to any landlord, provides the applicable Agent with a reasonable time to sell and

 

13

 

dispose of the Collateral from such Real Estate, and (v) makes such other agreements with the Agents as the Agents may reasonably require.

 

“Collateral Agent” means Bank of America, acting in such capacity for its own benefit and the ratable benefit of the other Domestic Credit Parties.

 

“Combined Borrowing Base” means the sum of the Domestic Borrowing Base and the Canadian Borrowing Base.

 

“Commercial Letter of Credit” means any letter of credit or similar instrument (including, without limitation, bankers’ acceptances) issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by a Loan Party in the ordinary course of business of such Loan Party.

 

“Commitment” means, as to each Lender, its Domestic Commitment and its Canadian Commitment.

 

“Committed Borrowing” means each Canadian Committed Borrowing and each Domestic Committed Borrowing.

 

“Committed Loan” means any loan at any time made by any Lender (including, without limitation, any Domestic Committed Loan and any Canadian Committed Loan) pursuant to Section 2.01.

 

“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a Conversion of Committed Loans from one Type to the other, or (c) a continuation of LIBOR Rate Loans or BA Equivalent Loans, pursuant to Section 2.02(b), which, if in writing, shall be substantially in the form of Exhibit A-1 (Domestic Committed Loan Notice) or Exhibit A-2 (Canadian Committed Loan Notice), as applicable.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit F.

 

“Concentration Accounts” means, collectively, the Canadian Concentration Account and the Domestic Concentration Account.

 

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.

 

“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of Holdings and its Subsidiaries on a Consolidated basis for the most recently completed Measurement Period, plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges, (ii) the provision for Federal, state, local and foreign income Taxes, (iii) depreciation and amortization expense and, (iv) all other non-cash charges and non-cash losses, including all non-cash compensation to officers, directors and employees paid in the form of Equity Interests and all write-downs of assets and goodwill, (v) all cash expenses incurred in connection with (A) any capital markets transaction (including any merger or acquisition transaction) for the issuance of debt, equity or convertible security, and (B) the issuance of any Indebtedness (including the Obligations), (vi) losses incurred in any Disposition, (vii) fees, cash and expenses incurred in the early extinguishment of Indebtedness, (viii) non-cash losses or non-cash reserves incurred from or by discontinued operations, (ix) any loss accounted for by the equity method of accounting, net of any

 

14

 

Investments made by Holdings or any of its Subsidiaries in the Person which has incurred such loss during such Measurement Period, (x) non-cash fees and expense reimbursements paid to members of the Board of Directors in connection with their service on such Board of Directors, and (xi) only with respect to determining compliance with Section 7.13 hereof, any Specified Equity Contribution, minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, provincial, territorial, municipal, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Holdings and its Subsidiaries for such Measurement Period), all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) the unfinanced portion of all Capital Expenditures (excluding any Capital Expenditure made with all or any portion of the proceeds, applied within twelve months of receipt thereof, from (x) any casualty insurance, condemnation or eminent domain, or (y) any sale of assets (other than Inventory) and excluding (z) any Capital Expenditure made with all or any portion of the proceeds from the sale of Equity Interests, provided that any such Capital Expenditure is made or committed to be made within six (6) months after the date of receipt of the initial proceeds from the sale of such Equity Interests), minus (iii) the aggregate amount of Federal, state, provincial, territorial, municipal, local and foreign income taxes paid in cash during such period to (b) the sum of (i) Debt Service Charges plus (ii) the aggregate amount of all Restricted Payments paid by Parent in cash pursuant to Section 7.06(f) hereof, in each case, of or by Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Funded Indebtedness” means, as of any date of determination, for Holdings and its Subsidiaries on a Consolidated basis, without duplication, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances and bank guaranties, (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) all Attributable Indebtedness, and (f) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership (other than a joint venture that is itself a corporation or limited liability company) in which Holdings or any of its Subsidiaries is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Holdings and such Subsidiary.

 

“Consolidated Interest Charges” means, for any Measurement Period, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Swap Contracts, but excluding any non-cash or deferred interest financing costs and expense, and (b) the portion of rent expense with respect to such period under Capital Lease Obligations that is treated as interest in accordance with GAAP, minus interest income (accrued and received or receivable in cash for such period), in each case of or by Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Net Income” means, as of any date of determination, the net income of Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP, provided, however, that there shall be excluded (a) all extraordinary and/or non-recurring and/or unusual gains, losses, items, credits and expenses for such Measurement Period, (b) the income (or loss) of any Person during such Measurement Period in which

 

15

 

any Person (other than any Subsidiary of Holdings) has a joint interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to Holdings and its Subsidiaries during such period, (c) the income (or loss) of any Person during such Measurement Period and accrued prior to the date it becomes a Subsidiary of Holdings or any of its Subsidiaries or is merged into or consolidated with Holdings or any of its Subsidiaries or that Person’s assets are acquired by Holdings or any of its Subsidiaries, and (d) the income of any direct or indirect Subsidiary of Holdings and its Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its Organization Documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, except that Holdings’ and its Subsidiaries’ equity in any net loss of any such Subsidiary for such Measurement Period shall be included in determining Consolidated Net Income.

 

“Continuing Directors” means the directors of Holdings on the Closing Date and each other director if, in each case, such other director’s nomination for election to the board of directors of Holdings is recommended by at least a majority of the then Continuing Directors.

 

“Contractual Obligation” means, as to any Person, any provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

 

“Convert”, “Conversion” and “Converted” each refers to a conversion of Committed Loans of one Type into Committed Loans of the other Type.

 

“Cost” means the lower of cost or market value of Inventory, based upon the Borrowers’ accounting practices, known to the Administrative Agent, which practices are in effect on the Closing Date as such calculated cost is determined from invoices received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’ stock ledger.  “Cost” does not include inventory capitalization costs or other non-purchase price charges (such as freight) used in the Borrowers’ calculation of cost of goods sold.

 

“Covenant Compliance Event” means either (a) that an Event of Default has occurred and is continuing, or (b) Excess Availability is less than the greater of (a) 15% of the Loan Cap, or (b) $40,000,000. For purposes hereof, the occurrence of a Covenant Compliance Event shall be deemed continuing (i) so long as such Event of Default has not been waived, and/or (ii) if the Covenant Compliance Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until Excess Availability has exceeded the greater of (a) 15% of the Loan Cap, or (b) $40,000,000 for forty-five (45) consecutive Business Days, in which case a Covenant Compliance Event shall no longer be deemed to be continuing for purposes of this Agreement. The termination of a Covenant Compliance as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Covenant Compliance Event in the event that the conditions set forth in this definition again arise.

 

“Credit Card Notifications” has the meaning provided in Section 6.12(a)(i).

 

“Credit Card Receivables” means each Account, together with all income, payments and proceeds thereof, owed by a major credit or debit card issuer (including, but not limited to, Visa, MasterCard and American Express and such other issuers approved by the Administrative Agent) to a Domestic Loan Party or to the Canadian Borrower resulting from charges by a customer of such Loan Party on credit or

 

16

 

debit cards issued by such issuer in connection with the sale of goods by such Loan Party, or services performed by such Loan Party, in each case in the ordinary course of its business.

 

“Credit Extension” means each of (a) a Canadian Credit Extension and (b) a Domestic Credit Extension.

 

“Credit Party” or “Credit Parties” means collectively, each Canadian Credit Party and each Domestic Credit Party.

 

“Credit Party Expenses” means: (a) all reasonable and documented out-of-pocket expenses incurred by any of the Agents and their respective Affiliates, in connection with this Agreement and the other Loan Documents, including, without limitation (but in any event subject to the limitations described below), (i) the reasonable and documented fees, charges and disbursements of (A) counsel for any of the Agents and their Affiliates (limited to not more than one primary counsel, one Canadian counsel and one European counsel and necessary local counsel (limited to one local counsel for each other jurisdiction), (B) outside consultants for any of the Agents (solely after the occurrence of an Event of Default), (C) appraisers (but only to the extent expressly provided to be paid by the Borrowers as set forth in this Agreement or the other Loan Documents), (D) commercial finance examinations (but only to the extent expressly provided to be paid by the Borrowers as set forth in this Agreement or the other Loan Documents), and (E) all such out-of-pocket expenses incurred during any workout or restructuring negotiations in respect of the Obligations, and (ii) all reasonable and documented out-of-pocket expenses incurred in connection with (A) the syndication of the credit facility provided for herein, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (C) the enforcement or protection of their rights in connection with this Agreement or the other Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with any proceeding under any Debtor Relief Laws, or (D) any workout or restructuring negotiations in respect of any Obligations; and (b) with respect to each L/C Issuer, all reasonable and documented out-of-pocket expenses incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder; and (c) all reasonable and documented out-of-pocket expenses incurred by the Credit Parties who are not the Agents, the L/C Issuer or any Affiliate of any of them in connection with the enforcement of the Credit Parties’ rights and remedies under any of the Loan Documents or applicable Law including in the course of any work-out or restructuring of the Loans or other Obligations during the pendency of any Event of Default, provided that such Credit Parties shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent a conflict of interest in which case the Credit Parties may engage and be reimbursed for additional counsel).

 

“Customer Credit Liabilities” means at any time, the aggregate remaining value at such time of (a) outstanding gift certificates and gift cards of the Borrowers entitling the holder thereof to use all or a portion of the certificate or gift card to pay all or a portion of the purchase price for any Inventory, and (b) outstanding merchandise credits of the Borrowers.

 

“DDA” means each checking, savings or other demand deposit account maintained by any of the Loan Parties.  All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agents and the Lenders shall have no duty to inquire as to the source of the amounts on deposit in any DDA.

 

“Debt Service Charges” means for any Measurement Period, the sum of (a) Consolidated Interest Charges paid or required to be paid for such Measurement Period, plus (b) principal payments required to be made on account of Indebtedness (excluding the Obligations, any Synthetic Lease Obligations and any

 

17

 

Indebtedness which has been refinanced at its maturity, but including, without limitation, Capital Lease Obligations, all amortization of the Senior Term Loans, all payments of excess cash flow on account of any Indebtedness, and the full amount of any non-recourse Indebtedness, and scheduled mandatory payments on account of Disqualified Stock (whether in the nature of dividends, redemption, repurchase or otherwise) required to be made during such period)) for such Measurement Period, in each case determined on a Consolidated basis in accordance with GAAP.

 

“Debtor Relief Laws” means each of (i) the Bankruptcy Code of the United States, (ii) the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-up and Restructuring Act (Canada), and (iii) all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States, Canada, or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

“Default Rate” means (a) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus two percent (2%) per annum, and (b) otherwise, when used with respect to Obligations, the Canadian Liabilities or the Foreign Liabilities, an interest rate two percent (2%) per annum in excess of the rate then applicable to such Obligation, Canadian Liability or Foreign Liability.

 

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within three (3) Business Day of the date required to be funded by it hereunder (other than as a result of a good faith dispute), (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due (other than as a result of a good faith dispute), or (c) has been deemed insolvent or become the subject of any proceeding under any Debtor Relief Law unless, in the case of any Lender subject to this clause (c), the Administrative Agent shall have determined that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder..

 

“Deteriorating Lender” means any Defaulting Lender or any Lender as to which (a) the L/C Issuer or the Swing Line Lender has a good faith belief (based upon information reasonably believed by it to be true and correct) that such Lender has defaulted in fulfilling its obligations under one or more other syndicated credit facilities, or (b) a Person that Controls such Lender has been deemed insolvent or become the subject of any proceeding under any Debtor Relief Law unless, in the case of such Person subject to this clause (b), the Administrative Agent shall have determined that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder.

 

“Determination Date” shall mean the date upon which each of the following has occurred:

 

(a)           The Canadian Commitments and/or the Domestic Commitments have been terminated by the Required Lenders (or are deemed terminated) upon the occurrence of an Event of Default; and

 

(b)           The Obligations, the Foreign Liabilities and/or the Canadian Liabilities have been declared to be due and payable (or has become automatically due and payable) and have not been paid in accordance with the terms of this Agreement.

 

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“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale, transfer, license or other disposition of (whether in one transaction or in a series of transactions) of any property (including, without limitation, any Equity Interests) by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the date on which the Loans mature.  The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that Holdings and its Subsidiaries may become obligated to pay upon maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock or portion thereof, plus accrued dividends.

 

“Distribution” means collectively, Sally Beauty Distribution, LLC, a Delaware limited liability company, and Sally Distribution of Ohio, Inc., a Delaware corporation, or any successor thereof.

 

“Distribution Availability” means, as of any date of determination thereof by the Administrative Agent, the result, if a positive number, of:

 

(a)           the Distribution Borrowing Base

 

Minus

 

(b)           The aggregate unpaid balance of Credit Extensions to, or for the account of, the Borrowers and attributable to the Distribution Borrowing Base.

 

For purposes hereof, all Credit Extensions to the Foreign Borrower based on the Domestic Borrowing Base shall be deemed to have been made on account of Distribution Availability and shall be attributable to the Distribution Borrowing Base.

 

“Distribution Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)           the Cost of Eligible Inventory of Distribution, net of Inventory Reserves, multiplied by 85% multiplied by the Appraised Value of Eligible Inventory;

 

minus

 

(b)           the then amount of all Availability Reserves applicable to Distribution.

 

“Documentation Agent” means JPMorgan Chase Bank, N.A.

 

“Dollars” and “$” mean lawful money of the United States.

 

“Domestic Availability” means, as of any date of determination thereof by the Administrative Agent, the result, if a positive number, of:

 

(a)           The Domestic Loan Cap

 

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Minus

 

(b)           The aggregate unpaid balance of Credit Extensions to, or for the account of, the Borrowers.

 

“Domestic Borrowers” means each of Sally Holdings LLC, Beauty Systems Group LLC, Sally Beauty Supply LLC and, subject to the terms of this Agreement, the Foreign Borrower.

 

“Domestic Borrowing” means a Domestic Committed Borrowing or a Swing Line Borrowing made to the Domestic Borrowers or the Foreign Borrower (to the extent based on Domestic Availability), as the context may require.

 

“Domestic Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)           the face amount of Eligible Credit Card Receivables of the Domestic Loan Parties multiplied  by 90%;

 

plus

 

(b)           the Cost of Eligible Inventory of the Domestic Loan Parties, net of Inventory Reserves, multiplied  by 85% multiplied  by the Appraised Value of Eligible Inventory of the Domestic Loan Parties;

 

plus

 

(c)           the face amount of Eligible Trade Receivables of the Domestic Loan Parties multiplied by the Receivables Advance Rate;

 

minus

 

(d)           the then amount of all Availability Reserves.

 

“Domestic Committed Borrowing” means a borrowing consisting of simultaneous Domestic Committed Loans of the same Type and, in the case of LIBOR Rate Loans, having the same Interest Period made by each of the Domestic Lenders pursuant to Section 2.01.

 

“Domestic Committed Loan” means any loan at any time made by any Domestic Lender pursuant to Section 2.01.

 

“Domestic Commitments” means, as to each Domestic Lender, its obligation to (a) make Domestic Committed Loans to the Domestic Borrowers pursuant to Section 2.01, (b) make Domestic Committed Loans to the Foreign Borrower pursuant to Section 2.01(c), (c) purchase participations in Domestic L/C Obligations, and (c) purchase participations in Swing Line Loans made to the Domestic Borrowers or the Foreign Borrower (to the extent based on Domestic Availability), in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Domestic Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Domestic Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Domestic Concentration Account” has the meaning provided in Section 6.12(c).

 

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“Domestic Credit Extensions” mean each of the following: (a) a Domestic Borrowing and (b) a Domestic L/C Credit Extension.

 

“Domestic Credit Party” or “Domestic Credit Parties” means (a) individually, (i) each Domestic Lender and its Affiliates, (ii) the Administrative Agent and its Affiliates, (iii) each L/C Issuer of any Domestic Letter of Credit, (iv) the Arrangers, (v) each beneficiary of any indemnification obligation undertaken by any Loan Party under any Loan Document with respect to the Obligations, (vi) each holder of any Other Domestic Liabilities, and (vii) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

 

 “Domestic L/C Borrowing” means an extension of credit resulting from a drawing under any Domestic Letter of Credit which has not been reimbursed on or prior to the date required to be reimbursed by the Domestic Borrowers or by the Foreign Borrower pursuant to Section 2.03(c)(i) or refinanced as a Domestic Committed Borrowing.

 

“Domestic L/C Credit Extension” means, with respect to any Domestic Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“Domestic L/C Obligations” means, as at any date of determination and without duplication, the aggregate Stated Amount of all outstanding Domestic Letters of Credit plus the aggregate of all Unreimbursed Amounts under Domestic Letters of Credit, including all Domestic L/C Borrowings.

 

“Domestic Lenders” means the Lenders having Domestic Commitments from time to time or at any time.

 

“Domestic Letter of Credit” means each Letter of Credit issued hereunder for the account of the Domestic Borrowers or the Foreign Borrower (to the extent based on Domestic Availability).

 

“Domestic Letter of Credit Sublimit” means an amount equal to $50,000,000.  The Domestic Letter of Credit Sublimit is part of, and not in addition to, the Domestic Total Commitments.  A permanent reduction of the Domestic Total Commitments shall not require a corresponding pro rata reduction in the Domestic Letter of Credit Sublimit; provided, however, that if the Domestic Total Commitments are reduced to an amount less than the Domestic Letter of Credit Sublimit, then the Domestic Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Parent’s option, less than) the Domestic Total Commitments.

 

“Domestic Loan” means an extension of credit by a Domestic Lender to the Domestic Borrowers or the Foreign Borrower (to the extent based on Domestic Availability) under Article II in the form of a Committed Loan or a Swing Line Loan.

 

“Domestic Loan Cap” means, at any time of determination, the lesser of (a) the Domestic Total Commitments or (b) the Domestic Borrowing Base.

 

“Domestic Loan Parties” means, collectively, the Domestic Borrowers and each Domestic Subsidiary that is a Guarantor of the Obligations.  “Domestic Loan Party” means any one of such Persons.

 

“Domestic Note” means a promissory note made by the Domestic Borrowers in favor of a Domestic Lender evidencing Domestic Loans made by such Domestic Lender, substantially in the form of Exhibit C-2.

 

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“Domestic Overadvance” means a Domestic Credit Extension to the extent that, immediately after the making of such Domestic Credit Extension, the aggregate principal balance of all Domestic Credit Extensions then outstanding exceeds the Domestic Loan Cap as then in effect.

 

“Domestic Parallel Debt” has the meaning specified in Section 9.18.

 

“Domestic Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by a Loan Party or any ERISA Affiliate or to which a Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

“Domestic Prime Rate Loan” means a Loan that bears interest based on the U.S. Prime Rate.

 

“Domestic Principal Obligations” means the Obligations owing to the Credit Parties (other than the Domestic Parallel Debt and the Obligations of the Domestic Loan Parties).

 

 “Domestic Swing Line Note” means the promissory note of the Domestic Borrowers substantially in the form of Exhibit C-4, payable to the order of the applicable Swing Line Lender, evidencing the Swing Line Loans made by such Swing Line Lender to the Domestic Borrowers or to the Foreign Borrower (to the extent based on Domestic Availability).

 

“Domestic Swing Line Sublimit” means an amount equal to the lesser of (a) $25,00,000 and (b) the Domestic Total Commitments.  The Domestic Swing Line Sublimit is part of, and not in addition to, the Domestic Total Commitments.

 

“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.

 

“Domestic Total Commitments” means the aggregate of the Domestic Commitments of all Domestic Lenders.  On the Closing Date, the Domestic Total Commitments are $400,000,000.

 

“Domestic Total Outstandings” means, without duplication, the aggregate Outstanding Amount of all Domestic Loans and all Domestic L/C Obligations.

 

“Dutch FSA” means the Dutch Financial Supervision Act (Wet op het financieel toezicht) and its subordinated and implementing decrees and regulations (as amended and restated from time to time).

 

“Dutch Loan Party” means a Loan Party or any subsidiary thereof that is incorporated or organised under Dutch law.

 

“Dutch Pledge of Intragroup Loan Receivables” means the deed of pledge of intragroup loan receivables governed by Dutch law, between the Foreign Borrower as pledgor and the Collateral Agent and the Canadian Agent as pledgees, pursuant to which all intragroup loan receivables owed to the Foreign Borrower by any Foreign Subsidiary will be pledged in favor of the Collateral Agent and the Canadian Agent.

 

“Dutch Pledge of Limited Partnership Rights” means the deed of pledge of limited partnership rights governed by Dutch law, between Sally Beauty International, Inc. as pledgor and the Collateral Agent as pledgee, pursuant to which 65% of the rights of Sally Beauty International, Inc. under the Dutch

 

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law governed limited partnership Sally Beauty International Holdings C.V. will be pledged in favor of the Collateral Agent.

 

“Dutch Pledge of Shares” means the notarial deed of pledge of shares governed by Dutch law, between Sally Beauty International, Inc. as pledgor, Sally Beauty Supply B.V. as company and the Collateral Agent as pledgee, pursuant to which 65% of the issued and outstanding shares in the capital of Sally Beauty Supply B.V. will be pledged in favor of the Collateral Agent.

 

“Dutch Security Documents” means the Dutch Pledge of Shares, the Dutch Pledge of Intragroup Loan Receivables and the Dutch Pledge of Limited Partnership Rights.

 

“Eligible Assignee” means (a) a Credit Party or any of its Affiliates; (b) a bank, insurance company, or Person engaged in the business of making commercial loans, which Person, together with its Affiliates, has a combined capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any Person to whom a Credit Party assigns its rights and obligations under this Agreement as part of an assignment and transfer of such Credit Party’s rights in and to a material portion of such Credit Party’s portfolio of asset based credit facilities, and (e) any other Person (other than a natural person) approved by (i) the Administrative Agent, and (ii) unless an Event of Default has occurred and is continuing, the Parent (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Permitted Holder, a Loan Party or any of the Loan Parties’ or Permitted Holders Affiliates or Subsidiaries.

 

“Eligible Credit Card Receivables” means at the time of any determination thereof, each Credit Card Receivable that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Credit Card Receivable (i) has been earned by performance and represents the bona fide amounts due to a Domestic Loan Party or the Canadian Borrower, as applicable, from a credit card payment processor and/or credit card issuer, and in each case originated in the ordinary course of business of such Domestic Loan Party or Canadian Borrower, and (ii) is not ineligible for inclusion in the calculation of the Domestic Borrowing Base or the Canadian Borrowing Base, as applicable, pursuant to any of clauses (a) through (j) below.  Without limiting the foregoing, to qualify as an Eligible Credit Card Receivable, an Account shall indicate no Person other than a Domestic Loan Party or the Canadian Borrower as payee or remittance party.  In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that a Borrower may be obligated to rebate to a customer, a credit card payment processor, or credit card issuer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by the applicable Loan Parties to reduce the amount of such Credit Card Receivable.  Except as otherwise agreed by the Administrative Agent, any Credit Card Receivable included within any of the following categories shall not constitute an Eligible Credit Card Receivable:

 

(a)           Credit Card Receivables which do not constitute an Account;

 

(b)           Credit Card Receivables that have been outstanding for more than five (5) Business Days from the date of sale;

 

(c)           Credit Card Receivables (i) that are not subject to a perfected first-priority security interest and Lien in favor of the Collateral Agent or Canadian Agent, as applicable, or (ii) with respect to which a Domestic Loan Party or the Canadian Borrower does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral

 

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Agent or Canadian Agent, as applicable, pursuant to the Security Documents and Permitted Encumbrances);

 

(d)           Credit Card Receivables which are disputed, are with recourse, or with respect to which a claim, counterclaim, offset or chargeback has been asserted (to the extent of such claim, counterclaim, offset or chargeback);

 

(e)           Credit Card Receivables as to which the processor has the right under certain circumstances to require a Loan Party to repurchase the Accounts from such credit card processor;

 

(f)            Credit Card Receivables due from an issuer or payment processor of the applicable credit card which is the subject of any proceeding under any Debtor Relief Law;

 

(g)           Credit Card Receivables which are not a valid, legally enforceable obligation of the applicable issuer with respect thereto;

 

(h)           Credit Card Receivables which do not conform to all representations, warranties or other provisions in the Loan Documents relating to Credit Card Receivables;

 

(i)            Credit Card Receivables owed to a Loan Party which is not a Material Subsidiary and which is the subject of any case under any Debtor Relief Law; or

 

(j)            Credit Card Receivables which the Administrative Agent determines in its Permitted Discretion to be uncertain of collection.

 

 “Eligible Inventory” means, as of the date of determination thereof, without duplication, items of Inventory of a Domestic Loan Party or the Canadian Borrower that are finished goods, merchantable and readily saleable to the public in the ordinary course of business, in each case that, (A) complies with each of the representations and warranties respecting Inventory made by the Loan Parties in the Loan Documents, and (B) is not excluded as ineligible by virtue of one or more of the criteria set forth below.  The following items of Inventory shall not be included in Eligible Inventory:

 

(a)           Inventory that is not solely owned by a Domestic Loan Party or the Canadian Borrower or a Domestic Loan Party or the Canadian Borrower does not have good and valid title thereto;

 

(b)           Inventory that is leased by or is on consignment to a Domestic Loan Party or the Canadian Borrower or which is consigned by a Domestic Loan Party or the Canadian Borrower to a Person which is not a Loan Party;

 

(c)           Inventory that is not located in the United States of America in the case of Inventory of a Domestic Borrower (excluding territories or possessions of the United States) or Canada in the case of Inventory of the Canadian Borrower (excluding territories or possessions thereof) at a location that is owned or leased by a Loan Party, except Inventory in transit between such owned or leased locations;

 

(d)           Inventory that is comprised of goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are obsolete or slow moving, or custom items, work-in-process, raw materials, or that constitute spare parts, promotional, marketing, packaging and shipping materials or supplies used or consumed in a

 

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Domestic Loan Parties’ or the Canadian Borrower’s business, (iv) are seasonal in nature and which have been packed away for sale in the subsequent season, (v) not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, or (vi) are bill and hold goods;

 

(e)           Inventory that is not subject to a perfected first-priority security interest and Lien in favor of the Collateral Agent or the Canadian Agent, as applicable;

 

(f)            Inventory that consists of samples, labels, bags, and other similar non-merchandise categories;

 

(g)           Inventory that is not insured in compliance with the provisions of Section 5.10 hereof;

 

(h)           Inventory that has been sold but not yet delivered or as to which a Loan Party has accepted a deposit;

 

(i)            Inventory that is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third party from which any Loan Party or any of its Subsidiaries has received notice of a dispute in respect of any such agreement, or which would require the payment of fees or royalties to, or the consent of, the licensor under such agreement for any sale or other disposition of such Inventory by the Administrative Agent or the Canadian Agent, unless the Administrative Agent has imposed a Reserve for the payment of any such fees or royalties;

 

(j)            Inventory of a Loan Party which is not a Material Subsidiary and which is the subject of any case under any Debtor Relief Law; or

 

(k)           Inventory acquired in a Permitted Acquisition and which is not of the type usually sold in the ordinary course of the Loan Parties’ business, unless and until the Administrative Agent has completed or received (A) an appraisal of such Inventory from appraisers satisfactory to the Administrative Agent and establishes Inventory Reserves (if applicable) therefor, and otherwise agrees that such Inventory shall be deemed Eligible Inventory, and (B) such other due diligence as the Agents may require, all of the results of the foregoing to be reasonably satisfactory to the Agents.

 

Notwithstanding the foregoing, the Administrative Agent may, from time to time, in the exercise of its Permitted Discretion, on not less than three (3) Business Days’ prior notice to the Parent, change the criteria for Eligible Inventory as reflected on the Borrowing Base Certificate which the Administrative Agent has determined in the exercise of its Permitted Discretion could adversely affect, or would reasonably be expected to adversely affect, Eligible Inventory in any material respect. Any such change in criteria shall have a reasonable relationship to the event, condition or other circumstance that is the basis for such change.  Upon delivery of the notice of such change pursuant to the foregoing sentence, the Administrative Agent shall be available to discuss the proposed change, and the applicable Borrower may take such action as may be required so that the event, condition or circumstance that is the basis for such change no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent in the exercise of its Permitted Discretion.  Any Inventory of the Loan Parties that is not Eligible Inventory shall nevertheless be part of the Collateral as and to the extent provided in the Security Documents.

 

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“Eligible Trade Receivables” means Accounts arising from the sale of the Domestic Loan Parties’ or the Canadian Borrower’s Inventory (other than those consisting of Credit Card Receivables) that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Account (i) has been earned by performance and represents the bona fide amounts due to a Domestic Loan Party or the Canadian Borrower from an account debtor, and in each case originated in the ordinary course of business, and (ii) in each case is acceptable to the Administrative Agent in its Permitted Discretion, and is not ineligible for inclusion in the calculation of the Domestic Borrowing Base or the Canadian Borrowing Base, as applicable, pursuant to any of clauses (a) through (u) below. Without limiting the foregoing, to qualify as an Eligible Trade Receivable, an Account shall indicate no Person other than a Domestic Loan Party or the Canadian Borrower as payee or remittance party.  In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that a Loan Party may be obligated to rebate to a customer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by the Loan Parties to reduce the amount of such Eligible Trade Receivable.  Any Account included within any of the following categories shall not constitute an Eligible Trade Receivable:

 

(a)           Accounts that are not evidenced by an invoice;

 

(b)           Accounts that the account debtor has failed to pay within ninety (90) days of original invoice date;

 

(c)           Accounts owed by an account debtor (or its Affiliates) where 50% or more of the total amount of all Accounts owed by that account debtor (or its Affiliates) are deemed ineligible under clause (b) above;

 

(d)           Accounts having any credit balances greater than ninety (90) days past their invoice date,

 

(e)           Accounts with respect to an Account Debtor whose total obligations owing to Borrowers or Subsidiary Guarantors exceed 10% of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, however, that, in each case, the amount of Eligible Accounts that are excluded because they exceed the foregoing percentage shall be determined by the Administrative Agent based on all of the otherwise Eligible Accounts prior to giving effect to any eliminations based upon the foregoing concentration limit,

 

(f)            Accounts (i) that are not subject to a perfected first-priority security interest and Lien in favor of the Collateral Agent or the Canadian Agent, as applicable, or (ii) with respect to which a Domestic Loan Party or the Canadian Borrower does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral Agent or the Canadian Agent, as applicable, pursuant to the Security Documents and Permitted Encumbrances);

 

(g)           Accounts which are disputed or with respect to which a claim, counterclaim, offset or chargeback has been asserted, but only to the extent of such dispute, counterclaim, offset or chargeback;

 

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(h)           Accounts which arise out of any sale made not in the ordinary course of business, made on a basis other than upon credit terms usual to the business of the Loan Parties;

 

(i)            Accounts which are owed by any Affiliate or any employee of a Loan Party;

 

(j)            Accounts for which all consents, approvals or authorizations of, or registrations or declarations with any Governmental Authority required to be obtained, effected or given in connection with the performance of such Account by the account debtor or in connection with the enforcement of such Account by the Agents have not been duly obtained, effected or given and are not in full force and effect;

 

(k)           Accounts due from an account debtor which is the subject of any proceeding under any Debtor Relief Law, has had a trustee or receiver appointed for all or a substantial part of its property, has made an assignment for the benefit of creditors or has suspended its business;

 

(l)            Accounts due from (i) the federal government of the United States of America unless such Accounts have been assigned by the applicable Borrower to the Administrative Agent in accordance with the Federal Assignment of Claims Act of 1940 or (ii) the federal government of Canada or a political subdivision thereof, or any province or territory, or any municipality or department or agency or instrumentality thereof unless the provisions of the Financial Administration Act (Canada) or any applicable provincial, territorial or municipal law of similar purpose and effect restricting the assignment thereof, as the case may be, have been complied with, or any other Governmental Authority except to the extent reasonably acceptable to the Agents;

 

(m)          Accounts (i) owing from any Person that is also a supplier to or creditor of a Loan Party or any of its Subsidiaries unless such Person has waived any right of setoff in a manner acceptable to the Administrative Agent, or (ii) representing any manufacturer’s or supplier’s credits, discounts, incentive plans or similar arrangements entitling a Loan Party or any of its Subsidiaries to discounts on future purchase therefrom;

 

(n)           Accounts arising out of sales on a bill-and-hold, guaranteed sale, sale-or-return, sale on approval or consignment basis or subject to any right of return;

 

(o)           Accounts arising out of sales to account debtors outside the United States (with respect to Accounts of a Domestic Borrower) or Canada (with respect to Accounts of the Canadian Borrower), unless such Accounts are fully backed by an irrevocable letter of credit on terms, and issued by a financial institution, acceptable to the Administrative Agent and such irrevocable letter of credit is in the possession of, and drawable by, the Administrative Agent, or Canadian Agent, as applicable or other assurances of payment have been provided as determined in the Administrative Agent’s sole discretion;

 

(p)           Accounts evidenced by a promissory note or other instrument;

 

(q)           Accounts consisting of amounts due from vendors as rebates or allowances;

 

(r)            Accounts which are in excess of the credit limit for such account debtor established by the Loan Parties in the ordinary course of business and consistent with past practices;

 

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(s)           Accounts which include extended payment terms (datings) beyond those generally furnished to other account debtors in the ordinary course of business;

 

(t)            Accounts owed to a Loan Party which is not a Material Subsidiary and which is the subject of any case under any Debtor Relief Law;

 

(u)           Accounts which the Administrative Agent determines in its Permitted Discretion to be uncertain of collection; or

 

(k)           Accounts acquired in a Permitted Acquisition, unless and until the Agents (i) have completed due diligence with respect to such Accounts as the Agents may require, all of the results of the foregoing to be reasonably satisfactory to the Agents, and (ii) establish Receivables Reserves (if applicable) therefor.

 

Notwithstanding the foregoing, the Administrative Agent may, from time to time, in the exercise of its Permitted Discretion, on not less than three (3) Business Days’ prior notice to the Parent, change the criteria for Eligible Trade Receivables as reflected on the Borrowing Base Certificate which the Administrative Agent has determined in the exercise of its Permitted Discretion could adversely affect, or would reasonably be expected to adversely affect, Eligible Trade Receivables in any material respect.  Any such change in criteria shall have a reasonable relationship to the event, condition or other circumstance that is the basis for such change.  Upon delivery of the notice of such change pursuant to the foregoing sentence, the Administrative Agent shall be available to discuss the proposed change, and the applicable Borrower may take such action as may be required so that the event, condition or circumstance that is the basis for such change no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent in the exercise of its Permitted Discretion. Any Accounts of the Loan Parties that are not Eligible Trade Receivables shall nevertheless be part of the Collateral as and to the extent provided in the Security Documents.

 

Notwithstanding the foregoing, if the Accounts Receivable Reporting Requirement is not then in effect and the Borrowers have not elected to provide detailed reporting of Accounts, then 20% of all Accounts (whether or not eligible) as set forth in the most recent Borrowing Base Certificate delivered to the Administrative Agent shall be deemed ineligible and, other than the requirement that in all events the determination of eligibility shall require compliance with subsections (f), (h) and (t) above, no further determination of eligibility (including any adjustments or determinations of eligibility using the Administrative Agent’s Permitted Discretion) set forth in this definition or otherwise shall be made, except that the foregoing shall in no way limit the right of the Administrative Agent to establish and maintain the Dilution Reserve (as defined in the definition of Reserves). Any calculation or report made pursuant to this paragraph will be on the same basis that the Administrative Agent and the Loan Parties’ utilized prior to the Closing Date in agreeing to the foregoing provision.

 

“Environmental Laws” means any and all federal, state, provincial, territorial, municipal, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to Hazardous Materials, air emissions and discharges to waste or public systems.

 

“Environmental Liability” means any liability, obligation, damage, loss, claim, action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a)

 

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violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal or presence of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Equipment” shall mean “equipment”, as defined in the UCC or in the PPSA, and shall also mean all furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of a Loan Party’s business, and any and all accessions or additions thereto, and substitutions therefor.

 

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“Equivalent CD$ Amount” means, on any date, the rate at which Canadian Dollars may be exchanged into Dollars, determined by reference to the Bank of Canada noon rate as published on the Reuters Screen BOFC on the immediately preceding Business Day.  In the event that such rate does not appear on such Reuters page, “Equivalent Amount” shall mean, on any date, the amount of Dollars into which an amount of Canadian Dollars may be converted or the amount of Canadian Dollars into which an amount of Dollars may be converted, in either case, at, in the case of the Canadian Borrower, the Canadian Agent’s spot buying rate in Toronto as at approximately 12:00 noon (Toronto time) on such date and, in the case of a Domestic Borrower, the Administrative Agent’s spot buying rate in New York as at approximately 12:00 noon (New York City time) on the immediately preceding Business Day.

 

“Equivalent Amount” means, as applicable, (a) the Equivalent CD$ Amount, and (b) with respect to any other Optional Currency, the equivalent amount thereof determined by the Administrative Agent at such time on the basis of the Spot Rate.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Loan Parties within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by a Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a

 

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trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan Party or any ERISA Affiliate.

 

“Euros” and the designation “€”: the currency introduced on January 1, 1999 at the start of the third stage of European economic and monetary union pursuant to the Treaty (expressed in euros).

 

“Euribor Rate” means for any Interest Period with respect to a Euribor Rate Loan, the rate at which euro interbank term deposits in the applicable currency are being offered by one prime bank to another within the EMU zone as determined by the Administrative Agent at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.

 

“Euribor Rate Loan” means a Loan that bears interest based on the Euribor Rate.

 

“Eurocurrency Interbank Market” means any lawful recognized market in which deposits of Dollars and the relevant Optional Currencies are offered by international banking units of United States banking institutions and by foreign banking institutions to each other and in which foreign currency and exchange operations are customarily conducted.

 

“Event of Default” has the meaning specified in Section 8.01.  An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 10.01 hereof.

 

“Excess Availability” means the difference between (a) the Loan Cap and (b) the outstanding Credit Extensions to the Borrowers.

 

“Excluded Taxes” means, with respect to any Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or in which it is otherwise treated as doing business, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any Loan Party is located, (c) in the case of a Foreign Lender (other than a Canadian Lender or an assignee pursuant to a request by the Parent under Section 10.13) or L/C Issuer, any withholding tax that is imposed on amounts payable to such Foreign Lender or L/C Issuer at the time such Foreign Lender or L/C Issuer becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s or L/C Issuer’s failure or inability (other than as a result of a Change in Law after such Foreign Lender or L/C Issuer becomes a party hereto) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Loan Parties with respect to such withholding tax pursuant to Section 3.01(a), and (d) in the case of a Canadian Lender (other than an assignee pursuant to a request by the Canadian Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Canadian Lender at the time such Canadian Lender becomes a party to this Agreement (or designates a new Lending Office) or is attributable to such Canadian Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Canadian Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Canadian Borrower with respect to such withholding tax pursuant to Section 3.01(a).  For the avoidance of doubt,

 

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any Participant that is entitled to the benefits of Section 3.01(a) shall be treated as a Lender for purposes of this defined term.

 

“Executive Order” has the meaning set forth in Section 10.18.

 

“Existing Credit Agreement” means that certain Credit Agreement dated as of November 16, 2006 among Sally Holdings LLC, General Electric Capital Corporation, as administrative agent (successor to Merrill Lynch Capital Corporation) and the other parties thereto.

 

“Existing Letters of Credit” means those outstanding letters of credit issued under the Existing Credit Agreement listed on Schedule 1.02 hereto.

 

“Facility Guaranty” means (a) a Guarantee of the Obligations (including, without limitation, for clarity, the Canadian Liabilities and the Foreign Liabilities) made by a Guarantor which is a Domestic Loan Party in favor of the Administrative Agent and the other Credit Parties, in form reasonably satisfactory to the Administrative Agent, (b) a Guarantee of the Canadian Liabilities made by a Guarantor which is a Canadian Loan Party in favor of the Canadian Agent and the other Canadian Credit Parties, in form reasonably satisfactory to the Administrative Agent, and (c) a Guarantee of the Foreign Liabilities made by the Canadian Borrower in favor of the Canadian Agent and the other Canadian Credit Parties, to the extent of any Credit Extensions received by the Foreign Borrower on account of Canadian Availability, each in form reasonably satisfactory to the Administrative Agent.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

 

“Fee Letter” means the letter agreement, dated September 23, 2010, among the Parent, the Administrative Agent and Banc of America Securities LLC.

 

“Fiscal Month”  means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance with the fiscal accounting calendar of the Loan Parties.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the last day of each March, June, September or December of such Fiscal Year in accordance with the fiscal accounting calendar of the Loan Parties.

 

“Fiscal Year” means any period of twelve (12) consecutive months ending on September 30 of each calendar year.

 

“Foreign Assets Control Regulations” has the meaning set forth in Section 10.18.

 

“Foreign Borrower” has the meaning specified in the introductory paragraph hereto.

 

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 “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Parent is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Liabilities” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, the Foreign Borrower arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against the Foreign Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, fees, expenses and other amounts are allowed claims in such proceeding.

 

“Foreign Note” means a promissory note made by the Foreign Borrower in favor of a Canadian Lender evidencing Canadian Loans made by such Canadian Lender to the Foreign Borrower, substantially in the form of Exhibit C-6, or a promissory note made by the Foreign Borrower in favor of a Domestic Lender evidencing Domestic Loans made by such Domestic Lender to the Foreign Borrower, substantially in the form of Exhibit C-5.

 

“Foreign Parallel Debt” has the meaning specified in Section 9.19.

 

“Foreign Principal Obligations” means the Obligations owing to the Credit Parties (other than the Foreign Parallel Debt).

 

“Foreign Subsidiary” means each Subsidiary of the Parent (i) which is organized and existing under the laws of any jurisdiction outside of the United States of America or (ii) that is a Foreign Subsidiary Holdco, or (iii) that is a direct Subsidiary of a Foreign Subsidiary.  For the avoidance of doubt, any Subsidiary of the Parent that is organized and existing under the laws of Puerto Rico shall be a Foreign Subsidiary.

 

“Foreign Subsidiary Holdco” means any Subsidiary of the Parent, so long as such Subsidiary has no material assets other than securities or Indebtedness of one or more Foreign Subsidiaries (or Subsidiaries thereof), and intellectual property relating to such Foreign Subsidiaries (or Subsidiaries thereof) and other assets relating to an ownership interest in any such securities, Indebtedness or Subsidiaries.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

 

“Fronting Fee” has the meaning specified in Section 2.03(j).

 

“FSCO” means the Financial Services Commission of Ontario and any Person succeeding to the functions thereof and includes the Ontario Superintendent of Financial Services and any other Governmental Authority empowered or created by the Pension Benefits Act (Ontario) or any Governmental Authority of any other Canadian jurisdiction exercising similar functions in respect of any Canadian Pension Plan of any Canadian Loan Party and any Governmental Authority succeeding to the functions thereof.

 

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“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied; provided that, with respect to Foreign Subsidiaries of Parent organized under the laws of Canada, or any province or territory thereof, unless GAAP is being applied, “GAAP” shall mean principles which are consistent with those promulgated or adopted by the Canadian Institute of Chartered Accountants and its predecessors (or successors) in effect and applicable to the accounting period in respect of which reference to GAAP is being made.

 

“General Security Agreements” means (a) each General Security Agreement dated as of the Closing Date among the respective Canadian Loan Parties and the Canadian Agent for the benefit of the Canadian Credit Parties and (b) any other general security agreement entered into after the Closing Date by any Guarantor of the Canadian Liabilities, in form and substance satisfactory to the Administrative Agent.

 

“Governmental Authority” means the government of the United States, Canada, or any other nation, or any political subdivision thereof, whether state, local, provincial, territorial or municipal and any agency, authority, instrumentality, regulatory body, court, tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor” means (a) with respect to the Obligations (including, without limitation, the Canadian Liabilities and the Foreign Liabilities), the Persons named on Schedule 1.01 hereof as Guarantors and each other Person that shall be required to execute and deliver a Facility Guaranty of the

 

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Obligations pursuant to Section 6.11(a), (b) with respect to the Canadian Liabilities, the Persons named on Schedule 1.01 hereof as Canadian Guarantors (including the Foreign Borrower) and each other Person that shall be required to execute and deliver a Facility Guaranty of the Canadian Liabilities pursuant to Section 6.11(b), and (c) with respect to the Foreign Liabilities, the Persons named on Schedule 1.01 hereof as Foreign Guarantors (including the other Canadian Loan Parties) and each other Person that shall be required to execute and deliver a Facility Guaranty of the Foreign Liabilities pursuant to Section 6.11(b).

 

 “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

 

“Holdings” means Sally Beauty Holdings, Inc., a Delaware corporation, the ultimate parent of the Loan Parties, and any successor thereto.

 

“Honor Date” has the meaning specified in Section 2.03(c)(i).

 

“Increase Effective Date” shall have the meaning provided therefor in Section 2.15(d).

 

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

(b)           the maximum amount of all unreimbursed obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments that secure Indebtedness;

 

(c)           net obligations of such Person under any Swap Contract;

 

(d)           all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business);

 

(e)           indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)            indebtedness (a) in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation of any Person, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease, agreement or instrument were accounted for as a capital lease;

 

(g)           all obligations on account of Disqualified Stock; and

 

(h)           all Guarantees of such Person in respect of any of the foregoing.

 

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For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all present and future: trade secrets, know-how and other proprietary information; trademarks, trademark applications, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; (including copyrights for computer programs) and all tangible and intangible property embodying the copyrights, unpatented inventions (whether or not patentable); patents and patent applications; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

 

 “Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of November 16, 2006 (as amended, restated, supplemented or modified from time to time between (a) Merrill Lynch Capital, a division of Merrill Lynch Financial Business Services, Inc., as ABL Agent and (b) Merrill Lynch Capital Corporation, as Term Agent, as confirmed pursuant to a letter agreement dated as of November 12, 2010 between the Administrative Agent and the Term Agent.

 

“Interest Payment Date” means, (a) as to any LIBOR Rate Loan, Euribor Rate Loan, or BA Equivalent Loan, the last day of each Interest Period applicable to such LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan and the Maturity Date; provided, however, that if any Interest Period for a LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan exceeds three months, the date that falls every three months after the beginning of such Interest Period shall also be an Interest Payment Date; and (b) as to any Prime Rate Loan (including a Swing Line Loan), the first calendar day of each April, July, October and January and the Maturity Date.

 

“Interest Period” means, as to each LIBOR Rate Loan, Euribor Rate Loan, or BA Equivalent Loan, the period commencing on the date such Committed Borrowing is disbursed, converted into or continued as such Type of Committed Borrowing and ending on the date one, two, three or six months thereafter, as selected by the Parent, the Canadian Borrower or the Foreign Borrower, as applicable, in its Committed Loan Notice; provided that:

 

(i)            any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

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(ii)           any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;

 

(iii)          no Interest Period shall extend beyond the Maturity Date; and

 

(iv)          notwithstanding the provisions of clause (iii) no Interest Period shall have a duration of less than one (1) month, and if any Interest Period applicable to a LIBOR Rate Loan, Euribor Rate Loan or a BA Equivalent Loan, as applicable, would be for a shorter period, such Interest Period shall not be available hereunder.

 

For purposes hereof, the date of a Committed Borrowing initially shall be the date on which such Committed Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Committed Borrowing.

 

“Intermediate Holdco” means Sally Investment Holdings LLC, a Delaware limited liability company, the direct parent of the Parent, or any successor thereto.

 

“Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, Holdings and/or its Subsidiaries’ internal controls over financial reporting, in each case as described in the Securities Laws.

 

 “Inventory” means all “inventory” as defined in the UCC or the PPSA, as applicable, and shall also include, without limitation, all: (a) goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) goods of said description in transit; (c) goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.

 

“Inventory Reserves” means such reserves as may be established from time to time by the Administrative Agent in its Permitted Discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may, in the Administrative Agent’s Permitted Discretion, include (but are not limited to) reserves based on:

 

(a)           obsolescence;

 

(b)           seasonality;

 

(c)           shrink;

 

(d)           imbalance;

 

(e)           change in Inventory character;

 

(f)            change in Inventory composition;

 

(g)           change in Inventory mix;

 

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(h)           mark-downs (both permanent and point of sale);

 

(i)            retail mark-ons and mark-ups inconsistent with prior period practice and performance, industry standards, current business plans or advertising calendar and planned advertising events;

 

(j)            out-of-date and/or expired Inventory; and

 

(k)           seller’s reclamation or repossession rights under any Debtor Relief Laws.

 

The amount of any Reserve established by the Administrative Agent hereunder shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve. All such Reserves shall be established in good faith and without duplication for items already excluded from “Eligible Credit Card Receivables”, “Eligible Inventory” and “Eligible Trade Receivables” as set forth in the lettered clauses in the definitions thereof or Reserves or criteria deducted in computing the Appraised Value of Eligible Inventory or the imposition of Availability Reserves.  To the extent required pursuant to Section 2.01(e), the Administrative Agent shall give the Borrowers three (3) Business Days prior written notice of the imposition of any Reserve and, upon delivery of such notice, the Administrative Agent shall be available to discuss the proposed Inventory Reserves and the Borrowers may take such action as may be required so that the event, condition or other matter that is the basis for the Inventory Reserve no longer exists or has been otherwise adequately addressed by the Borrowers to the reasonable satisfaction of the Administrative Agent.

 

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) any Acquisition.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and any Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit.

 

“Joinder Agreement” means an agreement, in form satisfactory to the Administrative Agent pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as either a Borrower or a Guarantor, as the Administrative Agent may determine.

 

“Landlord Lien State” means such state(s) or province(s) in which a landlord’s claim for rent may have priority over the Lien of the Collateral Agent or the Canadian Agent, as applicable, in any of the Collateral.

 

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“Laws” means each international, foreign, federal, state, provincial, territorial, municipal and local statute, treaty, rule, guideline, regulation, ordinance, code and administrative or judicial precedent or authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and each applicable administrative order, directed duty, request, license, authorization and permit of, and agreement with, any Governmental Authority, in each case whether or not having the force of law.

 

“L/C Advance” means, (a) with respect to each Domestic Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage of all Domestic Lenders, and (b) with respect to each Canadian Lender, such funding of its participation in any L/C or Borrowing in accordance with Applicable Percentage of all Canadian Lenders.

 

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when due or refinanced as a Committed Borrowing.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“L/C Issuer” means Bank of America, in its capacity as the issuer of Letters of Credit hereunder,  and any other Lender as requested by the Parent and acceptable to the Administrative Agent. The L/C Issuer may, in its reasonable discretion, arrange for one or more Letters of Credit to be issued by Affiliates or branches of the L/C Issuer, in which case the term “L/C Issuer” shall include any such Affiliate or branch with respect to Letters of Credit issued by such Affiliate or branch.

 

“L/C Obligations” means, collectively, the Canadian L/C Obligations and the Domestic L/C Obligations.  For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

“Lease” means any agreement, whether written or oral, no matter how styled or structured, pursuant to which a Loan Party is entitled to the use or occupancy of any real property for any period of time.

 

“Lender” means each Domestic Lender and each Canadian Lender and, as the context requires, includes the Swing Line Lender. Any Lender may, in its reasonable discretion, arrange for one or more Loans to be made by Affiliates or branches of such Lender, in which case the term “Lender” shall include any such Affiliate or branch with respect to Loans made by such Affiliate or branch.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Parent and the Administrative Agent and the Canadian Agent, as applicable

 

“Letter of Credit” means each Standby Letter of Credit and each Commercial Letter of Credit issued hereunder and shall include the Existing Letters of Credit.  Letters of Credit issued hereunder may be denominated in the same currencies as Loans may be denominated, as elected by the Borrowers.

 

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

 

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“Letter of Credit Expiration Date” means the day that is seven (7) days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(i).

 

“LIBOR Borrowing” means a Borrowing comprised of LIBOR Rate Loans.

 

“LIBOR Rate” means for any Interest Period with respect to a LIBOR Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Loan being made, continued or Converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period.

 

“LIBOR Rate Loan” means a Committed Loan that bears interest at a rate based on the Adjusted LIBOR Rate.

 

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation, or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) and, with respect to the Canadian Loan Parties, also includes any deemed trust or prior claim in, on or of such asset and (b) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“Liquidation” means the exercise by the Agents or the Collateral Agent of those rights and remedies accorded to such Agents under the Loan Documents and applicable Laws as a creditor of the Loan Parties with respect to the realization on the Collateral, including (after the occurrence and during the continuation of an Event of Default) the conduct by the Loan Parties acting with the consent of the Administrative Agent, of any public, private or “going-out-of-business”, “store closing” or other similar sale or any other disposition of the Collateral for the purpose of liquidating the Collateral.  Derivations of the word “Liquidation” (such as “Liquidate”) are used with like meaning in this Agreement.

 

“Liquidation Percentage” shall mean, for any Lender, a fraction, the numerator of which is the sum of such Lender’s Domestic Commitment and Canadian Commitment on the Determination Date and the denominator of which is the Total Commitments of all Lenders on the Determination Date.

 

“Loan” means a Domestic Loan and a Canadian Loan.

 

“Loan Account” has the meaning assigned to such term in Section 2.11(a).

 

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“Loan Cap” means, at any time of determination, the lesser of (a) the Aggregate Total Commitments or (b) the Combined Borrowing Base.

 

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the Credit Card Notifications, the Security Documents, each Facility Guaranty, the Intercreditor Agreement and any other instrument or agreement now or hereafter executed and delivered in connection herewith, or in connection with any transaction arising out of any Cash Management Services and Bank Products provided by any Lender or any of its Affiliates, each as amended and in effect from time to time.

 

“Loan Parties” means, collectively, the Domestic Loan Parties and the Canadian Loan Parties (and for clarity includes the Foreign Borrower).  “Loan Party” means any one of such Persons.

 

“Management Investors” means the collective reference to the officers, directors, employees and other members of the management of Holdings or any of its Subsidiaries, or family members or relatives thereof or trusts, partnerships or limited liability companies for the benefit of any of the foregoing, or any of their heirs, executors, successors and legal representatives, who at any particular date shall beneficially own or have the right to acquire, directly or indirectly, common stock of Holdings.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the legality, validity, binding effect, or enforceability as to any Loan Party thereto of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents and the Lenders under the Loan Documents or with respect to the Collateral comprising the U.S. Borrowing Base and the Canadian Borrowing Base, in each case taken as a whole.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $20,000,000.   For purposes of determining the amount of Material Indebtedness at any time, (a) the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof, and (b) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included. In all events Indebtedness under the Senior Term Loan Credit Agreement or either Notes Indenture constitutes Material Indebtedness.

 

“Material Subsidiary” means, as of the end of any Fiscal Quarter, any Subsidiary of the Borrower (a) whose Consolidated EBITDA for the period of (4) consecutive Fiscal Quarters ending on such date exceeds five percent (5%) of Consolidated EBITDA of Holdings for such period or (b) that owns five percent (5%) of consolidated total assets of Holdings on a consolidated basis.

 

“Maturity Date” means November 12, 2015.

 

“Maximum Rate” has the meaning set forth in Section 10.09.

 

“Measurement Period” means, at any date of determination, the most recently completed twelve Fiscal Months of Holdings and its Subsidiaries for which financial statements have been or, if a Default  under Section 6.01 then exists, were required to have been, delivered.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

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“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which a Loan party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

 

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and cash equivalents received in connection with such transaction (including any cash or cash equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset by a Lien permitted hereunder which is senior to the Collateral Agent’s Lien on such asset and that is required to be repaid (or to establish an escrow for the future repayment thereof) in connection with such transaction (other than Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket expenses incurred by such Loan Party or such Subsidiary in connection with such transaction (including, without limitation, appraisals, and brokerage, legal, title and recording or transfer tax expenses and commissions) paid by any Loan Party to third parties (other than Affiliates)), and (C) unless a Trigger Event is then continuing, taxes paid or reasonably estimated to be payable as a result thereof; and

 

(b)           with respect to the incurrence or issuance of any Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the sum of the cash and cash equivalents received in connection with such transaction over (ii) the underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by such Loan Party or such Subsidiary in connection therewith.

 

“Non-Consenting Lender” has the meaning set forth in Section 10.01.

 

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii).

 

“Note” means either a Domestic Note, a Canadian Note or a Foreign Note, as the context may require.

 

“Notes Indentures” means, collectively, the Senior Notes Indenture and the Senior Subordinated Notes Indenture, and any Permitted Refinancing thereof.

 

“NPL” means the National Priorities List under CERCLA.

 

“Obligations” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan (including Loans incurred pursuant to Section 2.15 hereof) or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, fees costs, expenses and indemnities are allowed claims in such proceeding, and (b) any Other Liabilities. Without limiting the foregoing, for purposes of clarity, whenever used herein the term “Obligations” shall include all Canadian Liabilities and Foreign Liabilities.

 

“Optional Currency” means Euros, Pounds Sterling and Canadian dollars.

 

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“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity, (d) with respect to any unlimited liability company, the memorandum of association and articles of association (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); and (e) in each case, all shareholder or other equity holder agreements, voting trusts and similar arrangements to which such Person is a party or which is applicable to its Equity Interests and all other arrangements relating to the Control or management of such Person.

 

“Other Canadian Liabilities” means any obligation on account of: (a) any Cash Management Services furnished to any of the Canadian Loan Parties or any of their Canadian Subsidiaries and/or (b) any transaction which arises out of any Bank Product entered into with any Canadian Loan Party.

 

“Other Domestic Liabilities” means any obligation on account of: (a) any Cash Management Services furnished to any of the Domestic Loan Parties or any of their Domestic Subsidiaries and/or (b) any transaction which arises out of any Bank Product entered into with any Domestic Loan Party.

 

“Other Liabilities” means, collectively, all Other Canadian Liabilities and all Other Domestic Liabilities.

 

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document, excluding, however, any such amounts imposed as a result of an assignment by a Lender of its Loan or Commitment.

 

“Outstanding Amount” means (i) with respect to Committed Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans and Swing Line Loans, as the case may be, occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by any Borrower of Unreimbursed Amounts.

 

“Overadvance” means either a Canadian Overadvance or a Domestic Overadvance.

 

“Parallel Debt” has the meaning specified in Section 9.18.

 

“Parent” means Sally Holdings LLC, a Delaware limited liability company, or any successor thereto.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Patriot Act” means USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

 

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“Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, that (a) no Default or Event of Default then exists or would arise as a result of entering into such transaction or the making of such payment, and (b) if after giving pro forma effect to such transaction or payment, (x) Excess Availability for the 45 day period immediately preceding, and on the date of, such distribution or dividend was equal to or greater than 20% of the Loan Cap, and (y) the Consolidated Fixed Charge Coverage Ratio, for the most recent Measurement Period, is equal to or greater than 1.1:1.0.  If after giving pro forma effect to such transaction or payment, Excess Availability would be equal to or less than 50% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such transaction or payment which is subject to the Payment Conditions, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements and, if applicable, the satisfaction of the required Consolidated Fixed Charge Coverage Ratio, no less than five (5) Business Days prior to the consummation of any such transaction or payment.

 

“Payment in Full” means the payment in full in cash of all Obligations (or with respect to the Canadian Borrower, all Canadian Liabilities and with respect to the Foreign Borrower, all Foreign Liabilities), including, without limitation, with respect to amounts available to be drawn under outstanding Letters of Credit, the cancellation of such Letters of Credit or the delivery or provision of money or backstop irrevocable letters of credit, in form, on terms, and issued by a financial institution reasonably acceptable to the Administrative Agent, in respect thereof in an amount equal to 105% of the L/C Obligations.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by a Loan Party or any ERISA Affiliate or to which a Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

“Permitted Acquisition” means an Acquisition in which all of the following conditions are satisfied:

 

(a)           No Default then exists or would arise from the consummation of such Acquisition;

 

(b)           If any proceeds from Credit Extensions are being utilized to consummate such Acquisition, such Acquisition shall have been approved by the Board of Directors of the Person (or similar governing body if such Person is not a corporation) which is the subject of such Acquisition and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition shall violate applicable Law;

 

(c)           After giving effect to the Acquisition, if the Acquisition is an Acquisition of Equity Interests, a Loan Party shall acquire and own, directly or indirectly, a majority of the Equity Interests in the Person being acquired and shall Control a majority of any voting interests or shall otherwise Control the governance of the Person being acquired; and

 

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(d)           The total consideration (excluding consideration in the form of Equity Interests) paid for all such Acquisitions in any Fiscal Year (i) shall not  exceed $30,000,000 in the aggregate as long as, after giving pro forma effect to such transaction or payment, Excess Availability is equal to or greater than 15% of the Loan Cap (and if such Excess Availability is not achieved the Acquisition shall not be permitted), but the Acquisition/Investment Payment Conditions are not satisfied, and (ii) without limitation as to amount if, after giving pro forma effect to such transaction or payment, the Acquisition/Investment Payment Conditions are satisfied.

 

“Permitted Canadian Overadvance” means a Canadian Overadvance made by the Canadian Agent, in its discretion, which:

 

(a)           is made to maintain, protect or preserve the Collateral of the Canadian Borrower and/or the Canadian Credit Parties’ rights under the Loan Documents or which is otherwise for the benefit of the Credit Parties; or

 

(b)           is made to enhance the likelihood of, or maximize the amount of, repayment of any of the Canadian Liabilities; or

 

(c)           is made to pay any other amount chargeable to any Canadian Loan Party hereunder or under any other Loan Document; and

 

(d)           together with all other Permitted Canadian Overadvances then outstanding, shall not (i) exceed at any time $1,250,000 or (ii) unless a Liquidation is occurring, remain outstanding for more than forty-five (45) consecutive Business Days, unless in each case, the Required Lenders otherwise agree;

 

provided, that the foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03 regarding each Canadian Lender’s obligations with respect to Canadian Letters of Credit, or (ii) result in any claim or liability against the Canadian Agent (regardless of the amount of any Canadian Overadvance) for Unintentional Canadian Overadvances and such Unintentional Canadian Overadvances shall not reduce the amount of Permitted Canadian Overadvances allowed hereunder, and provided further, that in no event shall the Canadian Agent make a Canadian Overadvance, if after giving effect thereto, the principal amount of the Canadian Credit Extensions would exceed the Canadian Total Commitments (as in effect prior to any termination of the Canadian Commitments pursuant to Section 2.06 hereof).

 

“Permitted Cure Securities” means common equity securities or other equity securities of Holdings, Intermediate Holdco or the Parent that do not constitute Disqualified Capital Stock and the issuance of which does not result in a Change of Control.

 

“Permitted Discretion” means the commercially reasonable judgment of the Administrative Agent exercised in good faith in accordance with customary business practices for comparable asset-based lending transactions.  In exercising such judgment, the Administrative Agent may consider any factors which it reasonably determines: (a) with respect to any Collateral issues, will or reasonably could be expected to adversely affect in any material respect the value of the Collateral, the enforceability or priority of the applicable Agent’s Liens thereon or the amount which any Agent, the Lenders or any Issuing Lender would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral, or (b) is evidence that any collateral report or financial information delivered to such Agent by any Person on behalf of the applicable Borrower is incomplete, inaccurate or misleading in any material respect, or (c) creates or reasonably could be expected to create a

 

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Default or Event of Default.  In exercising such judgment, the Administrative Agent may also consider, without duplication, such factors already included in or tested by the definition of Eligible Inventory or Eligible Accounts, as well as any of the following: (i) changes after the Closing Date in any material respect in demand for, pricing of, or product mix of Inventory; (ii) changes after the Closing Date in any material respect in any concentration of risk with respect to Accounts; (iii) any other factors or circumstances that will or would reasonably be expected to have a Material Adverse Effect and (iv) any other factors arising after the Closing Date that change in any material respect the credit risk of lending to the Borrowers on the security of the Collateral.

 

“Permitted Domestic Overadvance” means a Domestic Overadvance made by the Administrative Agent, in its discretion, which:

 

(a)           is made to maintain, protect or preserve the Collateral and/or the Credit Parties’ rights under the Loan Documents or which is otherwise for the benefit of the Credit Parties; or

 

(b)           is made to enhance the likelihood of, or to maximize the amount of, repayment of any Obligation; or

 

(c)           is made to pay any other amount chargeable to any Loan Party hereunder or any other Loan Document; and

 

(d)           together with all other Permitted Domestic Overadvances then outstanding, shall not (i) exceed at any time the lesser of $20,000,000 or five percent (5%) of the Domestic Borrowing Base at any time or (ii) unless a Liquidation is occurring, remain outstanding for more than forty-five (45) consecutive Business Days, unless in each case, the Required Lenders otherwise agree;

 

provided, that the foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03 regarding each Domestic Lender’s obligations with respect to Domestic Letters of Credit, or (ii) result in any claim or liability against the Administrative Agent (regardless of the amount of any Domestic Overadvance) for Unintentional Domestic Overadvances, and such Unintentional Domestic Overadvances” shall not reduce the amount of Permitted Domestic Overadvances allowed hereunder, and provided further, that in no event shall the Administrative Agent make a Domestic Overadvance, if after giving effect thereto, the principal amount of the Domestic Credit Extensions would exceed the Domestic Total Commitments (as in effect prior to any termination of the Domestic Commitments pursuant to Section 2.06 hereof).

 

“Permitted Encumbrances” means:

 

(a)           Liens imposed by law for Taxes that are not yet due, or the nonpayment of which in the aggregate would not reasonably be expected to have a Material Adverse Effect, or are being contested in compliance with Section 6.04;

 

(b)           carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by applicable Laws, arising in the ordinary course of business and securing obligations that are not overdue by more than sixty (60) days or are being contested in compliance with Section 6.04;

 

(c)           pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security or similar laws or regulations, other than any Lien imposed by ERISA or other applicable Law relating to Canadian

 

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Pension Plans (except Liens arising in respect of employee contributions withheld from pay but not yet due to be remitted to a Canadian Pension Plan);

 

(d)           deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(e)           Liens in respect of judgments that would not constitute an Event of Default hereunder;

 

(f)            easements, covenants, conditions, restrictions, building code laws, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of a Loan Party and such other minor title defects or survey matters that are disclosed by current surveys that, in each case, do not materially interfere with the current use of the real property;

 

(g)           Liens existing on the date hereof and listed on Schedule 7.01 and any renewals, extensions or Permitted Refinancings thereof;

 

(h)           Liens on fixed or capital assets acquired by any Loan Party which are permitted under Section 7.03(a) so long as (i) such Liens and the Indebtedness secured thereby are incurred prior to or within ninety (90) days after such acquisition, (ii) the Indebtedness secured thereby does not exceed the cost of acquisition of such fixed or capital assets and (iii) such Liens shall not extend to any other property or assets of the Loan Parties;

 

(i)            Liens in favor of the Collateral Agent and the Canadian Agent;

 

(j)            Liens of landlords or of mortgagees of landlords arising by operation of law or pursuant to the terms of real property leases, provided that the rental payments secured thereby are not yet due and payable;

 

(k)           Liens securing or consisting of Indebtedness of the Parent and its Subsidiaries incurred pursuant to the Senior Term Loans Documents and any Permitted Refinancings, thereof, provided that (i) such Liens do not apply to any asset other than the Collateral that is subject to a Lien granted under a Security Document, and (ii) all such Liens shall be subject to the Intercreditor Agreement or another intercreditor agreement that is no less favorable to the Credit Parties than the Intercreditor Agreement;

 

(l)            Liens on property (i) of any Subsidiary that is not a Loan Party and (ii) that does not constitute Collateral;

 

(m)          Liens on Intellectual Property; provided that such Liens result from the granting of licenses in the ordinary course of business to any Person to use such Intellectual Property or such foreign patents, patent applications, trademarks, trademark applications, trade names, copyrights, technology, know-how or processes, as the case may be and such Liens are subject to the Agents’ rights with respect to such Intellectual Property;

 

(n)           the rights reserved to or vested in Governmental Authorities by statutory provisions or the terms of leases, licenses and franchises, grants or permits, in each case, which

 

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affect any land and which allow such Governmental Authorities to terminate the leases, licenses, franchises, grants or permits or to require annual or other periodic payments as a condition to the continuance thereof;

 

(o)           Liens on property subject to Sale and Leaseback Transactions and general intangibles related thereto;

 

(p)           any encumbrance or restriction (including put and call agreements) with respect to the Equity Interests of any joint venture or similar arrangement pursuant to the joint venture or similar agreement with respect to such joint venture or similar arrangement, provided that no such encumbrance or restriction affects in any way the ability of the Parent or any of its Subsidiaries to comply with their obligations under the Loan Documents;

 

(q)           Possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments owned as of the date hereof and Permitted Investments, provided that such liens (a) attach only to such Investments and (b) secure only obligations incurred in the ordinary course and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing;

 

(r)            Liens arising solely by virtue of any statutory or common law provisions relating to banker’s liens, liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;

 

(s)           Liens arising from precautionary UCC or PPSA filings regarding “true” operating leases or, to the extent permitted under the Loan Documents, the consignment of goods to a Loan Party;

 

(t)            voluntary Liens on property (other than property of the type included in the Combined Borrowing Base) in existence at the time such property is acquired pursuant to a Permitted Acquisition or on such property of a Subsidiary of a Loan Party in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition; provided, that such Liens are not incurred in connection with or in anticipation of such Permitted Acquisition and do not attach to any other assets of any Loan Party or any Subsidiary;

 

(u)           Liens in favor of customs and revenues authorities imposed by applicable Laws arising in the ordinary course of business in connection with the importation of goods and securing obligations (i) that are not overdue by more than thirty (30) days, or (ii)(A) that are being contested in good faith by appropriate proceedings, (B) the applicable Loan Party or Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (C) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation;

 

(v)           Liens in favor of Loan Parties; and

 

(w)          Liens securing Indebtedness permitted under Section 7.03(b) and (c).

 

“Permitted Holders” means (i) any of the CD&R Investors; (ii) any of the Management Investors, CD&R, and their respective Affiliates; (iii) any investment fund or vehicle managed, sponsored or advised by CD&R or any Affiliate thereof, and any Affiliate of or successor to any such investment fund or vehicle; (iv) any limited or general partners of, or other investors in, any CD&R Investor or any 

 

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Affiliate thereof, or any such investment fund or vehicle; and (v) any Person acting in the capacity of an underwriter in connection with a public or private offering of Equity Interests of Holdings.  In addition, any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) whose status as a “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) constitutes or results in a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of either Notes Indenture, together with its Affiliates, shall thereafter constitute Permitted Holders.

 

“Permitted Investments” means each of the following:

 

(a)           readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or, with respect to the Canadian Loan Parties, Canada (or by any agency or instrumentality of the United States of America or Canada, as applicable) having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America or Canada, as applicable, is pledged in support thereof;

 

(b)           commercial paper issued by any Person organized under the laws of any state of the United States of America or Canada or any province thereof and rated, at the time of acquisition thereof, at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof;

 

(c)           time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia (or with respect to the Canadian Loan Parties, Canada or any province or territory thereof) or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (b) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 180 days from the date of acquisition thereof;

 

(d)           fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (c) above or with any primary dealer and having a market value at the time that such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such counterparty entity with whom such repurchase agreement has been entered into;

 

(e)           Investments, classified in accordance with GAAP as current assets of the Loan Parties, in any money market fund, mutual fund, or other investment companies that are registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P, and which invest solely in one or more of the types of securities described in clauses (a) through (d) above;

 

(f)            Investments existing on the Closing Date, and set forth on Schedule 7.02, but not any increase in the amount thereof or any other modification of the terms thereof;

 

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(g)           (i) Investments by any Loan Party and their respective Subsidiaries in their respective direct and indirect Subsidiaries outstanding on the Closing Date, (ii) additional Investments by any Loan Party and its Subsidiaries in Loan Parties, (iii) additional Investments by Subsidiaries of the Loan Parties that are not Loan Parties in other Subsidiaries that are not Loan Parties and (iv) so long as no Event of Default has occurred and is continuing or would result from such Investment, additional Investments by the Loan Parties in wholly-owned Subsidiaries that are not Loan Parties;

 

(h)           Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

 

(i)            Guarantees of Indebtedness permitted under Section 7.03;

 

(j)            so long as no Default or Event of Default has occurred and is continuing or would result from such Investment, Investments by any Loan Party in Swap Contracts permitted hereunder;

 

(k)           Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

 

(l)            advances to officers, directors and employees of the Loan Parties and Subsidiaries in the ordinary course of business in an amount consistent with past practice for travel, entertainment, relocation and analogous ordinary business purposes;

 

(m)          Investments constituting Permitted Acquisitions;

 

(n)           other Investments not specifically set forth above not to exceed $2,500,000 in the aggregate in any Fiscal Year;

 

(o)           Other Investments not specifically set forth above, in any Fiscal Year (i) shall not  exceed $30,000,000 in the aggregate as long as, after giving pro forma effect to such Investment, Excess Availability is equal to or greater than 15% of the Loan Cap (and if such Excess Availability is not achieved the Investment shall not be permitted), but the Acquisition/Investment Payment Conditions are not satisfied, and (ii) without limitation as to amount if, after giving pro forma effect to such transaction or payment, the Acquisition/Investment Payment Conditions are satisfied; and

 

(p)           Investments by Foreign Subsidiaries in cash equivalents customarily purchased by companies in the European Union as part of their cash management policies and having a credit quality substantially equivalent to those set forth in clauses (a) through (e) of this definition, and otherwise consistent with past practice of such Foreign Subsidiaries;

 

provided, however, that notwithstanding the foregoing, (i) after the occurrence and during the continuance of a Trigger Event, no such Investments specified in clauses (a) through (e) and clauses (n) and (o) shall be permitted to be made unless either (A) no Loans are then outstanding, or (B) the Investment is a temporary Investment pending expiration of an Interest Period for a LIBOR Rate Loan, the proceeds of which Investment will be applied to the Obligations after the expiration of such Interest Period.

 

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“Permitted Pro Forma Adjustments” as applied to any Person or business unit acquired or disposed of on or after the Closing Date means any adjustment to the actual results of operations of such Person or business unit (a) that are permitted to be recognized in pro forma financial statements prepared in accordance with Regulation S-X of the Securities Act of 1933 or (b) that otherwise reflect verifiable and adequately documented severance payments and reductions in, among other items, officer and employee compensation, insurance expenses, interest expense, rental expense, and other overhead expense, and other quantifiable expenses which are not anticipated to be incurred on an ongoing basis following consummation of such acquisitions or dispositions, in each case, with respect to this clause (b) only, as approved by the Administrative Agent in its Permitted Discretion.

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting a Permitted Refinancing); provided, that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premiums thereon and underwriting discounts, defeasance costs, fees, commissions and expenses), (b) the weighted average life to maturity of such Permitted Refinancing is greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall either be (i) unsecured or (ii) subordinated in right of payment to such Obligations on terms at least as favorable to the Credit Parties as those contained in the documentation governing the Indebtedness being Refinanced, (d) the interest rate applicable to any such Permitted Refinancing shall not exceed the then applicable market interest rate (as determined in good faith by the Board of Directors of Holdings), (e) if requested by the Administrative Agent, if such Permitted Refinancing includes security consisting of Collateral included in the Combined Borrowing Base, the Person providing such Permitted Refinancing shall have entered into an intercreditor agreement with the Agents on terms reasonably satisfactory to the Administrative Agent; and provided further, that if such refinancing is a Permitted Refinancing of the Senior Term Facility, the Administrative Agent agrees to execute an intercreditor agreement with respect thereto substantially in the form of the Intercreditor Agreement, and (f) at the time thereof, no Default or Event of Default shall have occurred and be continuing.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.

 

“Plan” means, collectively, each Domestic Pension Plan and each Canadian Pension Plan.

 

“Platform” has the meaning specified in Section 6.02.

 

“PPSA” means the Personal Property Security Act of Ontario (or any successor statute) or similar legislation of any other Canadian jurisdiction, including, without limitation, the Civil Code of Quebec, the laws of which are required by such legislation to be applied in connection with the issue, perfection, enforcement, opposability, priority, validity or effect of security interests or other applicable Liens.

 

“Pounds Sterling” means pounds in lawful currency of the United Kingdom.

 

“Prepayment Event” means:

 

(a)           Any Disposition (including pursuant to a sale and leaseback transaction) of any Collateral of a Loan Party included in the Combined Borrowing Base excluding sales of Inventory in the ordinary course of business, unless the proceeds therefrom are required to be

 

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paid to the holder of a Lien on such Collateral having priority over the Lien of the Collateral Agent or Canadian Agent, as applicable;

 

(b)           If a Trigger Event then exists or would arise by reason of such Disposition, any Disposition (including pursuant to a sale and leaseback transaction) of any property or asset of a Loan Party (including, without limitation, Collateral) outside of the ordinary course of business, unless the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset;

 

(c)           Any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of (and payments in lieu thereof), Collateral of a Loan Party included in the Combined Borrowing Base, unless (i) the proceeds therefrom are required to be paid to the holder of a Lien on such Collateral having priority over the Lien of the Collateral Agent or Canadian Agent, as applicable, or (ii) unless a Trigger Event has occurred and is continuing, the proceeds therefrom are utilized for purposes of replacing or repairing the Collateral in respect of which such proceeds, awards or payments were received, or are otherwise used to purchase assets useful in the business of the Loan Parties, within 180 days of the occurrence of the damage to or loss of the Collateral being repaired or replaced; or

 

(d)           If a Trigger Event then exists or would arise by reason of such damage or taking, any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of (and payments in lieu thereof), any property or asset of a Loan Party (including, without limitation, Collateral), unless the proceeds therefrom are required to be paid to the holder of a Lien on such Collateral having priority over the Lien of the Collateral Agent or Canadian Agent, as applicable.

 

“Prime Rate Loan” means a Canadian Prime Rate Loan, a US Index Rate Loan, or a Domestic Prime Rate Loan, as the context may require.

 

“Principal Obligations” means the Obligations owing to the Lenders (other than each Loan Party’s Parallel Debt).

 

“Professional Market Party” means a professional market party (professionele marktpartij) within the meaning of the Dutch FSA and any regulation promulgated thereunder, as amended from time to time.

 

“Public Lender” has the meaning specified in Section 6.02.

 

“Real Estate” means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned or leased by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto and all leases, tenancies, and occupancies thereof.

 

“Receivables Advance Rate” means (i) 80% if the Accounts Receivable Reporting Requirement is not then in effect; and (ii) 85% if either (x) the Accounts Receivable Reporting Requirement is then in effect or (y) the Borrowers elect at their option to provide the detailed accounts receivables reporting as required by Section 6.02(c) as if the Account Receivable Reporting Requirement was in effect at such time.

 

“Receivables Reserves” means such Reserves as may be established from time to time by the Administrative Agent in the Administrative Agent’s Permitted Discretion with respect to the determination of the collectability in the ordinary course of Eligible Trade Receivables.

 

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“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified by the Securities Laws and shall be independent of the Parent and its Subsidiaries as prescribed by the Securities Laws.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

 

“Reports” has the meaning provided in Section 9.12(b).

 

“Request for Credit Extension” means (a) with respect to a Borrowing, Conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

 

“Required Lenders” means, as of any date of determination, Lenders holding more than 50% of Applicable Percentage of all Lenders of the Aggregate Total Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender or Deteriorating Lender shall be excluded for purposes of making a determination of Required Lenders.

 

“Reserves” means all (if any) Inventory Reserves, Availability Reserves and Receivables Reserves. Borrowing Base Certificates shall include detailed reporting of ineligible Accounts if the Accounts Receivable Reporting Requirement is then in effect.  Borrowing Base Certificates shall include a deemed ineligible Accounts amount of 20% of reported Accounts (as set forth in the definition of Eligible Trade Receivables) and a deemed Dilution Reserve of 8.1% of reported Accounts (in each case, without detailed reporting of ineligible Accounts) if the Accounts Receivable Reporting Requirement is not in effect; provided, however, that the Borrowers may, at their election at any time, provide detailed reporting of Accounts (and report actual ineligibility and dilution for purposes of determining the applicable Reserves and Borrowing Base) even if the Accounts Receivable Reporting Requirement is not then in effect.

 

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Loan Party or any of the other individuals designated in writing to the Administrative Agent by an existing Responsible Officer of a Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to

 

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such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.  Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.

 

“RP Availability Condition” means, at any time of determination with respect to any specified transaction or payment, that, (a) no Default or Event of Default then exists or would arise as a result of entering into the transaction or making such payment, and (b) after giving pro forma effect thereto, Excess Availability for the 45 day period immediately preceding, and on the date of, such transaction or payment was equal to or greater than 20% of the Loan Cap.  If after giving pro forma effect to such transaction or payment, Excess Availability would be equal to or less than 50% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such transaction or payment which is subject to the RP Availability Condition, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements, no less than five (5) Business Days prior to the consummation of any such transaction or payment.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Secured Funded Indebtedness” means Consolidated Funded Indebtedness that is secured by Liens on the property or assets of the Borrowers and the Loan Parties (other than property or assets held in a defeasance or similar trust or arrangement for the benefit of the Indebtedness secured thereby).

 

“Secured Leverage Ratio” means, as of any date of determination, the ratio of (a) Secured Funded Indebtedness to (b) Consolidated EBITDA, in each case of Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.

 

“Securities Laws” means, collectively, the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB; and all applicable securities laws in each province and territory of Canada and the respective regulations, rules regulations, blanket orders and blanket rulings under such laws together with applicable published policy statements and notices of the securities regulator of each such province and territory.

 

“Security Agreement” means the Security Agreement dated as of the Closing Date among the Domestic Loan Parties and the Collateral Agent.

 

“Security Documents” means the Security Agreement, the Canadian Security Documents, the Dutch Security Documents, the Blocked Account Agreements, the Credit Card Notifications, and each other security agreement or other instrument or document executed and delivered by or on behalf of any Loan Party to the Collateral Agent or the Canadian Agent pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations or the Canadian Liabilities or the Foreign Liabilities, as applicable.

 

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“Senior Notes” means 9.25% Senior Notes due 2014 of the Parent issued on November 16, 2006, as the same may be exchanged for substantially similar unsecured senior notes that have been registered under the Securities Act, and as the same or such substantially similar notes may be amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement.

 

“Senior Notes Indenture” means the Indenture dated as of November 16, 2006, under which the Senior Notes are issued, as the same may be amended, supplemented, waived or otherwise modified from time to time, in accordance with the provisions of this Agreement.

 

“Senior Subordinated Notes” means 10.5% Senior Subordinated Notes due 2016 of the Parent issued on November 16, 2006, as the same may be exchanged for substantially similar unsecured senior notes or unsecured senior subordinated notes that have been registered under the Securities Act, and as the same or such substantially similar notes may be amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement.

 

“Senior Subordinated Notes Indenture” means the Indenture dated as of November 16, 2006, under which the Senior Subordinated Notes are issued, as the same may be amended, supplemented, waived or otherwise modified from time to time, in accordance with the provisions of this Agreement.

 

“Senior Term Facility” means the senior secured term loan facility entered into by the Parent and Merrill Lynch Capital Corporation, as administrative agent and collateral agent, dated as of November 16, 2006, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement and any Permitted Refinancings thereof.

 

“Senior Term Loan Documents” means the “Loan Documents” as defined in the Senior Term Loan Credit Agreement, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement

 

“Senior Term Loans” means the senior secured term loans of the Parent in the aggregate principal amount of $1,070,000,000 made under the Senior Term Loan Credit Agreement, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement and any Permitted Refinancings thereof.

 

“Senior Term Loan Credit Agreement” means that certain credit agreement among the Parent, the several banks and other financial institutions from time to time parties thereto and Merrill Lynch Capital Corporation, as administrative agent and collateral agent, dated as of November 16, 2006, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement and any Permitted Refinancings thereof.

 

“Settlement Date” has the meaning provided in Section 2.14(a).

 

“Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of Holdings and its Subsidiaries as of that date determined in accordance with GAAP.

 

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.

 

“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) at fair valuation, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of the properties

 

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and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged, and (f) such Person is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code and, in the case of any Canadian Loan Party, is not an “insolvent person” within the meaning of such term in the Bankruptcy and Insolvency Act (Canada), as applicable.  The amount of all guarantees or other contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.

 

“Specified Equity Contribution” means any cash equity contribution made to Holdings, Intermediate Holdings or Parent in exchange for Permitted Cure Securities; provided (a)(i) such cash equity contribution and (ii) the contribution of any proceeds therefrom to Holdings, Intermediate Holdings or Parent occur (x) after the Closing Date and (y) on or prior to the date that is 10 days after the date on which the financial statements are required to be delivered for a fiscal quarter (or year); (b) the Parent identifies such equity contribution as a “Specified Equity Contribution”; (c) in each four fiscal quarter period, there shall exist a period of at least two consecutive quarters in respect of which no Specified Equity Contribution shall have been made, (d) the amount of any Specified Equity Contribution included in the calculation of Consolidated EBITDA hereunder shall be limited to the amount required to effect compliance with subsection 7.13 hereof, and (e) the Specified Equity Contribution shall not be included for purposes of any calculation under this Agreement other than for the calculation of Consolidated EBITDA for purposes of compliance with Section 7.13 only.

 

“Spot Rate” means the rate determined by the Administrative Agent to be the rate quoted as the spot rate for purchase by the Administrative Agent of such Optional Currency with Dollars through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two (2) Business Days prior to the date of such determination; provided that the Administrative Agent may obtain such spot rate from another financial institution designated by it.

 

“Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit and that (a) is used in lieu or in support of performance guaranties or performance, surety or similar bonds, (b) is used in lieu or in support of stay or appeal bonds, (c) supports the payment of insurance premiums for reasonably necessary casualty insurance carried by any of the Loan Parties, or (d) supports payment or performance for identified purchases or exchanges of products or services.

 

“Stated Amount” means at any time the maximum amount for which a Letter of Credit may be honored.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the FRB to which the Administrative Agent is subject with respect to the Adjusted LIBOR Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D.  LIBOR Rate Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The

 

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Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

“Store” means any retail store (which may include any real property, fixtures, equipment, inventory and other property related thereto) operated, or to be operated, by any Loan Party.

 

“Subordinated Indebtedness” means Indebtedness which is expressly subordinated in right of payment to the prior Payment in Full of the Obligations and which is in form and on terms approved in writing by the Administrative Agent.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company, unlimited liability company or other business entity of which a majority of the shares of Equity Interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Loan Party.

 

“Substantial Liquidation” means either (a) the Liquidation of substantially all of the Collateral (other than Collateral from the Foreign Borrower), or (b) the sale or other disposition of substantially all of the Collateral (other than Collateral from the Foreign Borrower) by the Loan Parties.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

 

“Swing Line” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.

 

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

 

“Swing Line Lender” means Bank of America, in its capacity as provider of Swing Line Loans to the Domestic Borrowers (and to the extent based on Domestic Availability, the Foreign Borrower), and

 

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Bank of America-Canada Branch, in its capacity as provider of Swing Line Loans to the Canadian Borrower (and to the extent based on Canadian Availability, the Foreign Borrower), or any successor swing line lender hereunder.

 

“Swing Line Loan” has the meaning specified in Section 2.04(a), and shall include all such Loans made by the Swing Line Lender to the Domestic Borrowers, the Canadian Borrower or the Foreign Borrower.

 

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B-1 (Domestic Swing Line Loan Notice) or Exhibit B-2 (Canadian Swing Line Loan Notice), as applicable.

 

“Swing Line Note” means the Domestic Swing Line Note and the Canadian Swing Line Note, as the context may require.

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property (including sale and leaseback transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

 

“Target Amount” means with respect to any DDA, an amount which, when aggregated with all other Target Amounts remaining on deposit in all DDAs at any one time, does not exceed $7,500,000 (such aggregate amount to be determined no less frequently than on a monthly basis).

 

“Tax Sharing Agreement” means the Tax Sharing Agreement among Holdings and the Parent dated as of  November 16, 2006, as the same may be amended, supplemented, waived or otherwise modified from time to time.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Term Agent” means Merrill Lynch Capital Corporation, the agent for term lenders under the Term Loan Agreement.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date, (ii) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Commitments are irrevocably terminated (or deemed terminated) in accordance with Article VIII, or (iii) the termination of the Commitments in accordance with the provisions of Section 2.06 hereof.

 

“Term Loan Agreement” means that certain credit agreement among the Parent, the several banks and other financial institutions from time to time parties thereto and Merrill Lynch Capital Corporation, as administrative agent and collateral agent, dated as of November 16, 2006 as amended and in effect, and any Permitted Refinancing thereof.

 

“Total Outstandings” means the aggregate of all Canadian Total Outstandings and all Domestic Total Outstandings and, without duplication, all Foreign Liabilities.

 

“Trading with the Enemy Act” has the meaning set forth in Section 10.18.

 

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“Trigger Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) the failure of the Borrowers to maintain Excess Availability of at least the greater of (i) $40,000,000, or (ii) fifteen percent (15%) of the Loan Cap.  For purposes of this Agreement, the occurrence of a Trigger Event shall be deemed continuing, (i) so long as such Event of Default has not been waived, and/or (ii) if the Trigger Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until the date Excess Availability shall have been not less than the greater of (i) $40,000,000 or (ii) fifteen percent (15%) of the Loan Cap for forty-five (45) consecutive days; provided  that for the purposes of Section 6.12 a Trigger Event may be discontinued only three (3) times during the term of this Agreement notwithstanding that the Event of Default has been waived or that Availability shall have been not less than the amounts required above for forty-five (45) consecutive days.  The termination of a Trigger Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Trigger Event in the event that the conditions set forth in this definition again arise.

 

“Type” means, with respect to a Committed Loan, its character as a Prime Rate Loan, a LIBOR Rate Loan, a Euribar Rate Loan or a BA Equivalent Loan.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

“UFCA “ has the meaning specified in Section 10.22(d).

 

“UFTA” has the meaning specified in Section 10.22(d).

 

“Unfunded Pension Liability” means the excess of a Domestic Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Domestic Pension Plan’s assets, determined in accordance with the assumptions used for funding the Domestic Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

 

“Unintentional Canadian Overadvance” means a Canadian Overadvance which, to the Agents’ knowledge, did not constitute a Canadian Overadvance when made but which has become a Canadian Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the Appraised Value of property or assets included in the Borrowing Base or misrepresentation by the Canadian Loan Parties.

 

“Unintentional Domestic Overadvance” means a Domestic Overadvance which, to the Administrative Agent’s knowledge, did not constitute a Domestic Overadvance when made but which has become a Domestic Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the Appraised Value of property or assets included in the Borrowing Base or misrepresentation by the Loan Parties.

 

“United States” and “U.S.” mean the United States of America.

 

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

 

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“US Index Rate” means, for any day, a floating rate equal to the annual rate of interest determined by the Canadian Agent which is equal to the greatest of (a) the annual rate of interest announced from time to time by Bank of America-Canada Branch , as being its reference rate in effect on such date (or if such date is not a Business Day, on the Business Day immediately preceding such date) for determining interest rates on Dollar denominated commercial loans made by it in Canada, in each case regardless of whether such bank actually charges such rate of interest in connection with extensions of credit in Dollars to debtors, (b) the Federal Funds Rate for such day plus one-half of one percent (0.50%) or (c) the LIBOR Rate for a thirty (30) day interest period as determined on such day, plus 1.0%.  Each change in any interest rate provided for in the Agreement based upon the US Index Rate shall take effect at the time of such change in the US Index Rate.

 

“US Index Rate Loan” means a Loan or portion thereof made to the Canadian Borrower or the Foreign Borrower (to the extent based on Canadian Availability) denominated in US Dollars bearing interest at a rate based on the US Index Rate.

 

“U.S. Prime Rate” means, for any day, a fluctuating rate per annum equal to the highest of (a) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate”, (b) the Federal Funds Rate for such day plus one-half of one percent (0.50%) or (c) the LIBOR Rate for a 30 day interest period as determined on such day, plus 1.0%.  The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“Voting Stock” means Equity Interests entitled to vote generally in the election of directors (or Persons performing similar functions).

 

1.02        Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(a)           The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer

 

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to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

(b)           In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

 

(c)           Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

(d)           Any other undefined term contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meaning provided for such term in the Uniform Commercial Code or the PPSA, as the context may require,  to the extent the same are used or defined therein

 

1.03        Accounting Terms

 

(a)           Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

 

(b)           Changes in GAAP.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Parent or the Administrative Agent shall so request, the Administrative Agent, the Lenders and the Parent shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided  that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Parent shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

(c)           Notwithstanding the foregoing, any obligations of a Person under a lease (whether existing now or entered into in the future) that is not (or would not be) a Capital Lease Obligation under GAAP as in effect on the Closing Date, shall not be treated as a Capital Lease Obligation solely as a result of the adoption of changes in GAAP outlined by the Financial Accounting Standards Board in its press release dated March 19, 2009.

 

(d)           For purposes of making all financial calculations to determine compliance with this Credit Agreement, all components of such calculations shall be adjusted to include or exclude, as the case may be, without duplication, such components of such calculations attributable to any business or assets that have been acquired or disposed of by the Borrowers or any of their Subsidiaries, including through Permitted Acquisitions, after the first day of the applicable period of determination and prior to the end of such period, as determined in good faith by the Borrowers utilizing Permitted Pro Forma Adjustments, and such financial calculation will be determined based on the most recent period for which Financial Statements were required

 

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to be delivered pursuant to Section 6.01, with such adjustments calculated as if the applicable acquisitions or dispositions had been consummated on the first day of such period.

 

1.04        Rounding.  Any financial ratios required to be maintained by the Loan Parties pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05        Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

 

1.06        Letter of Credit Amounts.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to be the Stated Amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms of any Issuer Documents related thereto, provides for one or more automatic increases in the Stated Amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum Stated Amount is in effect at such time.

 

1.07        Currency Equivalents Generally.  Any amount specified in this Agreement (other than in Articles II, IX and X) or any of the other Loan Documents to be in Dollars shall also include the Equivalent Amount in any currency other than Dollars.

 

1.08        Québec Matters.  For purposes of any assets, liabilities, Collateral or entities located in the Province of Québec and for all other purposes pursuant to which the interpretation or construction of this Agreement may be subject to the laws of the Province of Québec or a court or tribunal exercising jurisdiction in the Province of Québec, (a) “personal property” shall include “movable property”, (b) “real property” or “real estate” shall include “immovable property”, (c) “tangible property” shall include “corporeal property”, (d) “intangible property” shall include “incorporeal property”, (e) “security interest”, “mortgage” and “security” shall include a “hypothec”, “right of retention”, “prior claim” and a resolutory clause, (f) all references to filing, perfection, priority, remedies, registering or recording under the UCC or a PPSA shall include publication under the Civil Code of Québec, (g) all references to “perfection” of or “perfected” security or security interest shall include a reference to an “opposable” or “set up” hypothec, security or security interest as against third parties, (h) any “right of offset”, “right of setoff” or similar expression shall include a “right of compensation”, (i) “goods” shall include “corporeal movable property” other than chattel paper, documents of title, instruments, money and securities, (j) an “agent” shall include a “mandatary”, (k) “construction security” shall include “legal hypothecs”, (l) “joint and several” shall include “solidary”, (m) “gross negligence or willful misconduct” shall be deemed to be “intentional or gross fault”, (n) “beneficial ownership” shall include “ownership on behalf of another as mandatary”; (o) “easement” shall include “servitude”, (p) “priority” shall include “prior claim”, (q) “survey” shall include “certificate of location and plan”, (r) “state” shall include “province”, (s) “fee simple title” shall include “absolute ownership”, and (t) “accounts” shall include “claims”.

 

1.09        Dutch Matters

 

In this Agreement, where it relates to a Dutch entity, a reference to:

 

(a)                                   a necessary action to authorize, where applicable, includes without limitation: (A) any action required to comply with the Dutch Works Council Act (Wet op de

 

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ondernemingsraden); and (B) obtaining unconditional positive advice (advies) from each competent works council;

 

(b)                                  a winding-up, administration or dissolution includes a Dutch entity being: (A) declared bankrupt (failliet verklaard); and (B) dissolved (ontbonden);

 

(c)                                   a moratorium includes surseance van betaling and granted a moratorium includes surseance verleend;

 

(d)                                  a trustee in bankruptcy includes a curator;

 

(e)                                   an administrator includes a bewindvoerder;

 

(f)                                     a receiver or an administrative receiver does not include a curator or bewindvoerder;

 

(g)                                  a nationalization includes a nationalisering; and

 

(h)                                  an attachment includes a beslag.

 

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01        Committed Loans; Reserves.  (a) Subject to the terms and conditions set forth herein, each Domestic Lender severally agrees to make Domestic Committed Loans to the Domestic Borrowers and the Foreign Borrower (subject to the provisions of subsection (c) below), from time to time, on any Business Day during the Availability Period, in an aggregate principal amount not to exceed at any time outstanding the lesser of (x) the amount of the Domestic Commitment of such Domestic Lender, or (y) the Applicable Percentage of the Domestic Borrowing Base for such Domestic Lender; subject in each case to the following limitations:

 

(i)            after giving effect to any Domestic Committed Borrowing, the Domestic Total Outstandings shall not exceed the Domestic Loan Cap,

 

(ii)           after giving effect to any Domestic Committed Borrowing, the aggregate Outstanding Amount of the Domestic Committed Loans of any Domestic Lender, plus the Applicable Percentage of the Outstanding Amount of all Domestic L/C Obligations for such Domestic Lender, plus such Domestic Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans made to the Domestic Borrowers shall not exceed the Domestic Commitment of such Domestic Lender, and

 

(iii)          the Outstanding Amount of all Domestic L/C Obligations shall not at any time exceed the Domestic Letter of Credit Sublimit.

 

Within the limits of the Domestic Commitment for each Domestic Lender, and subject to the other terms and conditions hereof, the Domestic Borrowers (and the Foreign Borrower subject to the limitations provided herein) may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01.

 

(b)           Subject to the terms and conditions set forth herein, each Canadian Lender severally agrees to make Canadian Committed Loans to the Canadian Borrower and the Foreign Borrower

 

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(subject to the provisions of subsection (c) below), from time to time, on any Business Day during the Availability Period, in an aggregate principal amount not to exceed at any time outstanding the lesser of (x) the amount of the Canadian Commitment of such Canadian Lender, or (y) the Applicable Percentage of the Canadian Borrowing Base for such Canadian Lender; subject in each case to the following limitations:

 

(i)            after giving effect to any Canadian Committed Borrowing, the Total Canadian Outstandings shall not exceed the Canadian Loan Cap,

 

(ii)           after giving effect to any Canadian Committed Borrowing, the aggregate Outstanding Amount of the Canadian Committed Loans of any Canadian Lender, plus the Applicable Percentage of the Outstanding Amount of all Canadian L/C Obligations for such Canadian Lender, plus such Canadian Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans made to the Canadian Borrower, shall not exceed the Canadian Commitment of such Canadian Lender, and

 

(iii)          the Outstanding Amount of all Canadian L/C Obligations shall not at any time exceed the Canadian Letter of Credit Sublimit.

 

Within the limits of the Canadian Commitment for each Canadian Lender, and subject to the other terms and conditions hereof, the Canadian Borrower (and the Foreign Borrower subject to the limitations provided herein) may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01.

 

(c)           Subject to the terms and conditions set forth herein, the Foreign Borrower may directly obtain Domestic Loans and Canadian Loans from time to time only if and to the extent that the following conditions are satisfied:

 

(i)            the Foreign Borrower must have utilized all then remaining Distribution Availability (or the Domestic Borrowers shall have borrowed all such remaining Distribution Availability, made an Investment in the amount of such remaining Distribution Availability in Distribution and Distribution shall have made an Investment in the amount of such remaining Distribution Availability in the Foreign Borrower); and

 

(ii)           after full utilization pursuant to subsection (i), above, the Foreign Borrower must have utilized all then remaining Canadian Availability (or the Canadian Borrower shall have borrowed all then remaining Canadian Availability and made an Investment in the amount of such remaining Canadian Availability in the Foreign Borrower);

 

(iii)          after giving effect to the proposed direct Borrowing by the Foreign Borrower, Excess Availability shall be greater than 60% of the Domestic Loan Cap (excluding the Distribution Borrowing Base); and

 

(iv)          all other conditions precedent to the obtaining of Credit Extensions by the Borrowers shall have been satisfied.

 

(d)           The following are the Inventory Reserves and Availability Reserves as of the Closing Date:

 

(i)            Shrink (an Inventory Reserve).  In an amount to the accrual therefor in the Loan Parties’ general ledger.

 

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(ii)           Other/Shows/Administrative Reserve (an Inventory Reserve). In an amount equal to 100% of the amount reflected therefor in the Loan Parties’ general ledger.

 

(iii)          Dilution Reserve (an Availability Reserve). In an amount equal to 8.1% of the Eligible Trade Receivables.

 

(iv)          Rent Reserve (an Availability Reserve). In an amount equal to three months rent for all leased distribution centers and all stores located in any jurisdiction in which a landlord’s lien may have priority over the Lien of the Collateral Agent or the Canadian Agent

 

(v)           Gift Certificates and Gift Cards (an Availability Reserve).  In an amount equal to 100% of all outstanding gift certificates and gift cards issued by or on behalf of the Loan Parties.

 

(vi)          Beauty Club (an Availability Reserve). In an amount equal to 100% of the amount reflected therefor in the Loan Parties’ general ledger.

 

(vii)         GST/PST Reserve (an Availability Reserve). As to the Canadian Borrowing Base only, in an amount equal to all accrued taxes due to any Governmental Authority.

 

(viii)        WEPPA Reserve (an Availability Reserve). As to the Canadian Borrowing Base only, in an amount equal to all accrued payroll and payroll related items protected by the Wage Earner Protection Program Act (Canada).

 

(e)           Subject to the restrictions otherwise set forth in this Agreement, the Administrative Agent shall have the right, at any time and from time to time after the Closing Date in its Permitted Discretion to establish, modify or eliminate Reserves upon three (3) Business Days prior notice to the Borrowers, (during which period the Administrative Agent shall be available to discuss any such proposed Reserve with the Borrowers; provided that no such prior notice shall be required for  (1) changes to any Reserves resulting solely by virtue of mathematical calculations of the amount of the Reserve in accordance with the methodology of calculation previously utilized (such as, but not limited to, Rent and Customer Credit Liabilities), or (2) changes to Reserves or establishment of additional Reserves if a Material Adverse Effect has occurred or it would be reasonably likely that a Material Adverse Effect to the Lenders would occur were such Reserve not changed or established prior to the expiration of such two (2) Business Day period, or (3) any changes to Reserves during the continuance of any Event of Default.

 

2.02        Borrowings, Conversions and Continuations of Committed Loans.

 

(a)           Interest Rate Elections.

 

(i)            Domestic Committed Loans made to the Domestic Borrowers or to the Foreign Borrower shall be either Domestic Prime Rate Loans or LIBOR Rate Loans, as the Parent, on behalf of the Domestic Borrowers or the Foreign Borrower, may request subject to and in accordance with this Section 2.02;  provided that all Domestic Committed Loans made in Euros shall solely be Euribor Rate Loans and all Domestic Loans made in Sterling shall be LIBOR Rate Loans.  All Swing Line Loans made to the Domestic Borrowers or the Foreign Borrower shall be only made in Dollars and shall be only Domestic Prime Rate Loans.

 

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(ii)           Canadian Committed Loans made to the Canadian Borrower or the Foreign Borrower shall be either Canadian Prime Rate Loans or BA Equivalent Loans (if made in CD$) or LIBOR Rate Loans or US Index Rate Loans (if in Dollars) as the Canadian Borrower or the Foreign Borrower may request subject to and in accordance with this Section 2.02; provided that provided that all Canadian Committed Loans made in Euros shall solely be Euribor Rate Loans and all Canadian Committed Loans made in Sterling shall be LIBOR Rate Loans.  All Swing Line Loans made to the Canadian Borrower or the Foreign Borrower shall be made only in CD$ or Dollars and shall be only Canadian Prime Rate Loans or U.S. Index Rate Loans, as applicable.

 

(iii)          Subject to the other provisions of this Section 2.02, Committed Borrowings of more than one Type may be incurred at the same time.

 

(b)           Each Committed Borrowing, each conversion of a Committed Loan from one Type to another, and each continuation of Loans shall be made upon the irrevocable notice of the Parent on behalf of the Domestic Borrowers, by the Canadian Borrower or by Foreign Borrower, as applicable, to the Administrative Agent or the Canadian Agent, as applicable, which may be given by telephone.  Each such notice must be received by the Administrative Agent or the Canadian Agent not later than 11:00 a.m. (i) three (3) Business Days prior to the requested date of any Committed Borrowing of or continuation of Euribor Rate Loans, LIBOR Rate Loans or BA Equivalent Loans or of any conversion of any such Loans to Loans of a different Type, (ii) four (4) Business Days prior to the requested date of any Committed Borrowing to be made in an Optional Currency of, conversion to, or continuation of Euribor Rate Loans, LIBOR Rate Loans or BA Equivalent Loans in an Optional Currency or of any conversion of any such Loans to Loans of a different Type, and (iii) one (1) Business Day prior to the requested date of any Committed Borrowing of any of Canadian Prime Rate Loans, Domestic Prime Rate Loans or US Index Rate Loans.  Each telephonic notice pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Administrative Agent or the Canadian Agent, as applicable, of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Parent, the Canadian Borrower or the Foreign Borrower, as applicable.  Each Committed Borrowing of, conversion to or continuation of LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans shall be in a principal amount of $1,000,000 or a whole multiple of $1,000,000 in excess thereof (or the Equivalent Amount thereof).  Except as provided in Sections 2.03(c) and 2.04(c), each Committed Borrowing of or conversion to Canadian Prime Rate Loans , U.S. Index Rate Loans, or Domestic Prime Rate Loans, as applicable, shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or the Equivalent Amount thereof).  Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the request is for a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of LIBOR Rate Loans, BA Equivalent Loans, or Euribor Rate Loans, (ii) the requested date of the Committed Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, (v) whether such Committed Loan is to be made in Dollars, Canadian Dollars or another Optional Currency, and (vi) if applicable, the duration of the Interest Period with respect thereto, provided that any request for Optional Currency shall comply with the provisions of Section 2.02(b) hereof.  If (x) the request fails to specify a Type of Committed Loan in a Committed Loan Notice or the currency in which such Committed Loan is to be made or if the Parent, the Canadian Borrower, or the Foreign Borrower, as the case may be, fails to give a timely notice of a conversion or continuation of a LIBOR Rate Loan, Euribor Rate Loan, or a BA Equivalent Loan, then the applicable Committed Loans shall be made as, or converted to, Domestic Prime Rate Loans made in Dollars or Canadian Prime Rate Loans made

 

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in CD$, as applicable.  Any such automatic conversion to Prime Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBOR Rate Loans, Euribor Rate Loan or BA Equivalent Loans, or (y) fails to specify an Interest Period for a LIBOR Rate Loan, Euribor Rate Loan, or a BA Equivalent Loan, it will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary herein, a Swing Line Loan may not be converted to a LIBOR Rate Loan, Euribor Rate Loan or a BA Equivalent Loan.

 

(c)           Following receipt of a Committed Loan Notice, the Agents shall promptly notify each Domestic Lender or Canadian Lender, as the case may be, of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Parent, on behalf of the Domestic Borrower or by the Canadian Borrower or by the Foreign Borrower, the Agents shall notify each Lender of the details of any automatic conversion to Prime Rate Loans described in Section 2.02(b).  Each Domestic Lender and each Canadian Lender shall make the amount of its applicable Committed Loan available to the Administrative Agent or the Canadian Agent, as the case may be, in immediately available funds at the applicable Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Committed Borrowing is the initial Credit Extension, Section 4.01), the applicable Agent shall use reasonable efforts to make all funds so received available to the applicable Borrowers in like funds by no later than 4:00 p.m. (and, if such Borrowing is the initial Credit Extension, 4:00 p.m.) on the day of receipt by the applicable Agent, either by (i) crediting either the account of the Parent, the Canadian Borrower or the Foreign Borrower, as applicable, on the books of Bank of America or Bank of America-Canada Branch, as applicable, with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the applicable Agent by the Parent, the Canadian Borrower or by the Foreign Borrower; provided, however, that (A) if, on the date a Committed Loan Notice with respect to a Canadian Committed Borrowing is given by the Canadian Borrower or the Foreign Borrower, as applicable, there are Canadian L/C Borrowings outstanding, then the proceeds of such Canadian Committed Borrowing, first, shall be applied to the payment in full of any such Canadian L/C Borrowings, and second, shall be made available to the Canadian Borrower or the Foreign Borrower as provided above; or (B) if, on the date a Committed Loan Notice with respect to a Domestic Committed Borrowing is given by the Parent on behalf of the Domestic Borrowers or the Foreign Borrower, there are Domestic L/C Borrowings outstanding, then the proceeds of such Domestic Committed Borrowing, first, shall be applied to the payment in full of any such Domestic L/C Borrowings, and second, shall be made available to the Domestic Borrowers or the Foreign Borrower as provided above.

 

(d)           In the event that any Borrower fails to pay any interest, fee, service charge, Credit Party Expenses, or other payment to which any Lender or any Agent is entitled from the such Borrower pursuant hereto when due, or at any time after the occurrence and during the continuance of a Trigger Event, the applicable Agent, without the request of any Loan Party, may advance such interest, fee, service charge, Credit Party Expenses, or other payment to which any Lender or any Agent is entitled from the applicable Borrower pursuant hereto or any other Loan Document and may charge the same to the Loan Account with respect to the Domestic Credit Extensions or Canadian Credit Extensions, as applicable, notwithstanding that a Domestic Overadvance or a Canadian Overadvance may result thereby.  The Agents shall advise the Parent of any such advance or charge by the Administrative Agent promptly after the making thereof, and the Canadian Agent shall advise the Canadian Borrower of any such advance or charge by the Canadian Agent promptly after the making thereof.  Such action on the part of the Administrative Agent or the Canadian Agent shall not constitute a waiver of the applicable Credit Party’s rights

 

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and the applicable Borrowers’ obligations under Section 2.05(c).  Any amount which is added to the principal balance of the applicable Loan Account as provided in this Section 2.02(c) shall be deemed to be a Domestic Prime Rate Loan or a Canadian Prime Rate Loan, as applicable.

 

(e)           Except as otherwise provided herein, a LIBOR Rate Loan, a Euribor Rate Loan or a BA Equivalent Loan may be continued or converted only on the last day of an Interest Period for such Loan.  During the existence of an Event of Default, no Loans may be requested as, converted to or continued as LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans without the Consent of the Required Lenders.

 

(f)            The applicable Agent shall promptly notify the Parent, the Canadian Borrower, the Foreign Borrower and the applicable Lenders of the interest rate applicable to any Interest Period for Euribor Rate Loans, BA Equivalent Loans, or LIBOR Rate Loans upon determination of such interest rate.  At any time that Prime Rate Loans are outstanding, the applicable Agent shall promptly notify the Parent, the Canadian Borrower, the Foreign Borrower and the applicable Lenders  of any change in the U.S. Prime Rate, US Index Rate or Canadian Prime Rate promptly following the public announcement of such change.

 

(g)           After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to another in accordance with the terms hereof, and all continuations of Committed Loans as the same Type, there shall not be more than five (5) Interest Periods in effect with respect to Domestic Committed Loans and not be more than five (5) Interest Periods in effect with respect to Canadian Committed Loans.

 

(h)           None of the Agents, the Lenders, or the L/C Issuer shall have any obligation to make any Loan or to provide any Letter of Credit if an Overadvance would result.  The Administrative Agent may, in its discretion, make Permitted Domestic Overadvances without the consent of any Lender or any L/C Issuer and each Domestic Lender shall be bound thereby.  The Canadian Agent may, in its discretion, make Permitted Canadian Overadvances without the consent of any Lender, or any L/C Issuer and each Canadian Lender shall be bound thereby.  Any Permitted Overadvance may constitute a Swing Line Loan and shall bear interest at the U.S. Prime Rate or the Canadian Prime Rate, as applicable.  All Permitted Overadvance are for the account of the applicable Borrowers and shall be repaid on demand.  The making of any such Permitted Overadvance on any one occasion shall not obligate any Agent or any Lender to make or permit any Permitted Overadvance on any other occasion or to permit such Permitted Overadvances to remain outstanding. The making by any Agent of a Permitted Overadvance shall not modify or abrogate any of the provisions of Section 2.03 regarding the Lenders’ obligations to purchase participations with respect to Letters of Credit or of Section 2.04 regarding the Lenders’ obligations to purchase participations with respect to Swing Line Loans.  Neither the Administrative Agent nor the Canadian Agent shall have any liability for, and no Loan Party or Credit Party shall have the right to, or shall, bring any claim of any kind whatsoever against the Administrative Agent or the Canadian Agent with respect to Unintentional Overadvances regardless of the amount of any such Overadvance(s).

 

2.03        Letters of Credit.

 

(a)           The Letter of Credit Commitment.

 

Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of

 

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Credit for the account of any Borrower (provided that any Canadian Letter of Credit may only be for the benefit of any Canadian Loan Party or the Foreign Borrower), and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit; (B) each Domestic Lender severally agrees to participate in Domestic Letters of Credit and any drawings thereunder; provided that, after giving effect to any L/C Credit Extension with respect to any Domestic Letter of Credit, the provisions of Section 2.01(a) shall not have been breached, and (C) each Canadian Lender severally agrees to participate in Canadian Letters of Credit and any drawings thereunder; provided that, after giving effect to any Canadian L/C Credit Extension, the provisions of Section 2.01(a) shall not have been breached.  Each request by a Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by all Borrowers that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, each Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly such Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  Any L/C Issuer (other than Bank of America or any of its branches or Affiliates) shall notify the applicable Agent in writing on each Business Day of all Letters of Credit issued on the prior Business Day by such L/C Issuer, provided that (i) until the applicable Agent advises any such L/C Issuer that the provisions of Section 4.02 are not satisfied, or (ii) the aggregate amount of the Letters of Credit issued in any such week exceeds such amount as shall be agreed by the Agents and the L/C Issuer, such L/C Issuer shall be required to so notify the Agents in writing only once each week of the Letters of Credit issued by such L/C Issuer during the immediately preceding week as well as the daily amounts outstanding for the prior week, such notice to be furnished on such day of the week as the Agents and such L/C Issuer may agree. All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

 

(i)            The L/C Issuers shall not issue any Letter of Credit, if:

 

(A)          subject to Section 2.03(b)(iii), the expiry date of such requested Standby Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

 

(B)           subject to Section 2.03(b)(iii), the expiry date of such requested Commercial Letter of Credit would occur more than 120 days after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

 

(C)           the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless either such Letter of Credit is Cash Collateralized on or prior to the date of issuance of such Letter of Credit or all the Lenders have approved such expiry date.

 

(ii)           The L/C Issuers shall not be required to issue any Letter of Credit without the prior consent of the Agents if:

 

(A)          any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing such Letter of Credit, or any Law applicable to such L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or request that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon

 

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such L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such L/C Issuer in good faith deems material to it;

 

(B)           the issuance of such Letter of Credit would violate one or more policies of such L/C Issuer applicable to letters of credit generally;

 

(C)           such Letter of Credit contains any provisions for automatic reinstatement of the Stated Amount after any drawing thereunder; or

 

(D)          any Lender is at such time a Defaulting Lender or Deteriorating Lender hereunder, unless such L/C Issuer has entered into satisfactory arrangements with the applicable Borrowers or such Lender to eliminate such L/C Issuer’s risk with respect to such Lender.

 

(iii)          The L/C Issuers shall not amend any Letter of Credit if the L/C Issuers would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof or if the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

 

(iv)          The L/C Issuers shall act on behalf of the applicable Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuers shall have all of the benefits and immunities (A) provided to the Administrative Agent and the Canadian Agent  in Article IX with respect to any acts taken or omissions suffered by the L/C Issuers in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the terms “Administrative Agent” and “Canadian Agent”  as used in Article IX included the L/C Issuers with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuers.

 

(b)           Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

 

(i)            Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Parent on behalf of the Domestic Borrowers, the Canadian Borrower, or the Foreign Borrower, as applicable, delivered to the L/C Issuer (with a copy to the Administrative Agent and, if applicable, the Canadian Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable.  Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent and, if applicable, the Canadian Agent, not later than 11:00 a.m. at least two (2) Business Days (or such later date and time as the Administrative Agent, or the Canadian Agent, as applicable, and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the L/C Issuer: (A) whether such Letter of Credit is to be a Domestic Letter of Credit or a Canadian Letter of Credit, and the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the identity of the Borrower for the account of which such Letter of Credit is requested to be issued; and (H) such other matters as the L/C Issuer may reasonably require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the L/C Issuer: (A) the Letter of Credit to be

 

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amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require.  Additionally, the applicable Borrower shall furnish to the L/C Issuer and the Administrative Agent and, if applicable, the Canadian Agent, such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer, the Administrative Agent or the Canadian Agent may require.

 

(ii)           Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent and, if applicable, the Canadian Agent (by telephone or in writing) that the Administrative Agent and, if applicable, the Canadian Agent has received a copy of such Letter of Credit Application from the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable, and, if not, the L/C Issuer will provide the Administrative Agent and, if applicable, the Canadian Agent, with a copy thereof.  Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent, the Canadian Agent or any Loan Party, at least one (1) Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the applicable Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices.  Immediately upon the issuance or amendment of each Letter of Credit, each Domestic Lender or each Canadian Lender, as applicable, shall be deemed to (without any further action), and hereby irrevocably and unconditionally severally agrees to, purchase from the L/C Issuer, without recourse or warranty, a risk participation in such Letter of Credit in an amount equal to the product of such Domestic Lender’s or Canadian Lender’s Applicable Percentage, as applicable times the Stated Amount of such Letter of Credit.  Upon any change in the Domestic Commitments or the Canadian Commitments under this Agreement, it is hereby agreed that with respect to all L/C Obligations, there shall be an automatic adjustment to the participations hereby created to reflect any new Applicable Percentages of the assigning and assignee Domestic Lenders or Canadian Lenders, as the case may be.

 

(iii)          If the Parent on behalf of the Domestic Borrowers, the Canadian Borrower, or the Foreign Borrower, as applicable, so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Standby Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Standby Letter of Credit is issued.  Unless otherwise directed by the L/C Issuer, the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable, shall not be required to make a specific request to the L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Standby Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Standby Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clauses (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, the Canadian Agent, or any Lender that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

 

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(iv)          Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Parent and the Administrative Agent and, if applicable, the Canadian Agent, a true and complete copy of such Letter of Credit or amendment.

 

(c)           Drawings and Reimbursements; Funding of Participations.

 

(i)            Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable, and the Administrative Agent and, if applicable, the Canadian Agent, thereof; provided, however, that any failure to give or delay in giving such notice shall not relieve the applicable Borrower of its obligation to reimburse the L/C Issuer and the applicable Lenders with respect to any such payment.  Not later than 11:00 a.m. on the first (1st) Business Day after the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the applicable Borrower shall reimburse the L/C Issuer through the Administrative Agent or the Canadian Agent, as applicable, in an aggregate principal amount equal to the amount of such drawing.  If such Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent or the Canadian Agent, as applicable, shall promptly notify each Domestic Lender or each Canadian Lender, as applicable, of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Domestic Lender’s or Canadian Lender’s Applicable Percentage thereof, as applicable.  In such event, the Domestic Borrowers, the Canadian Borrower, or the Foreign Borrower, as applicable, shall be deemed to have requested a Committed Borrowing of Domestic Prime Rate Loans or Canadian Prime Rate Loans, as applicable, to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Prime Rate Loans, but subject to the amount of the unutilized portion of the Domestic Total Commitments or the Canadian Total Commitments, as applicable, and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice).  Any notice given by the L/C Issuer, the Administrative Agent or the Canadian Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)           Each Domestic Lender or Canadian Lender, as the case may be, shall upon any notice delivered pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent or the Canadian Agent, as applicable, for the account of the L/C Issuer at the Administrative Agent’s Office or the Canadian Agent’s Office, as applicable, in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent or the Canadian Agent, as applicable, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Domestic Prime Rate Loan to the Domestic Borrowers (or the Foreign Borrower if based on Domestic Availability), or a Canadian Prime Rate Loan to the Canadian Borrower (or the Foreign Borrower if based on Canadian Availability), as applicable, in such amount.  The Administrative Agent or the Canadian Agent, as applicable, shall remit the funds so received to the L/C Issuer.

 

(iii)          With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Prime Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Domestic Borrowers, the Canadian Borrower, or the Foreign Borrower, as applicable, shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.  In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall

 

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constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

 

(iv)          Until each applicable Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Domestic Lender’s or Canadian Lender’s Applicable Percentage, as applicable, of such amount shall be solely for the account of the L/C Issuer.

 

(v)           Each Lender’s obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery of a Committed Loan Notice).  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrowers to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

 

(vi)          If any Lender fails to make available to the Administrative Agent or the Canadian Agent, as applicable, for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent or the Canadian Agent, as applicable), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of (A) the Federal Funds Rate, with respect to the Administrative Agent or payments due to the Canadian Agent in Dollars, and the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars or any Optional Currency, and (B) a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be.  A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent or the Canadian Agent, as applicable) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

 

(d)           Repayment of Participations.

 

(i)            At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent or the Canadian Agent, as applicable, receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the applicable Borrowers or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent or the Canadian Agent, as applicable), the Administrative Agent or the Canadian Agent, as applicable, will distribute to the applicable Domestic Lender or Canadian Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Administrative Agent or the Canadian Agent, as applicable.

 

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(ii)           If any payment received by the Administrative Agent or the Canadian Agent, as applicable, for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Domestic Lender or Canadian Lender, as applicable, shall pay to the Administrative Agent or the Canadian Agent, as applicable, for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent or the Canadian Agent, as applicable, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate, with respect to the Administrative Agent or payments due to the Canadian Agent in Dollars, and the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars or other Optional Currency, from time to time in effect.  The obligations of the Lenders under this clause shall survive the Payment in Full of the Obligations and the termination of this Agreement.

 

(e)           Obligations Absolute.  The obligation of each Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)            any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

 

(ii)           the existence of any claim, counterclaim, setoff, defense or other right that any Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)          any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv)          any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

 

(v)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Borrower or any of their respective Subsidiaries; or

 

(vi)          the fact that any Event of Default shall have occurred and be continuing.

 

The Parent, the Canadian Borrower, or the Foreign Borrower, as applicable, shall promptly examine a copy of each Domestic Letter of Credit or each Canadian Letter of Credit, as applicable, and each amendment thereto that is delivered to such Person and, in the event of any claim of noncompliance with the Parent’s, the Canadian Borrower’s, or the Foreign Borrower’s, as applicable, instructions or other irregularity, the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable, will promptly

 

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notify the L/C Issuer.  The Borrowers shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

(f)            Role of L/C Issuer.  Each Lender and the Borrowers agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Administrative Agent, the Canadian Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; (iii) any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit or any error in interpretation of technical terms; or (iv) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The Borrowers hereby assume all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrowers’ pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative Agent, the Canadian Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrowers, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrowers which the Borrowers prove were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary (or the L/C Issuer may refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit), and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

 

(g)           Cash Collateral.  Upon the written request of the Administrative Agent or the Canadian Agent, as applicable, (or if an Event of Default is continuing, the applicable L/C Issuer) if, as of the Letter of Credit Expiration Date, any L/C Obligation (other than L/C Borrowings) for any reason remains outstanding, then, the Domestic Borrowers shall, in each case, promptly Cash Collateralize the then Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings) and the Canadian Borrower shall, in each case, promptly Cash Collateralize the then Outstanding Amount of all Canadian L/C Obligations (other than Canadian L/C Borrowings).  Sections 2.05 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder.  For purposes of this Section 2.03, Section 2.05 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit into the applicable Cash Collateral Account or deliver to the Administrative Agent or the Canadian Agent, as applicable, for the benefit of the L/C Issuer and the Domestic Lenders or the Canadian Lenders, as applicable, as collateral for the Domestic L/C Obligations or the Canadian L/C Obligations, as applicable, cash or deposit account balances in an amount equal to one hundred five percent (105%) of the Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings) or the Canadian L/C Obligations (other than Canadian L/C Borrowings), as applicable, pursuant to documentation in form and

 

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substance reasonably satisfactory to the Administrative Agent or the Canadian Agent, as applicable, and the L/C Issuer (which documents are hereby consented to by the Lenders).  Derivatives of such term have corresponding meanings.  The Domestic Borrowers hereby grant to the Administrative Agent (for the benefit of itself and the other Credit Parties) a security interest in, and Lien on, all such cash, deposit accounts and all balances in the Cash Collateral Account established by the Domestic Loan Parties and all proceeds of the foregoing to secure the Secured Obligations (as defined in the Security Agreement) of the Domestic Loan Parties.  The Canadian Loan Parties hereby grant to the Canadian Agent a security interest in, and Lien on, all such cash, deposit accounts and all balances in the Cash Collateral Account established by the Canadian Loan Parties and all proceeds of the foregoing to secure the Canadian Liabilities.  Cash Collateral shall be maintained in Cash Collateral Accounts at Bank of America or Bank of America-Canada Branch, as applicable.  If at any time the Administrative Agent reasonably determines that any funds held by it as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent (for the benefit of itself and the other Domestic Credit Parties) or that the total amount of such funds is less than 105% of the aggregate Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings), the Domestic Borrowers will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings) over (y) the total amount of funds, if any, then held by the Administrative Agent as Cash Collateral that the Administrative Agent reasonably determines to be free and clear of any such right and claim.   If at any time the Canadian Agent reasonably determines that any funds held by it as Cash Collateral are subject to any right or claim of any Person other than the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties) or that the total amount of such funds is less than 105% of the aggregate Outstanding Amount of all Canadian L/C Obligations (other than Canadian L/C Borrowings), the Canadian Borrower will, forthwith upon demand by the Canadian Agent, pay to the Canadian Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount of all Canadian L/C Obligations (other than Canadian L/C Borrowings) over (y) the total amount of funds, if any, then held by the Canadian Agent as Cash Collateral that the Canadian Agent reasonably determines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations in the manner specified in Section 2.05 and Section 8.03.

 

(h)           Applicability of ISP and UCP.  Unless otherwise expressly agreed by the L/C Issuer and the Parent or the Canadian Borrower, as applicable, when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each Standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each Commercial Letter of Credit.

 

(i)            Letter of Credit Fees.  The Domestic Borrowers shall pay to the Administrative Agent for the account of the Domestic Lenders, the Canadian Borrower and the Foreign Borrower shall pay to the Canadian Agent, for the account of the Canadian Lenders, as applicable, each in accordance with its Applicable Percentage, a Letter of Credit fee (the “Letter of Credit Fee”) for (i) in the case of the Letter of Credit Fee payable by the Domestic Borrowers, each Domestic Letter of Credit equal to the Applicable Rate multiplied by the daily Stated Amount under each such Domestic Letter of Credit (whether or not such maximum amount is then in effect under such Domestic Letter of Credit) and (ii) in the case of the Letter of Credit Fee payable by the Canadian Borrower, each Canadian Letter of Credit equal to the Applicable Rate multiplied by the daily Stated Amount under each such Canadian Letter of Credit (whether or not such maximum amount is then in effect under such Canadian Letter of Credit).  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount

 

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of the Letter of Credit shall be determined in accordance with Section 1.06.  Letter of Credit Fees shall be (i) due and payable on the first calendar day of each April, July, October and January, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand, and (ii) computed on a quarterly basis in arrears.  If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary contained herein, while any Event of Default exists, Administrative Agent may, and upon the request of the Required Lenders shall, notify the Parent that all Letter of Credit Fees shall accrue at the Default Rate and thereafter such Letter of Credit Fees shall accrue at the Default Rate to the fullest extent permitted by applicable Law so long as such Event of Default is continuing.

 

(j)            Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.  The Domestic Borrowers, the Canadian Borrower and the Foreign Borrower, as applicable, shall pay directly to the L/C Issuer for its own account a fronting fee (the “Fronting Fee”) at a rate equal to 0.125% per annum, computed on the daily amount available to be drawn under each Letter of Credit and payable on a quarterly basis in arrears.  Such Fronting Fees shall be due and payable on the last Business Day of each calendar quarter, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.   For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.06.  In addition, the Domestic Borrowers, the Canadian Borrower and the Foreign Borrower, as applicable, shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to Letters of Credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(k)           Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

2.04        Swing Line Loans.

 

(a)           The Swing Line.  Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, to from time to time on any Business Day during the Availability Period, make loans (each such loan, a “Swing Line Loan”) (i) to the Domestic Borrowers or the Foreign Borrower (subject to the provisions of Section 2.01(c)) in an aggregate principal amount not to exceed at any time outstanding the amount of the Domestic Swing Line Sublimit, notwithstanding the fact that the Outstanding Amount of such Swing Line Loans made to the Domestic Borrowers and the Foreign Borrower, when aggregated with the Applicable Percentage of the Outstanding Amount of Domestic Committed Loans and Domestic L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Applicable Percentage; provided, however, that after giving effect to any Swing Line Loan made to the Domestic Borrowers and the Foreign Borrower, the provisions of Section 2.01(a) shall not have been breached;  and (ii) to the Canadian Borrower or the Foreign Borrower (subject to the provisions of Section 2.01(c)) in an aggregate principal amount not to exceed at any time outstanding the amount of the Canadian Swing Line Sublimit, notwithstanding the fact that the Outstanding Amount of such Swing Line Loans made to the Canadian Borrower and the Foreign Borrower, when aggregated with the Applicable Percentage of the Outstanding Amount of Canadian Committed Loans and Canadian L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Applicable Percentage; provided, however, that after giving effect to any Swing Line Loan made to the Canadian Borrower and the Foreign Borrower, the provisions of Section 2.01(b) shall not have been breached.  No Borrower shall use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan, and the Swing Line Lender shall not be

 

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obligated to make any Swing Line Loan at any time when any Lender is at such time a Defaulting Lender or Deteriorating Lender hereunder, unless the Swing Line Lender has entered into satisfactory arrangements with the applicable Borrower or such Lender to eliminate the Swing Line Lender’s risk with respect to such Lender.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only at a rate based on the U.S. Prime Rate , the Canadian Prime Rate or the U.S. Index Rate, as applicable.  Immediately upon the making of a Swing Line Loan to the Domestic Borrowers and the Foreign Borrower, each Domestic Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan made to the Domestic Borrowers and the Foreign Borrower (based on Domestic Availability).  Immediately upon the making of a Swing Line Loan to the Canadian Borrower, each Canadian Lender and the Foreign Borrower shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan made to the Canadian Borrower and the Foreign Borrower (based on Canadian Availability).  The Swing Line Lender shall have all of the benefits and immunities (A) provided to the Administrative Agent and the Canadian Agent in Article IX with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with Swing Line Loans made by it or proposed to be made by it as if the term “Administrative Agent” and “Canadian Agent” as used in Article IX  included the Swing Line Lender with respect to such acts or omissions, and (B) as additionally provided herein with respect to the Swing Line Lender.

 

(b)           Swing Line Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the irrevocable notice of the Parent on behalf of the Domestic Borrowers, the Foreign Borrower or the Canadian Borrower, as applicable, to the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 or the Equivalent Amount thereof, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent or the Canadian Agent, as applicable (by telephone or in writing) that the Administrative Agent or the Canadian Agent, as applicable, has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent or the Canadian Agent, as applicable (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent or the Canadian Agent at the request of the Required Lenders prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso in clause (i) or clause (ii) to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Domestic Borrowers, the Canadian Borrower or the Foreign Borrower, as applicable, at its office by crediting the account of such Borrower or such other account as directed by the applicable Borrower, as applicable, on the books of the Swing Line Lender in immediately available funds.

 

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(c)           Refinancing of Swing Line Loans.

 

(i)            The Swing Line Lender, at any time in its sole and absolute discretion, may request, on behalf of the Domestic Borrowers, the Canadian Borrower or the Foreign Borrower, as applicable (which hereby irrevocably authorize the Swing Line Lender to so request on their behalf), that each Domestic Lender or each Canadian Lender, as applicable, make a Prime Rate Loan in an amount equal to such Domestic Lender’s or Canadian Lender’s Applicable Percentage, as the case may be, of the amount of Swing Line Loans then outstanding to the Domestic Borrowers or the Canadian Borrower or the Foreign Borrower, as applicable; provided that the Swing Line Lender shall settle the Swing Line Loans with the Lenders weekly in accordance with Section 2.14(a).  Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Prime Rate Loans, but subject to the unutilized portion of the Domestic Total Commitments or the Canadian Total Commitments, as applicable, and the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Parent, the Canadian Borrower or the Foreign Borrower, as applicable, with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent or the Canadian Agent, as applicable.  Each Domestic Lender or each Canadian Lender, as applicable, shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent or the Canadian Agent, as applicable, in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office or the Canadian Agent’s Office, as applicable, not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Domestic Lender or each Canadian Lender, as applicable, that so makes funds available shall be deemed to have made a Domestic Prime Rate Loan to the Domestic Borrowers or a Canadian Prime Rate Loan or U.S. Index Rate Loan, as applicable, to the Canadian Borrower, as applicable, in such amount.  The Administrative Agent or the Canadian Agent, as applicable, shall remit the funds so received to the Swing Line Lender.

 

(ii)           If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.04(c)(i), the request for Prime Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the applicable Lenders fund its risk participation in the relevant Swing Line Loan and each such Lender’s payment to the Administrative Agent or the Canadian Agent, as applicable, for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

 

(iii)          If any Lender fails to make available to the Administrative Agent or the Canadian Agent, as applicable, for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent or the Canadian Agent, as applicable), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of (A) the Federal Funds Rate, with respect to the Administrative Agent or payments due to the Canadian Agent in Dollars, and the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars, and (B) a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or funded participation in the relevant Swing Line Loan, as the case may be.   A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent or the Canadian Agent, as applicable) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

 

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(iv)          Each Lender’s obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrowers or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall relieve or otherwise impair the obligation of any Borrower to repay Swing Line Loans, together with interest as provided herein.

 

(d)           Repayment of Participations.

 

(i)            At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to the applicable Domestic Lender or Canadian Lender, its Applicable Percentage of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by the Swing Line Lender.

 

(ii)           If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan made to a Domestic Borrower is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Domestic Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate.  The Administrative Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Domestic Lenders under this clause shall survive the Payment in Full of the Obligations and the termination of this Agreement.

 

(iii)          If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan made to the Canadian Borrower is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Canadian Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Canadian Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars and the Federal Funds Rate with respect to payments due to the Canadian Agent in Dollars.  The Canadian Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Canadian Lenders under this clause shall survive the Payment in Full of the Canadian Liabilities and the termination of this Agreement.

 

(e)           Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible for invoicing the Borrowers for interest on the Swing Line Loans.  Until each Lender funds its Prime Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Domestic Lender’s or Canadian Lender’s Applicable Percentage, as applicable, of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.

 

(f)            Payments Directly to Swing Line Lender.  The Borrowers shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender at the office specified by the Swing Line Lender in writing to the Parent.

 

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2.05        Prepayments.

 

(a)           The Borrowers may, upon irrevocable notice from the Parent to the Administrative Agent (except as set forth below) (with respect to Committed Loans made to Domestic Borrowers or the Foreign Borrower based on Domestic Availability) or from the Canadian Borrower to the Canadian Agent (with respect to Committed Loans made to the Canadian Borrower or the Foreign Borrower based on Canadian Availability), at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent or the Canadian Agent, as applicable, not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans and (B) on the date of prepayment of Prime Rate Loans; (ii) any voluntary prepayment of LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof (or the Equivalent Amount thereof); and (iii) any voluntary prepayment of Prime Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof (or the Equivalent Amount thereof) or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans, the Interest Period(s) of such Loans.  The Administrative Agent or the Canadian Agent, as applicable, will promptly notify each Domestic Lender or Canadian Lender, as applicable, of its receipt of each such notice, and of the amount of such Domestic Lender’s or Canadian Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Parent or the Canadian Borrower, the applicable Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBOR Rate Loan , Euribor Rate Loan or a BA Equivalent Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the Committed Loans of the Domestic Lenders or Canadian Lenders, as the case may be, in accordance with their respective Applicable Percentages.  Notwithstanding anything to the contrary contained herein, the Parent may rescind any notice of prepayment provided pursuant to this Section 2.05(a) if such prepayment was to have been made with the proceeds of a refinancing of all part of the Committed Loans hereunder or from the proceeds of an asset sale, which refinancing or asset sale shall not have been consummated or shall otherwise have been delayed.

 

(b)           The Borrowers may, upon irrevocable notice to the Swing Line Lender (except as set forth below)(with a copy to the Administrative Agent or the Canadian Agent, as applicable), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, not later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000 or the Equivalent Amount thereof, as applicable, or, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment.  If such notice is given, the applicable Borrowers, as applicable, shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Notwithstanding anything to the contrary contained herein, the Borrowers may rescind any notice of prepayment provided pursuant to this Section 2.05(b) if such prepayment was to have been made with the proceeds of a refinancing of all part of the Swing Line Loans hereunder or from the proceeds of an asset sale, which refinancing or asset sale shall not have been consummated or shall otherwise have been delayed.

 

(c)           If for any reason the Domestic Total Outstandings at any time exceed the Domestic Loan Cap as then in effect, the Domestic Borrowers, and the Foreign Borrower to the extent  the Foreign Borrower has directly obtained Domestic Loans, shall immediately prepay Domestic Committed Loans, Swing Line Loans made to the Domestic Borrowers, and Foreign Borrower, and

 

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Domestic L/C Borrowings and/or Cash Collateralize the Domestic L/C Obligations (other than Domestic L/C Borrowings) in an aggregate amount equal to such excess; provided, however, that the Domestic Borrowers and the Foreign Borrower shall not be required to Cash Collateralize the Domestic L/C Obligations pursuant to this Section 2.05(c) unless after the prepayment in full of the Domestic Loans the Domestic Total Outstandings exceed the lesser of the Domestic Total Commitments or the Domestic Borrowing Base, each as then in effect.

 

(d)           If for any reason the Total Canadian Outstandings at any time exceed the Canadian Loan Cap as then in effect, the Canadian Borrower, and the Foreign Borrower to the extent  the Foreign Borrower has directly obtained Canadian Loans, shall immediately prepay Canadian Committed Loans, Swing Line Loans made to the Canadian Borrower, and Foreign Borrower,  and Canadian L/C Borrowings and/or Cash Collateralize the Canadian L/C Obligations (other than Canadian L/C Borrowings) in an aggregate amount equal to such excess; provided, however, that the Canadian Borrower and the Foreign Borrower shall not be required to Cash Collateralize the Canadian L/C Obligations pursuant to this Section 2.05(d) unless after the prepayment in full of the Canadian Loans the Total Canadian Outstandings exceed the lesser of the Canadian Total Commitments or the Canadian Borrowing Base, each as then in effect.

 

(e)           The Borrowers shall prepay the Loans in accordance with the provisions of Section 6.12 hereof but without any permanent reduction in the respective Commitments.

 

(f)            The Domestic Borrowers shall prepay the Domestic Loans, and the Canadian Borrower shall prepay the Canadian Loans, in an amount equal to the Net Proceeds in excess of $20,000,000 in any Fiscal Year received on account of a Prepayment Event (and if a Trigger Event is continuing, the provisions of clause (e) above shall govern).  Nothing in this Section 2.05(f) shall be construed to constitute any Agent’s or any Lender’s consent to any Prepayment Event that is not permitted by other provisions of this Agreement or the other Loan Documents but, in either event, without any permanent reduction in the respective Commitments.

 

(g)           Prepayments made on account of the Obligations first, shall be applied ratably to the Domestic L/C Borrowings and the Swing Line Loans made to the Domestic Borrowers and the Foreign Borrower (to the extent based on Domestic Availability), second, shall be applied ratably to the outstanding Domestic Committed Loans, and third, the amount remaining, if any, after the prepayment in full of all such Domestic L/C Borrowings, Swing Line Loans and Domestic Committed Loans outstanding at such time may be retained by (or shall be returned to) the Domestic Borrowers for use in a manner not prohibited by this Agreement; provided that if a Default or Event of Default then exists, such Net Proceeds shall be applied in accordance with the provisions of Section 8.03 hereof.

 

(h)           Prepayments made on account of the Canadian Liabilities first, shall be applied ratably to the Canadian L/C Borrowings and the Swing Line Loans made to the Canadian Borrower and the Foreign Borrower (to the extent based on Canadian Availability), second, shall be applied ratably to the outstanding Canadian Committed Loans, and third the amount remaining, if any, after the prepayment in full of all such Canadian L/C Borrowings, Swing Line Loans made to the Canadian Borrower and Canadian Committed Loans outstanding at such time may be retained by (or shall be returned to) the Canadian Borrower for use in a manner not prohibited by this Agreement provided that if a Default or Event of Default then exists, such Net Proceeds shall be applied in accordance with the provisions of Section 8.03 hereof.

 

(i)            In the case of Loans and Letters of Credit denominated in Optional Currencies, the Administrative Agent shall with the delivery of each Borrowing Base Certificate, and may, at its discretion, at other times, recalculate the aggregate exposure under such Loans and Letters of Credit

 

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denominated in Optional Currencies at any time to account for fluctuations in exchange rates affecting the Optional Currencies in which any such non-U.S. dollar loans and Letters of Credit are denominated.  The Borrowers shall promptly make payments in accordance with the provisions of Section 2.05(c) and (d) hereof, to the extent necessary as a result of any such recalculation.

 

2.06        Termination or Reduction of Commitments.

 

(a)           The Domestic Borrowers may, upon irrevocable notice from the Parent to the Administrative Agent (except as set forth below), terminate the Domestic Total Commitments, the Domestic Letter of Credit Sublimit or the Domestic Swing Line Sublimit or from time to time permanently reduce in part the Domestic Total Commitments, the Domestic Letter of Credit Sublimit or the Domestic Swing Line Sublimit; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. three (3) Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof and (iii) the Domestic Borrowers shall not reduce (A) the Domestic Total Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Domestic Total Outstandings would exceed the Domestic Total Commitments, (B) the Domestic Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of Domestic L/C Obligations (other than Domestic L/C Borrowings) not fully Cash Collateralized hereunder would exceed the Domestic Letter of Credit Sublimit, and (C) the Domestic Swing Line Sublimit if, after giving effect thereto, and to any concurrent payments hereunder, the Outstanding Amount of Swing Line Loans made to the Domestic Borrowers hereunder would exceed the Domestic Swing Line Sublimit.  Notwithstanding anything to the contrary contained herein, the Domestic Borrowers may rescind any notice of reduction or termination of the Domestic Commitments provided pursuant to this Section 2.06(a), if such termination or reduction was to have been made with the proceeds of a refinancing of all part of the Committed Loans hereunder or from the proceeds of an asset sale, which refinancing or asset sale shall not have been consummated or shall otherwise have been delayed.

 

(b)           The Canadian Borrower may, upon irrevocable notice from the Canadian Borrower to the Canadian Agent (except as set forth below), terminate the Canadian Total Commitments, the Canadian Letter of Credit Sublimit or the Canadian Swing Line Sublimit or from time to time permanently reduce in part the Canadian Total Commitments, the Canadian Letter of Credit Sublimit or the Canadian Swing Line Sublimit; provided that (i) any such notice shall be received by the Canadian Agent not later than 11:00 a.m. (Toronto time) three (3) Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $2,000,000 or any whole multiple of $1,000,000 in excess thereof and (iii) the Canadian Borrower shall not reduce (A) the Canadian Total Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Canadian Outstandings would exceed the Canadian Total Commitments, (B) the Canadian Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of Canadian L/C Obligations (other than Canadian L/C Borrowings) not fully Cash Collateralized hereunder would exceed the Canadian Letter of Credit Sublimit, and (C) the Canadian Swing Line Sublimit if, after giving effect thereto, and to any concurrent payments hereunder, the Outstanding Amount of Swing Line Loans made to the Canadian Borrower hereunder would exceed the Canadian Swing Line Sublimit.  Notwithstanding anything to the contrary contained herein, the Canadian Borrower may rescind any notice of reduction or termination of the Canadian Commitments provided pursuant to this Section 2.06(b), if such termination or reduction was to have been made with the proceeds of a refinancing of all part of the Committed Loans hereunder or from the proceeds of an asset sale, which refinancing or asset sale shall not have been consummated or shall otherwise have been delayed.

 

(c)           If, after giving effect to any reduction of the Domestic Total Commitments, the Domestic Letter of Credit Sublimit or the Domestic Swing Line Sublimit exceeds the amount of the

 

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Domestic Total Commitments, such Domestic Letter of Credit Sublimit or Domestic Swing Line Sublimit shall be automatically reduced by the amount of such excess.

 

(d)           If, after giving effect to any reduction of the Canadian Total Commitments, the Canadian Letter of Credit Sublimit or the Canadian Swing Line Sublimit exceeds the amount of the Canadian Total Commitments, such Canadian Letter of Credit Sublimit or Canadian Swing Line Sublimit shall be automatically reduced by the amount of such excess.

 

(e)           The Canadian Total Commitments, the Canadian Letter of Credit Sublimit or the Canadian Swing Line Sublimit shall be automatically terminated without any further action of any Loan Party or any Credit Party upon the termination of the Domestic Commitments pursuant to Section 2.06(a) hereof.

 

(f)            The Administrative Agent or the Canadian Agent, as applicable, will promptly notify the Domestic Lenders or the Canadian Lenders, as applicable, of any termination or reduction made pursuant to this Section 2.06.  Upon any reduction of the Domestic Total Commitments, the Domestic Commitment of each Domestic Lender shall be reduced by such Domestic Lender’s Applicable Percentage of such reduction amount.  Upon any reduction of the Canadian Total Commitments, the Canadian Commitment of each Canadian Lender shall be reduced by such Canadian Lender’s Applicable Percentage of such reduction amount.  All fees (including, without limitation, Commitment Fees and Letter of Credit Fees) and interest in respect of the Aggregate Total Commitments accrued until the effective date of any termination of the Aggregate Total Commitments shall be paid on the effective date of such termination.

 

2.07        Repayment of Loans.

 

(a)           The Domestic Borrowers shall repay to the Administrative Agent, for the account of the Domestic Lenders on the Termination Date the aggregate principal amount of Obligations outstanding on such date.

 

(b)           The Canadian Borrower shall repay to the Canadian Agent, for the account of the Canadian Lenders, on the Termination Date the aggregate principal amount of Canadian Liabilities outstanding on such date.

 

(c)           The Foreign Borrower shall repay to the Administrative Agent and the Canadian Agent, as applicable, on the Termination Date the aggregate principal amount of Foreign Liabilities outstanding on such date.

 

2.08        Interest.

 

(a)           Subject to the provisions of Section 2.08(b) below, (i) each LIBOR Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable Margin; (ii) each BA Equivalent Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the BA Rate for such Interest Period plus the Applicable Margin; (iii) each Domestic Prime Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the U.S. Prime Rate plus the Applicable Margin; (iv) each Canadian Prime Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Canadian Prime Rate plus the Applicable Margin; (v) each US Index Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the US Index Rate plus the Applicable Margin; 

 

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(vi) each Euribor Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Euribor Rate plus the Applicable Margin; (vii) each Swing Line Loan made to the Domestic Borrowers or the Foreign Borrower (to the extent based on Domestic Availability) shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the U.S. Prime Rate plus the Applicable Margin; and (viii) each Swing Line Loan made to the Canadian Borrower or the Foreign Borrower (to the extent based on Canadian Availability) shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Canadian Prime Rate plus the Applicable Margin.

 

(b)           (i)            If any amount payable under any Loan Document is not paid when due (after giving effect to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(ii)           If any other Event of Default exists, then the Administrative Agent may, and upon the request of the Required Lenders shall, notify the Parent that all outstanding Obligations shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate and thereafter such Loans and L/C Obligations shall bear interest at the Default Rate to the fullest extent permitted by applicable Laws for so long as such or any other Event of Default is continuing.

 

(iii)          Accrued and unpaid interest on past due amounts (including interest on past due interest to the fullest extent permitted by applicable Laws) shall be due and payable upon demand.

 

(c)           Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

2.09        Fees.  In addition to certain fees described in subsections (i) and (j) of Section 2.03:

 

(a)           Commitment Fee.  The Borrowers shall pay to the Administrative Agent, for the account of each Lender (other than a Defaulting Lender) in accordance with its Applicable Percentage, a commitment fee (the “Commitment Fee”) equal to 0.50% multiplied by the actual daily amount by which the Aggregate Total Commitments exceed the Total Outstandings (excluding the principal amount of Swing Line Loans made to the Borrowers).  The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the first calendar day of each April, July, October and January, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period.  The commitment fee shall be calculated quarterly in arrears.

 

(b)           Other Fees.  The Borrowers shall pay to the Agents and the Arrangers for their own respective accounts fees in the amounts and at the times specified in the Fee Letter.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

2.10        Computation of Interest and Fees.

 

(a)           All computations of interest for Prime Rate Loans and BA Equivalent Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a

 

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365-day year).  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day.  Each determination by the Administrative Agent or the Canadian Agent, as applicable, of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

(b)           For the purposes of this Agreement and the Interest Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by three hundred and sixty (360) or the number of days in such period, as applicable.

 

(c)           If any provision of this Agreement or of any of the other Loan Documents would obligate a Loan Party to make any payment of interest or other amount payable to any of the Administrative Agent, the Canadian Agent or any Lender under this Agreement or any other Loan Document in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by any of the Administrative Agent, the Canadian Agent or any Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provisions, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by the Administrative Agent, the Canadian Agent or any Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (1) firstly, by reducing the amount or rate of interest required to be paid to the Administrative Agent, the Canadian Agent or any Lender under this subsection 4.1, and (2) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the Administrative Agent, the Canadian Agent or any Lender which would constitute “interest” for purposes of Section 347 of the Criminal Code (Canada).  Notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if the Administrative Agent, the Canadian Agent or any Lender shall have received an amount in excess of the maximum permitted by that Section of the Criminal Code (Canada), the Loan Parties shall be entitled, by notice in writing to the applicable Administrative Agent, Canadian Agent or Lender, to obtain reimbursement from such party in an amount equal to such excess and, pending such reimbursement, such amount shall be deemed to be an amount payable by the applicable Administrative Agent, Canadian Agent or Lender to the Canadian Borrower.  Any amount or rate of interest referred to in this subsection 4.1(c) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the applicable loan remains outstanding with the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall be included in the calculation of such effective rate and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Canadian Agent shall be conclusive for the purposes of such determination.

 

(d)           All calculations of interest payable by the Loan Parties under this Agreement or any other Loan Document are to be made on the basis of the nominal interest rate described herein and therein and not on the basis of effective yearly rates or on any other basis which gives effect to the principle of deemed reinvestment of interest which principle does not apply to any interest calculated under this Agreement or any Loan Document.  The parties hereto acknowledge that there is a material difference between the stated nominal interest rates and the effective yearly rates of interest and that they are capable of making the calculations required to determine such effective yearly rates of interest.

 

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2.11        Evidence of Debt.

 

(a)           The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by the Administrative Agent (with respect to Domestic Credit Extensions) and the Canadian Agent (with respect to Canadian Credit Extensions) (each, the “Loan Account”) in the ordinary course of business.  In addition, each Lender may record in such Lender’s internal records, an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of any such Loan, and each payment of interest, fees and other amounts due in connection with the Obligations due to such Lender.  The accounts or records maintained by the Administrative Agent, the Canadian Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent or the Canadian Agent, as applicable, in respect of such matters, the accounts and records of the Administrative Agent or the Canadian Agent, as applicable, shall control in the absence of manifest error.  Upon the request of any Domestic Lender made through the Administrative Agent (who shall notify the Domestic Borrowers and the Foreign Borrower, if applicable), or any Canadian Lender through the Canadian Agent (who shall notify the Canadian Borrower and the Foreign Borrower, if applicable), the applicable Borrowers shall execute and deliver to such Lender (through the Administrative Agent or the Canadian Agent, as applicable) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.  Any failure to so attach or endorse, or any error in doing so, shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations or the Canadian Liabilities, or the Foreign Liabilities, as applicable.  Upon receipt of an affidavit and indemnity of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the applicable Borrowers will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor (subject to adjustment in the case of any assignments of such Lender’s Commitments).

 

(b)           In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent or, as applicable, the Canadian Agent, shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent or the Canadian Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent or the Canadian Agent, as applicable, shall control in the absence of manifest error.

 

2.12        Payments Generally; Administrative Agent’s Clawback.

 

(a)           General.  All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made, as applicable, to the Administrative Agent, for the account of the respective Domestic Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and to the Canadian Agent, for the account of the respective Canadian Lenders to which such payment is owed, at the Canadian Agent’s Office, in each case, in immediately available funds not later than 2:00 p.m. on the date specified herein.  The Administrative Agent or the Canadian Agent, as applicable, will promptly distribute to each Domestic Lender or Canadian Lender, as applicable, its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office in accordance with the provisions of Section 2.14.  All payments received by the Administrative Agent or the Canadian Agent after 2:00 p.m. shall, at the option of the Administrative Agent or the

 

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Canadian Agent, as applicable, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment (other than with respect to payment of a LIBOR Rate Loan or a BA Equivalent Loan or a Euribor Rate Loan) to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(b)           Currency.  Loan shall be funded and payments shall be made in respect of Optional Currencies in the applicable Optional Currency.  Letters of Credit denominated in an Optional Currency shall be reimbursed by the applicable Borrower in that Optional Currency.  All obligations of the Lenders with respect to Letters of Credit will be immediately due and payable in Dollars, provided that the amount of any amounts denominated in an Optional Currency will be redenominated into Dollars.

 

(c)           (i)            Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent or the Canadian Agent, as applicable, shall have received notice from a Lender prior to the proposed date of any Committed Borrowing of LIBOR Rate Loans or BA Equivalent Loans, as applicable (or in the case of any Committed Borrowing of Prime Rate Loans, prior to 1:00 p.m. on the date of such Committed Borrowing) that such Lender will not make available to the Administrative Agent or the Canadian Agent, as applicable, such Lender’s share of such Committed Borrowing, the Administrative Agent or the Canadian Agent, as applicable, may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or in the case of a Committed Borrowing of Prime Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the applicable Borrowers a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent or the Canadian Agent, as applicable, then the applicable Lender and the Domestic Borrowers or the Foreign Borrower, as applicable, severally agree with respect to Domestic Committed Loans, and the Canadian Borrower or the Foreign Borrower, as applicable, severally agrees with respect to Canadian Committed Loans, to pay to the Administrative Agent or the Canadian Agent, as applicable, forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to such Borrowers to but excluding the date of payment to the Administrative Agent or the Canadian Agent, as applicable, at (A) in the case of a payment to be made by a Domestic Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, (B) in the case of a payment to be made by a Canadian Lender, the greater of the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars and the Federal Funds Rate with respect to payments due to the Canadian Agent in Dollars, and a rate determined by the Canadian Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Canadian Agent in connection with the foregoing, (C) in the case of a payment to be made by the Domestic Borrowers or the Foreign Borrower, as applicable, the interest rate applicable to Domestic Prime Rate Loans and (D) in the case of a payment to be made by the Canadian Borrower or the Foreign Borrower, as applicable, the interest rate applicable to Canadian Prime Rate Loans.  If the applicable  Borrowers and such Lender shall pay such interest to the Administrative Agent or the Canadian Agent, as applicable, for the same or an overlapping period, the Administrative Agent or the Canadian Agent, as applicable, shall promptly remit to such Borrowers the amount of such interest paid by such Borrowers for such period.  If such Lender pays its share of the applicable Committed Borrowing to the Administrative Agent or the Canadian Agent, as applicable, then the amount so paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing.  Any payment by the Borrowers shall be without prejudice to any claim the Borrowers may have against a Lender that shall have failed to make such payment to the Administrative Agent or the Canadian Agent, as applicable.

 

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(ii)           Payments by Borrowers; Presumptions by Administrative Agent and Canadian Agent.  Unless the Administrative Agent or the Canadian Agent, as applicable, shall have received notice from the Parent or the Canadian Borrower or the Foreign Borrower, as applicable, as applicable, prior to the time at which any payment is due to the Administrative Agent or the Canadian Agent, as applicable, for the account of the Lenders or the L/C Issuer hereunder that the Borrowers will not make such payment, the Administrative Agent or the Canadian Agent, as applicable, may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due.  In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent or the Canadian Agent, as applicable, forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to, as applicable, the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, or the Canadian Agent, the greater of the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars and the Federal Funds Rate with respect to payments due to the Canadian Agent in Dollars, and a rate determined by the Canadian Agent in accordance with banking rules on interbank compensation.

 

A notice of the Administrative Agent or the Canadian Agent, as applicable, to any Lender or the Parent with respect to any amount owing under this Section 2.12(c) shall be conclusive, absent manifest error.

 

(d)           Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent or the Canadian Agent, as applicable, funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrowers by the Administrative Agent or the Canadian Agent, as applicable, because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof (subject to the provisions of the last paragraph of Section 4.02 hereof), the Administrative Agent or the Canadian Agent, as applicable, shall promptly return such funds (in like funds as received from such Lender) to such Lender, without interest.

 

(e)           Obligations of Lenders Several.  The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments hereunder are several and not joint.  The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment hereunder on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment hereunder.

 

(f)            Funding Source.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

 

2.13        Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro  rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) if a Domestic Lender, notify the Administrative Agent of such fact, and if a Canadian Lender, notify the Canadian

 

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Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and Swing Line Loans of the other applicable Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably, provided that:

 

(a)           if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

 

(b)           the provisions of this Section shall not be construed to apply to (x) any payment made by any Loan Party pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Borrowers or any Subsidiary thereof (as to which the provisions of this Section shall apply).

 

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

 

2.14        Settlement Amongst Lenders.

 

(a)           The amount of each Lender’s Applicable Percentage of outstanding Loans (including outstanding Swing Line Loans) shall be computed weekly (or more frequently in the Administrative Agent’s discretion) and shall be adjusted upward or downward based on all Loans (including Swing Line Loans) and repayments of Loans (including Swing Line Loans) received by the Administrative Agent (with respect to Domestic Loans) or the Canadian Agent (with respect to Canadian Loans) as of 3:00 p.m. on the first Business Day (such date, the “Settlement Date”) following the end of the period specified by the Administrative Agent or the Canadian Agent, as applicable.

 

(b)           The Administrative Agent shall deliver to each of the Domestic Lenders and the Canadian Agent shall deliver to the Canadian Lenders, promptly after a Settlement Date a summary statement of the amount of outstanding Committed Loans and Swing Line Loans for the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the Administrative Agent or the Canadian Agent, as applicable, shall transfer to each Domestic Lender or Canadian Lender, as applicable, its Applicable Percentage of repayments, and (ii) each Lender shall transfer to the Administrative Agent or the Canadian Agent, as applicable (as provided below) or the Administrative Agent or the Canadian Agent, as applicable, shall transfer to each Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Committed Loans made by each Lender shall be equal to such Lender’s Applicable Percentage of all Committed Loans outstanding as of such Settlement Date.  If the summary statement requires transfers to be made to the Administrative Agent or the Canadian Agent, as applicable, by the Lenders and is received prior to 1:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on the next Business Day.  The obligation of each Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent or the Canadian Agent, as applicable.  If and to the extent any Domestic Lender shall not have so made its transfer to the Administrative Agent, such Domestic Lender agrees to pay to the Administrative Agent forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent equal to the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance

 

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with banking industry rules on interbank compensation plus any administrative, processing, or similar fees customarily charged by the Administrative Agent in connection with the foregoing.  If and to the extent any Canadian Lender shall not have so made its transfer to the Canadian Agent, such Canadian Lender agrees to pay to the Canadian Agent forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Canadian Agent equal to the greater of the greater of the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars and the Federal Funds Rate with respect to payments due to the Canadian Agent in Dollars, and a rate determined by the Canadian Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Canadian Agent in connection with the foregoing.

 

2.15        Increase in Commitments.

 

(a)           Request for Increase.  Provided no Default then exists or would arise therefrom, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Parent may request (i) an increase in the Domestic Total Commitments in an aggregate amount not exceeding $200,000,000 in the aggregate for all such increases, and (ii) an increase in the Canadian Total Commitments by an amount not to exceed $25,000,000, either in conjunction with an increase in the Domestic Total Commitments or as an increase in the Canadian Total Commitments only (each such increase, a “Commitment Increase”); provided that any such request for a Commitment Increase shall be in a minimum amount of $25,000,000 (or, in the case of the Canadian Facility, $10,000,000).  At the time of sending such request for a Commitment Increase, the Parent (in consultation with the Administrative Agent) shall specify the time period within which each applicable Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders).

 

(b)           Lender Elections to Increase.  Each Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its applicable Commitment and, if so, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested Commitment Increase (each Lender agreeing to increase its Commitment, an “Existing Increasing Lender”).  Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.

 

(c)           Notification by Administrative Agent; Additional Commitment Lenders.  The Administrative Agent shall notify the Parent and each applicable Lender of the Lenders’ responses to each request made hereunder for a Commitment Increase.  To achieve the full amount of a requested Commitment Increase, to the extent that the existing applicable Lenders decline to increase their Commitments, or decline to increase their Commitments to the amount requested by the Parent, the Parent may, at its option, obtain other Persons which shall be Eligible Assignees to issue Commitments in the amount of the requested Commitment Increase or request the Administrative Agent or any of its Affiliates to, and the Administrative Agent and such Affiliates shall, use its reasonable efforts to arrange for other Eligible Assignees to become a Domestic Lender or Canadian Lender, as applicable, hereunder and to issue commitments in an amount equal to the amount of the increase in the Domestic Total Commitments and Canadian Total Commitments requested by the Parent and not accepted by the existing applicable Lenders (and the Parent may also invite additional Eligible Assignees to become Lenders) (each such Eligible Assignee issuing a commitment and becoming a Lender, an “Additional Commitment Lender”), provided, however, that without the consent of the Administrative Agent, at no time shall the Commitment of any Additional Commitment Lender be less than $10,000,000.

 

(d)           Effective Date and Allocations.  If the Domestic Total Commitments or the Canadian Total Commitments are increased in accordance with this Section 2.15, the Administrative

 

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Agent, in consultation with the Parent, shall determine the effective date (the “Increase Effective Date”) and the final allocation of such Commitment Increase.  The Administrative Agent shall promptly notify the Parent and the Lenders of the final allocation of such Commitment Increase and the Increase Effective Date and on the Increase Effective Date (i) the Domestic Total Commitments and Canadian Total Commitments, if applicable, and the Aggregate Total Commitments under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Commitment Increase, and (ii) Schedule 2.01 shall be deemed modified, without further action, to reflect the revised Commitments and Applicable Percentages of the Lenders.

 

(e)           Conditions to Effectiveness of Increase.  As a condition precedent to such increase, (i) the Parent shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (B) in the case of the Borrowers, certifying that, before and after giving effect to such increase, (1) the representations and warranties contained in Article V and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.15, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, (ii) the Borrowers, the Administrative Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Administrative Agent shall reasonably require; (iii) the Borrowers shall have paid such fees and other compensation to the Additional Commitment Lenders and to any existing Lender increasing its Commitment as the Parent and such Additional Commitment Lenders shall agree; (iv) if the Parent has requested the Administrative Agent or any of its Affiliates to seek additional Lenders pursuant to Section 2.15(c), the Borrowers shall have paid such arrangement fees to the Administrative Agent and such Affiliates as the Parent and the Administrative Agent may agree; (v) the Borrowers shall deliver to the Administrative Agent and the Lenders an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrowers reasonably satisfactory to the Administrative Agent and dated such date; (vi) the Borrowers and the Additional Commitment Lender shall have delivered such other instruments, documents and agreements evidencing the Commitment Increase as the Administrative Agent may reasonably have requested; and (vii) no Default exists.  The Borrowers shall prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Commitments under this Section.

 

(f)            No Obligation to Engage Administrative Agent.  The Parent shall not be obligated to engage the Administrative Agent or any of its Affiliates to arrange any Commitment Increase, however, in no event shall any other person be so engaged by any Loan Party.

 

(g)           Conflicting Provisions.  This Section 2.15 shall supersede any provisions in Sections 2.13 or 10.01 to the contrary.

 

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ARTICLE III
 TAXES, YIELD PROTECTION AND ILLEGALITY;
 APPOINTMENT OF PARENT

 

3.01        Taxes.

 

(a)           Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Loan Parties shall be required by Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Agents, Lenders or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Loan Parties shall make such deductions and (iii) the Loan Parties shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Law.

 

(b)           Payment of Other Taxes by the Borrowers.  Without limiting or duplicating the provisions of subsection (a) above, the Loan Parties shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Law.

 

(c)           Indemnification by the Loan Parties.  The Domestic Loan Parties and the Foreign Borrower (to the extent applicable) shall indemnify each Credit Party, and the Canadian Loan Parties and the Foreign Borrower (to the extent applicable) shall indemnify each Canadian Credit Party, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) paid by such Credit Party, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Parent by a Lender or the L/C Issuer (with a copy to the Administrative Agent or the Canadian Agent, as applicable), or by the Administrative Agent on its own behalf or on behalf of a Domestic Credit Party, or by the Canadian Agent on its own behalf or on behalf of a Canadian Credit Party, shall be conclusive absent manifest error.

 

(d)           Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Loan Parties to a Governmental Authority, the Parent shall deliver to the Administrative Agent or the Canadian Borrower shall deliver to the Canadian Agent, as applicable, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent or the Canadian Agent, as applicable.

 

(e)           Status of Lenders.  Any Lender that is entitled to an exemption from, or reduction of, withholding tax under the law of the jurisdiction in which any Loan Party is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Parent (with a copy to the Administrative Agent) or the Canadian Borrower (with a copy to the Canadian Agent), as applicable, at the time or times prescribed by applicable Law or reasonably requested by the Parent, the Administrative Agent, the Canadian Borrower or the Canadian Agent, such properly completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding.  Such delivery shall be required on the Closing Date and on or before the date such documentation expires or becomes obsolete or after the occurrence of any event requiring a change in the documentation most recently delivered.  In addition, any Lender, if requested by the Parent, the Administrative Agent, the Canadian Borrower or the Canadian Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Parent, the Administrative Agent, the Canadian Borrower or the Canadian Agent, as will enable the Parent, the Administrative Agent, the Canadian Borrower or the Canadian Agent, to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

 

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Without limiting the generality of the foregoing, in the event that any Loan Party is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Parent and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Parent or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

 

(i)            duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

 

(ii)           duly completed copies of Internal Revenue Service Form W-8ECI,

 

(iii)          in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Domestic Borrowers within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” related to the Domestic Borrowers, as described in section 881(c)(3)(C) of the Code and (y) duly completed copies of  Internal Revenue Service Form W-8BEN, or

 

(iv)          any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable Law to permit the Parent to determine the withholding or deduction required to be made.

 

(f)            Treatment of Certain Refunds.  If any Credit Party determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by any Loan Party or with respect to which the Loan Parties have paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan Parties an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 3.01 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the applicable Credit Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Loan Parties, upon the request of the Administrative Agent or the Canadian Agent, as applicable, such Lender or the L/C Issuer, agree to repay the amount paid over to the Loan Parties (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the applicable Credit Party in the event such Credit Party is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require any Credit Party to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Loan Parties or any other Person.

 

3.02        Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBOR Rate Loans, BA Equivalent Loans or Euribor Rate Loans, as applicable, or to determine or charge interest rates based upon the LIBOR Rate, the Euribor Rate or the BA Rate, as applicable, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Parent through the Administrative Agent, any obligation of such Lender to make or continue LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans, as applicable, or to convert Prime Rate Loans to LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans, as applicable, shall be suspended until such Lender notifies the Administrative Agent and the Parent that the circumstances giving rise to such determination no longer exist.  Upon receipt of such

 

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notice, the applicable Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all LIBOR Rate Loans, Euribor Rate Loans and BA Equivalent Loans of such Lender to Prime Rate Loans either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Rate Loans, Euribor Rate Loans, or BA Equivalent Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans.  Upon any such prepayment or conversion, the applicable Borrowers shall also pay accrued interest on the amount so prepaid or converted.

 

3.03        Inability to Determine Rates.  If the Required Lenders determine that for any reason in connection with any request for a LIBOR Rate Loan, Euribor Rate Loan or a BA Equivalent Loan, or a conversion to or continuation thereof that (a) with respect to LIBOR Rate Loans or Euribor Rate Loans  only, Dollar deposits are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such LIBOR Rate Loan or Euribor Rate Loan, (b) with respect to BA Equivalent Loans only, there is no market for bankers acceptances, (c) adequate and reasonable means do not exist for determining the LIBOR Rate, Euribor Rate Loan or the BA Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan, or (d) the LIBOR Rate, Euribor Rate or the BA Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Agents will promptly so notify the Borrowers and each Lender.  Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans or of the Canadian Lenders to make or maintain BA Equivalent Loans or Euribor Rate Loans, as applicable, shall be suspended until the Administrative Agent or the Canadian Agent, as applicable (but in either case upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Parent or the Foreign Borrower may revoke any pending request for a Committed Borrowing of, conversion to or continuation of LIBOR Rate Loans made to a Domestic Borrower or the Foreign Borrower (if based on Domestic Availability) or the Canadian Borrower or the Foreign Borrower may revoke any pending request for a Committed Borrowing of, conversion to or continuation of LIBOR Rate Loans, Euribor Rate Loans or BA Equivalent Loans, as applicable, made to the Canadian Borrower or the Foreign Borrower (based on Canadian Availability), as applicable, or, failing that, will be deemed to have converted such request into either a request for a Domestic Committed Borrowing of Domestic Prime Rate Loans in the amount specified therein, or a request for a Canadian Committed Borrowing of Canadian Prime Rate Loans in the amount specified therein, as applicable.

 

3.04        Increased Costs; Reserves on LIBOR Rate Loans.

 

(a)           Increased Costs Generally.  If any Change in Law shall:

 

(i)            impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBOR Rate) or the L/C Issuer;

 

(ii)           subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer); or

 

(iii)          impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or LIBOR Rate Loans, Euribor

 

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Rate Loans or BA Equivalent Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Loan Parties will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)           Capital Requirements.  If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has had, or would have, the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Loan Parties will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company, as the case may be, for any such reduction suffered.

 

(c)           Certificates for Reimbursement.  A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Parent shall be conclusive absent manifest error.  The applicable Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

(d)           Delay in Requests.  Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section 3.04 shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the applicable Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section 3.04 for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Parent of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine (9) month period referred to above shall be extended to include the period of retroactive effect thereof).

 

3.05        Compensation for Losses.  Upon demand of any Lender (with a copy to the Agents) from time to time, each Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)           any continuation, conversion, payment or prepayment of any LIBOR Rate Loan, Euribor Rate Loan, or BA Equivalent Loan made to such Borrower on a day other than the last

 

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day of the Interest Period for such LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)           any failure by such Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan on the date or in the amount notified by the applicable Borrower; or

 

(c)           any assignment of a LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan made to such Borrower on a day other than the last day of the Interest Period therefor as a result of a request by such Borrower pursuant to Section 10.13;

 

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.  The applicable Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by a Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan made by it at the LIBOR Rate, Euribor Rate or BA Rate for such Loan by a matching deposit or other borrowing for a comparable amount and for a comparable period, whether or not such LIBOR Rate Loan, Euribor Rate Loan or BA Equivalent Loan was in fact so funded.

 

3.06        Mitigation Obligations; Replacement of Lenders.

 

(a)           Designation of a Different Lending Office.  If any Lender or L/C Issuer requests compensation under Section 3.04, or the Borrowers are required to pay any additional amount to any Lender or L/C Issuer or any Governmental Authority for the account of any Lender or L/C Issuer pursuant to Section 3.01, or if any Lender or L/C Issuer gives a notice pursuant to Section 3.02, then such Lender or L/C Issuer shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or Section 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender or L/C Issuer to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or L/C Issuer.  The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender or L/C Issuer in connection with any such designation or assignment.

 

(b)           Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrowers may replace such Lender in accordance with Section 10.13.

 

3.07        Survival.  All of the obligations of each Loan Party under this Article III shall survive termination of the Aggregate Total Commitments and Payment in Full of all Obligations hereunder.

 

3.08        Designation of Parent as Borrowers’ Agent.

 

(a)           Each Domestic Borrower hereby irrevocably designates and appoints the Parent as such Domestic Borrower’s agent to obtain Credit Extensions, the proceeds of which shall be available to each Domestic Borrower for such uses as are permitted under this Agreement.  As the disclosed

 

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principal for its agent, each Domestic Borrower shall be obligated to each Credit Party on account of Credit Extensions so made as if made directly by the applicable Credit Party to such Domestic Borrower, notwithstanding the manner by which such Credit Extensions are recorded on the books and records of the Parent and of any other Domestic Borrower.  In addition, each Loan Party hereby irrevocably designates and appoints the Parent as such Loan Party’s agent to represent such Loan Party in all respects under this Agreement and the other Loan Documents.  The Parent shall act as a conduit for each Borrower (including itself, as a “Borrower”) on whose behalf the Parent has requested a Credit Extension.  Neither the Administrative Agent nor any other Credit Party shall have any obligation to see to the application of such proceeds therefrom.

 

(b)           Each Borrower recognizes that credit available to it hereunder is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor is its joining in the applicable credit facility contemplated herein with all other Borrowers.  Consequently, subject to the terms and conditions of this Agreement, each Borrower hereby assumes, guarantees payment and performance of, and agrees to discharge all Obligations of each of the other Borrowers; provided that, notwithstanding anything herein or in any of the other Loan Documents to the contrary, the Canadian Loan Parties shall be liable only for the Canadian Liabilities and the Foreign Borrower shall be liable only for the Foreign Liabilities.

 

ARTICLE IV
 CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01        Conditions of Initial Credit Extension.  The obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

 

(a)           The Administrative Agent’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif “ via e-mail) (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party or the Lenders, as applicable, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent:

 

(i)            executed counterparts of this Agreement sufficient in number for distribution to the Administrative Agent, the Canadian Agent, each Lender and the Parent;

 

(ii)           a Note executed by the Borrowers in favor of each Lender requesting a Note;

 

(iii)          such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing (A) the authority of each Loan Party to enter into this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party and (B) the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party;

 

(iv)          copies of each Loan Party’s Organization Documents and a certificate of good standing (where applicable, or such other customary functionally equivalent certificates, to the extent available in the applicable jurisdiction) from such Loan Party’s

 

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jurisdiction of organization and from each jurisdiction where such Loan Party’s ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to so qualify in such jurisdiction would not reasonably be expected to have a Material Adverse Effect;

 

(v)           a favorable opinion of (x) Alston & Bird LLP, counsel to the Domestic Loan Parties, addressed to the Administrative Agent and each Domestic Lender, as to such matters concerning the Domestic Loan Parties and the Loan Documents as the Administrative Agent may reasonably request; (y) Blakes, Cassels & Graydon LLP, and local Canadian counsel, counsel to the Canadian Loan Parties, addressed to the Canadian Agent and each Canadian Lender, as to such matters concerning the Canadian Loan Parties and the Loan Documents as the Canadian Agent may reasonably request; and (z) Eversheds, counsel to the Foreign Borrower, addressed to the Administrative Agent and each Domestic Lender and to the Canadian Agent and each Canadian Lender, as to such matters concerning the Foreign Borrower and the Loan Documents as the Administrative Agent and the Canadian Agent may reasonably request;

 

(vi)          a certificate signed by a Responsible Officer of the Parent certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or would be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect, (C) to the Solvency of the Loan Parties as of the Closing Date after giving effect to the transactions contemplated hereby, and (D) either that (1) no consents, licenses or approvals are required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, or (2) that all such consents, licenses and approvals have been obtained and are in full force and effect;

 

(vii)         a payoff letter from the agent for the lenders under the Existing Credit Agreement satisfactory in form and substance to the Administrative Agent evidencing that the Existing Credit Agreement has been or concurrently with the Closing Date is being terminated, all obligations thereunder are being paid in full, and all Liens securing obligations under the Existing Credit Agreement have been or concurrently with the Closing Date are being released;

 

(viii)        the Security Documents and certificates evidencing any stock being pledged thereunder, together with undated stock powers executed in blank, each duly executed by the applicable Loan Parties and the Loan Parties shall have used commercially reasonable efforts to obtain any Collateral Access Agreements reasonably requested by the Agents (failing which the Administrative Agent may establish Reserves against the Borrowing Base);

 

(ix)           all other Loan Documents, each duly executed by the applicable Loan Parties;

 

(x)            results of searches or other evidence reasonably satisfactory to the Agents (in each case dated as of a date reasonably satisfactory to the Agents) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Encumbrances and Liens for which termination statements and releases, satisfactions and releases or subordination agreements satisfactory to the Agents are being tendered concurrently with such extension of credit or other arrangements satisfactory to the

 

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Agents for the delivery of such termination statements and releases, satisfactions and discharges have been made;

 

(xi)           (A)          all documents and instruments, including Uniform Commercial Code and PPSA financing statements, required by law or reasonably requested by the Agents to be filed, registered or recorded to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Agents, (B) the Credit Card Notifications, and Blocked Account Agreements required pursuant to Section 6.12 hereof shall have been obtained, and (C) control agreements with respect to the Loan Parties’ securities and investment accounts have been obtained;

 

(xii)          satisfactory evidence of insurance to be maintained by the Loan Parties with respect to the Collateral, in each case reasonably satisfactory to the Agents and customary for transactions of this type; and

 

(xiii)         such other assurances, certificates, documents, consents or opinions as the Agents reasonably may require.

 

(b)           After giving effect to (i) the first funding under the Loans, (ii) any charges to the Loan Account made in connection with the establishment of the credit facility contemplated hereby and (iii) all Letters of Credit to be issued at, or immediately subsequent to, such establishment, Combined Availability shall be not less than $200,000,000.

 

(c)           The Administrative Agent shall have received a Borrowing Base Certificate with respect to the Domestic Borrowing Base and the Canadian Borrowing Base dated the Closing Date, relating to the month ended on September 30, 2010, and executed by a Responsible Officer of the Parent and by the Canadian Borrower.

 

(d)           The Administrative Agent shall be reasonably satisfied that any financial statements delivered to it and the Lenders fairly present the business and financial condition of the Loan Parties and that there has not been, nor has an event or condition occurred that would reasonably be expected, either individually or in the aggregate, to have, a Material Adverse Effect since June 30, 2010.

 

(e)           The Administrative Agent shall have received and be satisfied with financial projections for the Parent and its Subsidiaries (x) for the consecutive monthly periods following the Closing Date ending September 30, 2011 and (y) on an annual basis, for each Fiscal Year thereafter through fiscal year 2014, including, in each case, a consolidated income statement, balance sheet, statement of cash flow and Availability model (which Availability model shall be prepared on a four week-accounting period basis through July 2011).

 

(f)            There shall not be pending any litigation or other proceeding, the result of which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(g)           All governmental consents and approvals, and all third party consents required for the Loan Parties to consummate the financing, shall have been obtained by the Loan Parties other than those consents and approvals that, if not obtained, would not be reasonably expected, either individually or in the aggregate, to have a Material Adverse Effect.

 

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(h)           The Lenders shall have completed a due diligence investigation of the Borrowers and their Subsidiaries in scope, and with results, satisfactory to the Lenders (including, without limitation a satisfactory commercial finance examination and inventory appraisal) and shall have been given such access to the management, records, books of account, contracts and properties of the Borrowers and their Subsidiaries and shall have received such financial, business and other information regarding each of the foregoing persons and businesses as they shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, collective bargaining agreements and other arrangements with employees, the annual (or other audited) financial statements of Sally Investment Holdings LLC and its Subsidiaries for the most recently ended Fiscal Year and interim financial statements of Sally Investment Holdings LLC and its Subsidiaries dated the end of the most recent Fiscal Quarter for which financial statements are available.  All of the Information shall be complete and correct in all material respects;  and no changes or developments shall have occurred, and no new or additional information, shall have been received or discovered by the Agents or the Lenders regarding Sally Investment Holdings LLC or its Subsidiaries or the transactions contemplated hereby after September 23, 2010 that (A) either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or (B) purports to adversely affect the transactions contemplated hereby, and nothing shall have come to the attention of the Lenders to lead them to believe that any information furnished to the Administrative Agent prior to the Closing Date was or has become misleading, incorrect or incomplete in any material respect or (y) the transactions contemplated hereby will have a Material Adverse Effect.

 

(i)            The Administrative Agent and the other parties to the Intercreditor Agreement shall have entered into an agreement ratifying and confirming the Intercreditor Agreement.

 

(j)            The consummation of the transactions contemplated hereby shall not violate any Law or any Organization Document.

 

(k)           All fees required to be paid to the Agents or the Arranger on or before the Closing Date shall have been paid in full, and all fees required to be paid to the Lenders on or before the Closing Date shall have been paid in full.

 

(l)            The Borrowers shall have paid all fees, charges and disbursements of counsel to the Administrative Agent and the Canadian Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Agents).

 

(m)          The Administrative Agent shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act.

 

Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have Consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be Consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

 

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4.02        Conditions to all Credit Extensions.  The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a Conversion of Committed Loans to the other Type, or a continuation of LIBOR Rate Loans, Euribor Rate Loans and BA Equivalent Loans) and of each L/C Issuer to issue each Letter of Credit is subject to the following conditions precedent:

 

(a)           The representations and warranties of each Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Credit Extension, except (i) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, (ii) in the case of any representation and warranty qualified by materiality, they shall be true and correct in all respects and (iii) for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.

 

(b)           No Default or Event of Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

 

(c)           The Administrative Agent or the Canadian Agent, if applicable, and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

 

Each Request for a Credit Extension (other than a Committed Loan Notice requesting only a conversion of a Committed Loan to another Type of Committed Loan or a continuation of LIBOR Rate Loans, BA Equivalent Loans or Euribor Rate Loans) submitted by the Parent or the Canadian Borrower, as applicable, shall be deemed to be a representation and warranty by the Domestic Borrowers or the Canadian Borrower or the Foreign Borrower, as applicable, that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.  The conditions set forth in this Section 4.02 are for the sole benefit of the Credit Parties but unless and until the Required Lenders otherwise direct the Administrative Agent and the Canadian Agent (in accordance with the terms of this Agreement) to cease making Committed Loans, the Lenders will fund their Applicable Percentage of all Loans that are requested by the Parent or the Canadian Borrower, as applicable, of all L/C Advances required to be made hereunder and participate in all Swing Line Loans and Letters of Credit whenever made or issued in accordance with the provisions of this Agreement, and which, notwithstanding the failure of the Loan Parties to comply with the provisions of this Article IV, are agreed to by the Administrative Agent or the Canadian Agent, as applicable; provided that, the making of any such Loans or the issuance of any Letters of Credit in the event the provisions of this Article IV are not complied with shall not be deemed to be a modification or waiver by any Credit Party of the provisions of this Article IV on any future occasion or a waiver of any rights of the Credit Parties as a result of any such failure to comply.

 

ARTICLE V
 REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, each Loan Party represents and warrants to the Administrative Agent and the other Credit Parties that:

 

5.01        Existence, Qualification and Power.  Each Loan Party (a) is a corporation, limited liability company, unlimited liability company, partnership or limited partnership, duly incorporated,

 

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organized or formed, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation, organization or formation, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, where applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.  Schedule 5.01 annexed hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears in official filings in its state or province of incorporation or organization, its state or province of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization (in the case of each Domestic Loan Party), and its federal employer identification number (if any).

 

5.02        Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party, has been duly authorized by all necessary corporate or other organizational action, and does not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (i) any material contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; (c) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Collateral Agent or the Canadian Agent, as applicable, under the Security Documents); or (d) violate any Law.

 

5.03        Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (a) consents, authorizations, notices and filings described in Schedule 5.4, all of which have been obtained or made prior to the Closing Date, (b) filings to perfect the Liens created by the Security Documents, (c) filings pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq.), in respect of Accounts of the Parent and its Subsidiaries the Obligor in respect of which is the United States of America or any department, agency or instrumentality thereof, (d) filings pursuant to the Financial Administration Act (Canada) in respect of accounts of the Parent and its Subsidiaries the Obligor in respect of which is Her Majesty the Queen in the right of Canada or any department, agency or instrumentality thereof and (e) consents, authorizations, notices and filings which the failure to obtain or make would not reasonably be expected to have a Material Adverse Effect.

 

5.04        Binding Effect.  This Agreement has been, and each other Loan Document, when delivered, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

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5.05        Financial Statements; No Material Adverse Effect.

 

(a)           The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

(b)           The unaudited Consolidated balance sheet of the Parent and its Subsidiaries dated June 30, 2010, and the related Consolidated statements of income or operations, Shareholders’ Equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

 

(c)           Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect with respect to the Collateral included in the Borrowing Base, including, without limitation, which adversely affects in any material respect the value of such Collateral, the enforceability or priority of the applicable Agent’s Liens thereon or the amount which any Agent, the Lenders or any Issuing Lender would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral.

 

(d)           To the best knowledge of the Parent, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements through the Closing Date, that has resulted in or would reasonably be expected to result in a misstatement in any material respect, in any financial information delivered or to be delivered to the Administrative Agent or the Lenders, of (i) covenant compliance calculations provided hereunder or (ii) the assets, liabilities, financial condition or results of operations of the Parent and its Subsidiaries on a Consolidated basis.

 

(e)           To the best knowledge of the Parent, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements that has resulted in or would reasonably be expected to result in a misstatement in any material respect, in any financial information or Borrowing Base Certificate delivered or to be delivered to the Administrative Agent or the Lenders with respect to any components of the Combined Borrowing Base.

 

(f)            The Consolidated forecasted balance sheet and statements of income and cash flows of the Parent and its Subsidiaries delivered pursuant to Section 6.01(d) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Loan Parties’ best estimate of its future financial performance.

 

5.06        Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) except as specifically disclosed in Schedule 5.06, either individually or in the aggregate, if determined adversely, would reasonably be expected to have a Material Adverse Effect.

 

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5.07        No Default.  No Loan Party is in default under or with respect to, or party to, any Material Indebtedness.  No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

5.08        Ownership of Property; Liens

 

(a)           Each of the Loan Parties  has good record and marketable title in fee simple to or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each of the Loan Parties has good and marketable title to, valid leasehold interests in, or valid licenses to use all personal property and assets material to the ordinary conduct of its business.

 

(b)           Schedule 5.08(b)(1) sets forth the address (including street address, state, province or territory and postal or zip code) of all Real Estate that is owned by the Loan Parties, together with a list of the holders of any mortgage or other Lien thereon as of the Closing Date.  Each Loan Party has good, marketable and insurable fee simple title to the real property owned by such Loan Party or such Subsidiary, free and clear of all Liens, other than Permitted Encumbrances.  Schedule 5.08(b)(2) sets forth the address (including street address, county, state, province and zip/postal code) of all Leases of the Loan Parties.  As of the Closing Date each of such Leases is in full force and effect and the Loan Parties are not in default of the terms thereof.

 

(c)           The property of each Loan Party is subject to no Liens other than Permitted Encumbrances.

 

(d)           Schedule 7.01 sets forth a complete and accurate list of all Liens on the property or assets of each Loan Party, showing as of the Closing Date the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto.

 

(e)           Schedule 7.02 sets forth a complete and accurate list of all Investments held by any Loan Party on the Closing Date, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.

 

(f)            Schedule 7.03 sets forth a complete and accurate list of all Material Indebtedness of each Loan Party on the Closing Date, showing as of the date hereof the amount, obligor or issuer and maturity thereof.

 

5.09        Environmental Compliance

 

Except for events, conditions or circumstances that would not constitute a Material Adverse Effect:

 

(a)           No Loan Party or any Subsidiary thereof (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

 

(b)           Except as otherwise set forth in Schedule 5.09, none of the properties currently or formerly owned or operated by any Loan Party or any Subsidiary thereof is listed or proposed for listing

 

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on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there are no and never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or, to the best of the knowledge of the Loan Parties, on any property formerly owned or operated by any Loan Party or any Subsidiary thereof; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any Subsidiary thereof.

 

(c)           Except as otherwise set forth on Schedule 5,09, no Loan Party  is undertaking, and no Loan Party or any Subsidiary thereof has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party.

 

(d)           There is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under any Environmental Law to which the Parent or any of its Subsidiaries is, or to the knowledge of the Parent or any of its Subsidiaries is reasonably likely to be, named as a party that is pending or, to the knowledge of the Parent or any of its Subsidiaries, threatened.

 

(e)           Neither the Parent nor any of its Subsidiaries has entered into or agreed to any consent decree, order, or settlement or other agreement, nor is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum, relating to compliance with or liability under any Environmental Law.

 

5.10        Insurance.  Schedule 5.10 sets forth a complete and correct listing of all insurance that is (a) maintained by the Loan Parties and (b) material to the business and operations of the Parent and its Subsidiaries, taken as a whole, maintained by Subsidiaries other than Loan Parties, in each case as of the Closing Date, with the amounts insured (and any deductibles) set forth therein.

 

5.11        Taxes.  The Loan Parties have filed all federal, state, provincial, territorial, municipal, local and other material tax returns and reports required to be filed, and have paid all federal, state, provincial, territorial, municipal, local and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings for which adequate reserves have been provided in accordance with GAAP, as to which Taxes no Lien has been filed and which contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation.  There is no proposed tax assessment against any Loan Party or any Subsidiary that would, if made, have a Material Adverse Effect.  No Loan Party or any Subsidiary thereof is a party to any tax sharing agreement.

 

5.12        Plans.

 

(a)           (i) Each Plan in respect of employees of any Domestic Loan Party is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws; (ii)  each Plan in respect of employees of any Domestic Loan Party that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an

 

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application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Parent, nothing has occurred which would prevent, or cause the loss of, such qualification; (iii) the Domestic Loan Parties and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan in respect of employees of any Domestic Loan Party; and (iv) no Lien imposed under the Code or ERISA exists or is likely to arise on account of any Plan in respect of employees of any Domestic Loan Party.

 

(b)           There are no pending or, to the best knowledge of the Parent, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that would reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or would reasonably be expected to result in a Material Adverse Effect.

 

(c)           There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan in respect of employees of any Domestic Loan Party that has resulted or would reasonably be expected to result in a Material Adverse Effect.

 

(d)           (i)  No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither any Domestic Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither any Domestic Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

 

(e)           As of the Closing Date, no Canadian Loan Party sponsors, maintains or contributes to any Canadian Pension Plan.

 

(f)            During the five year period prior to each date as of which this representation is made, or deemed made, with respect to any Domestic Pension Plan (or, with respect to (g) below, as of the date such representation is made or deemed made), none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a Material Adverse Effect: (a) a Reportable Event; (b) an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA); (c) any noncompliance with the applicable provisions of ERISA or the Code; (d) a termination of a single employer plan (other than a standard termination pursuant to Section 4041(b) of ERISA); (e) a Lien on the property of the Parent or its Subsidiaries in favor of the PBGC or a Plan; (f) any Underfunding with respect to any Single Employer Plan; (g) a complete or partial withdrawal from any Multiemployer Plan by the Parent or any Commonly Controlled Entity; (h) any liability of the Parent or any Commonly Controlled Entity under ERISA if the Parent or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the annual valuation date most closely preceding the date on which this representation is made or deemed made; (i) the Reorganization or Insolvency of any Multiemployer Plan; or (j) any transactions that resulted or would reasonably be expected to result in any liability to the Parent or any Commonly Controlled Entity under Section 4069 of ERISA or Section 4212(c) of ERISA

 

(g)           With respect to any Pension Plan under the laws of any foreign jurisdiction, none of the following events or conditions exists and is continuing that, either individually or in the aggregate,

 

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would reasonably be expected to have a Material Adverse Effect: (a) substantial non-compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders; (b) failure to be maintained, where required, in good standing with applicable regulatory authorities; (c) any obligation of the Parent or its Subsidiaries in connection with the termination or partial termination of, or withdrawal from, any such foreign plan; (d) any Lien on the property of the Parent or its Subsidiaries in favor of a Governmental Authority as a result of any action or inaction regarding such a foreign plan; (e) for each such foreign plan which is a funded or insured plan, failure to be funded or insured on an ongoing basis to the extent required by applicable non-U.S. law (using actuarial methods and assumptions which are consistent with the valuations last filed with the applicable Governmental Authorities); (f) any facts that, to the best knowledge of the Parent or any of its Subsidiaries, exist that would reasonably be expected to give rise to a dispute and any pending or threatened disputes that, to the best knowledge of the Parent or any of its Subsidiaries, would reasonably be expected to result in a material liability to the Parent or any of its Subsidiaries concerning the assets of any such foreign plan (other than individual claims for the payment of benefits); and (g) failure to make all contributions in a timely manner to the extent required by applicable non-U.S. law.

 

5.13        Subsidiaries; Equity Interests.  As of the Closing Date, the Loan Parties have no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary.  All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party (or a Subsidiary of a Loan Party) in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except for those created under the Security Documents and other Permitted Encumbrances.  Except as set forth in Schedule 5.13, as of the Closing Date, there are no outstanding rights to purchase any Equity Interests in any Subsidiary.  As of the Closing Date, the Loan Parties have no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13.  As of the Closing Date, all of the outstanding Equity Interests in the Loan Parties have been validly issued, and are fully paid and non-assessable and are owned in the amounts specified on Part (c) of Schedule 5.13 free and clear of all Liens except for those created under the Security Documents.  As of the Closing Date, the copies of the Organization Documents of each Loan Party and each amendment thereto provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

 

5.14        Margin Regulations; Investment Company Act.

 

(a)           No Loan Party is engaged or will be engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  None of the proceeds of the Credit Extensions shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any margin stock or for any other purpose that might cause any of the Credit Extensions to be considered a “purpose credit” within the meaning of Regulations T, U, or X issued by the FRB.

 

(b)           None of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

 

5.15        Disclosure.  As of the Closing Date, each Loan Party has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate or other

 

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information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

5.16        Compliance with Laws.  Each of the Loan Parties is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

5.17        Intellectual Property; Licenses, Etc.  The Loan Parties own, or possess the right to use, all of the Intellectual Property, licenses, permits and other authorizations that are reasonably necessary for the operation of their respective businesses, without conflicting with the material rights of any other Person which would give rise to a Material Adverse Effect.  To the best knowledge of the Parent, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party infringes upon any rights held by any other Person.  Except as specifically disclosed in Schedule 5.17, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Parent, threatened, which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

5.18        Labor Matters.

 

As of the Closing Date, there are no strikes, lockouts, slowdowns or other material labor disputes against any Loan Party pending or, to the knowledge of any Loan Party, threatened. The hours worked by and payments made to employees of the Loan Parties comply with the Fair Labor Standards Act and any other applicable federal, state, provincial, territorial, municipal, local or foreign Law dealing with such matters except to the extent that any such violation would not reasonably be expected to have a Material Adverse Effect. No Loan Party has incurred any liability or obligation under the Worker Adjustment and Retraining Act or similar federal, state, provincial, territorial, municipal, local or foreign Law.  All payments due from any Loan Party, or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in accordance with GAAP as a liability on the books of such Loan Party. Except as set forth on Schedule 5.18 no Loan Party is a party to or bound by any collective bargaining agreement, management agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement. There are no representation proceedings pending or, to any Loan Party’s knowledge, threatened to be filed with the National Labor Relations Board or other applicable Governmental Authority, and no labor organization or group of employees of any Loan Party has made a pending demand for recognition. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against any Loan Party pending or, to the knowledge of any Loan Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of any Loan Party. The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party is bound.

 

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5.19        Security Documents.

 

The Security Documents create in favor of the Administrative Agent (for the benefit of itself and the other Credit Parties) or the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties), as applicable, a legal, valid, continuing and enforceable security interest in, and Lien on, the Collateral, and the Security Documents constitute, or will upon the filing of financing statements or other requisite registrations and recordations   and/or the obtaining of “control”, in each case with respect to the relevant Collateral as required under the applicable UCC or similar legislation of any jurisdiction, including, without limitation, the PPSA and the Civil Code of Quebec, the creation of a perfected Lien on, and security interest in, all right, title and interest of the Loan Parties thereunder in such Collateral that may be perfected in the United States or Canada by filing, recording or registering a financing statement or analogous document or, to the extent required by the Loan Documents (it being understood that subsequent recordings in the United States Patent and Trademark Office, United States Copyright Office, Canadian Intellectual Property Office or a substitute or successor agency may be necessary to perfect a Lien on Intellectual Property acquired, register or applied for after the date hereof).  Notwithstanding anything to the contrary herein, the Loan Parties shall have no obligation to prefect Liens on any Collateral in any jurisdiction outside the United States of America or Canada.

 

5.20        Solvency

 

After giving effect to the transactions contemplated by this Agreement, and before and after giving effect to each Credit Extension, the Loan Parties, on a Consolidated basis, are Solvent. No transfer of property has been or will be made by any Loan Party and no obligation has been or will be incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party.

 

5.21        Deposit Accounts; Credit Card Arrangements.

 

(a)           Annexed hereto as Schedule 5.21(a) is a list of all DDAs maintained by the Loan Parties as of the Closing Date, which Schedule includes, with respect to each DDA (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; (iii) a contact person at such depository, and (iv) the identification of each Blocked Account Bank.

 

(b)           Annexed hereto as Schedule 5.21(b) is a list describing all arrangements as of the Closing Date to which any Loan Party is a party with respect to the processing and/or payment to such Loan Party of the proceeds of any credit card charges and debit card charges for sales made by such Loan Party.

 

5.22        Brokers.  No broker or finder brought about the obtaining, making or closing of the Loans or transactions contemplated by the Loan Documents, and no Loan  Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

 

5.23        Customer and Trade Relations.  As of the Closing Date, and except as described in Schedule 5.06 hereof, there exists no actual or, to the knowledge of any Loan Party, threatened, termination or cancellation of, or any material adverse modification or change in the business relationship of any Loan Party with any supplier material to its operations except for those that would not constitute a Material Adverse Effect.

 

5.24        Casualty.  As of the Closing Date, neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty

 

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(whether or not covered by insurance) that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

5.25        Senior Indebtedness.  The Loans, L/C Obligations and all other Obligations of the Loan Parties hereunder and under the other Loan Documents (including, without limitation, the Facility Guaranty) constitute “Senior Indebtedness” and “Designated Senior Indebtedness” under and as defined in the Senior Subordinated Notes Indenture (to the extent such obligations constitute “Indebtedness” as defined in such document on the date hereof).

 

5.26        Anti-Terrorism.  As of the Closing Date, the Parent  and its Subsidiaries are in compliance with the Uniting and Strengthening of America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

 

ARTICLE VI
 AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, the Loan Parties shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:

 

6.01        Financial Statements Deliver to the Administrative Agent, in form and detail satisfactory to the Administrative Agent:

 

(a)           as soon as available, but in any event within five (5) Business Days after ninety (90) days after the end of each Fiscal Year of the Parent, a Consolidated balance sheet of the Parent and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by (i) a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit (it being agreed that the furnishing of Holdings’ or the Parent annual report on Form 10-K for such year, as filed with the United States Securities and Exchange Commission, will satisfy the Parent’s obligation under this subsection 6.01(a) with respect to such year except with respect to the requirement that such financial statements be reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit);

 

(b)           if the Borrowers maintain Excess Availability greater than fifty percent (50%) of the Loan Cap for each of the prior three Fiscal Months, as soon as available, but in any event within five (5) Business Days after forty-five (45) days after the end of each of the Fiscal Quarters of each Fiscal Year of the Parent, a Consolidated balance sheet of the Parent and its Subsidiaries as at the end of such Fiscal Quarter, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Quarter and for the portion of the Parent’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) the corresponding Fiscal Quarter of the previous Fiscal Year and (B) the corresponding portion of the previous Fiscal Year, all in reasonable detail, certified by a

 

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Responsible Officer of the Parent as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Parent and its Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes (it being agreed that the furnishing of filings or the Parent’s quarterly reports on Form 10-Q, as filed with the SEC, shall satisfy this subsection 6.01(b));

 

(c)           if the Borrowers fail to maintain Excess Availability greater than fifty percent (50%) of the Loan Cap for the prior Fiscal Month, as soon as available, but in any event within five (5) days after the date thirty (30) days after the end of each of the Fiscal Months of each fiscal year of Holdings (commencing with the Fiscal Month ended October 31, 2010), a consolidated balance sheet of Holdings as at the end of such Fiscal Month, and the related consolidated statements of income or operations, and cash flows, and for the portion of Holdings’ Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) the corresponding Fiscal Month of the previous Fiscal Year and (B) the corresponding portion of the previous fiscal year, all in reasonable detail, certified by a Responsible Officer of Holdings as fairly presenting the financial condition and results of operations and cash flows of Holdings as of the end of such Fiscal Month in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(d)           as soon as available, but in any event within five (5) Business Days after ninety (90) days after the end of each Fiscal Year of the Parent, forecasts prepared by management of the Parent, in form consistent with past practice, of Canadian Availability, Domestic Availability, and Excess Availability and the consolidated balance sheets and statements of income or operations and cash flows of the Parent and its Subsidiaries on a quarterly basis for the immediately following Fiscal Year (including the fiscal year in which the Maturity Date occurs).

 

6.02        Certificates; Other Information.  Deliver to the Administrative Agent, in form and detail satisfactory to the Administrative Agent:

 

(a)           concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its Registered Public Accounting Firm certifying such financial statements and stating that in making the examination necessary for their certification of such financial statements, such Registered Public Accounting Firm has not obtained any knowledge of the existence of any Default under Section 7.11 (but only if, during the Fiscal Year, Section 7.11 was applicable) the financial covenants set forth herein or, if any such Default shall exist, stating the nature and status of such event (which certificate may be limited to the extent required by accounting rules or guidelines);

 

(b)           concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (a) and (c), (commencing with the delivery of the financial statements for the Fiscal Quarter ended December 31, 2010), a duly completed Compliance Certificate signed by a Responsible Officer of the Parent, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Parent shall also provide a statement of reconciliation conforming such financial statements to GAAP, and in the case of quarterly reporting only, a copy of management’s discussion and analysis with respect to such financial statements if not included in Holdings’ Form 10-Q;

 

(c)           (i) within ten (10) Business Days after end of each Fiscal Month (or, if such day is not a Business Day, on the next succeeding Business Day), a certificate in the form of Exhibit E (a “Borrowing Base Certificate”) showing the Domestic Borrowing Base, Canadian Borrowing Base, Distribution Borrowing Base and Combined Borrowing Base as of the close of business as

 

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of the last day of the immediately preceding Fiscal Month, each Borrowing Base Certificate to be certified as complete and correct by a Responsible Officer of the Parent; provided that at any time that an Trigger Event has occurred and is continuing, such Borrowing Base Certificate shall be delivered on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), as of the close of business on the immediately preceding Saturday, and (ii) within one (1) Business Day after the consummation of the Disposition outside of the ordinary course of business of any Collateral included in the Domestic Borrowing Base or the Canadian Borrowing Base, in each case either with a cost value as included in the Combined Borrowing Base of equal to or greater than $25,000,000, or in connection with the Disposition of Stores consisting of more than five percent (5%) of the number of the Borrowers’ Stores as of the beginning of such Fiscal Year, a Borrowing Base Certificate showing the Domestic Borrowing Base, Canadian Borrowing Base and Combined Borrowing Base after giving effect to the consummation of such Disposition. In connection with each Borrowing Base Certificate, if the Accounts Receivable Reporting Requirement is not in effect, the Borrowers’ reporting of Accounts shall be summary in nature and shall be from the Parent’s then current financial statements with classification by only entity or business segment; if the Accounts Receivable Reporting Requirement is in effect (or the Borrowers elect to provide detailed Accounts reporting pursuant to the definition thereof) the Borrowers’ reporting of Accounts shall set forth in reasonable detail the aging and dilution thereof and incorporate appraisal and audit work with respect thereto;

 

(d)           promptly upon receipt, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Loan Party by its Registered Public Accounting Firm in connection with the accounts or books of the Loan Parties or any Subsidiary, or any audit of any of them, including, without limitation, specifying any Internal Control Event, to the extent that any of the foregoing relates to any weaknesses in the reporting of any components of the Collateral included in the Combined Borrowing Base or would reasonably be expected to have a Material Adverse Effect;

 

(e)           promptly after the same are available, copies of each annual report, proxy or financial statement or other material report or communication sent to the stockholders of Holdings, and copies of all annual, regular, periodic and special reports and registration statements which Holdings may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any national or foreign securities exchange or applicable Governmental Authority, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

 

(f)            The financial and collateral reports described on Schedule 6.02 hereto, at the times set forth in such Schedule;

 

(g)           promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of Holdings pursuant to the terms of either Notes Indenture or other public note issuance;

 

(h)           as soon as available, but in any event within thirty (30) days after the end of each Fiscal Year of the Loan Parties, if requested by the Administrative Agent, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Loan Party and its Subsidiaries and containing such additional information as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably specify;

 

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(i)            promptly after the Administrative Agent’s request therefor, copies of all documents evidencing Material Indebtedness;

 

(j)            promptly, and in any event within ten (10) days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from any Governmental Authority (including, without limitation, the SEC (or comparable agency in any applicable non-U.S. jurisdiction)) concerning any proceeding with, or investigation or possible investigation or other inquiry by such Governmental Authority regarding financial or other operational results of any Loan Party or any Subsidiary thereof or any other matter which, if adversely determined, would reasonably expected to have a Material Adverse Effect (unless the disclosure thereof would violate any attorney-client privilege or its disclosure would violate Applicable Law); and

 

(k)           promptly, such additional information regarding the business affairs, financial condition or operations of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent (or any Lender through the Administrative Agent) may from time to time reasonably request, that would not violate the attorney-client privilege.

 

Documents required to be delivered pursuant to Section 6.01(a) or (a) or Section 6.02(d) (to the extent any such documents and the information required to be provided therewith as set forth above  are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Parent posts such documents, or provides a link thereto on the Parent’s website on the Internet at the website address listed on Schedule 10.02 or filed with the SEC; or (ii) on which such documents are posted on the Parent’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Parent shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Parent to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Parent shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

The Loan Parties hereby acknowledge that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Loan Parties hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Loan Parties or their securities) (each, a “Public Lender”).  The Loan Parties hereby agree that so long as any Loan Party is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities they will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Loan Parties shall be deemed to have authorized the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Loan Parties or their securities for purposes of all

 

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applicable securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor”; and (z) the Administrative Agent and the Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

 

6.03        Notices.  Promptly notify the Administrative Agent after a Responsible Officer of the Parent knows or reasonably should know thereof:

 

(a)           of the occurrence of any Default or Event of Default;

 

(b)           of any matter that has resulted or, if adversely determined (and such adverse determination is reasonably likely) would result in, a Material Adverse Effect, including (i) breach or non-performance in a material respect of, or any default with respect to, Material Indebtedness of any Loan Party; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority; or (iii) the commencement of any litigation or proceeding affecting any Loan Party, including pursuant to any applicable Environmental Laws;

 

(c)           of (i) the occurrence of any ERISA Event, (ii) the complete or partial withdrawal by a Canadian Loan Party from participation in a “multi-employer pension plan” as defined under the Pension Benefits Act (Ontario) or any similar type of plan subject to pension benefits standards legislation of another jurisdiction in Canada, or the termination in whole or in part of a Canadian Pension Plan, where such withdrawal or termination is reasonably expected to result in a material liability of the Canadian Loan Party; (iii) the creation of any Lien on the property of the Parent or its Subsidiaries in favor of the PBGC or a Plan (other than a Lien in respect of employee contributions withheld from pay but not yet remitted to a Canadian Pension Plan; provided, however, that no such notice will be required under clauses (i), (ii) or (iii) above unless the event giving rise to such notice, when aggregated with all other such events under clause (i), (ii) or (iii) above, would be reasonably expected to result in a Material Adverse Effect; or (iv) the first occurrence of an Underfunding under a Single Employer Plan or Foreign Plan that exceeds 10% of the value of the assets of such Single Employer Plan or Foreign Plan, in each case, determined as of the most recent annual valuation date of such Single Employer Plan or Foreign Plan on the basis of the actuarial assumptions used to determine the funding requirements of such Single Employer Plan or Foreign Plan as of such date;

 

(d)           (i) of any release or discharge by the Parent or any of its Subsidiaries of any Hazardous Materials required to be reported under applicable Environmental Laws to any Governmental Authority, unless the Parent reasonably determines that the total environmental costs arising out of such release or discharge would not reasonably be expected to have a Material Adverse Effect; (ii) any condition, circumstance, occurrence or event not previously disclosed in writing to the Administrative Agent that would reasonably be expected to result in liability or expense under applicable Environmental Laws, unless the Parent reasonably determines that the total environmental costs arising out of such condition, circumstance, occurrence or event would not reasonably be expected to have a Material Adverse Effect, or would not reasonably be expected to result in the imposition of any Lien or other material restriction on the title, ownership or transferability of any properties owned, leased or operated by the Parent or any of its Subsidiaries that would reasonably be expected to result in a Material Adverse Effect; and (iii) any proposed action to be taken by the Parent or any of its Subsidiaries that would reasonably be expected to subject the Parent or any of its Subsidiaries to any material additional or different

 

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requirements or liabilities under Environmental Laws, unless the Parent reasonably determines that the total environmental costs arising out of such proposed action would not reasonably be expected to have a Material Adverse Effect;

 

(e)           the occurrence of any default or event of default under either of the Notes Indentures or the Senior Term Loan Documents;

 

(f)            of any material change in accounting policies (but only to the extent that such change have any effect on the reporting or calculation of Collateral included in the Combined Borrowing Base) or financial reporting practices by any Loan Party or any Subsidiary thereof;

 

(g)           of any change in Holdings’ senior executive officers;

 

(h)           of the discharge by Holdings’ of its present Registered Public Accounting Firm or any withdrawal or resignation by such Registered Public Accounting Firm;

 

(i)            of any collective bargaining agreement or other labor contract to which a Loan Party becomes a party, or the application for the certification of a collective bargaining agent;

 

(j)            of the filing of any Lien for unpaid Taxes against any Loan Party in excess of $10,000,000;

 

(k)           of any loss, damage, destruction, or casualty to any portion of the Collateral in the amount of $10,000,000 or more, whether or not covered by insurance; or the commencement of any action or proceeding for the taking of any interest in any portion of the Collateral in the amount of $10,000,000 or more under power of eminent domain or by condemnation or similar proceeding or if any material portion of the Collateral is damaged or destroyed; and

 

(l)            any and all default notices received under or with respect to any lease of any distribution center where Collateral with a cost value in excess of $10,000,000, either individually or in the aggregate, is located or of any failure by any Loan Party to pay rent at any of such Loan Party’s locations if such failure continues for more than ten (10) days following the day on which such rent first came due and such failure would be reasonably likely to result in a Material Adverse Effect.

 

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Parent setting forth details of the occurrence referred to therein and stating what action the Parent has taken and proposes to take with respect thereto.

 

6.04        Payment of Obligations.  Except to the extent that the failure to make any of the following payments would not reasonably be expected to result in a Material Adverse Effect, pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, (b) all lawful claims (including, without limitation, claims of landlords, warehousemen, customs brokers, and carriers) which, if unpaid, would by Law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except, in each case, where (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, (ii) such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (iii) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, and (iv) no

 

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Lien has been filed with respect thereto. Nothing contained herein shall be deemed to limit the rights of the Agents with respect to determining Reserves pursuant to this Agreement.

 

6.05        Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its Intellectual Property, except to the extent such Intellectual Property is no longer used or useful in the conduct of the business of the Loan Parties.

 

6.06        Maintenance of Properties.  (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

6.07        Maintenance of Insurance.

 

(a)           Maintain with financially sound and reputable insurance companies insurance on, or self insurance, all properties material to the business of the Parent and its Subsidiaries, taken as a whole, in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are consistent with past practices of the Parent and its Subsidiaries and otherwise are usually insured against in the same general area by companies engaged in the same or a similar business.

 

(b)           Furnish to the Administrative Agent, upon written request, information in reasonable detail as to the insurance carried.

 

(c)           Ensure that at all times the Collateral Agent or the Canadian Agent, as applicable, shall be named as additional insureds with respect to liability policies and the Collateral Agent or the Canadian Agent, as applicable, shall be named as loss payee with respect to the property insurance maintained by the Loan Parties; provided that notwithstanding anything to the contrary herein contained, but subject to the provisions of Section 2.05(f) hereof,  unless a Trigger Event shall have occurred and be continuing, the Agents shall turn over to the Parent any amounts received by it as loss payee under any property insurance covering any Collateral maintained by the Parent and its Subsidiaries, and, unless a Trigger Event shall have occurred and be continuing, the Agents agree that the Parent and/or the applicable Subsidiary shall have the sole right to adjust or settle any claims under such insurance.

 

6.08        Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which the failure to comply therewith would not have a Material Adverse Effect.

 

6.09        Books and Records; Accountants

 

(a)           Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP in all material respects consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties or such Subsidiary, as the case may be; and (ii) maintain such books of record and account in material conformity

 

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with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Loan Parties or such Subsidiary, as the case may be.

 

(b)           At all times retain a Registered Public Accounting Firm of national standing and shall instruct such Registered Public Accounting Firm, if a Trigger Event has occurred and is continuing, to cooperate with, and be available to, the Administrative Agent or its representatives to discuss the Loan Parties’ financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such Registered Public Accounting Firm, as may be raised by the Administrative Agent.

 

6.10        Inspection Rights

 

(a)           Permit representatives and independent contractors of the Administrative Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and Registered Public Accounting Firm, all at the expense of the Administrative Agent and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Parent, without unreasonable interference with the Loan Parties’ business operation; provided, however, that when an Event of Default exists the Administrative Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Loan Parties at any time during normal business hours and without advance notice.

 

(b)           Upon the request of the Administrative Agent after reasonable prior notice, permit the Administrative Agent or professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Administrative Agent, independently of or in connection with the visits and inspections provided for in clause (a) above,to conduct appraisals, commercial finance examinations and other evaluations, including, without limitation, of (i) the Parent’s practices in the computation of the Domestic Borrowing Base and the Distribution Borrowing Base and the Canadian Borrower’s practices in the computation of the Canadian Borrowing Base and (ii) the assets included in the Domestic Borrowing Base, the Canadian Borrowing Base and the Distribution Borrowing Base and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves.  Except as provided in the next sentence, all such costs of such professionals shall be at the expense of the Administrative Agent.  The Loan Parties acknowledge that the Administrative Agent and the Canadian Agent shall each undertake one (1) commercial finance examination in each twelve (12) month period at the Loan Parties’ expense; provided that if Excess Availability is less than 50% of the Loan Cap at any time during such twelve (12) month period, the Administrative Agent or the Canadian Agent, as applicable, may, in its discretion, each undertake up to two (2) commercial finance examinations in each such twelve (12) month period at the Loan Parties’ expense, provided further that if Excess Availability is less than 15% of the Loan Cap at any time during such twelve (12) month period, the Administrative Agent or the Canadian Agent, as applicable, may, in its discretion, each undertake up to three (3) commercial finance examinations in each such twelve (12) month period at the Loan Parties’ expense, such expense to be reasonable and the Parent shall have the opportunity to review the invoices thereof.  Notwithstanding the foregoing, the Administrative Agent may cause additional commercial finance examinations to be undertaken (i) as it in its discretion deems necessary or appropriate, at its own expense, without unreasonable interference with the Loan Parties’ business operation, or (ii) if required by Law or if a Default or Event of Default shall have occurred and be continuing, at the expense of the Loan Parties.

 

(c)           Upon the request of the Administrative Agent after reasonable prior notice, permit the Administrative Agent or professionals (including appraisers) retained by the Administrative Agent, independently of or in connection with the visits and inspections provided for in clause (a) above,

 

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to conduct appraisals of the Collateral, including, without limitation, the assets included in the Domestic Borrowing Base and the Canadian Borrowing Base.  Except as provided in the next sentence, all such costs of such professionals shall be at the expense of the Administrative Agent.  The Loan Parties acknowledge that the Administrative Agent and the Canadian  Agent shall each undertake one (1) inventory appraisal in each twelve (12) month period at the Loan Parties’ expense; provided that if Excess Availability is less than 50% of the Loan Cap at any time, the Administrative Agent or the Canadian Agent, as applicable, may, in its discretion, each undertake up to two (2) inventory appraisals in each such twelve (12) month period at the Loan Parties’ expense, provided further that if Excess Availability is less than 15% of the Loan Cap at any time, the Administrative Agent or the Canadian Agent, as applicable, may, in its discretion, each undertake up to three (3) inventory appraisals in each such twelve (12) month period at the Loan Parties’ expense, such expense to be reasonable and the Parent shall have the opportunity to review the invoices thereof.  Notwithstanding the foregoing, the Administrative Agent may cause additional appraisals to be undertaken (i) as it in its discretion deems necessary or appropriate, at its own expense, without unreasonable interference with the Loan Parties’ business operation, or (ii) if required by Law or if a Default or Event of Default shall have occurred and be continuing, at the expense of the Loan Parties.

 

(d)           In addition to the provisions of clause (c) above, after the consummation of the Disposition outside of the ordinary course of business of any Collateral included in the Domestic Borrowing Base or the Canadian Borrowing Base, in each case either with a cost value as included in the Combined Borrowing Base of equal to or greater than $25,000,000, or in connection with the Disposition of Stores consisting of more than five percent (5%) of the number of the Borrowers’ Stores as of the beginning of such Fiscal Year, the Administrative Agent shall have the right to conduct an updated appraisal of the Inventory, at the Loan Parties’ expense;

 

6.11        Additional Loan Parties

 

(a)           If any Domestic Loan Party shall form or acquire a Subsidiary the Parent will notify the Administrative Agent thereof and (i) if such Subsidiary is a Material Subsidiary but not a Foreign Subsidiary, the Parent will cause such Subsidiary to become a Loan Party hereunder and under each applicable Security Document within sixty (60) days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Liens on such Subsidiary’s personal property to secure the Obligations (subject to the Intercreditor Agreement), and (ii) if such Subsidiary is not a Material Subsidiary, at the request of the Administrative Agent the Parent will cause such Subsidiary to become a Loan Party hereunder and under each applicable Security Document within sixty (60) days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Liens on such Subsidiary’s personal property to secure the Obligations (subject to the Intercreditor Agreement) and (iii) if any Equity Interests or Indebtedness of such Subsidiary are owned by or on behalf of the Parent or any of its Domestic Subsidiaries, the Parent will cause such Equity Interests and promissory notes evidencing such Indebtedness to be pledged to secure the Obligations within sixty (60) days after such Subsidiary is formed or acquired (subject to the Intercreditor Agreement).

 

(b)           If the Canadian Borrower shall form or acquire a Subsidiary the Parent will notify the Administrative Agent thereof and (i) if such Subsidiary is a Material Subsidiary organized under the laws of Canada or any province or territory thereof, the Canadian Borrower will cause such Subsidiary to become a Canadian Loan Party hereunder and under each applicable Canadian Security Document within sixty (60) days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Liens on such Subsidiary’s personal property to secure the Canadian Liabilities and the Foreign Liabilities (subject to the Intercreditor Agreement), and (ii) if such Subsidiary is not a Material Subsidiary, at the request of the Administrative Agent the Canadian Borrower will cause such Subsidiary to become a Canadian Loan Party hereunder and under each applicable Canadian

 

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Security Document within sixty (60) days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Liens on such Subsidiary’s personal property to secure the Canadian Liabilities and the Foreign Liabilities (subject to the Intercreditor Agreement), and (iii) if any Equity Interests or Indebtedness of such Subsidiary are owned by or on behalf of the Canadian Borrower or any of its Subsidiaries, the Canadian Borrower will cause such Equity Interests and promissory notes evidencing such Indebtedness to be pledged to secure the Canadian Liabilities and Foreign Liabilities within sixty (60) days after such Subsidiary is formed or acquired (subject to the Intercreditor Agreement).

 

(c)           In connection with a Disposition permitted hereby, including a Disposition of the Equity Interests of a Subsidiary, the Administrative Agent shall, at the expense of the Borrowers, release its Lien upon the assets and/or Equity Interests subject to such Disposition and/or release the Guaranty of such Person subject to such Disposition of Equity Interests, all pursuant to such release documents as the Borrowers shall reasonably request.

 

6.12        Cash Management.

 

(a)           On or prior to the Closing Date, the Loan Parties shall:

 

(i)            deliver to the Administrative Agent copies of notifications (each, a “Credit Card Notification”) substantially in the form attached hereto as Exhibit G which have been executed on behalf of such Loan Party and delivered to such Loan Party’s credit card clearinghouses and processors listed on Schedule 5.21(b); and

 

(ii)           deliver to the Administrative Agent a Blocked Account Agreement satisfactory in form and substance to the Agents with each Blocked Account Bank executed and delivered by the applicable Loan Party and such Blocked Account Bank (collectively, the “Blocked Accounts”).

 

(b)           ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to a Blocked Account all amounts on deposit in each DDA and all payments due from credit card processors.

 

(c)           Each Blocked Account Agreement shall require, after the occurrence and during the continuance of a Trigger Event and notice from the Administrative Agent or the Required Lenders, the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the concentration account maintained by the Administrative Agent at Bank of America (the “Domestic Concentration Account”) (in the case of any Domestic Loan Party) or maintained by the Canadian Agent at Bank of America-Canada Branch (the “Canadian Concentration Account”) (in the case of any Canadian Loan Party) of all cash receipts and collections, including, without limitation, the following:

 

(i)            all available cash receipts from the sale of Inventory (including without limitation, proceeds of credit card charges) and other assets (whether or not constituting Collateral);

 

(ii)           all proceeds of collections of Accounts;

 

(iii)          all Net Proceeds, and all other cash payments received by a Loan Party from any Person or from any source or on account of any sale or other transaction or event, including, without limitation, any Prepayment Event;

 

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(iv)          the then contents of each DDA (net of any minimum balance, not to exceed in the aggregate for all DDAs the amount equal to the Target Amount); and

 

(v)           the then entire ledger balance of each Blocked Account (net of any minimum balance, not to exceed $2,500, as may be required to be kept in the subject Blocked Account by the Blocked Account Bank).

 

The Loan Parties shall undertake all action which may be necessary to effectuate the foregoing ACH and wire transfers as and when required hereunder.

 

(d)           The Domestic Concentration Account shall at all times be under the sole dominion and control of the Collateral Agent, and the Canadian Concentration Account shall at all times be under the sole dominion and control of the Canadian Agent.  The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Concentration Accounts, (ii) the funds on deposit in each Domestic Concentration Account shall at all times be collateral security for the Obligations, (iii) the funds on deposit in each Canadian Concentration Account shall at all times be collateral security for all of the Canadian Liabilities and Foreign Liabilities and (iv) the funds on deposit in the Concentration Accounts shall be applied as provided in this Agreement.  In the event that, notwithstanding the provisions of this Section 6.12, any Loan Party receives or otherwise has dominion and control of any such proceeds or collections while a Trigger Event exists, such proceeds and collections shall be held in trust by such Loan Party for the Agents, shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Domestic Concentration Account or the Canadian Concentration Account, as applicable, or dealt with in such other fashion as such Loan Party may be instructed by the Agents.  Notwithstanding the foregoing, to the extent that no Obligations are outstanding any amounts deposited in the Domestic Concentration Account and the Canadian Concentration Account shall be disbursed by the Administrative Agent or Canadian Agent, as applicable to such depository accounts as may be designated by the applicable Borrower.

 

(e)           Upon the request of the Administrative Agent, the Loan Parties shall cause bank statements and/or other reports to be delivered to the Agents not less often than monthly, accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

 

6.13        Information Regarding the Collateral.

 

(a)           Furnish to the Administrative Agent at least thirty (30) days prior written notice of any change in: (i) any Loan Party’s legal name; (ii) the location of any Loan Party’s chief executive office, registered office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility); (iii) any Loan Party’s organizational structure or jurisdiction of incorporation or formation; or (iv) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of organization.  The Loan Parties shall not effect or permit any change referred to in the preceding sentence unless the Loan Parties have timely furnished to the Administrative Agent all information, and executed all such documents and agreements, if any, requested by the Administrative Agent or the Collateral Agent to be executed prior to the expiration of such thirty (30) day period in order for the Collateral Agent or the Canadian Agent, as applicable, to continue at all times following such change to have a valid, legal and perfected first priority security interest, and Lien on, in all the Collateral for its own benefit and the benefit of the other applicable Credit Parties.

 

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(b)           Should any of the information on any of the Schedules hereto become inaccurate or misleading in any material respect as a result of changes after the Closing Date, advise the Administrative Agent in writing of such revisions or updates as may be necessary or appropriate to update or correct the same.  From time to time as may be reasonably requested by the Administrative Agent, the Parent shall supplement each Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter arising after the Closing Date that, if existing or occurring on the Closing Date, would have been required to be set forth or described in such Schedule or as an exception to such representation or that is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Schedule, such Schedule shall be appropriately marked to show the changes made therein).  Notwithstanding the foregoing, no supplement or revision to any Schedule or representation shall be deemed the Credit Parties’ consent to the matters reflected in such updated Schedules or revised representations nor permit the Loan Parties to undertake any actions otherwise prohibited hereunder or fail to undertake any action required hereunder from the restrictions and requirements in existence prior to the delivery of such updated Schedules or such revision of a representation; nor shall any such supplement or revision to any Schedule or representation be deemed the Credit Parties’ waiver of any Default resulting from the matters disclosed therein.

 

6.14        Physical Inventories.

 

(a)           Cause not less than one (1) physical inventory to be undertaken, at the expense of the Loan Parties, in each twelve (12) month period or periodic cycle counts, in each case consistent with past practices, conducted by such inventory takers as are satisfactory to the Agents and following such methodology as is consistent with the methodology used in the immediately preceding inventory or as otherwise may be satisfactory to the Agents. The Agents, at the expense of the Loan Parties, may participate in and/or observe each scheduled physical count of Inventory which is undertaken on behalf of any Loan Party.   The Parent or the Canadian Borrower, as applicable, upon the request of the Administrative Agent (which request may be made no more frequently than quarterly or if such information has been obtained in such quarter through the conduct of a commercial finance examination) shall provide the Agents with the results of such inventory (as well as of any other physical inventory undertaken by a Loan Party).

 

(b)           Permit any Agent, in its discretion, if any Default or Event of Default exists, to cause additional such inventories to be taken as any such Agent determines (each, at the expense of the Loan Parties).

 

6.15        Environmental Laws.

 

(a)           Conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain and renew all environmental permits necessary for its operations and properties except where such failure will not cause a Material Adverse Effect; and (c) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate except where such failure will not cause a Material Adverse Effect, provided, however, that neither a Loan Party nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Loan Parties with respect to such circumstances in accordance with GAAP.

 

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6.16        Further Assurances.

 

(a)           Execute any and all further documents, financing statements, filings, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, amendments to financing statements or other documents under the UCC, the PPSA or any other similar legislation), that may be required under any applicable Law, or which the Collateral Agent or the Canadian Agent may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties. The Loan Parties also agree to provide to the Agents, from time to time upon request, evidence reasonably satisfactory to the Agents as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

 

(b)           Upon the request of the Administrative Agent, use commercially reasonable efforts to cause (i) any holder of a Lien on, or possession of, any of the Collateral included in the Combined Borrowing Base, or (ii) any holder of a Lien on any real or personal properties (including, without limitation, licensees or transferees of Intellectual Property) which the Collateral Agent or the Canadian Agent as applicable, reasonably deems necessary to be utilized to realize upon, and maximize the amounts recovered on any liquidation of, any of the Collateral included in the Combined Borrowing Base, to execute and deliver a Collateral Access Agreement.

 

6.17        Compliance with Terms of LeaseholdsExcept as otherwise expressly permitted hereunder, keep all Leases in full force and effect and not allow such Leases to lapse or be terminated, except, in any case, other than in the ordinary course of business or where the failure to do so, either individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect.

 

6.18        Maintenance of New York Process Agent.  In the case of a Canadian Loan Party and the Foreign Borrower, maintain in New York, New York or at such other location in the United States of America as may be reasonably satisfactory to the Administrative Agent a Person acting as agent to receive on its behalf and on behalf of its property service of process.

 

6.19        Canadian Pension Benefit Plans.  Each Canadian Loan Party shall cause each of its Canadian Pension Plans (other than any Canadian Pension Plan which is a “multi-employer pension plan”, as defined under the Pension Benefits Act (Ontario) or any similar type of plan subject to pension benefits standards legislation of another jurisdiction in Canada) to be duly registered and administered in all material respects in compliance with the Pension Benefits Act (Ontario) or other applicable pension benefits standards legislation and all other applicable laws (including regulations, orders and directives), and the terms of the Canadian Pension Plans and any agreements relating thereto.  Each Canadian Loan Party shall ensure:

 

(a)           that no Lien arises on any of its assets in respect of any Canadian Pension Plan (other than Liens in respect of employee contributions withheld from pay but not yet due to be remitted to any Canadian Pension Plan); and

 

(b)           it makes all required contributions to any Canadian Pension Plan when due.

 

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ARTICLE VII
 NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, no Loan Party shall directly or indirectly:

 

7.01        Liens Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired; or assign or otherwise transfer any accounts or other rights to receive income, other than, as to all of the above, Permitted Encumbrances.

 

7.02        Investments.  Make any Investments, except Permitted Investments.

 

7.03        Secured Indebtedness.

 

Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Secured Funded Indebtedness, except:

 

(a)           Purchase money Indebtedness and Capital Lease Obligations, and any Permitted Refinancing thereof;

 

(b)           Secured Funded Indebtedness incurred from time to time if, as of and after giving effect to incurrence of such Indebtedness, the Secured Leverage Ratio shall not exceed 4.00 to 1.00 and any Permitted Refinancing thereof; provided that, unless otherwise agreed by the Administrative Agent, the holder of such Indebtedness shall have entered into an intercreditor agreement with the Collateral Agent and the Canadian Agent on terms reasonably acceptable to the Agents; for clarity, such intercreditor agreement shall not include provisions subordinating the debt (as opposed to the Liens) of the holder of such Secured Funded Indebtedness to the Obligations.

 

(c)           Secured Funded Indebtedness existing on the Closing Date and any Permitted Refinancing thereof.

 

7.04        Fundamental ChangesMerge, dissolve, liquidate, amalgamate, consolidate with or into another Person, (or agree to do any of the foregoing), except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom:

 

(a)           any Subsidiary of Holdings which is not a Loan Party may merge, amalgamate or consolidate with (i) a Loan Party, provided that the Loan Party shall be the continuing or surviving Person, or (ii) any other Person;

 

(b)           any Subsidiary of Holdings which is a Loan Party may merge, amalgamate or consolidate into any Subsidiary which is a Loan Party or into a Borrower, provided that in any merger, amalgamation or consolidation involving a Borrower, a Borrower shall be the continuing or surviving Person;

 

(c)           in connection with a Permitted Acquisition, any Subsidiary of Holdings may merge or amalgamate with or into or consolidate with any other Person or permit any other Person to merge, amalgamate with or into or consolidate with it; provided that (i) the Person surviving such merger or amalgamation shall be a wholly-owned Subsidiary of a Loan Party and (ii) in the case of any such merger to which any Loan Party is a party, such Loan Party is the

 

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surviving Person or, alternatively, such surviving Person executes the joinder documents contemplated by Section 6.11; and

 

(d)           any CFC that is not a Loan Party may merge into any CFC that is not a Loan Party.

 

(e)           Intermediate Holdco may dissolve or may merge or consolidate into another Person;

 

(f)            Holdings may merge or consolidate into another Person organized under the laws of the United States so long as such transaction does not constitute a Change of Control; and

 

(g)           any merger, dissolution, amalgamation or consolidation to effectuate a Disposition permitted hereunder may be consummated.

 

7.05        Dispositions.

 

Make any Disposition or enter into any agreement to make any Disposition, unless no Default or Event of Default then exists or would arise therefrom and the Net Proceeds thereof are applied to the Loans in accordance with Section 2.05 hereof.

 

7.06        Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom:

 

(a)           each Subsidiary of Parent may make Restricted Payments to any other Subsidiary or to Parent;

 

(b)           the Parent and each Subsidiary thereof may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

 

(c)           the Parent may pay cash dividends, payments and distributions in an amount sufficient to allow Holdings and Intermediate Holdco to pay expenses (other than taxes) incurred in the ordinary course of business, provided that, if Holdings or Intermediate Holdco shall own any material assets (other than the Equity Interests of Intermediate Holdco or the Parent or other assets relating to the Equity Interests of such Intermediate Holdco or the Parent), such cash dividends, payments and distributions made by the Parent with respect to Holdings and such Intermediate Holdco shall be limited to the reasonable and proportional share, as determined by the Parent in its reasonable discretion, of such expenses incurred by Holdings and the Intermediate Holdco solely relating or allocable to its Equity Interests in the Parent;

 

(d)           the Parent may pay cash dividends, payments and distributions in an amount sufficient to cover reasonable and necessary expenses (including professional fees and expenses) (other than taxes) incurred by Holdings in connection with (i) registration, public offerings and exchange listing of equity or debt securities and maintenance of the same, (ii) reporting obligations under, or in connection with compliance with, applicable laws or applicable rules of any governmental, regulatory or self-regulatory body or stock exchange, this Agreement, the Senior Term Facility, either Notes Indenture or any other agreement or instrument relating to Indebtedness of any Loan Party or any of their Subsidiaries, and (iii) indemnification and

 

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reimbursement of directors, officers and employees in respect of liabilities relating to their serving in any such capacity, or obligations in respect of director and officer insurance (including premiums therefor), provided that, if Holdings or Intermediate Holdco shall own any material assets (other than the Equity Interests of Intermediate Holdco or the Parent or other assets relating to the Equity Interests of such Intermediate Holdco or the Parent), such cash dividends, payments and distributions made by the Parent with respect to Holdings and such Intermediate Holdco shall be limited to the reasonable and proportional share, as determined by the Parent in its reasonable discretion, of such expenses incurred by Holdings solely relating or allocable to its Equity Interests in the Parent;

 

(e)           the Parent may pay, without duplication, cash dividends, payments and distributions (A) pursuant to the Tax Sharing Agreement; and (B) to pay or permit Holdings or Intermediate Holdco to pay any Related Taxes; and

 

(f)            the Parent may pay cash dividends, payments and distributions to Intermediate Holdco for distribution to Holdings, to enable the Holdings to pay cash dividends and repurchase its Equity Interests (i) in an amount not to exceed $30,000,000 in any Fiscal Year as long as, after giving pro forma effect to such dividend, payment and distribution, the RP Availability Condition is satisfied, and (ii) without limitation as to amount if after giving pro forma effect to such distribution or dividend, the Payment Conditions are satisfied.

 

7.07        Prepayments of Indebtedness.  Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness, or make any payment in violation of any subordination terms of any Subordinated Indebtedness, except (a) voluntary prepayments, repurchases, redemptions or defeasances of Consolidated Funded Indebtedness as long as the RP Availability Condition is satisfied (and, in the case of Subordinated Indebtedness, so long as such prepayment of such Indebtedness is permitted by the subordination terms thereof) and (b) as long as no Event of Default then exists, Permitted Refinancings of any such Indebtedness.

 

7.08        Change in Nature of Business.  Engage in any line of business substantially different from the Business conducted by the Loan Parties and their Subsidiaries on the date hereof or any business substantially related or incidental thereto or a reasonable extension thereof.

 

7.09        Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose, or (b) for any purposes other than (i) the refinancing of the Indebtedness under the Existing Credit Agreement, (ii) the financing of the acquisition of working capital assets, including the purchase of Inventory and Equipment in the ordinary course of business, (iii) to finance Capital Expenditures and Permitted Acquisitions (except to the extent restricted under the definition of Permitted Acquisitions) of the Loan Parties, and (iv) for general corporate purposes, in each case to the extent permitted under Law and the Loan Documents.

 

7.10        Amendment of Material Documents.

 

(a)           Except in connection with Permitted Refinancings thereof, amend, supplement, waive or otherwise modify any of the provisions of either Notes Indenture:

 

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(i)            which, in the case of the Senior Subordinated Notes Indenture, amends, supplements, waives, or otherwise modifies any subordination provisions contained therein;

 

(ii)           which shortens the fixed maturity or increases the principal amount of, or increases the rate or shortens the time of payment of interest on, or increases the amount or shortens the time of payment of any principal or premium payable whether at maturity, at a date fixed for prepayment or by acceleration or otherwise of the Indebtedness evidenced by the Notes Indentures, or increases the amount of, or accelerates the time of payment of, any fees or other amounts payable in connection therewith (except to the extent permitted by Section 7.07 hereof);

 

(iii)          which relates to any material affirmative or negative covenants or any events of default or remedies thereunder and the effect of which is to subject the Parent or any of its Subsidiaries to any more onerous or more restrictive provisions; or

 

(iv)          which otherwise adversely affects the interests of the Lenders as senior secured creditors with respect to the Notes Indentures or the interests of the Lenders under this Agreement or any other Loan Document in any material respect.

 

(b)           Amend, supplement, waive or otherwise modify any of the provisions of any Senior Term Loan Document (including pursuant to an extension, renewal, replacement or refinancing thereof) which shortens the average weighted maturity or the fixed maturity or increases the principal amount of the Indebtedness evidenced by the Senior Term Loan Documents; or effect any extension, refinancing, refunding, replacement or renewal of Indebtedness under the Senior Term Loan Documents, except for Permitted Refinancings.

 

7.11        Fiscal Year.

 

Change the Fiscal Year of Holdings, or the accounting policies or reporting practices of the Loan Parties which would in any way materially change the reporting or calculation of any component of the Combined Borrowing Base, except as required by GAAP; provided that (a) the Parent may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Parent and the Administrative Agent will, and will be authorized by the Lenders to, make any adjustments to the Loan Documents that are necessary to reflect such change in Fiscal Year, and (b) the Loan Parties may change such accounting policies if such change is reasonably acceptable to the Administrative Agent.

 

7.12        Deposit Accounts; Credit Card Processors.

 

Open new DDAs or Blocked Accounts unless the Loan Parties shall promptly thereafter have delivered to the Administrative Agent or the Canadian Agent, as applicable, appropriate Blocked Account Agreements consistent with the provisions of Section 6.12.  No Loan Party shall maintain any bank accounts or enter into any agreements with credit card processors other than the ones expressly contemplated herein or in Section 6.12 hereof.

 

7.13        Consolidated Fixed Charge Coverage Ratio.  During the continuance of a Covenant Compliance Event, permit the Consolidated Fixed Charge Coverage Ratio, calculated as of the last day of each month, on a trailing twelve (12) month basis to be less than 1.0:1.0.

 

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7.14                        Limitations on Currency, Commodity and Other Hedging Transactions.  Enter into, purchase or otherwise acquire agreements or arrangements relating to currency, commodity or other hedging except, to the extent and only to the extent that, such agreements or arrangements are entered into, purchased or otherwise acquired in the ordinary course of business of the Parent or any of its Subsidiaries with reputable financial institutions or vendors and not for purposes of speculation (any such agreement or arrangement permitted by this subsection, a “Permitted Hedging Arrangement”).

 

ARTICLE VIII
 EVENTS OF DEFAULT AND REMEDIES

 

8.01                        Events of Default.  Any of the following shall constitute an Event of Default:

 

(a)                                 Non-Payment.  The Borrowers or any other Loan Party fails (i) to pay when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C Obligations, or (ii) to pay any amount of interest on any Loan or any L/C Obligation, or pay any fee or other amount payable hereunder or under any other Loan Documents within three (3) Business Days of when due; or

 

(b)                                 Specific Covenants.  (i) Any Loan Party fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02 (except Section 6.02(c)), 6.03, 6.05, 6.07, 6.10, 6.11, or 6.12 or Article VII; or (ii) fails to perform its obligations under Section 6.02(c) within one Business Day after the date required for performance; or

 

(c)                                  Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for a period ending on the earlier of (i) the date thirty (30) days after a Responsible Officer of a Loan Party shall have discovered or should have discovered such default and (ii) the date fifteen (15) days after written notice has been given to the Parent by the Administrative Agent; or

 

(d)                                 Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith (including, without limitation, any Borrowing Base Certificate) shall be incorrect or misleading in any material respect when made or deemed made; or

 

(e)                                  Cross-Default.  (i) Any Loan Party (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness, or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded, and such event has not been waived or the holder of such Indebtedness has agreed and continues to forbear from exercising its rights on account thereof; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract

 

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as to which a Loan Party or any Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Loan Party or such Subsidiary as a result thereof is greater than $20,000,000, unless such event described in (A) or (B) has been waived or the counterparty has agreed and continues to forbear from exercising its rights on account thereof; or

 

(f)                                   Insolvency Proceedings, Etc.  Any Borrower or any Material Subsidiary that is a Loan Party institutes or consents to the institution of any proceeding or makes any filing under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, interim receiver, monitor, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or a proceeding shall be commenced or a petition filed, without the application or consent of such Person, seeking or requesting the appointment of any receiver, interim receiver, monitor, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for sixty (60) calendar days or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

 

(g)                                  Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Material Subsidiary thereof becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and is not released, vacated or fully bonded within thirty (30) days after its issuance or levy; or

 

(h)                                 Judgments.  There is entered against any Loan Party or any Subsidiary thereof (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $20,000,000 (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary judgments that have, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal, bonding or otherwise, is not in effect; or

 

(i)                                     ERISA.  Any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of either of the Parent or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is in the reasonable opinion of the Administrative Agent likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA other than a standard termination pursuant to Section 4041(b) of ERISA, (v) either of the Parent or any

 

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Commonly Controlled Entity shall, or in the reasonable opinion of the Administrative Agent is reasonably likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, would be reasonably expected to result in a Material Adverse Effect; or

 

(j)                                    Canadian Pension Plan.  Any event or condition shall occur or exist with respect to a Canadian Pension Plan that would reasonably be expected to subject any Canadian Loan Party to any tax, penalty or other liabilities under the Pension Benefits Act (Ontario) or any other applicable pension benefits standards legislation or other applicable Laws, or if a Canadian Loan Party is in default with respect to required payments to a Canadian Pension Plan or any Lien arises on the assets of a Canadian Loan Party (save for contribution amounts not yet due) in connection with any Canadian Pension Plan, where any of the foregoing events, conditions, defaults or Liens would reasonably be expected to result in a Material Adverse Effect.

 

(k)                                 Invalidity of Loan Documents.  (i)  Any provision of any Loan Document, at any time after its execution and delivery and for any reason, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document; or

 

(l)                                     Change of Control.  There occurs any Change of Control; or

 

(m)                             Cessation of Business.  Except as otherwise expressly permitted hereunder, Holdings and/or the Borrowers shall take any action to liquidate all or substantially all of its “Sally Beauty Supply” or “Beauty Systems Group” divisions in the United States or, unless the Canadian Borrower has terminated the Canadian Facility, Canada; or

 

(n)                                 Guaranty.  The termination or attempted termination of any Facility Guaranty except as expressly permitted hereunder or under any other Loan Document; or

 

(o)                                 Subordination.  (i)  Any outstanding Senior Subordinated Notes, for any reason, shall not be or shall cease to be validly subordinated as provided therein and in the applicable Notes Indenture to the obligations of the Parent under this Agreement and the other Loan Documents, or the obligations of any other Loan Party under any outstanding guarantee of the Senior Subordinated Notes, for any reason, shall not be or shall cease to be validly subordinated as provided therein and in the applicable Notes Indenture, to the obligations of the Borrowers hereunder, of the Guarantors under the Facility Guaranty, or under any other Loan Document, as the case may be, or (ii) the subordination provisions of the documents evidencing or governing any other Subordinated Indebtedness (the “Subordinated Provisions”) shall, in whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the applicable Subordinated Indebtedness; or (iii) any Borrower or any other Loan Party shall, directly or indirectly, disavow or contest in any manner (A) the effectiveness, validity or enforceability of any of the Subordination Provisions or of the applicable Notes Indenture, (B) that the Subordination Provisions or the applicable Notes Indenture exist for the benefit of the

 

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Credit Parties, or (C) that all payments of principal of or premium and interest on the applicable Subordinated Indebtedness, or realized from the liquidation of any property of any Loan Party, shall be subject to any of the Subordination Provisions.

 

8.02                        Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Agents, may, or, at the request of the Required Lenders shall, take any or all of the following actions:

 

(a)                                 declare the Commitments of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such Commitments and obligation shall be terminated;

 

(b)                                 declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties;

 

(c)                                  require that the Domestic Borrowers Cash Collateralize the Domestic L/C Obligations (other than L/C Borrowings), and require that the Canadian Loan Parties Cash Collateralize the Canadian L/C Obligations (other than L/C Borrowings); and

 

(d)                                 whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies of the Credit Parties under this Agreement, any of the other Loan Documents or Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the entry of an order for relief (or similar order) with respect to any Loan Party or any Subsidiary thereof under any Debtor Relief Laws, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Loan Parties to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent, the Canadian Agent, the L/C Issuer or any Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.

 

8.03                        Application of Funds

 

(a)                                 After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received from any Domestic Loan Party, from the liquidation of any Collateral of any Domestic Loan Party, or on account of the Obligations (other than the Canadian Liabilities), shall be applied by the Administrative Agent against the Obligations in the following order:

 

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First, to payment of that portion of the Obligations (excluding the Other Liabilities and the Canadian Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent, in its capacity as such;

 

Second, to payment of that portion of the Obligations (excluding the Other Liabilities and the Canadian Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Domestic Lenders and the L/C Issuer (on account of Domestic Letters of Credit) (including fees, charges and disbursements of counsel to the respective Domestic Lenders and the L/C Issuer (on account of Domestic Letters of Credit) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

Third, to the extent not previously reimbursed by the Domestic Lenders, to payment to the Domestic Lenders of that portion of the Obligations constituting principal and accrued and unpaid interest on any Permitted Domestic Overadvances, ratably among the Domestic Lenders in proportion to the amounts described in this clause Third payable to them;

 

Fourth, to the extent that Swing Line Loans made to the Domestic Borrowers have not been refinanced by a Domestic Committed Loan, payment to the Swing Line Lender of that portion of the Obligations constituting accrued and unpaid interest on the Swing Line Loans made to the Domestic Borrowers;

 

Fifth, to the extent that Swing Line Loans made to the Domestic Borrowers have not been refinanced by a Domestic Committed Loan, payment to the Swing Line Lender of that portion of the Obligations constituting unpaid principal on the Swing Line Loans made to the Domestic Borrowers;

 

Sixth, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Domestic Loans, Domestic L/C Borrowings and other Obligations (other than the Canadian Liabilities), and fees (including Letter of Credit Fees, other than any fees due on account of any Canadian Letter of Credit), ratably among the Domestic Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Sixth payable to them;

 

Seventh, to payment of that portion of the Obligations constituting unpaid principal of the Domestic Loans and Domestic L/C Borrowings, and to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of Domestic L/C Obligations comprised of the aggregate undrawn amount of Domestic Letters of Credit, ratably among the Domestic Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Seventh held by them;

 

Eighth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders as cash collateral to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Canadian  Agent and amounts payable under Article III) payable to the Canadian Agent, in its capacity as such;

 

Ninth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer as cash collateral to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities)

 

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constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Canadian Lenders and the L/C Issuer (on account of Canadian Letters of Credit) (including fees, charges and disbursements of counsel to the respective Domestic Lenders and the L/C Issuer (on account of Canadian Letters of Credit) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Tenth payable to them;

 

Tenth, to the extent not previously reimbursed by the Canadian Lenders and subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders as cash collateral to payment to the Canadian Lenders of that portion of the Canadian Liabilities constituting principal and accrued and unpaid interest on any Permitted Canadian Overadvances, ratably among the Canadian Lenders in proportion to the amounts described in this clause Tenth payable to them;

 

Eleventh, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan and subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the Swing Line Lender as cash collateral to payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Swing Line Loans made to the Canadian Borrower;

 

Twelfth, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan and subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the Swing Line Lender as cash collateral to payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting unpaid principal of the Swing Line Loans made to the Canadian Borrower;

 

Thirteenth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer as cash collateral to payment of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Canadian Loans, Canadian L/C Borrowings and other Canadian Liabilities, and fees (including Letter of Credit Fees not paid pursuant to clause Fifth above), ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Thirteenth payable to them;

 

Fourteenth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer as cash collateral to payment of that portion of the Canadian Liabilities constituting unpaid principal of the Canadian Loans, Canadian L/C Borrowings to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer, to Cash Collateralize that portion of Canadian L/C Obligations comprised of the aggregate undrawn amount of Canadian Letters of Credit, ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourteenth held by them;

 

Fifteenth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations for which a claim has been made as provided in Section 10.04, but excluding any Other Domestic Liabilities and Other Canadian Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Fifteenth held by them;

 

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Sixteenth, to payment of that portion of the Obligations arising from Cash Management Services, ratably among the Credit Parties in proportion to the respective amounts described in this clause Sixteenth held by them;

 

Seventeenth, to payment of all other Obligations arising from Bank Products, ratably among the Credit Parties in proportion to the respective amounts described in this clause Seventeenth held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Domestic Loan Parties or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Domestic Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Domestic Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Domestic Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

 

Any amounts received by the Canadian Agent pursuant to clauses Eighth through Fifteenth of Section 8.03(a) shall be held as cash collateral for the applicable Canadian Liabilities until the earlier of (i) the Substantial Liquidation of the Collateral granted by the Canadian Loan Parties to secure the Canadian Liabilities, or (ii) such date that the Canadian Agent and the Administrative Agent shall otherwise determine.

 

(b)                                 After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received from any Canadian Loan Party, from the liquidation of any Collateral of any Canadian Loan Party, or on account of the Canadian Liabilities, shall be applied by the Canadian Agent against the Canadian Liabilities in the following order:

 

First, to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Canadian Agent and amounts payable under Article III) payable to the Canadian Agent, in its capacity as such;

 

Second, to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Canadian Lenders and the L/C Issuer (on account of Canadian Letters of Credit) (including fees, charges and disbursements of counsel to the respective Domestic Lenders and the L/C Issuer (on account of Canadian Letters of Credit) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

Third, to the extent not previously reimbursed by the Canadian Lenders, to the Canadian Agent to be applied to that portion of the Canadian Liabilities constituting principal and accrued and unpaid interest on any Permitted Canadian Overadvances, ratably among the Canadian Lenders in proportion to the amounts described in this clause Third payable to them;

 

Fourth, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan, to payment to the Swing Line Lender of that

 

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portion of the Canadian Liabilities constituting accrued and unpaid interest on the Swing Line Loans made to the Canadian Borrower;

 

Fifth, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan, payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting unpaid principal on the Swing Line Loans made to the Canadian Borrower;

 

Sixth, to payment of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Canadian Loans, Canadian L/C Borrowings and other Canadian Liabilities, and fees (including Letter of Credit Fees due on account of Canadian Letters of Credit), ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Sixth payable to them;

 

Seventh, to payment of that portion of the Canadian Liabilities constituting unpaid principal of the Canadian Loans, Canadian L/C Borrowings, and to the Canadian Agent for the account of the L/C Issuer, to Cash Collateralize that portion of Canadian L/C Obligations comprised of the aggregate undrawn amount of Canadian Letters of Credit, ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Seventh held by them;

 

Eighth, to payment of all other Canadian Liabilities (including without limitation the cash collateralization of unliquidated indemnification obligations as provided in Section 10.04, but excluding, except as provided above, any Other Canadian Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Eighth held by them;

 

Ninth, to payment of that portion of the Canadian Liabilities arising from Cash Management Services to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Ninth held by them;

 

Tenth, to payment of all other Canadian Liabilities arising from Bank Products to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Tenth held by them; and

 

Last, the balance, if any, after all of the Canadian Liabilities have been indefeasibly paid in full, to the Canadian Loan Parties or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Canadian Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Canadian Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Canadian Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Canadian Liabilities, if any, in the order set forth above.

 

(c)                                  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received from the Foreign Borrower, from the liquidation of any Collateral of the Foreign Borrower, or on account of the Obligations, shall be applied by the Agents against the Obligations and the Canadian Liabilities in the order set forth in clauses (a) and (b) above as the Agents shall determine.

 

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8.04                        Waivers By Loan Parties.  Except as otherwise provided for in this Agreement or by applicable Law, each Loan Party waives (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, and hereby ratifies and confirms whatever any Agent may do in this regard, (b) all rights to notice and a hearing prior to any Agent’s taking possession or control of, or to any Agent’s replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing either Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption Laws.

 

ARTICLE IX
 ADMINISTRATIVE AGENT

 

9.01                        Appointment and Authority.

 

(a)                                 Each of the Credit Parties hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.

 

(b)                                 Each of the Credit Parties hereby irrevocably appoints Bank of America-Canada Branch to act on its behalf as the Canadian Agent hereunder and under the other Loan Documents and authorizes the Canadian Agent to take such actions on its behalf and to exercise such powers as are delegated to the Canadian Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.

 

(c)                                  Each of the Lenders (in its capacities as a Lender), the Swing Line Lender and the L/C Issuer hereby irrevocably appoints Bank of America as Collateral Agent and authorizes the Collateral Agent to act as the agent of such Lender, Swing Line Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto.  In this connection, the Collateral Agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article IX and Article X, as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents, as if set forth in full herein with respect thereto.

 

(d)                                 Each of the Lenders (in its capacities as a Lender), the Swing Line Lender and the L/C Issuer hereby irrevocably appoints Bank of America Canada-Branch as Canadian Agent and authorizes the Canadian Agent to act as the agent of such Lender, Swing Line Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Canadian Liabilities, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Canadian Agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Canadian Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the direction of the Canadian Agent), shall be entitled to the benefits of all provisions of this Article IX and Article X, as though such co-agents, sub-agents and attorneys- in-fact were the “collateral agent” under the Loan Documents, as if set forth in full herein with respect thereto.

 

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(e)                                  Without limiting the generality of the foregoing Section 9.01(c), for the purposes of creating a solidarité active in accordance with article 1541 of the Civil Code of Québec between each Credit Party that is owed any Canadian Liabilities, taken individually, on the one hand, and the Canadian Agent, on the other hand, each Canadian Loan Party and each such Credit Party acknowledge and agree with the Canadian Agent that such Credit Party and the Canadian Agent are hereby conferred the legal status of solidary creditors of the Canadian Loan Parties in respect of all Canadian Liabilities, present and future, owed by any Canadian Loan Party to each such Credit Party and the Canadian Agent (collectively, for the purposes of this paragraph, the “solidary claim”).  Accordingly, but subject (for the avoidance of doubt) to article 1542 of the Civil Code of Québec, the Canadian Loan Parties are irrevocably bound towards the Canadian Agent and each such Credit Party in respect of the entire solidary claim of the Canadian Agent and such Credit Party.  As a result of the foregoing, the Canadian Loan Parties confirm and agree that subject to Section 9.01(b), above, the rights of the Canadian Agent and each of the Credit Parties who are owed Canadian Liabilities from time to time a party to this Agreement or any of the other Loan Documents by way of assignment or otherwise are solidary and, as regards the Canadian Liabilities owing from time to time to each such Credit Party, each of the Canadian Agent and such Credit Party is entitled, when permitted pursuant to Section 9.01, to: (i) demand payment of all outstanding amounts from time to time in respect of the Canadian Liabilities; (ii) exact the whole performance of such Canadian Liabilities from the Canadian Loan Parties; (iii) benefit from the Canadian Agent’s Liens in the Collateral in respect of such Canadian Liabilities; (iv) give a full acquittance of such Canadian Liabilities (each Credit Party that is owed Canadian Liabilities hereby agreeing to be bound by any such acquittance); and (v) exercise all rights and recourses under the Loan Documents with respect to those Canadian Liabilities.  The Canadian Liabilities of the Canadian Loan Parties will be secured by the Canadian Agent’s Liens in the Collateral and the Canadian Agent and the Credit Parties who are owed Canadian Liabilities will have a solidary interest therein.

 

(f)                                    The provisions of this Section 9.01 are for the benefit of the Agents, the Domestic Lenders and the L/C Issuer, and no Loan Party or any Subsidiary thereof shall have rights as a third party beneficiary of any of such provisions (other than the provisions of Section 9.06).

 

9.02                        Rights as a Lender.  The Persons serving as the Agents hereunder shall have the same rights and powers in their capacity as a Lender as any other Lender and may exercise the same as though they were not the Administrative Agent, the Canadian Agent or the Collateral Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent, the Canadian Agent or the Collateral Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent, the Canadian Agent or the Collateral Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03                        Exculpatory Provisions.  The Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, the Agents:

 

(a)                                  shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

(b)                                 shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent, the Canadian Agent or the Collateral Agent, as applicable, is required to exercise as directed in writing by the Required Lenders (or

 

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such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that no Agent shall be required to take any action that, in its respective opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Law; and

 

(c)                                  shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent, the Canadian Agent, the Collateral Agent, the Arranger or any of their Affiliates in any capacity.

 

No Agent shall be liable to any Credit Party for any action taken or not taken by it (i) with the Consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as such Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.

 

The Agents shall not be deemed to have knowledge of any Default unless and until notice describing such Default is given to such Agent by the Loan Parties, a Lender or the L/C Issuer.  In the event that the Agents obtains such actual knowledge or receives such a notice, the Agents shall give prompt notice thereof to each of the other Lenders.  Upon the occurrence of an Event of Default, the Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.  Unless and until the Agents shall have received such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as they shall deem advisable in the best interest of the Credit Parties.  In no event shall the Agents be required to comply with any such directions to the extent that any Agent believes that its compliance with such directions would be unlawful.

 

The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.

 

9.04                        Reliance by Agents.

 

Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including, but not limited to, any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent and the Canadian Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent or the Canadian Agent, as applicable, shall have received written notice to the

 

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contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  Each Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

9.05                        Delegation of Duties.  Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent.  Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as such Agent.

 

9.06                        Resignation of Agents.  Any Agent may at any time give written notice of its resignation to the Lenders, the L/C Issuer and the Parent.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Parent, to appoint a successor, which, in the case of any Agent, shall be a bank with an office in the United States, or a Affiliate of any such bank with an office in the United States and shall, unless an Event of Default has occurred and is continuing at the time of such appointment, be reasonably acceptable to the Parent (whose consent shall not be unreasonably withheld or delayed), and in the case of the Canadian Agent, shall be a financial institution that is listed on Schedule I, II or III of the Bank Act (Canada), has received an approval to have a financial establishment in Canada pursuant to Section 522.21 of the Bank Act (Canada) or is not a foreign bank for purposes of the Bank Act (Canada), and if such financial institution is not resident in Canada and is not deemed to be resident in Canada for purposes of the Income Tax Act (Canada), then such financial institution deals at arm’s length with each Canadian Loan Party for purposes of the Income Tax Act (Canada) and shall, unless an Event of Default has occurred and is continuing at the time of such appointment, be reasonably acceptable to the Canadian Borrower (whose consent shall not be unreasonably withheld or delayed).  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent or Canadian Agent, as applicable, meeting the qualifications set forth above; provided that if the Administrative Agent or the Canadian Agent shall notify the Parent and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by such Person on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent or Canadian Agent, as applicable, shall continue to hold such collateral security until such time as a successor Administrative Agent or Canadian Agent, as applicable, is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent or Canadian Agent, as applicable, shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent or Canadian Agent, as applicable, as provided for above in this Section 9.06.  Upon the acceptance of a successor’s appointment as Administrative Agent or Canadian Agent, as applicable, hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section 9.06).  The fees payable by the Borrowers to a successor Administrative Agent or Canadian Agent, as applicable, shall be the same as those payable to its predecessor unless otherwise agreed between the Parent and such successor.  After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect

 

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of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Administrative Agent or Canadian Agent hereunder.

 

9.07                        Non-Reliance on Agents and Other Lenders.  Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Agents, the Arranger or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Agents, the Arranger or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.  Except as provided in Section 9.12, the Agents and the Arranger shall not have any duty or responsibility to provide any Credit Party with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agents or the Arranger.

 

9.08                        No Other Duties, Etc.  Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers, or Documentation Agent listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as an Agent, the Collateral Agent, a Lender or the L/C Issuer hereunder.

 

9.09                        Agents May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Agents (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agents shall have made any demand on the Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise

 

(a)                                  to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer, the Agents and the other Credit Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer, the Agents, such Credit Parties and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer the Agents and such Credit Parties under Sections 2.03(i), 2.03(j), 2.09 and 10.04) allowed in such judicial proceeding; and

 

(b)                                 to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, interim receiver, assignee, trustee, monitor, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Agents and, if the Agents shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Agents any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and its agents and counsel, and any other amounts due the Agents under Sections 2.09 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Agents to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer or to authorize the Agents to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.

 

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9.10                        Collateral and Guaranty Matters.  The Credit Parties irrevocably authorize the Collateral Agent and the Canadian Agent, at their option and in their discretion to, or, in the event of any Disposition permitted hereunder, the Collateral Agent or the Canadian Agent shall,

 

(a)                                  release any Lien on any property granted to or held by any Agent under any Loan Document (i) upon termination of the Aggregate Total Commitments and Payment in Full, (ii) solely with respect to any Lien on any property of the Canadian Loan Parties, upon termination of the Canadian Total Commitments and Payment in Full of all Canadian Liabilities, (iii) that is Disposed of or to be Disposed of as part of or in connection with any Disposition permitted hereunder or under any other Loan Document, or (iv) if approved, authorized or ratified in writing by the Required Lenders in accordance with Section 10.01;

 

(b)                                 subordinate any Lien on any property granted to or held by the Administrative Agent or the Canadian Agent under any Loan Document to the holder of any Lien on such property that is permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)                                  release any Guarantor from its obligations under any Facility Guaranty and each other applicable Loan Document if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

 

Upon request by any Agent at any time, the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents) will confirm in writing the Collateral Agent’s or the Canadian Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Facility Guaranty and each other applicable Loan Document pursuant to this Section 9.10.  In each case as specified in this Section 9.10, the Collateral Agent or the Canadian Agent will, at the Loan Parties’ expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and Lien granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Facility Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

 

9.11                        Notice of Transfer.

 

The Agents may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Loans and Commitments for all purposes, unless and until, and except to the extent, an Assignment and Assumption shall have become effective as set forth in Section 10.06.

 

9.12                        Reports and Financial Statements.

 

By signing this Agreement, each Lender:

 

(a)                                  agrees to promptly furnish the Agents with a summary of all Other Domestic Liabilities or Other Canadian Liabilities due or to become due to such Lender. In connection with any distributions to be made hereunder, the Administrative Agent and the Canadian Agent shall be entitled to assume that no amounts are due to any Lender on account of Other Liabilities unless the Agents have received written notice thereof from such Lender;

 

(b)                                 is deemed to have requested that the Administrative Agent or the Canadian Agent, as applicable, furnish such Lender, promptly after they become available, copies of all financial statements, Borrowing Base Certificates, notices or other written communications

 

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required to be delivered by any Loan Party hereunder and all commercial finance examinations and appraisals of the Collateral received by the Agents (collectively, the “Reports”) and the Administrative Agent and the Canadian Agent each hereby agrees to honor each such request;

 

(c)                                  expressly agrees and acknowledges that neither the Administrative Agent nor the Canadian Agent makes any representation or warranty as to the accuracy of the Reports, and shall not be liable for any information contained in any Report;

 

(d)                                 expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agents, or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records, as well as on representations of the Loan Parties’ personnel;

 

(e)                                  agrees to keep all Reports confidential in accordance with the provisions of Section 10.07 hereof; and

 

(f)                                    without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agents and any such other Person preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrowers, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a Loan or Loans; and (ii) to pay and protect, and indemnify, defend, and hold the Agents and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agents and any such other Person preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

 

9.13                        Agency for Perfection.

 

Each Agent and Lender hereby appoints each other Agent and Lender as agent for the purpose of perfecting Liens for the benefit of the Agents and the Lenders, in assets which, in accordance with Article 9 of the UCC, the PPSA or any other applicable Law of the United States or Canada can be perfected only by possession.  Should any Lender (other than the Agents) obtain possession of any such Collateral, such Lender shall notify the Agents thereof, and, promptly upon the Administrative Agent’s or the Canadian Agent’s request therefor, shall deliver such Collateral to the Administrative Agent or the Canadian Agent, as applicable, or otherwise deal with such Collateral in accordance with the Administrative Agent’s or the Canadian Agent’s instructions.

 

9.14                        Indemnification of Agents.  The Lenders shall indemnify the Agents (to the extent not reimbursed by the Loan Parties and without limiting the obligations of Loan Parties hereunder), ratably according to their Applicable Percentages in effect on the date on which indemnification is sought under this subsection 10.6 (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Commitment Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by any Agent in connection therewith; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or

 

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disbursements resulting from such Agent’s gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

9.15                        Relation among Lenders.  The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agents) authorized to act for, any other Lender.

 

9.16                        Defaulting Lender.

 

(a)                                  If for any reason any Lender shall fail or refuse to abide by its obligations under this Agreement, including without limitation its obligation to make available to Administrative Agent or the Canadian Agent, as applicable, its Applicable Percentage of any Loans, expenses or setoff or purchase its Applicable Percentage of a participation interest in the Swing Line Loans or L/C Borrowings and such failure is not cured within one (1) Business Day of receipt from the Administrative Agent of written notice thereof, then, in addition to the rights and remedies that may be available to the other Credit Parties, the Loan Parties or any other party at law or in equity, and not at limitation thereof, (i) such Defaulting Lender’s right to participate in the administration of, or decision-making rights related to, the Obligations, this Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal (other than the Defaulting Lender’s rights pursuant to Section 10.01(a)), and (ii) if any of the other Lenders have made Loans on behalf of a Defaulting Lender, a Defaulting Lender shall be deemed to have assigned any and all payments due to it from the Loan Parties, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining non-Defaulting Lenders for application to, and reduction of, their proportionate shares of all outstanding Obligations until, as a result of application of such assigned payments the Lenders’ respective Applicable Percentages of all outstanding Obligations shall have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency, and (iii) at the option of the Administrative Agent, any amount payable to such Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Administrative Agent as cash collateral for future funding obligations of the Defaulting Lender in respect of any Loan or existing or future participating interest in any Swing Line Loan or Letter of Credit.  The Defaulting Lender’s decision-making and participation rights and rights to payments as set forth in clauses (i) and (ii) hereinabove shall be restored only upon the payment by the Defaulting Lender of its Applicable Percentage of any Obligations, any participation obligation, or expenses as to which it is delinquent, together with interest thereon at the rate set forth in Section 2.08(b) hereof from the date when originally due until the date upon which any such amounts are actually paid.

 

(b)                                 The non-Defaulting Lenders shall also have the right, but not the obligation, in their respective, sole and absolute discretion, to cause the termination and assignment, without any further action by the Defaulting Lender for no cash consideration (pro rata, based on the respective Domestic Commitments of those Domestic Lenders electing to exercise such right, and the respective Canadian Commitments of those Canadian Lenders electing to exercise such right), of the Defaulting Lender’s Domestic Commitment and/or Canadian Commitment, as applicable, to fund future Loans.  Upon any such purchase of the Applicable Percentage of any Defaulting Lender, the Defaulting Lender’s share in future Credit Extensions and its rights under the Loan Documents with respect thereto shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest, including, if so requested, an Assignment and Assumption.

 

(c)                                  Each Defaulting Lender shall indemnify the Administrative Agent or the Canadian Agent, as applicable, and each non-Defaulting Lender from and against any and all loss, damage or expenses, including but not limited to reasonable attorneys’ fees and funds advanced by the

 

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Administrative Agent or the Canadian Agent, as applicable, or by any non-Defaulting Lender, on account of a Defaulting Lender’s failure to timely fund its Applicable Percentage of a Loan or to otherwise perform its obligations under the Loan Documents.

 

9.17                        Risk Participation.

 

(a)                                  Upon the earlier of Substantial Liquidation or the Determination Date, if all Canadian Liabilities and the Foreign Liabilities incurred under the Canadian Borrowing Base have not been repaid in full (other than the Other Liabilities of the Canadian Borrower and its Subsidiaries), then the Domestic Lenders shall purchase from the Canadian Lenders (on the date of Substantial Liquidation or the Determination Date, as applicable) such portion of the Canadian Liabilities (other than Other Liabilities relating to the Canadian Borrower and its Subsidiaries) so that each Lender shall, after giving effect to any such purchases, hold its Liquidation Percentage of all outstanding Canadian Liabilities and all other Obligations.

 

(b)                                 Upon the earlier of Substantial Liquidation or the Determination Date, if all Obligations of the Domestic Borrowers (including the Foreign Liabilities but excluding those Obligations relating to the Canadian Liabilities or the Other Liabilities of the Domestic Borrowers) have not been repaid in full, then the Canadian Lenders shall purchase from the Domestic Lenders (on the date of Substantial Liquidation or the Determination Date, as applicable) such portion of such Obligations so that each Lender shall, after giving effect to any such purchases, hold its Liquidation Percentage of all outstanding Obligations of the Domestic Borrowers and the Canadian Liabilities.

 

(c)                                  All purchases of Obligations under this Section 9.17 shall be at par, for cash, with no premium, discount or reduction.

 

(d)                                 No Lender shall be responsible for any default of any other Lender in respect of any other Lender’s obligations under this Section 9.17, nor shall the obligations of any Lender hereunder be increased as a result of such default of any other Lender.  Each Lender shall be obligated to the extent provided herein regardless of the failure of any other Lender to fulfill its obligations hereunder.

 

(e)                                  Each Lender shall execute such instruments, documents and agreements and do such other actions as may be necessary or proper in order to carry out more fully the provisions and purposes of this Section 9.17 and the purchase of Obligations or the Canadian Liabilities, as applicable, as provided herein.

 

(f)                                    The obligations of each Lender under this Section 9.17 are irrevocable and unconditional and shall not be subject to any qualification or exception whatsoever including, without limitation, lack of validity or enforceability of this Agreement or any of the Loan Documents or the existence of any claim, setoff, defense or other right which any Loan Party may have at any time against any of the Lenders.

 

(g)                                 No fees required to be paid on any assignment pursuant to Section 10.06 of this Agreement shall be payable in connection with any assignment under this Section 9.17.

 

9.18                        Domestic Parallel Debt

 

(a)                                  Each Loan Party hereby irrevocably and unconditionally undertakes to pay to the Collateral Agent as a separate and independent obligation an amount equal to the total amount owed from time to time by such Loan Party to any Credit Party in respect of its Domestic Principal Obligations as they may exist from time to time. The payment

 

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undertaking of each Loan Party to the Collateral Agent under this Section 9.18 (a) is hereinafter referred to as a “Domestic Parallel Debt”. Each Domestic Parallel Debt will be payable in the currency or currencies of the relevant Domestic Principal Obligations.

 

(b)                                 For the avoidance of doubt it is confirmed that Section 9.18 (a) means that each Domestic Parallel Debt constitutes a payment obligation of the relevant Loan Party to the Collateral Agent which is separate and independent from, and without prejudice to, its Domestic Principal Obligations and shall become due and payable to the Collateral Agent as soon as, and to the extent that, any amount owed by such Loan Party to the relevant Credit Party under its Domestic Principal Obligations becomes due and payable.

 

(c)                                  Each of the parties to this Agreement acknowledges that each Domestic Parallel Debt represents the Collateral Agent’s own claim to receive payment of such Domestic Parallel Debt from the relevant Loan Party and that the amount which may become due and payable by a Loan Party under its Domestic Parallel Debt pursuant to this Section 9.18 shall never exceed the total amount which becomes due and payable by such Loan Party to the Credit Parties under its Domestic Principal Obligations.

 

(d)                                 Notwithstanding any of the other provisions of this Section 9.18:

 

(i)                                     any amount due and payable by a Loan Party under its Parallel Debt shall, to the extent such Loan Party shall have paid any amounts to any Credit Party under its Domestic Principal Obligations or any Credit Party otherwise receives any amount in payment of such Domestic Principal Obligations (other than by virtue of Section 9.18 (f)), be decreased by equivalent amounts as if such amounts were received directly in payment of such Domestic Parallel Debt on the date of receipt by the relevant Credit Party of such amount in payment of such Domestic Principal Obligations; and

 

(ii)                                  to the extent that any Loan Party shall have paid any amounts to the Collateral Agent under its Domestic Parallel Debt or the Collateral Agent shall have otherwise received monies in payment of such Parallel Debt, the Domestic Principal Obligations of such Loan Party to the relevant Credit Parties shall be decreased by equivalent amounts as if such amounts were received directly in payment of such Domestic Principal Obligations on the date of receipt by the Collateral Agent of such amount in payment of such Domestic Parallel Debt.

 

(e)                                  For the purpose of this Section 9.18 the Collateral Agent acts in its own name and on behalf of itself but for the benefit of the Credit Parties and any security right granted to the Collateral Agent to secure the Domestic Parallel Debt is granted to the Collateral Agent in its capacity of sole creditor of the Domestic Parallel Debt.

 

(f)                                    All payments received by the Collateral Agent shall be applied towards payment of the relevant Domestic Parallel Debt, whereupon the Collateral Agent shall distribute such amounts to the Credit Parties who are creditors in accordance with the terms of this Agreement.

 

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9.19                        Foreign Parallel Debt

 

(a)                                  Each Loan Party hereby irrevocably and unconditionally undertakes to pay to the Canadian Agent as a separate and independent obligation an amount equal to the total amount owed from time to time by such Loan Party to any Credit Party in respect of its Foreign Principal Obligations as they may exist from time to time. The payment undertaking of each Loan Party to the Canadian Agent under this Section 9.19 (a) is hereinafter referred to as a “Foreign Parallel Debt”. Each Foreign Parallel Debt will be payable in the currency or currencies of the relevant Foreign Principal Obligations.

 

(b)                                 For the avoidance of doubt it is confirmed that Section 9.19 (a) means that each Foreign Parallel Debt constitutes a payment obligation of the relevant Loan Party to the Canadian Agent which is separate and independent from, and without prejudice to, its Foreign Principal Obligations and shall become due and payable to the Canadian Agent as soon as, and to the extent that, any amount owed by such Loan Party to the relevant Credit Party under its Foreign Principal Obligations becomes due and payable.

 

(c)                                  Each of the parties to this Agreement acknowledges that each Foreign Parallel Debt represents the Canadian Agent’s own claim to receive payment of such Foreign Parallel Debt from the relevant Loan Party and that the amount which may become due and payable by a Loan Party under its Foreign Parallel Debt pursuant to this Section 9.19 shall never exceed the total amount which becomes due and payable by such Loan Party to the Credit Parties under its Foreign Principal Obligations.

 

(d)                                 Notwithstanding any of the other provisions of this Section 9.19:

 

(i)                                     any amount due and payable by a Loan Party under its Foreign Parallel Debt shall, to the extent such Loan Party shall have paid any amounts to any Credit Party under its Foreign Principal Obligations or any Credit Party otherwise receives any amount in payment of such Foreign Principal Obligations (other than by virtue of Section 9.19 (f)), be decreased by equivalent amounts as if such amounts were received directly in payment of such Foreign Parallel Debt on the date of receipt by the relevant Credit Party of such amount in payment of such Foreign Principal Obligations; and

 

(ii)                                  to the extent that any Loan Party shall have paid any amounts to the Canadian Agent under its Foreign Parallel Debt or the Canadian Agent shall have otherwise received monies in payment of such Foreign Parallel Debt, the Foreign Principal Obligations of such Loan Party to the relevant Secured Party shall be decreased by equivalent amounts as if such amounts were received directly in payment of such Foreign Principal Obligations on the date of receipt by the Canadian Agent of such amount in payment of such Foreign Parallel Debt.

 

(e)                                  For the purpose of this Section 9.19 the Canadian Agent acts in its own name and on behalf of itself but for the benefit of the Credit Parties and any security right granted to the Canadian Agent to secure the Foreign Parallel Debt is granted to the Canadian Agent in its capacity of sole creditor of the Foreign Parallel Debt.

 

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(f)                                    All payments received by the Canadian Agent shall be applied towards payment of the relevant Foreign Parallel Debt, whereupon the Canadian Agent shall distribute such amounts to the Credit Parties who are creditors in accordance with the terms of this Agreement.

 

9.20                        Parallel Debt Savings Clause.

 

Notwithstanding any provision of Section 9.18 and 9.19 or any other provision of this Agreement, neither the Canadian Loan Parties nor the Foreign Borrower shall be liable for the payment of the Obligations incurred by the Domestic Borrowers (other than the Foreign Borrower) and Domestic Loan Parties. Rather, it is the intent of Sections 9.18 and 9.19 to create parallel debts for purpose of Dutch law.

 

ARTICLE X
 MISCELLANEOUS

 

10.01                 Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Administrative Agent, with the Consent of the Required Lenders, and the Parent or the applicable Loan Party, as the case may be, and each such waiver or Consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

 

(a)                                  extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written Consent of such Lender;

 

(b)                                 postpone any date fixed by this Agreement or any other Loan Document for (i) any scheduled payment (including the Maturity Date) of principal, interest, fees or other amounts due hereunder or under any of the other Loan Documents without the written Consent of each Lender directly affected thereby (it being understood that postponements of the date for mandatory prepayments required by Section 2.05 may be made with the consent of the Required Lenders and shall not be subject to this clause (b)) or (ii) any scheduled or mandatory reduction of the Aggregate Total Commitments hereunder or under any other Loan Document, without the written Consent of each Lender directly affected thereby;

 

(c)                                  reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or any fees or other amounts payable hereunder or under any other Loan Document, without the written Consent of each Lender directly affected thereby; provided, however, that only the Consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest or Letter of Credit Fees at the Default Rate;

 

(d)                                 change Section 2.13 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written Consent of each Lender directly affected thereby;

 

(e)                                  change any provision of this Section or the definition of “Required Lenders”, or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, or consent to the assignment or transfer by any Loan Parties of any of its rights and obligations under this Agreement and the other Loan Documents, in each case without the written Consent of each Lender;

 

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(f)                                    except as expressly permitted hereunder or under any other Loan Document, release, or limit the liability of, any Loan Party without the written Consent of each Lender;

 

(g)                                 except for Dispositions permitted under Section 7.05 hereof or as provided in Section 9.10, release all or substantially all of the Collateral from the Liens of the Security Documents without the written Consent of each Lender;

 

(h)                                 change the definition of the term “Domestic Borrowing Base”, “Canadian Borrowing Base”, “Combined Borrowing Base” or any component definition of either term, if as a result thereof the amount of credit available to the Borrowers hereunder would be increased without the written Consent of each Lender, provided that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves with respect to the Domestic Borrowing Base, or the Canadian Agent to change, establish or eliminate any Reserves with respect to the Canadian Borrowing Base even if such change or elimination results in an increase in the amount of credit available to the Borrowers hereunder;

 

(i)                                     modify the definition of “Domestic Permitted Overadvance” or the definition of “Canadian Permitted Overadvance” so as to increase the amount thereof or, except as provided in such definitions, the time period for a Domestic Permitted Overadvance or a Canadian Permitted Overadvance without the written Consent of each Lender; and

 

(j)                                     except as expressly permitted herein or in any other Loan Document, subordinate the Obligations hereunder or the Liens granted hereunder or under the other Loan Documents, to any other Indebtedness or Lien, as the case may be without the written Consent of each Lender;

 

and, provided  further, that (i) no amendment, waiver or Consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or Consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or Consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (iv) no amendment, waiver or Consent shall, unless in writing and signed by the Collateral Agent in addition to the Lenders required above, affect the rights or duties of the Collateral Agent under this Agreement or any other Loan Document, (v) no amendment, waiver or Consent shall, unless in writing and signed by the Canadian Agent in addition to the Lenders required above, affect the rights or duties of the Canadian Agent under this Agreement or any other Loan Document, and (vi) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary herein, no Deteriorating Lender or Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or Consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

 

Notwithstanding any provision herein to the contrary, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Agents and the Borrowers (y) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the existing Obligations and the accrued interest and fees in respect thereof, and (z) to include, as appropriate, the Lenders holding such credit facilities in any required vote or action of the Applicable Lenders.

 

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If any Lender does not Consent (a “Non-Consenting Lender”) to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the Consent of each Lender and that has been approved by the Required Lenders, the Parent may replace such Non-Consenting Lender in accordance with Section 10.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Parent to be made pursuant to this paragraph).

 

10.02                 Notices; Effectiveness; Electronic Communications.

 

(a)                                  Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)                                     if to the Loan Parties, the Agents, the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

 

(ii)                                  if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

 

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).  Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)                                 Electronic Communications.  Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent or the Canadian Agent, as applicable, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent or the Parent or the Canadian Agent and the Canadian Borrower may, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

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(c)                                  The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Agents or any of their Related Parties (collectively, the “Agent Parties”) have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Loan Parties’ or the Agent Parties’ transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

(d)                                 Change of Address, Etc.  Each of the Loan Parties, the Agents, the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Parent, the Agents, the L/C Issuer and the Swing Line Lender.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

 

(e)                                  Reliance by Agents, L/C Issuer and Lenders.  The Agents, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Loan Parties even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Loan Parties shall indemnify the Agents, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Loan Parties.  All telephonic notices to and other telephonic communications with the Agents may be recorded by the Agents, and each of the parties hereto hereby consents to such recording.

 

10.03                 No Waiver; Cumulative Remedies.  No failure by any Credit Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Credit Party may have had notice or knowledge of such Default at the time.

 

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10.04                 Expenses; Indemnity; Damage Waiver.

 

(a)                                  Costs and Expenses.  The Borrowers shall pay all Credit Party Expenses.

 

(b)                                 Indemnification by the Loan Parties.  The Loan Parties shall indemnify the Agents (and any sub-agent thereof), each other Credit Party, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis) from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs, and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Agents (and any sub-agents thereof) and their Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Loan Party or any of its Subsidiaries, or any Environmental Liability related in any way to any Loan Party or any of its Subsidiaries, (iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Borrower or any other Loan Party or any of the Loan Parties’ directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by a Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrowers or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction; provided that with respect to the Canadian Loan Parties, “Indemnitees” shall only refer to the Canadian Credit Parties and each Related Party of the Canadian Credit Parties.  provided  further that reimbursement of legal expenses shall be limited to the expenses of one counsel (and any necessary local counsel) per Indemnitee.

 

(c)                                  Waiver of Consequential Damages, Etc.  To the fullest extent permitted by Law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction. None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07.  Each Loan Party shall look solely to its insurance companies or any other parties other

 

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than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees.  If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees.

 

(d)                                 Payments.  All amounts due under this Section shall be payable on demand therefor.

 

(e)                                  Survival.  The agreements in this Section shall survive the resignation of any Agent, the Swingline Lender, and the L/C Issuer, the assignment of any Commitment or Loan by any Lender, the replacement of any Lender, the termination of the Aggregate Total Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

10.05                 Payments Set Aside.  To the extent that any payment by or on behalf of the Loan Parties is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a receiver, interim receiver, trustee, monitor, custodian, conservator, liquidator, rehabilitator or similar officer, or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, (b) each Domestic Lender and the L/C Issuer (with respect to Domestic Letters of Credit) severally agrees to pay to the Agents upon demand its Applicable Percentage (without duplication) of any amount so recovered from or repaid by the Agents, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect, and (c) each Canadian Lender and the L/C Issuer (with respect to Canadian Letters of Credit) severally agrees to pay to the Canadian Agent upon demand its Applicable Percentage (without duplication) of any amount so recovered from or repaid by the Canadian Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Canadian Prime Rate from to time in effect.  The obligations of the Lenders and the L/C Issuer under clause (b) and clause (c) of the preceding sentence shall survive the Payment in Full of the Obligations and the termination of this Agreement.

 

10.06                 Successors and Assigns.

 

(a)                                  Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written Consent of the Agents and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of Section 10.06(b), (ii) by way of participation in accordance with the provisions of subsection Section 10.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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(b)                                 Assignments by Lenders.  Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) and the Loans (including for purposes of this Section 10.06(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)                                     Minimum Amounts.

 

(A)                              in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, no minimum amount need be assigned; and

 

(B)                                in any case not described in subsection (b)(i)(A)of this Section, the aggregate amount of the Domestic Commitment or Canadian Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Domestic Loans or Canadian Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Default has occurred and is continuing, the Parent otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;

 

(ii)                                  Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Domestic Loans or the Domestic Commitment assigned or the Canadian Loans or the Canadian Commitment assigned, as applicable, except that this clause (ii) shall not apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;

 

(iii)                               Required Consents.  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

 

(A)                              the consent of the Parent (such consent not to be unreasonably withheld or delayed) shall be required unless (1) a Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender; and

 

(B)                                the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of any Commitment if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and

 

(iv)                              Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any

 

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assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

 

(v)                                 Restrictions on Canadian Lenders.  Unless otherwise agreed by the Administrative Agent, no Person may be a Canadian Lender unless it (or any of its Affiliates) also has a Domestic Commitment in an amount at least equal to its Canadian Commitment.

 

(vi)                              Assignments to Canadian Lenders.  The amount assigned by a Canadian Lender to its assignee (each such an assignee a “New Canadian Lender”) in relation to a Canadian Loan and/or commitments under this Agreement made available to any Dutch Loan Party shall be at least EUR 50,000 (or its equivalent in another currency) or, if it is less, the New Canadian Lender shall confirm in writing to the relevant Dutch Loan Party that such New Canadian Lender is a Professional Market Party

 

(vii)                           Representation by New Canadian Lender.  If on the date on which a New Canadian Lender becomes a Canadian Lender, such Canadian Lender participates in Canadian Loans that may be made available to a Dutch Loan Party and the amount of such participation shall be less than EUR 50,000 (or its equivalent in another currency) and it is a requirement under Dutch law that such New Canadian Lender be a Professional Market Party, such New Canadian Lender will make a representation that it is a Professional Market Party and will undertake, to the extent necessary, to provide its reasonable assistance to each Dutch Loan Party in verifying such New Canadian Lender’s status as a Professional Market Party.

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment.  Upon request, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

 

(c)                                  Register.  The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, absent manifest error, and the Loan Parties, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Parent and any Lender at any reasonable time and from time to time upon reasonable prior notice.

 

(d)                                 Participations.  Any Lender may at any time, without the consent of, or notice to, the Loan Parties or the Administrative Agent, sell participations to any Person (other than a natural person or the Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a

 

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portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Domestic Commitment, Canadian Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties, the Agents, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 10.07 as if such Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant.  Subject to subsection (e) of this Section, the Loan Parties agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05  to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b).  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08  as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.

 

(e)                                  Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04  than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Parent’s prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Parent is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a Lender.

 

(f)                                    Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(g)                                 Electronic Execution of Assignments.  The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

(h)                                 Resignation as L/C Issuer or Swing Line Lender after Assignment or Resignation.  Notwithstanding anything to the contrary contained herein, if at any time Bank of America or Bank of America Canada-Branch assigns all of its Commitment and Loans pursuant to subsection (b) above, or resigns as Administrative Agent or Canadian Agent in accordance with the provisions of Section 9.06, Bank of America or Bank of America Canada-Branch and its Affiliates may, (i) upon thirty (30) days’ notice to the Parent and the Lenders, resign as an L/C Issuer and/or (ii) with duplication of any notice required under Section 9.06, upon thirty (30) days’ notice to the Parent, resign as a Swing Line

 

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Lender.  In the event of any such resignation as L/C Issuer or Swing Line Lender, the Parent shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Parent to appoint any such successor shall affect the resignation of Bank of America or Bank of America Canada-Branch as an L/C Issuer or a Swing Line Lender, as the case may be.  If Bank of America or Bank of America Canada-Branch and its Affiliates resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America or Bank of America Canada-Branch to effectively assume the obligations of Bank of America or Bank of America Canada-Branch and any of its Affiliates with respect to such Letters of Credit.

 

10.07                 Treatment of Certain Information; Confidentiality.  Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates, Approved Funds, and to its and its Affiliates’ and Approved Funds’ respective partners, directors, officers, employees, agents, funding sources, attorneys, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap or derivative transaction relating to any Loan Party and its obligations, (g) with the consent of the Parent or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to any Credit Party or any of their respective Affiliates on a non-confidential basis from a source other than the Loan Parties.

 

For purposes of this Section, “Information” means all information received from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary thereof, provided that, in the case of information received from any Loan Party or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning the Loan Parties or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with Law, including Federal and state securities Laws.

 

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10.08                 Right of Setoff.  If an Event of Default shall have occurred and be continuing or if any Lender shall have been served with a trustee process or similar attachment relating to property of a Loan Party, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent or the Required Lenders, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) or other property at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrowers or any other Loan Party against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, regardless of the adequacy of the Collateral, and irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees to notify the Parent and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.  Notwithstanding the foregoing, any amounts of the Canadian Loan Parties so offset shall be applied solely to the Canadian Liabilities.

 

10.09                 Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Law (the “Maximum Rate”).  If the Administrative Agent, the Canadian Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans and the other Obligations or, if it exceeds such unpaid principal and other Obligations, refunded to the Borrowers.  In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

10.10                 Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

10.11                 Survival.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan

 

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or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.  Further, the provisions of Sections 3.01, 3.04, 3.05 and 10.04 and Article IX shall survive and remain in full force and effect regardless of the repayment of the Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.  In connection with the termination of this Agreement and the release and termination of the security interests in the Collateral, the Agents may require such indemnities and collateral security as they shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to the Other Liabilities, and (z) any Obligations that may thereafter arise under Section 10.04 hereof.

 

10.12                 Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

10.13                 Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrowers (other than the Foreign Borrower) are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Deteriorating Lender or a Defaulting Lender or a Non-Consenting Lender, then the Borrowers may, at their sole expense and effort (in the case of the Canadian Borrower, only in respect of any Canadian Lender), upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

(a)                                 the Borrowers shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

 

(b)                                 such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts);

 

(c)                                  in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

 

(d)                                 such assignment does not conflict with Laws.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

 

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10.14                 Governing Law; Jurisdiction; Etc.

 

(a)                                 GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

(b)                                 SUBMISSION TO JURISDICTION.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)                                  WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)                                 SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

(e)                                  ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE ADMINISTRATIVE AGENT MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

10.15                 Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON

 

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CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16                 No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, the each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.  Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

 

10.17                 USA PATRIOT Act Notice; Proceeds of Crime Act.  Each Lender that is subject to the Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act and all applicable “know your customer” rules, regulations and procedures applicable to such Lender in Canada), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the Act. Each Loan Party is in compliance, in all material respects, with the Patriot Act and the Proceeds of Crime (Money Laundering) and  Terrorist Financing Act (Canada) (the “Proceeds of Crime Act”).  No part of the proceeds of the Loans will be used by the Loan Parties, directly or indirectly, for any purpose which would contravene or breach the Proceeds of Crime Act or for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

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10.18                 Foreign Asset Control Regulations.  Neither of the advance of the Loans, the issuance of Letters of Credit nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).  Furthermore, none of the Borrowers or their Affiliates (a) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person” or in any manner violative of any such order.

 

10.19                 Time of the Essence.  Time is of the essence of the Loan Documents.

 

10.20                 Designation as Senior Debt.  All Obligations shall be “Designated Senior Indebtedness” for purposes of and as defined in the Senior Subordinated Note certain Indenture and all supplemental indentures thereto.

 

10.21                 Press Releases.

 

(a)                                 Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of any Agent or their respective Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Agents and without the prior written consent of the Agents unless (and only to the extent that) such Credit Party or Affiliate is required to do so under Law and then, in any event, such Credit Party or Affiliate will consult with the Agents before issuing such press release or other public disclosure,

 

(b)                                 Each Loan Party consents to the publication by any Agent or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using any Loan Party’s name, product photographs, logo or trademark.  Such Agent or such Lender shall provide a draft reasonably in advance of any advertising material to the Parent for review and comment prior to the publication thereof.  The Agents reserve the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

 

10.22                 Additional Waivers.

 

(a)                                 Except as provided herein or in any other Loan Document or pursuant to any amendment or waiver executed pursuant to Section 10.01, (i) the Obligations (including, for avoidance of doubt, the Canadian Liabilities and the Foreign Liabilities) are the joint and several obligation of each Domestic Loan Party; (ii) the Canadian Liabilities and the Foreign Liabilities are the joint and several obligation of each Canadian Loan Party; and (iii) the Foreign Liabilities are the joint and several obligations of each Loan Party.  To the fullest extent permitted by applicable Law, the obligations of each Loan Party shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any release of any other Loan Party from any of the terms or provisions of, this Agreement or any other Loan Document, or (iii) the failure to perfect any

 

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security interest in, or the release of, any of the Collateral or other security held by or on behalf of any Agent, the Collateral Agent or any other Credit Party.

 

(b)                                 Except as provided herein or in any other Loan Document or pursuant to any amendment or waiver executed pursuant to Section 10.01, the Obligations of each Loan Party shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible Payment in Full in cash of the Obligations after the termination of the Commitments), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise. Without limiting the generality of the foregoing, the Obligations of each Loan Party shall not be discharged or impaired or otherwise affected by the failure of any Agent or any other Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible Payment in Full in cash of all of the Obligations after the termination of the Commitments).

 

(c)                                  To the fullest extent permitted by applicable Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible Payment in Full in cash of all the Obligations after the termination of the Commitments. The Agents and the Collateral Agent may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and the Commitments have been terminated.  Each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.

 

(d)                                 Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible Payment in Full in cash of all the Obligations after the termination of the Commitments.  Any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior indefeasible Payment in Full of the Obligations.  If any amount shall erroneously be paid to any Loan Party on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the applicable Agent to be credited against the payment of the applicable Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents.  Subject to the foregoing, to the extent that any Borrower or Guarantor shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Loans made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an “Accommodation Payment”), then the Borrower or Guarantor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount, (x) for each of such other Domestic Borrower, equal to a fraction of such Accommodation Payment, the numerator of

 

161

 

which fraction is such other Domestic Borrower’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Domestic Borrowers, or (y) for the Canadian Loan Parties or the Foreign Borrower, in an amount equal to such Accommodation Payment.  As of any date of determination, the “Allocable Amount” of each Domestic Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Domestic Borrower hereunder without (a) rendering such Domestic Borrower “insolvent” within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Domestic Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Domestic Borrower unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

10.23                 Judgment Currency

 

(a)                                 If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Agreement or any other Loan Document, it becomes necessary to convert into a particular currency (the “Judgment Currency”) any amount due under this Agreement or under any other Loan Document in any currency other than the Judgment Currency (the “Currency Due”), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given.  For this purpose “rate of exchange” means the rate at which the applicable Agent is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice for the applicable currency conversion in the wholesale market.  In the event that there is a change in the rate of exchange prevailing there is a change in the rate of exchange prevailing between the conversion date and the date of actual payment of the amount due, the Loan Parties will pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of Currency Due which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the conversion date.  If the amount of the Currency Due which the applicable Agent is so able to purchase is less than the amount of the Currency Due originally due to it, the applicable Loan Party shall indemnify and save the Agents, the L/C Issuer and the Lenders harmless from and against all loss or damage arising as a result of such deficiency.  This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Agreement and the other Loan Documents, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Agent from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Agreement or any other Loan Document or under any judgment or order.

 

10.24                 No Strict Construction.

 

The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

10.25                 Attachments.

 

The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any

 

162

 

conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.

 

10.26                 Language.

 

The parties herein have expressly requested that this Agreement and all related documents be drawn up in the English language.  A la demande expresse des parties aux présentes, cette convention et tout document y afférent ont été rédigés en langue anglaise.

 

[SIGNATURES ON THE FOLLOWING PAGES]

 

163

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

DOMESTIC BORROWERS:

 

SALLY HOLDINGS LLC

BEAUTY SYSTEMS GROUP LLC

SALLY BEAUTY SUPPLY LLC

 

 

	
By:   
    	
/s/   Mark J. Flaherty
    	
 
    
	
Name:   Mark J. Flaherty
    	
 
    
	
Title:   Senior Vice President and
    	
 
    
	
Chief   Financial Officer
    	
 
    

 

 

CANADIAN BORROWER:

 

BEAUTY SYSTEMS GROUP (CANADA), INC.

 

 

	
By:
    	
/s/   Mark J. Flaherty
    	
 
    
	
Name: Mark J. Flaherty
    
	
Title: Senior Vice President and
    
	
Chief Financial Officer
    

 

 

FOREIGN BORROWER:

 

SBH FINANCE B.V.

 

 

	
/s/   E.T. Kromhout
    	
 
    	
/s/   D. Zeelenberg
    
	
By:   ANT Management (Netherland) B.V.
    	
By:   ANT Management (Netherland) B.V.
    
	
Title:   Managing Director A
    	
Title:   Managing Director A
    
	
On   behalf of ANT Management (Netherlands) B.V.
    	
On   behalf of ANT Management (Netherlands) B.V.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:   
    	
ANT   Management (Netherlands) B.V.

Managing   Director A
    	
 
    	
By:   
    	
ANT   Management (Netherlands) B.V.

Managing   Director A
    
	
Name: E.T. Kromhout
    	
Name:   D. Zeelenberg
    
	
Title:   Senior Account Manager
    	
Title:   Managing Director
    
	
Place:   Rotterdam, The Netherlands
    	
Place:   Rotterdam, The Netherlands
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   E.T. Kromhout
    	
 
    	
/s/   D. Zeelenberg
    
	
By: Sally Beauty Worldwide Holdings B.V.
    	
By:   Sally Beauty Worldwide Holdings B.V.
    
	
Title:   Managing Director A
    	
Title:   Managing Director A
    
	
On   behalf of Sally Beauty Worldwide Holdings B.V.
    	
On   behalf of Sally Beauty Worldwide Holdings B.V.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:   
    	
ANT   Management (Netherlands) B.V.

Managing   Director A
    	
 
    	
By:   
    	
ANT   Management (Netherlands) B.V. 

Managing   Director A
    
	
Name: E.T. Kromhout
    	
Name:   D. Zeelenberg
    
	
Title:   Senior Account Manager
    	
Title:   Managing Director
    
	
Place:   Rotterdam, The Netherlands
    	
Place:   Rotterdam, The Netherlands
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   Mark Faulkner
    	
 
    	
/s/   Mark Faulkner
    
	
By: Sally Beauty Worldwide Holdings B.V.
    	
By:   Mark Faulkner
    
	
Title:   Managing Director A
    	
Title:   Managing Director B
    
	
On   behalf of Sally Beauty Worldwide Holdings B.V.
    	
Place:   Denton, Texas USA
    
	
By:   Mark Faulkner
    	
 
    
	
Title:   Managing Director B
    	
 
    
	
Place:   Denton, Texas USA
    	
 
    

 

 

GUARANTORS:

 

INNOVATIONS — SUCCESSFUL SALON SERVICES

NEKA SALON SUPPLY, INC.

PROCARE LABORATORIES, INC.

SCHOENEMAN BEAUTY SUPPLY, INC.

ARMSTRONG MCCALL HOLDINGS, INC.

ARMSTRONG MCCALL MANAGEMENT, L.C.

ARMSTRONG MCCALL HOLDINGS, L.L.C.

ARNOLD’S, INC.

ARMSTRONG MCCALL, L.P.

DIORAMA SERVICES COMPANY, LLC

SALLY CAPITAL, INC.

SALLY BEAUTY DISTRIBUTION LLC

SALLY BEAUTY DISTRIBUTION OF OHIO, INC.

SALLY BEAUTY INTERNATIONAL FINANCE LLC

BEAUTY HOLDING LLC

SOREN ENTERPRISES, INC.

BEYOND THE ZONE, INC.

SILK ELEMENTS, INC.

HIGH INTENSITY PRODUCTS, INC.

NAIL LIFE, INC.

SEXY U PRODUCTS, INC.

FOR PERMS ONLY, INC.

ENERGY OF BEAUTY, INC.

MIRACLE LANE, INC.

TANWISE, INC.

SATIN STRANDS, INC.

POWER IQ, INC.

DESIGN LENGTHS, INC.

BRENTWOOD BEAUTY LABORATORIES INTERNATIONAL, INC.

ION PROFESSIONAL PRODUCTS, INC.

NEW IMAGE PROFESSIONAL PRODUCTS, INC.

ESTHETICIAN SERVICES, INC.

FEMME COUTURE INTERNATIONAL, INC.

GENERIC VALUE PRODUCTS, INC.

MODERN PANACHE, INC.

LAND OF DREAMS, INC.

COLORESSE, INC.

AERIAL COMPANY, INC.

 

 

	
By:   
    	
/s/   Mark J. Flaherty
    	
 
    
	
Name:   Mark J. Flaherty
    	
 
    
	
Title:   Senior Vice President and Chief Financial Officer
    	
 
    
	
 
    	
 
    
	
SALON   SUCCESS INTERNATIONAL, LLC
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Mark J. Flaherty
    	
 
    
	
Name: Mark J. Flaherty
    	
 
    
	
Title:   Authorized Signatory
    	
 
    

 

 

	
 
    	
BANK   OF AMERICA, N.A., as
    
	
 
    	
Administrative   Agent, as Collateral Agent, as
    
	
 
    	
Domestic   L/C Issuer, as Domestic Swing Line
    
	
 
    	
Lender,   and as a Domestic Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Matthew Potter
    
	
 
    	
Name:   Matthew Potter
    
	
 
    	
Title:   Vice President
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
BANK   OF AMERICA, N.A.  (ACTING
    
	
 
    	
THROUGH   ITS CANADA BRANCH), as
    
	
 
    	
Canadian   Agent, as Canadian Swing Line
    
	
 
    	
Lender,   and as a Canadian Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Medina Sales de Andrade
    
	
 
    	
Name:   Medina Sales de Andrade
    
	
 
    	
Title:   Vice President
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
WELLS   FARGO BANK, N.A. as a Domestic
    
	
 
    	
Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Jennifer Blanchette
    
	
 
    	
Name:   Jennifer Blanchette
    
	
 
    	
Title:   Director
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
WELLS   FARGO CAPITAL FINANCE
    
	
 
    	
CORPORATION   CANADA, as a Canadian
    
	
 
    	
Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Jennifer Blanchette
    
	
 
    	
Name:   Jennifer Blanchette
    
	
 
    	
Title:   Director
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
WELLS   FARGO BANK, N.A. (LONDON
    
	
 
    	
BRANCH), as European   funding Agent for
    
	
 
    	
Wells   Fargo Bank, N.A. and Wells Fargo
    
	
 
    	
Capital   Corporation Canada
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Julian Daley
    
	
 
    	
Name:   Julian Daley
    
	
 
    	
Title:   Chief Operating Officer
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
JPMORGAN   CHASE BANK, N.A., as a
    
	
 
    	
Domestic   Lender and as a Canadian Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Andrew Ray
    
	
 
    	
Name:   Andrew Ray
    
	
 
    	
Title:   Vice President
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
UBS   AG, STAMFORD BRANCH, as a
    
	
 
    	
Domestic   Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Irja R. Otsa
    
	
 
    	
Name:   Irja R. Otsa
    
	
 
    	
Title:   Associate Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Mary E. Evans
    
	
 
    	
Name:   Mary E. Evans
    
	
 
    	
Title:   Associate Director
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
UBS   AG CANADA BRANCH, as a Canadian
    
	
 
    	
Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Irja R. Otsa
    
	
 
    	
Name:   Irja R. Otsa
    
	
 
    	
Title:   Associate Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Mary E. Evans
    
	
 
    	
Name:   Mary E. Evans
    
	
 
    	
Title:   Associate Director
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
PNC   BANK, NATIONAL ASSOCIATION,
    
	
 
    	
as   a Domestic Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Graham Holding
    
	
 
    	
Name:   Graham Holding
    
	
 
    	
Title:   Commercial Banking Officer
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
PNC   BANK CANADA BRANCH, as a
    
	
 
    	
Canadian   Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Mike Danby
    
	
 
    	
Name:   Mike Danby
    
	
 
    	
Title:   Assistant Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Bill Hines
    
	
 
    	
Name:   
    	
Bill   Hines
    
	
 
    	
Title:   
    	
Senior   Vice President &
    
	
 
    	
 
    	
Principal   Officer
    
				

 

Signature Page to Credit Agreement

 

 

	
 
    	
ROYAL   BANK OF CANADA, as a Domestic
    
	
 
    	
Lender   and as a Canadian Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   G. David Cole
    
	
 
    	
Name:   G. David Cole
    
	
 
    	
Title:   Authorized Signatory
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
FIFTH   THIRD BANK, as a Domestic Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Donald R. Parker
    
	
 
    	
Name:   Donald R. Parker
    
	
 
    	
Title:   Vice President
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
CREDIT   SUISSE AG, CAYMAN ISLANDS
    
	
 
    	
BRANCH, as a   Domestic Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Ari Bruger
    
	
 
    	
Name:   Ari Bruger
    
	
 
    	
Title:   Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Kevin Buddhdew
    
	
 
    	
Name:   Kevin Buddhdew
    
	
 
    	
Title:   Associate
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
DEUTSCHE   BANK AG NEW YORK
    
	
 
    	
BRANCH, as a   Domestic Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Scottye Lindsey
    
	
 
    	
Name:   Scottye Lindsey
    
	
 
    	
Title:   Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Enrique Landaeta
    
	
 
    	
Name:   Enrique Landaeta
    
	
 
    	
Title:   Vice President
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
DEUTSCHE   BANK AG CANADA
    
	
 
    	
BRANCH, as a   Canadian Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Rod O’Hara
    
	
 
    	
Name:   Rod O’Hara
    
	
 
    	
Title:   Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Marcellus Leung
    
	
 
    	
Name:   Marcellus Leung
    
	
 
    	
Title:   Assistant Vice President
    

 

Signature Page to Credit Agreement

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