Document:

Exhibit 10.12

 

 

EXECUTION VERSION

 

 

INTERCREDITOR AGREEMENT

 

by and between

 

JPMORGAN CHASE BANK, N.A.,

 

as ABL Agent,

 

and

 

JPMORGAN CHASE BANK, N.A.

 

as Term Agent

 

 

Dated as of October 9, 2007

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page No.
    
	
 
    	
 
    	
 
    
	
ARTICLE 1 DEFINITIONS
    	
2
    
	
Section 1.1
    	
UCC   Definitions
    	
2
    
	
Section 1.2
    	
Other   Definitions
    	
2
    
	
Section 1.3
    	
Rules of   Construction
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE 2 LIEN PRIORITY
    	
12
    
	
Section 2.1
    	
Priority   of Liens
    	
12
    
	
Section 2.2
    	
Waiver   of Right to Contest Liens
    	
14
    
	
Section 2.3
    	
Remedies   Standstill
    	
15
    
	
Section 2.4
    	
Exercise   of Rights
    	
16
    
	
Section 2.5
    	
No   New Liens
    	
18
    
	
Section 2.6
    	
Waiver   of Marshalling
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE 3 ACTIONS OF THE PARTIES
    	
19
    
	
Section 3.1
    	
Certain   Actions Permitted
    	
19
    
	
Section 3.2
    	
Agent   for Perfection
    	
19
    
	
Section 3.3
    	
Sharing   of Information and Access
    	
19
    
	
Section 3.4
    	
Insurance
    	
20
    
	
Section 3.5
    	
No   Additional Rights For the Credit Parties Hereunder
    	
20
    
	
Section 3.6
    	
Inspection   Rights and Insurance
    	
20
    
	
Section 3.7
    	
Agreement   Regarding Mortgages
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE 4 APPLICATION OF PROCEEDS
    	
21
    
	
Section 4.1
    	
Application   of Proceeds
    	
21
    
	
Section 4.2
    	
Specific   Performance
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE 5 INTERCREDITOR ACKNOWLEDGEMENTS AND   WAIVERS
    	
24
    
	
Section 5.1
    	
Notice   of Acceptance and Other Waivers
    	
24
    
	
Section 5.2
    	
Modifications   to ABL Documents and Term Documents
    	
25
    
	
Section 5.3
    	
Reinstatement   and Continuation of Agreement
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE 6 INSOLVENCY PROCEEDINGS
    	
28
    
	
Section 6.1
    	
DIP   Financing
    	
28
    
	
Section 6.2
    	
Relief   From Stay
    	
29
    
	
Section 6.3
    	
No   Contest
    	
30
    
	
Section 6.4
    	
Asset   Sales
    	
30
    
	
Section 6.5
    	
Separate   Grants of Security and Separate Classification
    	
30
    
	
Section 6.6
    	
Enforceability
    	
31
    
	
Section 6.7
    	
ABL   Obligations Unconditional
    	
31
    
	
Section 6.8
    	
Term   Obligations Unconditional
    	
31
    
	
Section 6.9
    	
Adequate   Protection
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE 7 MISCELLANEOUS
    	
32
    
	
Section 7.1
    	
Rights   of Subrogation
    	
32
    

 

 

	
Section 7.2
    	
Further   Assurances
    	
33
    
	
Section 7.3
    	
Representations
    	
33
    
	
Section 7.4
    	
Amendments
    	
33
    
	
Section 7.5
    	
Addresses   for Notices
    	
33
    
	
Section 7.6
    	
No   Waiver, Remedies
    	
34
    
	
Section 7.7
    	
Continuing   Agreement, Transfer of Secured Obligations
    	
34
    
	
Section 7.8
    	
Governing   Law: Entire Agreement
    	
34
    
	
Section 7.9
    	
Counterparts
    	
35
    
	
Section 7.10
    	
No   Third Party Beneficiaries
    	
35
    
	
Section 7.11
    	
Headings
    	
35
    
	
Section 7.12
    	
Severability
    	
35
    
	
Section 7.13
    	
Attorneys   Fees
    	
35
    
	
Section 7.14
    	
VENUE;   JURY TRIAL WAIVER
    	
35
    
	
Section 7.15
    	
Intercreditor   Agreement
    	
36
    
	
Section 7.16
    	
No   Warranties or Liability
    	
36
    
	
Section 7.17
    	
Conflicts
    	
36
    
	
Section 7.18
    	
Information   Concerning Financial Condition of the Credit Parties
    	
36
    

 

ii

 

INTERCREDITOR AGREEMENT

 

THIS INTERCREDITOR AGREEMENT (as amended, supplemented, restated or otherwise modified from time to time pursuant to the terms hereof, this “Agreement”) is entered into as of October 9, 2007 between JPMORGAN CHASE BANK, N.A. (“JPMorgan Chase Bank”), in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the “ABL Agent”) for the financial institutions party from time to time to the Original ABL Credit Agreement referred to below (such financial institutions, together with their successors, assigns and transferees, the “ABL Credit Agreement Lenders” and, together with affiliates thereof and certain other specified hedging parties, in their capacity as ABL Bank Products Affiliates or ABL Hedging Affiliates (in each case, as hereinafter defined), the “ABL Lenders”) and JPMORGAN CHASE BANK, N.A., in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the “Term Agent”) for the financial institutions party from time to time to the Original Term Credit Agreement referred to below (such financial institutions, together with their successors, assigns and transferees, the “Term Lenders”).

 

RECITALS

 

A.            Pursuant to that certain Credit Agreement dated as of the date hereof by and among VH MergerSub, Inc. (to be merged with and into Guitar Center, Inc.), as lead borrower (the “Lead Borrower” and, together with certain other Subsidiaries of the Lead Borrower specified in the Original ABL Credit Agreement, the “ABL Borrowers”), the ABL Credit Agreement Lenders and the ABL Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the “Original ABL Credit Agreement”), the ABL Credit Agreement Lenders have agreed to make certain loans and other financial accommodations to or for the benefit of the ABL Borrowers (as hereinafter defined).

 

B.            Pursuant to certain guaranty agreements and security agreements dated as of the date hereof (the “ABL Guaranties”) by the ABL Guarantors (as hereinafter defined) in favor of the ABL Agent, the ABL Guarantors have agreed to guarantee the payment and performance of the ABL Borrowers’ obligations under the ABL Documents (as hereinafter defined).

 

C.            As a condition to the effectiveness of the Original ABL Credit Agreement and to secure the obligations of the ABL Borrowers and the ABL Guarantors (the ABL Borrowers, the ABL Guarantors and each other direct or indirect subsidiary or parent of the ABL Borrowers or any of their affiliates that is now or hereafter becomes a party to any ABL Document, collectively, the “ABL Credit Parties”) under and in connection with the ABL Documents, the ABL Credit Parties have granted to the ABL Agent (for the benefit of the ABL Lenders, including, at the option of the Lead Borrower, the ABL Bank Products Affiliates and ABL Hedging Affiliates) Liens on the Collateral.

 

D.            Pursuant to that certain Credit Agreement dated as of the date hereof by and among the Lead Borrower (the “Term Borrower”), the Term Lenders and the Term Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the “Original Term Credit Agreement”), the Term Lenders have agreed to make certain loans and other financial accommodations to or for the benefit of the Term Borrower.

 

 

E.             Pursuant to certain guaranty agreements and security agreements dated as of the date hereof (the “Term Guaranties”) by the Term Guarantors (as hereinafter defined) in favor of the Term Agent, the Term Guarantors have agreed to guarantee the payment and performance of the Term Borrower’s obligations under the Term Documents (as hereinafter defined).

 

F.             As a condition to the effectiveness of the Original Term Credit Agreement and to secure the obligations of the Term Borrower and the Term Guarantors (the Term Borrower, the Term Guarantors and each other direct or indirect subsidiary or parent of the Term Borrower or any of its affiliates that is now or hereafter becomes a party to any Term Document, collectively, the “Term Credit Parties”) under and in connection with the Term Documents, the Term Credit Parties have granted to the Term Agent (for the benefit of the Term Lenders) Liens on the Collateral.

 

G.            Each of the ABL Agent (on behalf of the ABL Lenders) and the Term Agent (on behalf of the Term Lenders) and, by their acknowledgment hereof, the ABL Credit Parties and the Term Credit Parties, desire to agree to the relative priority of Liens on the Collateral and certain other rights, priorities and interests as provided herein.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1
 DEFINITIONS

 

Section 1.1               UCC Definitions.  The following terms which are defined in the Uniform Commercial Code are used herein as so defined:  Accounts, Chattel Paper, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Financial Assets, Fixtures, Instruments, Inventory, Investment Property, Letter-Of-Credit Rights, Money, Payment Intangibles, Promissory Notes, Records, Security, Securities Accounts, Security Entitlements, Supporting Obligations and Tangible Chattel Paper.

 

Section 1.2               Other Definitions.  Subject to Section 1.1 above, unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Original ABL Credit Agreement and the Original Term Credit Agreement, in each case as in effect on the Closing Date.  In addition, as used in this Agreement, the following terms shall have the meanings set forth below:

 

“ABL Agent” shall have the meaning assigned to that term in the introduction to this Agreement and shall include any successor thereto as well as any Person designated as the “Agent” or “Administrative Agent” under any ABL Credit Agreement.

 

“ABL Bank Products Affiliate” shall mean any ABL Credit Agreement Lender or any Affiliate of any ABL Credit Agreement Lender that has entered into a Bank Products Agreement with an ABL Credit Party or any Subsidiary thereof with, at the option of the Lead Borrower, the obligations of such ABL Credit Party or Subsidiary thereunder being secured by one or more ABL Collateral Documents.

 

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“ABL Borrowers” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“ABL Collateral Documents” shall mean all “Security Documents” as defined in the Original ABL Credit Agreement, and all other security agreements, mortgages, deeds of trust and other collateral documents executed and delivered in connection with any ABL Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof.

 

“ABL Credit Agreement” shall mean the Original ABL Credit Agreement and any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the ABL Obligations, whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.

 

“ABL Credit Agreement Lenders” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“ABL Credit Parties” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“ABL Documents” shall mean the ABL Credit Agreement, the ABL Guaranties, the ABL Collateral Documents, at the option of the Lead Borrower, any Bank Product Agreements, at the option of the Lead Borrower, any ABL Designated Hedge Agreements, those other ancillary agreements as to which the ABL Agent or any ABL Lender is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any ABL Credit Party or any of its respective Subsidiaries or Affiliates, and delivered to the ABL Agent, in connection with any of the foregoing or any ABL Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof.

 

“ABL Designated Hedge Agreements” means “Designated Hedge Agreements” as such term is defined in the Original ABL Credit Agreement.

 

“ABL Guaranties” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“ABL Guarantors” shall mean the collective reference to Holdings and its Subsidiaries,  other than the ABL Borrowers and any Excluded Subsidiary (as defined in the Original ABL Credit Agreement), and any other Person who becomes a guarantor under any of the ABL Guaranties.

 

“ABL Hedging Affiliate” shall mean any Person that has entered into a Designated Hedge Agreement with an ABL Credit Party or any Subsidiary thereof with, at the option of the Lead Borrower, the obligations of such ABL Credit Party or Subsidiary thereunder being secured by one or more ABL Collateral Documents by an ABL Credit Party.

 

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“ABL Lenders” shall have the meaning assigned to that term in the introduction to this Agreement and shall, at the option of the Lead Borrower, include all ABL Bank Product Affiliates and ABL Hedging Affiliates and all successors, assigns, transferees and replacements thereof, as well as any Person designated as a “Lender” under any ABL Credit Agreement.

 

“ABL Obligations” shall mean all obligations of every nature of each ABL Credit Party and each Subsidiary thereof from time to time owed to the ABL Agent, the ABL Lenders or any of them, under any ABL Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such ABL Credit Party or such Subsidiary, would have accrued on any ABL Obligation, whether or not a claim is allowed against such ABL Credit Party or such Subsidiary for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under letters of credit, fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the ABL Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time in accordance with the terms thereof.

 

“ABL Priority Collateral” shall mean all Collateral consisting of the following:

 

(1)           all Accounts;

 

(2)           all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper);

 

(3)           (x) all Deposit Accounts and Money and all cash, checks, other negotiable instruments, funds and other evidences of payments held therein and (y) Securities, Security Entitlements and Securities Accounts, in each case, solely to the extent constituting cash or Cash Equivalents or representing a claim to Cash Equivalents and all cash, checks and other property held therein or credited thereto, but in any event and regardless of the foregoing clauses, excluding, in each case, the Asset Sales Proceeds Account;

 

(4)           all Inventory;

 

(5)           to the extent relating to, evidencing or governing any of the items referred to in the preceding clauses (1) through (4), all Documents, General Intangibles (other than any Intellectual Property), Instruments (including Promissory Notes) and commercial tort claims, provided that to the extent any of the foregoing also relates to Term Priority Collateral, only that portion related to the items referred to in the preceding clauses (1) through (4) shall be included in the ABL Priority Collateral.

 

(6) to the extent evidencing or governing any of the items referred to in the preceding clauses (1) through (5), all Supporting Obligations; provided that to the extent any of the foregoing also relates to Term Priority Collateral only that portion related to the items referred to in the preceding clauses (1) through (5) shall be included in the ABL Priority Collateral;

 

(7)           all books and Records relating to the items referred to in the preceding clauses (1) through (6) (including all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the items referred to in the preceding clauses (1) through (6)); and

 

4

 

(8)           all collateral security and guarantees with respect to any of the foregoing and all cash, Money, insurance proceeds, instruments, securities, financial assets and deposit accounts received as proceeds of any of the foregoing (such proceeds, “ABL Priority Proceeds”); provided, however, that no proceeds of ABL Priority Proceeds will constitute ABL Priority Collateral unless such proceeds of ABL Priority Proceeds would otherwise constitute ABL Priority Collateral.

 

“ABL Recovery” shall have the meaning set forth in Section 5.3(a).

 

“ABL Secured Parties” shall mean the ABL Agent and the ABL Lenders.

 

“Account(s)” means “accounts” as defined in the UCC, 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.  The term “Account” does not include (a) rights to payment evidenced by chattel paper or an instrument, (b) commercial tort claims, (c) deposit accounts, (d) investment property, or (e) letter-of-credit rights or letters of credit.

 

“Affiliate” shall mean, with respect to a specified Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with the Person specified.

 

“Agreement” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“Asset Sales Proceeds Account” shall mean one or more Deposit Accounts or Securities Accounts, in each case with the Term Agent, holding only the proceeds of any sale or disposition of any Term Priority Collateral and the proceeds or investment thereof.

 

“Bank Products Agreement” shall mean any agreement pursuant to which any ABL Bank Products Affiliate agrees to provide Cash Management Services.

 

“Borrower” shall mean any of the ABL Borrowers and the Term Borrower.

 

“Capital Stock” shall mean, as to any Person that is a corporation, the authorized shares of such Person’s capital stock, including all classes of common, preferred, voting and nonvoting capital stock, and, as to any Person that is not a corporation or an individual, the membership or other ownership interests in such Person, including the right to share in profits and losses, the right to receive distributions of cash and other property, and the right to receive allocations of items of income, gain, loss, deduction and credit and similar items from such Person, whether or not such interests include voting or similar rights entitling the holder thereof to exercise Control over such Person, collectively with, in any such case, all warrants, options and other rights to purchase or otherwise acquire, and all other instruments convertible into or exchangeable for, any of the foregoing.

 

“Cash Collateral” shall mean any Collateral consisting of Money or Cash Equivalents, Deposit Accounts, Instruments, any Security Entitlement and any Financial Assets.

 

5

 

“Cash Equivalents” shall mean (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America) or any state or state agency thereof, in each case maturing within one (1) year from the date of acquisition thereof, (b) investments in commercial paper maturing within one (1) year from the date of acquisition thereof and having, at the date of acquisition, the highest or next highest credit rating obtainable from S&P or from Moody’s, (c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within one (1) year from the date of acquisition thereof which are issued or guaranteed by, or placed with, and demand deposit and money market deposit accounts issued or offered by, any Lender or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000, (d) master demand notes and 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, (e) shares of any money market or mutual fund that has substantially all of its assets invested in the types of investments referred to in clauses (a) through (d), above, and (f) investments with foreign governmental entities which are members of the OECD, or foreign banks organized under the laws of countries which are member of the OECD, similar to the investments set forth in clauses (a), (b) and (c) above, so long as such foreign bank has combined capital and surplus of a dollar equivalent of no less than $500,000,000.

 

“Cash Management Services” shall have the meaning provided in the ABL Credit Agreement as in effect on the date hereof.

 

“Collateral” shall mean all Property now owned or hereafter acquired by any Borrower or any Guarantor in or upon which a Lien is granted or purported to be granted to the ABL Agent or the Term Agent under any of the ABL Collateral Documents or the Term Collateral Documents, together with all rents, issues, profits, products and Proceeds thereof.

 

“Control” shall mean the possession, directly or indirectly, of the power (a) to vote 50% or more of the securities having ordinary voting power for the election of directors (or any similar governing body) of a Person, or (b) to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power or by contract.  The terms “Controlling” and “Controlled” have meanings correlative thereto.

 

“Control Collateral” shall mean any Collateral consisting of any Certificated Security (as defined in Section 8-102 of the Uniform Commercial Code), Investment Property, Deposit Account, Instruments and any other Collateral as to which a Lien may be perfected through possession or control by the secured party, or any agent therefor.

 

“Copyright Licenses” shall have the meaning assigned to such term in the Intellectual Property Security Agreement as in effect on the Closing Date.

 

“Copyrights” shall have the meaning assigned to such term in the Intellectual Property Security Agreement as in effect on the Closing Date.

 

6

 

“Credit Documents” shall mean the ABL Documents and the Term Documents.

 

“Credit Parties” shall mean the ABL Credit Parties and the Term Credit Parties.

 

“Debtor Relief Laws” shall mean the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect affecting the rights of creditors generally.

 

“DIP Financing” shall have the meaning set forth in Section 6.1(a).

 

“Discharge of ABL Obligations” shall mean (a) the payment in full in cash of the ABL Obligations that are outstanding and unpaid at the time all Indebtedness thereunder is paid in full including, with respect to amounts available to be drawn under outstanding letters of credit issued thereunder (or indemnities or other undertakings issued pursuant thereto in respect of outstanding letters of credit) delivery or provision of Money or backstop letters of credit in respect thereof in compliance with the terms of any ABL Credit Agreement (which shall not exceed an amount equal to 103% of the aggregate undrawn amount of such letters of credit) and (b) the termination of all commitments to extend credit under the ABL Documents.

 

“Discharge of Term Obligations” shall mean (a) the payment in full in cash of the Term Obligations that are outstanding and unpaid at the time all Indebtedness thereunder is paid in full and (b) the termination of all commitments to extend credit under the Term Documents.

 

“Event of Default” shall mean an Event of Default under any ABL Credit Agreement or any Term Credit Agreement.

 

“Exercise Any Secured Creditor Remedies” or “Exercise of Secured Creditor Remedies” shall mean, except as otherwise provided in the final sentence of this definition:

 

(a)           the taking by any Secured Party of any action to enforce or realize upon any Lien, including the institution of any foreclosure proceedings or the noticing of any public or private sale pursuant to Article 9 of the Uniform Commercial Code;

 

(b)           the exercise by any Secured Party of any right or remedy provided to a secured creditor on account of a Lien under any of the Credit Documents, under applicable law, in an Insolvency Proceeding or otherwise, including the election to retain any of the Collateral in satisfaction of a Lien;

 

(c)           the taking by any Secured Party of any action or the exercise of any right or remedy in respect of the collection on, set off against, marshaling of, injunction respecting or foreclosure on the Collateral or the Proceeds thereof;

 

(d)           the appointment on an application of a Secured Party of a receiver, receiver and manager or interim receiver of all or part of the Collateral;

 

7

 

(e)           the sale, lease, license, or other disposition of all or any portion of the Collateral by private or public sale conducted by a Secured Party or any other means permissible under applicable law;

 

(f)            the exercise of any other right of a secured creditor under Part 6 of Article 9 of the Uniform Commercial Code;

 

(g)           the exercise by any Secured Party of any voting rights relating to any Capital Stock included in the Collateral; and

 

(h)           the delivery of any claim or demand relating to the Collateral to any Person (including any securities intermediary, depository bank or landlord) in possession or control of any Collateral in connection with the collection of the ABL Obligations or Term Obligations after the occurrence of an Event of Default (except, with respect to the ABL Lenders, such action shall not be deemed an Exercise of Secured Creditor Remedies if the ABL Lenders have not terminated their commitments to the ABL Borrowers under the ABL Credit Agreement and/or are continuing to make loans and advances to or for the benefit of the ABL Borrowers).

 

For the avoidance of doubt, exercising any right or remedy provided to an ABL Lender upon the occurrence of a Cash Dominion Event, reducing advance rates and sub-limits, imposing reserves, filing a proof of claim in bankruptcy court or seeking adequate protection shall not be deemed to be an Exercise of Secured Creditor Remedies.

 

“Financing Lease” shall mean any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

 

“Foreign Subsidiary” shall have the meaning provided in the Original ABL Credit Agreement and the Original Term Credit Agreement as in effect on the date hereof.

 

“General Intangibles” shall mean all “general intangibles” as such term is defined in the Uniform Commercial Code including, with respect to any Credit Party, all contracts, agreements and indentures in any form, and portions thereof, to which such Credit Party is a party or under which such Credit Party has any right, title or interest or to which such Credit Party or any property of such Credit Party is subject, as the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Guarantor” shall mean any of the ABL Guarantors or Term Guarantors.

 

“Holdings” shall mean Guitar Center Holdings, Inc., a Delaware corporation.

 

“Indebtedness”  shall have the meaning provided in the ABL Credit Agreement and the Term Credit Agreement as in effect on the date hereof.

 

“Initial Borrower” shall have the meaning assigned to that term in the recitals to this Agreement.

 

8

 

“Insolvency Proceeding” shall mean (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case covered by clauses (a) and (b) undertaken under United States Federal, State or foreign law, including the Bankruptcy Code.

 

“JPMorgan Chase Bank” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“Lead Borrower” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation, encumbrance, collateral assignment, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any Financing Lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“Lien Priority” shall mean with respect to any Lien of the ABL Agent, the ABL Lenders, the Term Agent or the Term Lenders in the Collateral, the order of priority of such Lien as specified in Section 2.1.

 

“Original ABL Credit Agreement” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“Original Term Credit Agreement” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“Party” shall mean the ABL Agent or the Term Agent, and “Parties” shall mean both the ABL Agent and the Term Agent.

 

“Patent License” shall have the meaning assigned to such term in the Intellectual Property Security Agreement as in effect on the Closing Date.

 

“Patents” shall have the meaning assigned to such term in the Intellectual Property Security Agreement as in effect on the Closing Date.

 

“Payment Collateral” shall mean all Accounts, Instruments, Chattel Paper, Deposit Accounts (other than the Asset Sales Proceeds Account), Securities Accounts and Payment Intangibles, together with all Supporting Obligations, in each case composing a portion of the Collateral.

 

“Priority Collateral” shall mean the ABL Priority Collateral or the Term Priority Collateral, as applicable.

 

9

 

“Proceeds” shall mean (a) all “proceeds,” as defined in Article 9 of the Uniform Commercial Code, with respect to the Collateral, and (b) whatever is recoverable or recovered when any Collateral is sold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.

 

“Property” shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

“Secured Parties” shall mean the ABL Secured Parties and the Term Secured Parties.

 

“Subsidiary” shall mean with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity (a) of which Capital Stock representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

“Term Agent” shall have the meaning assigned to that term in the introduction to this Agreement and shall include any successor thereto as well as any Person designated as the “Agent” or “Administrative Agent” under any Term Credit Agreement.

 

“Term Borrower” shall have the meaning assigned to that term in the introduction to this Agreement.

 

“Term Collateral Documents” shall mean all “Security Documents” as defined in the Original Term Credit Agreement, and all other security agreements, mortgages, deeds of trust and other collateral documents executed and delivered in connection with any Term Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof.

 

“Term Credit Agreement” shall mean the Original Term Credit Agreement and any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the Term Obligations, whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.

 

“Term Credit Parties” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“Term Designated Hedge Agreements” means “Designated Hedge Agreements” as such term is defined in the Original Term Credit Agreement.

 

“Term Documents” shall mean the Term Credit Agreement, the Term Guaranties, the Term Collateral Documents, at the option of the Term Borrower, any Term Designated Hedge Agreements, those other ancillary agreements as to which the Term Agent or any Term Lender is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any Term Credit Party or any of its respective Subsidiaries or Affiliates, and delivered to the Term Agent, in connection with any of the foregoing or any 

 

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Term Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof.

 

“Term Guaranties” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“Term Guarantors” shall mean the collective reference to Holdings and its Subsidiaries, other than any Excluded Subsidiary (as defined in the Original Term Credit Agreement), and any other Person who becomes a guarantor under any of the Term Guaranties.

 

“Term Hedging Affiliate” shall mean any Person that has entered into a Designated Hedge Agreement with a Term Credit Party or any Subsidiary thereof with, at the option of the Term Borrower, the obligations of such Term Credit Party or Subsidiary thereunder being secured by one or more Term Collateral Documents by a Term Credit Party.

 

“Term Lenders” shall have the meaning assigned to that term in the introduction to this Agreement and shall, at the option of the Term Borrower, include all Term Hedging Affiliates and all successors, assigns, transferees and replacements thereof, as well as any Person designated as a “Lender” under any Term Credit Agreement.

 

“Term Obligations” shall mean all obligations of every nature of each Term Credit Party and each Subsidiary thereof from time to time owed to the Term Agent, the Term Lenders or any of them, under any Term Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Term Credit Party or such Subsidiary, would have accrued on any Term Obligation, whether or not a claim is allowed against such Term Credit Party or such Subsidiary for such interest in the related bankruptcy proceeding), fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the Term Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time in accordance with the terms thereof.

 

“Term Priority Collateral” shall mean:

 

(1)           all Equipment, Fixtures, Real Estate, Intellectual Property and Investment Property (other than Cash Equivalents not credited to or deposited in the Asset Sales Proceeds Account),

 

(2)           except to the extent relating to, evidencing or governing ABL Priority Collateral, all Instruments, Documents, General Intangibles and commercial tort claims,

 

(3)           all other Collateral, other than the ABL Priority Collateral, and

 

(4)           all collateral security and guarantees with respect to the foregoing and all cash, Money, insurance proceeds, instruments, securities, financial assets and deposit accounts received as proceeds of any Collateral, other than the ABL Priority Collateral (such proceeds, “Term Priority Proceeds”); provided, however, no proceeds of Term Priority Proceeds will constitute Term Priority Collateral unless such proceeds of Term Priority Proceeds would otherwise constitute Term Priority Collateral or are credited to the Asset Sales Proceeds Account.

 

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“Term Recovery” shall have the meaning set forth in Section 5.3(b).

 

“Term Secured Parties” shall mean the Term Agent and the Term Lenders.

 

“Trademark License” shall have the meaning assigned to such term in the Intellectual Property Security Agreement as in effect on the Closing Date.

 

“Trademarks” shall have the meaning assigned to such term in the Intellectual Property Security Agreement as in effect on the Closing Date.

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided that to the extent that the Uniform Commercial Code is used to define any term in any security document and such term is defined differently in differing Articles of the Uniform Commercial Code, the definition of such term contained in Article 9 shall govern; provided, further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, publication or priority of, or remedies with respect to, Liens of any Party is governed by the Uniform Commercial Code or foreign personal property security laws as enacted and in effect in a jurisdiction other than the State of New York, the term “Uniform Commercial Code” will mean the Uniform Commercial Code or such foreign personal property security laws as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

 

Section 1.3               Rules of Construction.  Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting and shall be deemed to be followed by the phrase “without limitation,” and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Article, section, subsection, clause, schedule and exhibit references herein are to this Agreement unless otherwise specified.  Any reference in this Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, restatements, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, restatements, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any reference herein to the repayment in full of an obligation shall mean the payment in full in cash of such obligation, or in such other manner as may be approved in writing by the requisite holders or representatives in respect of such obligation, or in such other manner as may be approved by the requisite holders or representatives in respect of such obligation.

 

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ARTICLE 2
  LIEN PRIORITY

 

Section 2.1               Priority of Liens.

 

(a)       Subject to the provisos in subclauses (b) and (c) of Section 4.1, notwithstanding (i) the date, time, method, manner, or order of grant, attachment, or perfection (including any defect or deficiency or alleged defect or deficiency in any of the foregoing) of any Liens granted to the ABL Agent or the ABL Lenders in respect of all or any portion of the Collateral or of any Liens granted to the Term Agent or the Term Lenders in respect of all or any portion of the Collateral and regardless of how any such Lien was acquired (whether by grant, statute, operation of law, subrogation or otherwise), (ii) the order or time of filing or recordation of any document or instrument for perfecting the Liens in favor of the ABL Agent or the Term Agent (or ABL Lenders or Term Lenders) in any Collateral, (iii) any provision of the Uniform Commercial Code, the Bankruptcy Code or any other applicable law, or of the ABL Documents or the Term Documents, (iv) whether the ABL Agent or the Term Agent, in each case, either directly or through agents, holds possession of, or has control over, all or any part of the Collateral, (v) the fact that any such Liens in favor of the ABL Agent or the ABL Lenders or the Term Agent or the Term Lenders securing any of the ABL Obligations or Term Obligations, respectively, are (x) subordinated to any Lien securing any obligation of any Credit Party other than the Term Obligations or the ABL Obligations, respectively, or (y) otherwise subordinated, voided, avoided, invalidated or lapsed, or (vi) any other circumstance of any kind or nature whatsoever, the ABL Agent, on behalf of itself and the ABL Lenders, and the Term Agent, on behalf of itself and the Term Lenders, hereby agree that:

 

(1)           any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations shall in all respects be junior and subordinate to all Liens granted to the ABL Agent and the ABL Lenders in the ABL Priority Collateral to secure all or any portion of the ABL Obligations;

 

(2)           any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the ABL Agent or any ABL Lender that secures all or any portion of the ABL Obligations shall in all respects be senior and prior to all Liens granted to the Term Agent or any Term Lender in the ABL Priority Collateral to secure all or any portion of the Term Obligations;

 

(3)           any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the ABL Agent or any ABL Lender that secures all or any portion of the ABL Obligations shall in all respects be junior and subordinate to all Liens granted to the Term Agent and the Term Lenders in the Term Priority Collateral to secure all or any portion of the Term Obligations; and

 

(4)           any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations shall in all respects be senior and prior to all Liens granted to the ABL Agent or any ABL Lender in the Term Priority Collateral to secure all or any portion of the ABL Obligations.

 

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(b)       Notwithstanding any failure by any ABL Secured Party or Term Secured Party to perfect its security interests in the Collateral or any avoidance, invalidation, priming or subordination by any third party or court of competent jurisdiction of the security interests in the Collateral granted to the ABL Secured Parties or the Term Secured Parties but, for the avoidance of doubt, subject to the provisos in subclauses (b) and (c) of Section 4.1, the priority and rights as between the ABL Secured Parties and the Term Secured Parties with respect to the Collateral shall be as set forth herein.

 

(c)       The Term Agent, for and on behalf of itself and the Term Lenders, acknowledges and agrees that, concurrently herewith, the ABL Agent, for the benefit of itself and the ABL Lenders, has been granted Liens upon all of the Collateral in which the Term Agent has been granted Liens and the Term Agent hereby consents thereto.  The ABL Agent, for and on behalf of itself and the ABL Lenders, acknowledges and agrees that, concurrently herewith, the Term Agent, for the benefit of itself and the Term Lenders, has been granted Liens upon all of the Collateral in which the ABL Agent has been granted Liens and the ABL Agent hereby consents thereto.  The subordination of Liens by the Term Agent and the ABL Agent in favor of one another as set forth herein shall not be deemed to subordinate the Term Agent’s Liens or the ABL Agent’s Liens to the Liens of any other Person.

 

Section 2.2               Waiver of Right to Contest Liens.

 

(a)       The Term Agent, for and on behalf of itself and the Term Lenders, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the ABL Agent and the ABL Lenders in respect of the Collateral or the provisions of this Agreement.  Except to the extent expressly set forth in this Agreement, the Term Agent, for itself and on behalf of the Term Lenders, agrees that none of the Term Agent or the Term Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the ABL Agent or any ABL Lender under the ABL Documents with respect to the ABL Priority Collateral.  Except to the extent expressly set forth in this Agreement, the Term Agent, for itself and on behalf of the Term Lenders, hereby waives any and all rights it or the Term Lenders may have as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the ABL Agent or any ABL Lender seeks to enforce its Liens in any ABL Priority Collateral.  The foregoing shall not be construed to prohibit the Term Agent from enforcing the provisions of this Agreement as to the relative priority of the parties hereto.

 

(b)       The ABL Agent, for and on behalf of itself and the ABL Lenders, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the Term Agent or the Term Lenders in respect of the Collateral or the provisions of this Agreement.  Except to the extent expressly set forth in this Agreement, the ABL Agent, for itself and on behalf of the ABL Lenders, agrees that none of the ABL Agent or the ABL Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the Term Agent or any 

 

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Term Lender under the Term Documents with respect to the Term Priority Collateral.  Except to the extent expressly set forth in this Agreement, the ABL Agent, for itself and on behalf of the ABL Lenders, hereby waives any and all rights it or the ABL Lenders may have as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the Term Agent or any Term Lender seeks to enforce its Liens in any Term Priority Collateral.  The foregoing shall not be construed to prohibit the ABL Agent from enforcing the provisions of this Agreement as to the relative priority of the parties hereto.

 

Section 2.3               Remedies Standstill.

 

(a)       The Term Agent, on behalf of itself and the Term Lenders, agrees that, until the date upon which the Discharge of ABL Obligations shall have occurred, neither the Term Agent nor any Term Lender will Exercise Any Secured Creditor Remedies with respect to any of the ABL Priority Collateral without the written consent of the ABL Agent, and will not take, receive or accept any Proceeds of ABL Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of ABL Priority Collateral in a Deposit Account controlled by the Term Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the ABL Agent.  From and after the date upon which the Discharge of ABL Obligations shall have occurred (or prior thereto upon obtaining the written consent of the ABL Agent), the Term Agent or any Term Lender may Exercise Any Secured Creditor Remedies under the Term Documents or applicable law as to any ABL Priority Collateral; provided, however, that any Exercise of Secured Creditor Remedies with respect to any Collateral by the Term Agent is at all times subject to the provisions of this Agreement, including Section 4.1 hereof.

 

(b)       The ABL Agent, on behalf of itself and the ABL Lenders, agrees that, until the date upon which the Discharge of Term Obligations shall have occurred, neither the ABL Agent nor any ABL Lender will Exercise Any Secured Creditor Remedies with respect to the Term Priority Collateral without the written consent of the Term Agent, and will not take, receive or accept any Proceeds of the Term Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of Term Priority Collateral in a Deposit Account controlled by the ABL Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the Term Agent.  From and after the date upon which the Discharge of Term Obligations shall have occurred (or prior thereto upon obtaining the written consent of the Term Agent), the ABL Agent or any ABL Lender may Exercise Any Secured Creditor Remedies under the ABL Documents or applicable law as to any Term Priority Collateral; provided, however, that any Exercise of Secured Creditor Remedies with respect to any Collateral by the ABL Agent is at all times subject to the provisions of this Agreement, including Section 4.1 hereof.

 

(c)       Notwithstanding any other provision of this agreement, nothing contained herein shall be construed to prevent (i) the ABL Agent or any ABL Lender from objecting to any proposed retention of collateral by the Term Agent or any Term Lender in full or partial satisfaction of any Term Obligations of (ii) the Term Agent or any Term Lender from objecting to any proposed retention of collateral by the ABL Agent or any ABL Lender in full or partial satisfaction of any ABL Obligations.

 

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Section 2.4               Exercise of Rights.

 

(a)       No Other Restrictions.  Except as expressly set forth in this Agreement, each of the Term Agent, each Term Lender, the ABL Agent and each ABL Lender shall have any and all rights and remedies it may have as a creditor under applicable law, including the right to the Exercise of Secured Creditor Remedies; provided, however, that the Exercise of Secured Creditor Remedies with respect to the Collateral shall be subject to the Lien Priority and to the provisions of this Agreement, including Sections 2.3 and 4.1 hereof.  None of the Term Agent, any Term Lender, the ABL Agent or any ABL Lender waives any claim it may have on grounds of commercial reasonableness.  The ABL Agent may enforce the provisions of the ABL Documents, the Term Agent may enforce the provisions of the Term Documents and each may Exercise Any Secured Creditor Remedies, all in such order and in such manner as each may determine in the exercise of its sole discretion, consistent with the terms of this Agreement and mandatory provisions of applicable law; provided, however, that each of the ABL Agent and the Term Agent agrees to provide to the other copies of any notices that it is required under applicable law to deliver to any Borrower or any Guarantor; provided  further, however, that the ABL Agent’s failure to provide any such copies to the Term Agent shall not impair any of the ABL Agent’s rights hereunder or under any of the ABL Documents and the Term Agent’s failure to provide any such copies to the ABL Agent shall not impair any of the Term Agent’s rights hereunder or under any of the Term Documents.  Each of the Term Agent, each Term Lender, the ABL Agent and each ABL Lender agrees that it will not institute any suit or other proceeding or assert in any suit, Insolvency Proceeding or other proceeding any claim, in the case of the Term Agent and each Term Lender, against either the ABL Agent or any other ABL Secured Party, and in the case of the ABL Agent and each other ABL Secured Party, against either the Term Agent or any other Term Secured Party, seeking damages from or other relief by way of specific performance, instructions or otherwise, with respect to, any action taken or omitted to be taken by such Person with respect to the Collateral which is consistent with the terms of this Agreement, and none of such Parties shall be liable for any such action taken or omitted to be taken.

 

(b)           Release of Liens.  (i)  In the event of (A) any private or public sale of all or any portion of the ABL Priority Collateral in connection with any Exercise of Secured Creditor Remedies by or with the consent of the ABL Agent (other than in connection with a refinancing as described in Section 5.2(c)), (B) any sale, transfer or other disposition of all or any portion of the ABL Priority Collateral (other than in connection with a refinancing as described in Section 5.2(c)), so long as such sale, transfer or other disposition is then permitted by the ABL Documents or shall have been approved by the requisite ABL Lenders or (C) the release of the ABL Secured Parties’ Lien on all or any portion of the ABL Priority Collateral (other than in connection with a sale, transfer or other disposition as described in clauses (A) and (B) above), so long as such release is then permitted by the ABL Documents or shall have been approved by the requisite ABL Lenders, in the case of clause (C) only to the extent prior to the date upon which the Discharge of ABL Obligations shall have occurred and not in connection with a Discharge of ABL Obligations (and irrespective of whether an Event of Default has occurred), the Term Agent agrees, on behalf of itself and the Term Lenders, such sale, transfer, other disposition or release will be free and clear of the Liens on such ABL Priority Collateral securing the Term Obligations, and the Term Agent’s and the Term Secured Parties’ Liens with respect to the ABL Priority Collateral so sold, transferred, disposed or released shall terminate and be 

 

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automatically released without further action.  In furtherance of, and subject to, the foregoing, the Term Agent agrees that it will promptly execute any and all Lien releases or other documents reasonably requested by the ABL Agent in connection therewith.  The Term Agent hereby appoints the ABL Agent and any officer or duly authorized person of the ABL Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney in the place and stead of the Term Agent and in the name of the Term Agent or in the ABL Agent’s own name, from time to time, in the ABL Agent’s sole discretion, for the purposes of carrying out the terms of this paragraph, to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this paragraph, including any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).  All proceeds realized from any such sale or disposition shall be applied to the ABL Obligations or the Term Obligations in accordance with the terms of this Agreement.

 

(ii)           In the event of (A) any private or public sale of all or any portion of the Term Priority Collateral in connection with any Exercise of Secured Creditor Remedies by or with the consent of the Term Agent (other than in connection with a refinancing as described in Section 5.2(c)), (B) any sale, transfer or other disposition of all or any portion of the Term Priority Collateral (other than in connection with a refinancing as described in Section 5.2(c)), so long as such sale, transfer or other disposition is then permitted by the Term Documents or shall have been approved by the requisite Term Lenders or (C) the release of the Term Secured Parties’ Lien on all or any portion of the Term Priority Collateral (other than in connection with a sale, transfer or other disposition as described in clauses (A) and (B) above), so long as such release is then permitted by the Term Documents or shall have been approved by the requisite Term Lenders, in the case of clause (C) only to the extent prior to the date upon which the Discharge of Term Obligations shall have occurred and not in connection with a Discharge of ABL Obligations (and irrespective of whether an Event of Default has occurred), the ABL Agent agrees, on behalf of itself and the ABL Lenders, that such sale, transfer, other disposition or release will be free and clear of the Liens on such Term Priority Collateral securing the ABL Obligations and the ABL Agent’s and the ABL Secured Parties’ Liens with respect to the ABL Priority Collateral so sold, transferred, disposed or released shall terminate and be automatically released without further action.  In furtherance of, and subject to, the foregoing, the ABL Agent agrees that it will promptly execute any and all Lien releases or other documents reasonably requested by the Term Agent in connection therewith.  The ABL Agent hereby appoints the Term Agent and any officer or duly authorized person of the Term Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney in the place and stead of the ABL Agent and in the name of the ABL Agent or in the Term Agent’s own name, from time to time, in the Term Agent’s sole discretion, for the purposes of carrying out the terms of this paragraph, to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this paragraph, including any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).  All proceeds realized from any such sale or disposition shall be applied to the ABL Obligations or the Term Obligations in accordance with the terms of this Agreement.

 

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Section 2.5               No New Liens.  (a)  Until the date upon which the Discharge of ABL Obligations shall have occurred, the parties hereto agree that no Term Secured Party shall acquire or hold any Lien on any assets of any Credit Party securing any Term Obligation which assets are not also subject to the Lien of the ABL Agent under the ABL Documents, subject to the Lien Priority set forth herein.  If any Term Secured Party shall (nonetheless and in breach hereof) acquire or hold any Lien on any assets of any Credit Party securing any Term Obligation which assets are not also subject to the Lien of the ABL Agent under the ABL Documents, subject to the Lien Priority set forth herein, then the Term Agent (or the relevant Term Secured Party) shall, without the need for any further consent of any other Term Secured Party, the Term Borrower or any Term Guarantor, and notwithstanding anything to the contrary in any other Term Document, be deemed to also hold and have held such Lien as bailee for the benefit of the ABL Agent as security for the ABL Obligations (subject to the Lien Priority and other terms hereof) and shall promptly notify the ABL Agent in writing of the existence of such Lien.

 

(b)       Until the date upon which the Discharge of Term Obligations shall have occurred, the parties hereto agree that no ABL Secured Party shall acquire or hold any Lien on any assets of any Credit Party securing any ABL Obligation which assets are not also subject to the Lien of the Term Agent under the Term Documents, subject to the Lien Priority set forth herein.  If any ABL Secured Party shall (nonetheless and in breach hereof) acquire or hold any Lien on any assets of any Credit Party securing any ABL Obligation which assets are not also subject to the Lien of the Term Agent under the Term Documents, subject to the Lien Priority set forth herein, then the ABL Agent (or the relevant ABL Secured Party) shall, without the need for any further consent of any other ABL Secured Party, any ABL Borrower or any ABL Guarantor and notwithstanding anything to the contrary in any other ABL Document be deemed to also hold and have held such Lien as bailee for the benefit of the Term Agent as security for the Term Obligations (subject to the Lien Priority and other terms hereof) and shall promptly notify the Term Agent in writing of the existence of such Lien.

 

Section 2.6               Waiver of Marshalling.  (a)  Until the Discharge of the ABL Obligations, the Term Agent, on behalf of itself and the Term Secured Parties, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the ABL Priority Collateral or any other similar rights a junior secured creditor may have under applicable law.

 

(b)           Until the Discharge of the Term Obligations, the ABL Agent, on behalf of itself and the ABL Secured Parties, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the Term Priority Collateral or any other similar rights a junior secured creditor may have under applicable law.

 

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ARTICLE 3
  ACTIONS OF THE PARTIES

 

Section 3.1               Certain Actions Permitted.  The Term Agent and the ABL Agent may make such demands or file such claims in respect of the Term Obligations or the ABL Obligations, as applicable, as are necessary to prevent the waiver or bar of such claims under applicable statutes of limitations or other statutes, court orders, or rules of procedure at any time.

 

Section 3.2               Agent for Perfection.  The ABL Agent, for and on behalf of itself and each ABL Lender, and the Term Agent, for and on behalf of itself and each Term Lender, as applicable, each agree to hold all Control Collateral and Cash Collateral that is part of the Collateral in their respective possession, custody, or control (or in the possession, custody, or control of agents or bailees for either) as agent for the other solely for the purpose of perfecting the security interest granted to each in such Control Collateral or Cash Collateral, subject to the terms and conditions of this Section 3.2.  None of the ABL Agent, the ABL Lenders, the Term Agent, or the Term Lenders, as applicable, shall have any obligation whatsoever to the others to assure that the Control Collateral is genuine or owned by any Borrower, any Guarantor, or any other Person or to preserve rights or benefits of any Person.  The duties or responsibilities of the ABL Agent and the Term Agent under this Section 3.2 are and shall be limited solely to holding or maintaining control of the Control Collateral and the Cash Collateral as agent for the other Party for purposes of perfecting the Lien held by the Term Agent or the ABL Agent, as applicable.  The ABL Agent is not and shall not be deemed to be a fiduciary of any kind for the Term Agent, the Term Lenders, or any other Person.  The Term Agent is not and shall not be deemed to be a fiduciary of any kind for the ABL Agent, the ABL Lenders, or any other Person.  In the event that (a) the Term Agent or any Term Lender receives any Collateral or Proceeds of the Collateral in violation of the terms of this Agreement, or (b) the ABL Agent or any ABL Lender receives any Collateral or Proceeds of the Collateral in violation of the terms of this Agreement, then the Term Agent, such Term Lender, the ABL Agent, or such ABL Lender, as applicable, shall promptly pay over such Proceeds or Collateral to (i) in the case of clause (a), the ABL Agent, or (ii) in the case of clause (b), the Term Agent, in each case, in the same form as received with any necessary endorsements, for application in accordance with the provisions of Section 4.1 of this Agreement.

 

Section 3.3               Sharing of Information and Access.  In the event that the ABL Agent shall, in the exercise of its rights under the ABL Collateral Documents or otherwise, receive possession or control of any books and Records of any Term Credit Party which contain information identifying or pertaining to the Term Priority Collateral, the ABL Agent shall, upon request from the Term Agent and as promptly as practicable thereafter, either make available to the Term Agent such books and Records for inspection and duplication or provide to the Term Agent copies thereof.  In the event that the Term Agent shall, in the exercise of its rights under the Term Collateral Documents or otherwise, receive possession or control of any books and records of any ABL Credit Party which contain information identifying or pertaining to any of the ABL Priority Collateral, the Term Agent shall, upon request from the ABL Agent and as promptly as practicable thereafter, either make available to the ABL Agent such books and records for inspection and duplication or provide the ABL Agent copies thereof.

 

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Section 3.4               Insurance.  Proceeds of Collateral include insurance proceeds and, therefore, the Lien Priority shall govern the ultimate disposition of casualty insurance proceeds.  The ABL Agent and the Term Agent each shall be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to Collateral.  The ABL Agent shall have the sole and exclusive right, as against the Term Agent, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of ABL Priority Collateral.  The Term Agent shall have the sole and exclusive right, as against the ABL Agent, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of Term Priority Collateral.  All proceeds of such insurance shall be remitted to the ABL Agent or the Term Agent, as the case may be, and each of the Term Agent and ABL Agent shall cooperate (if necessary) in a reasonable manner in effecting the payment of insurance proceeds in accordance with Section 4.1 hereof.

 

Section 3.5               No Additional Rights For the Credit Parties Hereunder.  Except as provided in Section 3.6, if any ABL Secured Party or Term Secured Party shall enforce its rights or remedies in violation of the terms of this Agreement, the Credit Parties shall not be entitled to use such violation as a defense to any action by any ABL Secured Party or Term Secured Party, nor to assert such violation as a counterclaim or basis for set off or recoupment against any ABL Secured Party or Term Secured Party.

 

Section 3.6               Inspection Rights and Insurance.  (a)  Without limiting any rights the ABL Agent or any other ABL Secured Party may otherwise have under applicable law or by agreement, the ABL Agent, the ABL Secured Parties and any representatives designated by the ABL Agent may, at any time and whether or not the Term Agent or any other Term Secured Party has commenced and is continuing to Exercise Any Secured Creditor Remedies (the “ABL Permitted Access Right”), (i) during normal business hours on any business day, access ABL Priority Collateral that (A) is stored or located in or on, (B) has become an accession with respect to (within the meaning of Section 9-335 of the Uniform Commercial Code), or (C) has been commingled with (within the meaning of Section 9-336 of the Uniform Commercial Code), Term Priority Collateral and (ii) in the event of any liquidation of the ABL Priority Collateral (or any other Exercise of Any Secured Creditor Remedies by the ABL Agent or any representatives designated by the ABL Agent (including any ABL Borrower or ABL Guarantor) acting with the consent or on behalf of the ABL Agent), use the Term Priority Collateral (including without limitation, Equipment, Fixtures, Intellectual Property, General Intangibles and Real Estate) (A) in the case of Term Priority Collateral other than Intellectual Property, until the date that is 120 days after the commencement of such liquidation of the ABL Priority Collateral or Exercise of Any Secured Creditor Remedies, as the case may be, and (B) in the case of Intellectual Property until the liquidation of such ABL Collateral is completed, non-exclusively, royalty free and without other costs, expenses or charges, in the case of each of (i) and (ii), (x) for the limited purposes of assembling, inspecting, copying or downloading information stored on, taking actions to perfect its Lien on, completing a production run of inventory involving, taking possession of, moving, preparing and advertising for sale, selling, liquidating (by public auction, private sale or a “store closing”, “going out of business” or similar sale, whether in bulk, in lots or to customers in the ordinary course of business, which sale may include augmented inventory of the same type sole in the ABL Borrowers’ and ABL Guarantors’ business), storing or otherwise dealing with, or to Exercise Any Secured Creditor Remedies with respect to, the ABL Priority Collateral (collectively, “ABL Permitted Access Purposes”) and (y) without notice to, 

 

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the involvement of or interference by any Term Secured Party or liability to any Term Secured Party.  In the event that any ABL Secured Party has commenced and is continuing to Exercise Any Secured Creditor Remedies with respect to any ABL Priority Collateral, the Term Agent may not sell, assign or otherwise transfer the related Term Priority Collateral prior to the expiration of the 120-day period commencing on the date such Secured Party begins to Exercise Any Secured Creditor Remedies, unless the purchaser, assignee or transferee thereof agrees to be bound by the provisions of this Section 3.6.  If any stay or other order that prohibits the ABL Agent and other ABL Secured Parties from commencing and continuing to Exercise Any Secured Creditor Remedies with respect to ABL Priority Collateral has been entered by a court of competent jurisdiction, such 120-day period shall be tolled during the pendency of any such stay or other order.  The ABL Agent and the ABL Secured parties shall not be obligated to pay any amounts to the Term Agent or the Term Secured Parties (or any Person claiming by, through or under the Term Secured Parties, including any purchaser of the Term Priority Collateral) or to the ABL Borrowers and ABL Guarantors, for or in respect of the use by the ABL Agent and the ABL Secured Parties of the Term Priority Collateral in accordance with this Section and none of the ABL Agent or the ABL Secured Parties shall be obligated to secure, protect, insure or repair any such Term Priority Collateral (other than for damages caused by the ABL Agent, the ABL Secured Parties or other respective employees, agents and representatives).

 

(b)       The Term Agent and the other Term Secured Parties shall use commercially reasonable efforts to not hinder or obstruct the ABL Agent and the other ABL Secured Parties from exercising the ABL Permitted Access Right.

 

(c)       Subject to the terms hereof, the Term Agent may advertise and conduct public auctions or private sales of the Term Priority Collateral without notice (except as required herein or by applicable law) to, the involvement of or interference by any ABL Secured Party or liability to any ABL Secured Party.

 

Section 3.7               Agreement Regarding Mortgages.  The ABL Agent agrees, for and on behalf of itself and the ABL Lenders, that all mortgages, deeds of trust, deeds and similar instruments (collectively, “mortgages”) now or thereafter filed against real property in favor of or for the benefit of the ABL Agent shall be in form satisfactory to the Term Agent and shall contain the following notation:  “The lien created by this mortgage on the property described herein is junior and subordinate to the lien on such property created by any mortgage, deed of trust or similar instrument now or hereafter granted to JPMorgan Chase Bank, N.A., as Term Agent, and its successors and assigns, in such property, in accordance with the provisions of the Intercreditor Agreement dated as of October 9, 2007 among JPMorgan Chase Bank, N.A., as ABL Agent and JPMorgan Chase Bank, N.A., as Term Agent, as amended from time to time.”

 

ARTICLE 4
  APPLICATION OF PROCEEDS

 

Section 4.1               Application of Proceeds.

 

(a)       Revolving Nature of ABL Obligations.  The Term Agent, for and on behalf of itself and the Term Lenders, expressly acknowledges and agrees that (i) any ABL Credit Agreement includes a revolving commitment, that in the ordinary course of business the 

 

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ABL Agent and the ABL Lenders will apply payments and make advances thereunder, and that no application of any Payment Collateral or Cash Collateral or the release of any Lien by the ABL Agent upon any portion of the Collateral in connection with a permitted disposition under any ABL Credit Agreement shall constitute the Exercise of Secured Creditor Remedies under this Agreement; (ii) the amount of the ABL Obligations that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the ABL Obligations may be modified, extended or amended from time to time, and that the aggregate amount of the ABL Obligations may be increased, replaced or refinanced, in each event, without notice to or consent by the Term Secured Parties and without affecting the provisions hereof; and (iii) all Payment Collateral or Cash Collateral received by the ABL Agent may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, to the ABL Obligations at any time; provided, however, that from and after the date on which the ABL Agent (or any ABL Lender) commences the Exercise of Any Secured Creditor Remedies (other than, prior to the acceleration of any of the Term Obligations, the exercise of its rights in accordance with Section 7.02 of the Original ABL Credit Agreement or any similar provision of any other ABL Credit Agreement), all amounts received by the ABL Agent or any ABL Lender shall be applied as specified in this Section 4.1.  The Lien Priority shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of either the ABL Obligations or the Term Obligations, or any portion thereof.

 

(b)       Application of Proceeds of ABL Priority Collateral.  The ABL Agent and the Term Agent hereby agree that all ABL Priority Collateral, and all ABL Priority Proceeds thereof, received by either of them in connection with any Exercise of Secured Creditor Remedies with respect to ABL Priority Collateral shall be applied,

 

first, to the payment of costs and expenses of the ABL Agent in connection with such Exercise of Secured Creditor Remedies,

 

second, to the payment of the ABL Obligations in accordance with the ABL Documents until the Discharge of ABL Obligations (other than contingent indemnity obligations with respect to then unasserted claims) shall have occurred,

 

third, to the payment, on a pro rata basis, of the Term Obligations (other than contingent indemnity obligations with respect to then unasserted claims), and

 

fourth, the balance, if any, to the Credit Parties or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct;

 

provided that in the event the Term Agent receives, in connection with an Insolvency Proceeding, any Proceeds of any ABL Priority Collateral and the Lien granted in favor of the ABL Agent or the ABL Lenders in respect of such ABL Priority Collateral has been voided, avoided or otherwise invalidated by a court of competent jurisdiction and the provisions of Section 5.3 would not be effective, then such Proceeds received by the Term Agent with respect to the ABL Priority Collateral shall be applied to the extent permitted by applicable law, to the payment, on a pro rata basis, of the Term Obligations in accordance with the Term Documents until the Discharge of the Term Obligations shall have occurred.

 

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(c)       Application of Proceeds of Term Priority Collateral.  The ABL Agent and the Term Agent hereby agree that all Term Priority Collateral, and all Term Priority Proceeds thereof, received by either of them in connection with any Exercise of Secured Creditor Remedies with respect to Term Priority Collateral shall be applied,

 

first, to the payment of costs and expenses of the Term Agent in connection with such Exercise of Secured Creditor Remedies,

 

second, to the payment, on a pro rata basis, of the Term Obligations in accordance with the Term Documents until the Discharge of Term Obligations shall have occurred (other than contingent indemnity obligations with respect to then unasserted claims),

 

third, to the payment of the ABL Obligations (other than contingent indemnity obligations with respect to then unasserted claims); and

 

fourth, the balance, if any, to the Credit Parties or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct;

 

provided that in the event the ABL Agent receives, in connection with an Insolvency Proceeding, any Proceeds of any Term Priority Collateral and the Lien granted in favor of the Term Agent or the Term Lenders in respect of such Term Priority Collateral has been voided, avoided or otherwise invalidated by a court of competent jurisdiction and the provisions of Section 5.3 would not be effective, then such Proceeds received by the ABL Agent with respect to the Term Priority Collateral as a result of such defect shall be applied to the extent permitted by applicable law, to the payment, on a pro rata basis, of the ABL Obligations in accordance with the ABL Documents until the Discharge of the ABL Obligations shall have occurred.

 

(d)       Limited Obligation or Liability.  In exercising remedies, whether as a secured creditor or otherwise, the ABL Agent shall have no obligation or liability to the Term Agent or to any Term Lender, and the Term Agent shall have no obligation or liability to the ABL Agent or any ABL Lender, regarding the adequacy of any Proceeds or for any action or omission, save and except solely for an action or omission that breaches the express obligations undertaken by each Party under the terms of this Agreement so long as such exercise of remedies is conducted in a commercially reasonable manner, in accordance with mandatory provisions of applicable law and does not breach the provisions of this Agreement.

 

(e)       Turnover of Cash Collateral After Discharge.  Upon the Discharge of ABL Obligations, the ABL Agent shall (at the ABL Borrowers’ expense) deliver to the Term Agent or shall execute such documents as the Term Agent may reasonably request to enable the Term Agent to have control over any Cash Collateral or Control Collateral still in the ABL Agent’s possession, custody, or control in the same form as received with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct.  Upon the Discharge of Term Obligations, the Term Agent shall (at the Term Borrower’s expense) deliver to the ABL Agent or shall execute such documents as the ABL Agent may reasonably request to enable the ABL Agent to have control over any Cash Collateral or Control Collateral still in the Term Agent’s possession, custody or control in the same form as received with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct.

 

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Section 4.2               Specific Performance.  Each of the ABL Agent and the Term Agent is hereby authorized to demand specific performance of this Agreement, whether or not any Borrower or any Guarantor shall have complied with any of the provisions of any of the Credit Documents, at any time when the other Party shall have failed to comply with any of the provisions of this Agreement applicable to it.  Each of the ABL Agent, for and on behalf of itself and the ABL Lenders, and the Term Agent, for and on behalf of itself and the Term Lenders, hereby irrevocably waives any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance.

 

ARTICLE 5
  INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS

 

Section 5.1               Notice of Acceptance and Other Waivers.

 

(a)       All ABL Obligations at any time made or incurred by any Borrower or any Guarantor shall be deemed to have been made or incurred in reliance upon this Agreement, and the Term Agent, on behalf of itself and the Term Lenders, hereby waives notice of acceptance, or proof of reliance by the ABL Agent or any ABL Lender of this Agreement, and notice of the existence, increase, renewal, extension, accrual, creation, or non-payment of all or any part of the ABL Obligations.  All Term Obligations at any time made or incurred by any Borrower or any Guarantor shall be deemed to have been made or incurred in reliance upon this Agreement, and the ABL Agent, on behalf of itself and the ABL Lenders, hereby waives notice of acceptance, or proof of reliance, by the Term Agent or any Term Lender of this Agreement, and notice of the existence, increase, renewal, extension, accrual, creation, or non-payment of all or any part of the Term Obligations.

 

(b)       None of the ABL Agent, any ABL Lender, or any of their respective Affiliates, directors, officers, employees, or agents shall be liable to the Term Agent, any Term Lender, or any of their respective Affiliates for failure to demand, collect, or realize upon any of the Collateral or any Proceeds, or for any delay in doing so, or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof, except as specifically provided in this Agreement.  If the ABL Agent or any ABL Lender honors (or fails to honor) a request by any Borrower for an extension of credit pursuant to any ABL Credit Agreement or any of the other ABL Documents, whether the ABL Agent or any ABL Lender has knowledge that the honoring of (or failure to honor) any such request would constitute a default under the terms of any Term Credit Agreement or any other Term Document (but not a default under this Agreement) or an act, condition, or event that, with the giving of notice or the passage of time, or both, would constitute such a default, or if the ABL Agent or any ABL Lender otherwise should exercise any of its contractual rights or remedies under any ABL Documents (subject to the express terms and conditions hereof), neither the ABL Agent nor any ABL Lender shall have any liability whatsoever to the Term Agent or any Term Lender as a result of such action, omission, or exercise (so long as any such exercise does not breach the express terms and provisions of this Agreement).  The ABL Agent and the ABL Lenders shall be entitled to manage and supervise their loans and extensions of credit under any ABL Credit Agreement and any of the other ABL Documents as they may, in their sole discretion, deem appropriate, and may manage their loans and extensions of credit without regard to any rights or interests that the Term Agent or any of 

 

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the Term Lenders have in the Collateral, except as otherwise expressly set forth in this Agreement.  The Term Agent, on behalf of itself and the Term Lenders, agrees that neither the ABL Agent nor any ABL Lender shall incur any liability as a result of a sale, lease, license, application, or other disposition of all or any portion of the Collateral or Proceeds thereof, pursuant to the ABL Documents, so long as such disposition is conducted in accordance with mandatory provisions of applicable law and does not breach the provisions of this Agreement.

 

(c)       None of the Term Agent, any Term Lender or any of their respective Affiliates, directors, officers, employees, or agents shall be liable to the ABL Agent, any ABL Lender, or any of their respective Affiliates for failure to demand, collect, or realize upon any of the Collateral or any Proceeds, or for any delay in doing so, or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof, except as specifically provided in this Agreement.  If the Term Agent or any Term Lender honors (or fails to honor) a request by any Borrower for an extension of credit pursuant to any Term Credit Agreement or any of the other Term Documents, whether the Term Agent or any Term Lender has knowledge that the honoring of (or failure to honor) any such request would constitute a default under the terms of any ABL Credit Agreement or any other ABL Document (but not a default under this Agreement) or an act, condition, or event that, with the giving of notice or the passage of time, or both, would constitute such a default, or if the Term Agent or any Term Lender otherwise should exercise any of its contractual rights or remedies under the Term Documents (subject to the express terms and conditions hereof), neither the Term Agent nor any Term Lender shall have any liability whatsoever to the ABL Agent or any ABL Lender as a result of such action, omission, or exercise (so long as any such exercise does not breach the express terms and provisions of this Agreement).  The Term Agent and the Term Lenders shall be entitled to manage and supervise their loans and extensions of credit under the Term Documents as they may, in their sole discretion, deem appropriate, and may manage their loans and extensions of credit without regard to any rights or interests that the ABL Agent or any ABL Lender has in the Collateral, except as otherwise expressly set forth in this Agreement.  The ABL Agent, on behalf of itself and the ABL Lenders, agrees that none of the Term Agent or the Term Lenders shall incur any liability as a result of a sale, lease, license, application, or other disposition of the Collateral or any part or Proceeds thereof, pursuant to the Term Documents, so long as such disposition is conducted in accordance with mandatory provisions of applicable law and does not breach the provisions of this Agreement.

 

Section 5.2               Modifications to ABL Documents and Term Documents.

 

(a)       The Term Agent, on behalf of itself and the Term Lenders, hereby agrees that, without affecting the obligations of the Term Agent and the Term Lenders hereunder, the ABL Agent and the ABL Lenders may, at any time and from time to time, in their sole discretion without the consent of or notice to the Term Agent or any Term Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to the Term Agent or any Term Lender or impairing or releasing the subordination provided for herein, amend, restate, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the ABL Documents in any manner whatsoever, including, without limitation, to:

 

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(i)        change the manner, place, time, or terms of payment or renew, alter or increase, all or any of the ABL Obligations or otherwise amend, restate, supplement, or otherwise modify in any manner, or grant any waiver or release with respect to, all or any part of the ABL Obligations or any of the ABL Documents;

 

(ii)       retain or obtain a Lien on any Property of any Person to secure any of the ABL Obligations, and in connection therewith to enter into any additional ABL Documents;

 

(iii)      amend, or grant any waiver, compromise, or release with respect to, or consent to any departure from, any guaranty or other obligations of any Person obligated in any manner under or in respect of the ABL Obligations;

 

(iv)      release its Lien on any Collateral or other Property;

 

(v)       exercise or refrain from exercising any rights against any Borrower, any Guarantor, or any other Person;

 

(vi)      retain or obtain the primary or secondary obligation of any other Person with respect to any of the ABL Obligations; and

 

(vii)     otherwise manage and supervise the ABL Obligations as the ABL Agent shall deem appropriate.

 

(b)       The ABL Agent, on behalf of itself and the ABL Lenders, hereby agrees that, without affecting the obligations of the ABL Agent and the ABL Lenders hereunder, the Term Agent and the Term Lenders may, at any time and from time to time, in their sole discretion without the consent of or notice to the ABL Agent or any ABL Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to the ABL Agent or any ABL Lender or impairing or releasing the subordination provided for herein, amend, restate, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the Term Documents in any manner whatsoever, including, without limitation, to:

 

(i)        change the manner, place, time, or terms of payment or renew, alter or increase, all or any of the Term Obligations or otherwise amend, restate, supplement, or otherwise modify in any manner, or grant any waiver or release with respect to, all or any part of the Term Obligations or any of the Term Documents;

 

(ii)       retain or obtain a Lien on any Property of any Person to secure any of the Term Obligations, and in connection therewith to enter into any additional Term Documents;

 

(iii)      amend, or grant any waiver, compromise, or release with respect to, or consent to any departure from, any guaranty or other obligations of any Person obligated in any manner under or in respect of the Term Obligations;

 

(iv)      release its Lien on any Collateral or other Property;

 

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(v)       exercise or refrain from exercising any rights against any Borrower, any Guarantor, or any other Person;

 

(vi)      retain or obtain the primary or secondary obligation of any other Person with respect to any of the Term Obligations; and

 

(vii)     otherwise manage and supervise the Term Obligations as the Term Agent shall deem appropriate.

 

(c)       The ABL Obligations and the Term Obligations may be refinanced, in whole or in part, in each case, without notice to, or the consent (except to the extent a consent is required to permit the refinancing transaction under any ABL Document or any Term Document) of the ABL Agent, the ABL Lenders, the Term Agent or the Term Lenders, as the case may be, all without affecting the Lien Priorities provided for herein or the other provisions hereof, provided, however, that the holders of such refinancing Indebtedness (or an authorized agent or trustee on their behalf) bind themselves in writing to the terms of this Agreement pursuant to such documents or agreements (including amendments or supplements to this Agreement) as the ABL Agent or the Term Agent, as the case may be, shall reasonably request and in form and substance reasonably acceptable to the ABL Agent or the Term Agent, as the case may be, and any such refinancing transaction shall be in accordance with any applicable provisions of both the ABL Documents and the Term Documents.

 

Section 5.3               Reinstatement and Continuation of Agreement.

 

(a)       If the ABL Agent or any ABL Lender is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay to the estate of any Borrower, any Guarantor, or any other Person any payment made in satisfaction of all or any portion of the ABL Obligations (an “ABL Recovery”), then the ABL Obligations shall be reinstated to the extent of such ABL Recovery.  If this Agreement shall have been terminated prior to such ABL Recovery, this Agreement shall be reinstated in full force and effect in the event of such ABL Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the Parties from such date of reinstatement.  All rights, interests, agreements, and obligations of the ABL Agent, the Term Agent, the ABL Lenders, and the Term Lenders under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of, any Insolvency Proceeding by or against any Borrower or any Guarantor or any other circumstance which otherwise might constitute a defense available to, or a discharge of any Borrower or any Guarantor in respect of the ABL Obligations or the Term Obligations.  No priority or right of the ABL Agent or any ABL Lender shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of any Borrower or any Guarantor or by the noncompliance by any Person with the terms, provisions, or covenants of any of the ABL Documents, regardless of any knowledge thereof which the ABL Agent or any ABL Lender may have.

 

(b)       If the Term Agent or any Term Lender is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay to the estate of any Borrower, any Guarantor, or any other Person any payment made in satisfaction of all or any portion of the Term Obligations (a “Term Recovery”), then the Term Obligations shall be reinstated to the 

 

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extent of such Term Recovery.  If this Agreement shall have been terminated prior to such Term Recovery, this Agreement shall be reinstated in full force and effect in the event of such Term Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the Parties from such date of reinstatement.  All rights, interests, agreements, and obligations of the ABL Agent, the Term Agent, the ABL Lenders, and the Term Lenders under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of, any Insolvency Proceeding by or against any Borrower or any Guarantor or any other circumstance which otherwise might constitute a defense available to, or a discharge of any Borrower or any Guarantor in respect of the ABL Obligations or the Term Obligations.  No priority or right of the Term Agent or any Term Lender shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of any Borrower or any Guarantor or by the noncompliance by any Person with the terms, provisions, or covenants of any of the Term Documents, regardless of any knowledge thereof which the Term Agent or any Term Lender may have.

 

ARTICLE 6
 INSOLVENCY PROCEEDINGS

 

Section 6.1               DIP Financing.

 

(a)       If any Borrower or any Guarantor shall be subject to any Insolvency Proceeding in the United States at any time prior to the Discharge of ABL Obligations, and the ABL Agent or the ABL Lenders shall seek to provide any Borrower or any Guarantor with, or consent to a third party providing, any financing under Section 364 of the Bankruptcy Code or consent to any order for the use of cash collateral under Section 363 of the Bankruptcy Code (each, a “DIP Financing”), with such DIP Financing to be secured by all or any portion of the ABL Priority Collateral (including assets that, but for the application of Section 552 of the Bankruptcy Code would be ABL Priority Collateral) (it being understood that the ABL Agent and the ABL Secured Parties shall not propose any DIP Financing with respect to the Term Priority Collateral in competition with the Term Agent and the Term Secured Parties without the consent of the Term Agent), then the Term Agent, on behalf of itself and the Term Lenders, agrees that it will raise no objection and will not support any objection to such DIP Financing or to the Liens securing the same on the grounds of a failure to provide “adequate protection” for the Liens of the Term Agent securing the Term Obligations or on any other grounds (and will not request any adequate protection solely as a result of such DIP Financing), so long as (i) the Term Agent retains its Lien on the Collateral to secure the Term Obligations (in each case, including Proceeds thereof arising after the commencement of the case under the Bankruptcy Code) and, as to the Term Priority Collateral only, such Lien has the same priority as existed prior to the commencement of the case under the Bankruptcy Code and any Lien on Term Priority Collateral securing such DIP Financing is junior and subordinate to the Lien of the Term Agent on the Term Priority Collateral, (ii) all Liens on ABL Priority Collateral securing any such DIP Financing shall be senior to or on a parity with the Liens of the ABL Agent and the ABL Lenders securing the ABL Obligations on ABL Priority Collateral and (iii) if the ABL Agent receives an adequate protection Lien on post-petition assets of the debtor to secure the ABL Obligations, the Term Agent also may seek to obtain an adequate protection Lien on such post-petition assets of the debtor to secure the Term Obligations, provided that (x) such Liens in favor of the ABL Agent and the Term Agent shall be subject to the provisions of Section 6.1(c) hereof 

 

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and (y) the foregoing provisions of this Section 6.1(a) shall not prevent the Term Agent and the Term Lenders from objecting to any provision in any DIP Financing relating to any provision or content of a plan of reorganization.

 

(b)       If any Borrower or any Guarantor shall be subject to any Insolvency Proceeding in the United States at any time prior to the Discharge of Term Obligations, and the Term Agent or the Term Lenders shall seek to provide any Borrower or any Guarantor with, or consent to a third party providing, any DIP Financing, with such DIP Financing to be secured by all or any portion of the Term Priority Collateral (including assets that, but for the application of Section 552 of the Bankruptcy Code would be Term Priority Collateral) (it being understood that the Term Agent and the Term Secured Parties shall not propose any DIP Financing with respect to the ABL Priority Collateral in competition with the ABL Agent and the ABL Secured Parties without the consent of the ABL Agent), then the ABL Agent, on behalf of itself and the ABL Lenders, agrees that it will raise no objection and will not support any objection to such DIP Financing or to the Liens securing the same on the grounds of a failure to provide “adequate protection” for the Liens of the ABL Agent securing the ABL Obligations or on any other grounds (and will not request any adequate protection solely as a result of such DIP Financing), so long as (i) the ABL Agent retains its Lien on the Collateral to secure the ABL Obligations (in each case, including Proceeds thereof arising after the commencement of the case under the Bankruptcy Code) and, as to the ABL Priority Collateral only, such Lien has the same priority as existed prior to the commencement of the case under the Bankruptcy Code and any Lien on ABL Priority Collateral securing such DIP Financing is junior and subordinate to the Lien of the ABL Agent on the ABL Priority Collateral, (ii) all Liens on Term Priority Collateral securing any such DIP Financing shall be senior to or on a parity with the Liens of the Term Agent and the Term Lenders securing the Term Obligations on Term Priority Collateral and (iii) if the Term Agent receives an adequate protection Lien on post-petition assets of the debtor to secure the Term Obligations, the ABL Agent also may seek to obtain an adequate protection Lien on such post-petition assets of the debtor to secure the ABL Obligations, provided that (x) such Liens in favor of the Term Agent and the ABL Agent shall be subject to the provisions of Section 6.1(c) hereof and (y) the foregoing provisions of this Section 6.1(b) shall not prevent the ABL Agent and the ABL Lenders from objecting to any provision in any DIP Financing relating to any provision or content of a plan of reorganization.

 

(c)       All Liens granted to the ABL Agent or the Term Agent in any Insolvency Proceeding, whether as adequate protection or otherwise, are intended by the Parties to be and shall be deemed to be subject to the Lien Priority and the other terms and conditions of this Agreement.

 

Section 6.2            Relief From Stay.  Until the Discharge of ABL Obligations has occurred, the Term Agent, on behalf of itself and the Term Lenders, agrees not to seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any portion of the ABL Priority Collateral without the ABL Agent’s express written consent.  Until the Discharge of Term Obligations has occurred, the ABL Agent, on behalf of itself and the ABL Lenders, agrees not to seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any portion of the Term Priority Collateral without the Term Agent’s express written consent.  In addition, neither the Term Agent nor the ABL Agent shall seek any relief from the automatic stay with respect to any Collateral without providing seven (7) business days’ 

 

29

 

prior written notice to the other, unless such period is agreed by both the ABL Agent and the Term Agent to be modified or unless the ABL Agent or the Term Agent, as applicable, makes a good faith determination that either (A) the ABL Priority Collateral or the Term Priority Collateral, as applicable, will decline speedily in value, or (B) the failure to take any action will have a reasonable likelihood of endangering the ABL Agent’s or the Term Agent’s ability to realize upon its Collateral.

 

Section 6.3            No Contest.  The Term Agent, on behalf of itself and the Term Lenders, agrees that, prior to the Discharge of ABL Obligations, none of them shall contest (or support any other Person contesting) (a) any request by the ABL Agent or any ABL Lender for adequate protection of its interest in the Collateral (unless in contravention of Section 6.1(b) above), or (b) any objection by the ABL Agent or any ABL Lender to any motion, relief, action, or proceeding based on a claim by the ABL Agent or any ABL Lender that its interests in the Collateral (unless in contravention of Section 6.1(b) above) are not adequately protected (or any other similar request under any law applicable to an Insolvency Proceeding), so long as any Liens granted to the ABL Agent as adequate protection of its interests are subject to this Agreement.  The ABL Agent, on behalf of itself and the ABL Lenders, agrees that, prior to the Discharge of Term Obligations, none of them shall contest (or support any other Person contesting) (i) any request by the Term Agent or any Term Lender for adequate protection of its interest in the Collateral (unless in contravention of Section 6.1(a) above), or (ii) any objection by the Term Agent or any Term Lender to any motion, relief, action or proceeding based on a claim by the Term Agent or any Term Lender that its interests in the Collateral (unless in contravention of Section 6.1(a) above) are not adequately protected (or any other similar request under any law applicable to an Insolvency Proceeding), so long as any Liens granted to the Term Agent as adequate protection of its interests are subject to this Agreement.

 

Section 6.4            Asset Sales.  The Term Agent agrees, on behalf of itself and the Term Lenders, that it will not oppose any sale consented to by the ABL Agent of any ABL Priority Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency Proceeding) so long as the proceeds of such sale are applied in accordance with this Agreement.  The ABL Agent agrees, on behalf of itself and the ABL Lenders, that it will not oppose any sale consented to by the Term Agent of any Term Priority Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency Proceeding) so long as the proceeds of such sale are applied in accordance with this Agreement.  If such sale of Collateral includes both ABL Priority Collateral and Term Priority Collateral and the Parties are unable after negotiating in good faith to agree on the allocation of the purchase price between the ABL Priority Collateral and Term Priority Collateral, either Party may apply to the court in such Insolvency Proceeding to make a determination of such allocation, and the court’s determination shall be binding upon the Parties.

 

Section 6.5            Separate Grants of Security and Separate Classification.  Each Term Lender, the Term Agent, each ABL Lender and the ABL Agent acknowledges and agrees that (i) the grants of Liens pursuant to the ABL Security Documents and the Term Security Documents constitute two separate and distinct grants of Liens and (ii) because of, among other things, their differing rights in the Collateral, the Term Obligations are fundamentally different from the ABL Obligations and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency Proceeding.  To further effectuate the intent of the parties as provided in the 

 

30

 

immediately preceding sentence, if it is held that the claims of the ABL Secured Parties and the Term Secured Parties in respect of the Collateral constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the ABL Secured Parties and the Term Secured Parties hereby acknowledge and agree that all distributions shall be made as if there were separate classes of ABL Obligation claims and Term Obligation claims against the Credit Parties (with the effect being that, to the extent that the aggregate value of the ABL Priority Collateral or Term Priority Collateral is sufficient (for this purpose ignoring all other claims held by the Secured Parties), the ABL Secured Parties or the Term Secured Parties, respectively, shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest that is available from each pool of Priority Collateral for the satisfaction of each of the applicable ABL Obligation claims and the applicable Term Obligation claims, respectively, before any distribution is made in respect of the other claims held by the Secured Parties, with the Secured Parties hereby acknowledging and agreeing to turn over to the respective other Secured Parties amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries).

 

Section 6.6            Enforceability.  The provisions of this Agreement are intended to be and shall be enforceable under Section 510(a) of the Bankruptcy Code.

 

Section 6.7            ABL Obligations Unconditional.  All rights of the ABL Agent hereunder, and all agreements and obligations of the Term Agent and the Credit Parties (to the extent applicable) hereunder, shall remain in full force and effect irrespective of:

 

(i)        any lack of validity or enforceability of any ABL Document;

 

(ii)       any change in the time, place or manner of payment of, or in any other term of, all or any portion of the ABL Obligations, or any amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding or restatement of any ABL Document;

 

(iii)      any exchange, release, voiding, avoidance or non perfection of any security interest in any Collateral or any other collateral, or any release, amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding, restatement or increase of all or any portion of the ABL Obligations or any guarantee or guaranty thereof; or

 

(iv)      any other circumstances that otherwise might constitute a defense (other than payment in full of the ABL Obligations) available to, or a discharge of, any Credit Party in respect of the ABL Obligations, or of any of the Term Agent or any Credit Party, to the extent applicable, in respect of this Agreement.

 

Section 6.8            Term Obligations Unconditional.  All rights of the Term Agent hereunder, all agreements and obligations of the ABL Agent and the Credit Parties (to the extent applicable) hereunder, shall remain in full force and effect irrespective of:

 

(i)        any lack of validity or enforceability of any Term Document;

 

31

 

(ii)       any change in the time, place or manner of payment of, or in any other term of, all or any portion of the Term Obligations, or any amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding or restatement of any Term Document;

 

(iii)      any exchange, release, voiding, avoidance or non perfection of any security interest in any Collateral, or any other collateral, or any release, amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding, restatement or increase of all or any portion of the Term Obligations or any guarantee or guaranty thereof; or

 

(iv)      any other circumstances that otherwise might constitute a defense (other than payment in full of the Term Obligations) available to, or a discharge of, any Credit Party in respect of the Term Obligations, or of any of the ABL Agent or any Credit Party, to the extent applicable, in respect of this Agreement.

 

Section 6.9            Adequate Protection.  Except to the extent expressly provided in Sections 6.1 and 6.3, nothing in this Agreement shall limit the rights of the ABL Agent and the ABL Lenders, on the one hand, and the Term Agent and the Term Lenders, on the other hand, from seeking or requesting adequate protection with respect to their respective interests in the applicable Collateral in any Insolvency Proceeding, including adequate protection in the form of a cash payment, periodic cash payments, cash payments of interest, additional collateral or otherwise; provided that (a) in the event that the ABL Agent, on behalf of itself or any of the ABL Lenders, seeks or requests adequate protection in respect of the ABL Obligations and such adequate protection is granted in the form of additional collateral comprising assets of the type of assets that constitute Term Priority Collateral, then the ABL Agent, on behalf of itself and each of the ABL Lenders, agrees that the Term Agent shall have the right to seek or request a senior Lien on such collateral as security for the Term Obligations and that any Lien on such collateral securing the ABL Obligations shall be subordinate to the Lien on such collateral securing the Term Obligations and (b) in the event that the Term Agent, on behalf of itself or any of the Term Lenders, seeks or requests adequate protection in respect of the Term Obligations and such adequate protection is granted in the form of additional collateral comprising assets of the type of assets that constitute ABL Priority Collateral, then the Term Agent, on behalf of itself and each of the Term Lenders, agrees that the ABL Agent shall have the right to seek or request a senior Lien on such collateral as security for the ABL Obligations and that any Lien on such collateral securing the Term Obligations shall be subordinate to the Lien on such collateral securing the ABL Obligations.

 

ARTICLE 7
  MISCELLANEOUS

 

Section 7.1               Rights of Subrogation.  The Term Agent, for and on behalf of itself and the Term Lenders, agrees that no payment to the ABL Agent or any ABL Lender pursuant to the provisions of this Agreement shall entitle the Term Agent or any Term Lender to exercise any rights of subrogation in respect thereof until the Discharge of ABL Obligations shall have occurred.  Following the Discharge of ABL Obligations, the ABL Agent agrees to execute such documents, agreements, and instruments as the Term Agent or any Term Lender may 

 

32

 

reasonably request to evidence the transfer by subrogation to any such Person of an interest in the ABL Obligations resulting from payments to the ABL Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by the ABL Agent are paid by such Person upon request for payment thereof.  The ABL Agent, for and on behalf of itself and the ABL Lenders, agrees that no payment to the Term Agent or any Term Lender pursuant to the provisions of this Agreement shall entitle the ABL Agent or any ABL Lender to exercise any rights of subrogation in respect thereof until the Discharge of Term Obligations shall have occurred.  Following the Discharge of Term Obligations, the Term Agent agrees to execute such documents, agreements, and instruments as the ABL Agent or any ABL Lender may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the Term Obligations resulting from payments to the Term Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by the Term Agent are paid by such Person upon request for payment thereof.

 

Section 7.2               Further Assurances.  The Parties will, at their own expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that either Party may reasonably request, in order to protect any right or interest granted or purported to be granted hereby or to enable the ABL Agent or the Term Agent to exercise and enforce its rights and remedies hereunder; provided, however, that no Party shall be required to pay over any payment or distribution, execute any instruments or documents, or take any other action referred to in this Section 7.2, to the extent that such action would contravene any law, order or other legal requirement or any of the terms or provisions of this Agreement, and in the event of a controversy or dispute, such Party may interplead any payment or distribution in any court of competent jurisdiction, without further responsibility in respect of such payment or distribution under this Section 7.2.

 

Section 7.3               Representations.  The Term Agent represents and warrants to the ABL Agent that it has the requisite power and authority under the Term Documents to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the Term Lenders and that this Agreement shall be a binding obligation of the Term Agent and the Term Lenders, enforceable against the Term Agent and the Term Lenders in accordance with its terms.  The ABL Agent represents and warrants to the Term Agent that it has the requisite power and authority under the ABL Documents to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the ABL Lenders and that this Agreement shall be a binding obligation of the ABL Agent and the ABL Lenders, enforceable against the ABL Agent and the ABL Lenders in accordance with its terms.

 

Section 7.4               Amendments.  No amendment or waiver of any provision of this Agreement nor consent to any departure by any Party hereto shall be effective unless it is in a written agreement executed by the Term Agent and the ABL Agent and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

Section 7.5               Addresses for Notices.  Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in

 

33

 

 

writing and may be personally served, telecopied, or sent by overnight express courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or five (5) days after deposit in the United States mail (certified, with postage prepaid and properly addressed).  For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section) shall be as set forth below or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.

 

	
ABL Agent:
    	
JPMorgan Chase   Bank, N.A.
    
	
 
    	
270 Park Avenue
    
	
 
    	
New York, New York   10017
    
	
 
    	
Attention: Barry   Bergman
    
	
 
    	
 
    
	
Term Agent:
    	
JPMorgan Chase   Bank, N.A.
    
	
 
    	
270 Park Avenue
    
	
 
    	
New York, New York   10017
    
	
 
    	
Attention: Barry   Bergman
    

 

Section 7.6               No Waiver, Remedies.  No failure on the part of any Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

Section 7.7               Continuing Agreement, Transfer of Secured Obligations.  This Agreement is a continuing agreement and shall (a) remain in full force and effect until the Discharge of ABL Obligations and the Discharge of Term Obligations shall have occurred, (b) be binding upon the Parties and their successors and assigns, and (c) inure to the benefit of and be enforceable by the Parties and their respective successors, transferees and assigns.  Nothing herein is intended, or shall be construed to give, any other Person any right, remedy or claim under, to or in respect of this Agreement or any Collateral.  All references to any Credit Party shall include any Credit Party as debtor-in-possession and any receiver or trustee for such Credit Party in any Insolvency Proceeding.  Without limiting the generality of the foregoing clause (c), the ABL Agent, any ABL Lender, the Term Agent, or any Term Lender may assign or otherwise transfer all or any portion of the ABL Obligations or the Term Obligations, as applicable, to any other Person (other than any Borrower, any Guarantor or any Affiliate of any Borrower or any Guarantor (except as provided in the ABL Credit Agreement or the Term Credit Agreement) and any Subsidiary of any Borrower or any Guarantor), and such other Person shall thereupon become vested with all the rights and obligations in respect thereof granted to the ABL Agent, the Term Agent, any ABL Lender, or any Term Lender, as the case may be, herein or otherwise.  The ABL Secured Parties and the Term Secured Parties may continue, at any time and without notice to the other parties hereto, to extend credit and other financial accommodations, lend monies and provide Indebtedness to, or for the benefit of, any Credit Party on the faith hereof.

 

Section 7.8               Governing Law: Entire Agreement.  The validity, performance, and enforcement of this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.  This Agreement constitutes the entire agreement and 

 

34

 

understanding among the Parties with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.

 

Section 7.9               Counterparts.  This Agreement may be executed in any number of counterparts, and it is not necessary that the signatures of all Parties be contained on any one counterpart hereof, each counterpart will be deemed to be an original, and all together shall constitute one and the same document.

 

Section 7.10             No Third Party Beneficiaries.  This Agreement is solely for the benefit of the ABL Agent, ABL Lenders, Term Agent and Term Lenders.  No other Person (including any Borrower, any Guarantor or any Affiliate of any Borrower or any Guarantor, or any Subsidiary of any Borrower or any Guarantor) shall be deemed to be a third party beneficiary of this Agreement.

 

Section 7.11             Headings.  The headings of the articles and sections of this Agreement are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof.

 

Section 7.12             Severability.  If any of the provisions in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement and shall not invalidate the Lien Priority or the application of Proceeds and other priorities set forth in this Agreement.

 

Section 7.13             Attorneys Fees.  The Parties agree that if any dispute, arbitration, litigation, or other proceeding is brought with respect to the enforcement of this Agreement or any provision hereof, the prevailing party in such dispute, arbitration, litigation, or other proceeding shall be entitled to recover its reasonable attorneys’ fees and all other costs and expenses incurred in the enforcement of this Agreement, irrespective of whether suit is brought and whether incurred before or after judgment.

 

Section 7.14             VENUE; JURY TRIAL WAIVER.

 

(a)       EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT 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 FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY 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 OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  EACH OF THE 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 SHALL AFFECT ANY RIGHT 

 

35

 

THAT ANY ABL SECURED PARTY OR ANY TERM SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY ABL DOCUMENTS AGAINST ANY CREDIT PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(b)       EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH PARTY HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(c)       EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.5.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

Section 7.15             Intercreditor Agreement.  This Agreement is the Intercreditor Agreement referred to in the Original ABL Credit Agreement and the Original Term Credit Agreement.  Nothing in this Agreement shall be deemed to subordinate the obligations due (i) to any ABL Secured Party to the obligations due to any Term Secured Party or (ii) to any Term Secured Party to the obligations due to any ABL Secured Party, in each case whether before or after the occurrence of an Insolvency Proceeding, it being the intent of the Parties that this Agreement shall effectuate a subordination of Liens but not a subordination of Indebtedness.

 

Section 7.16             No Warranties or Liability.  The Term Agent and the ABL Agent acknowledge and agree that neither has made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any other ABL Document or any Term Document.  Except as otherwise provided in this Agreement, the Term Agent and the ABL Agent will be entitled to manage and supervise their respective extensions of credit to any Credit Party in accordance with law and their usual practices, modified from time to time as they deem appropriate.

 

Section 7.17             Conflicts.  In the event of any conflict between the provisions of this Agreement and the provisions of any ABL Document or any Term Document, the provisions of this Agreement shall govern.

 

Section 7.18             Information Concerning Financial Condition of the Credit Parties.  Each of the Term Agent and the ABL Agent hereby assume responsibility for keeping itself informed of the financial condition of the Credit Parties and all other circumstances bearing upon the risk of nonpayment of the ABL Obligations or the Term Obligations.  The Term Agent and the ABL Agent hereby agree that no party shall have any duty to advise any other party of 

 

36

 

information known to it regarding such condition or any such circumstances.  In the event the Term Agent or the ABL Agent, in its sole discretion, undertakes at any time or from time to time to provide any information to any other party to this Agreement, (a) it shall be under no obligation (i) to provide any such information to such other party or any other party on any subsequent occasion, (ii) to undertake any investigation not a part of its regular business routine, or (iii) to disclose any other information, (b) it makes no representation as to the accuracy or completeness of any such information and (c) the party receiving such information hereby indemnifies and holds harmless the other party from and against any and all losses, claims, damages, liabilities and expenses to which such receiving party may become subject arising out of or in connection with the use of such information.

 

[Signature pages follow]

 

37

 

IN WITNESS WHEREOF, the ABL Agent, for and on behalf of itself and the ABL Lenders, and the Term Agent, for and on behalf of itself and the Term Lenders, have caused this Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
JPMORGAN   CHASE BANK, N.A., in its capacity as the ABL Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas H.   Kozlark
    
	
 
    	
Name:
    	
Thomas H. Kozlark
    
	
 
    	
Title:
    	
Executive Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JPMORGAN   CHASE BANK, N.A., in its capacity as the Term Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas H.   Kozlark
    
	
 
    	
Name:
    	
Thomas H. Kozlark
    
	
 
    	
Title:
    	
Executive Director
    

 

[Signature Page — Intercreditor Agreement]

 

 

ACKNOWLEDGMENT

 

Each Borrower and each Guarantor hereby acknowledges that it has received a copy of this Agreement and consents thereto, agrees to recognize all rights granted thereby to the ABL Agent, the ABL Lenders, the Term Agent, and the Term Lenders and will not do any act or perform any obligation which is not in accordance with the agreements set forth in this Agreement. Each Borrower and each Guarantor further acknowledges and agrees that it is not an intended beneficiary or third party beneficiary under this Agreement and that the ABL Documents and Term Documents remain in full force and effect as written.

 

 

	
 
    	
VH MERGERSUB, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Tudor
    
	
 
    	
Name: John Tudor
    
	
 
    	
Title: Vice   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GUITAR CENTER, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland Smith
    
	
 
    	
Name: Leland Smith
    
	
 
    	
Title: Executive   VP of Corporate Development, General Counsel and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MUSICIAN’S   FRIEND, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland Smith
    
	
 
    	
Name: Leland Smith
    
	
 
    	
Title: Executive   Vice President, General Counsel and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GUITAR CENTER   STORES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland Smith
    
	
 
    	
Name: Leland Smith
    
	
 
    	
Title: Executive   VP of Corporate Development, General Counsel and Secretary
    

 

[Signature Page — Intercreditor Agreement]

 

 

	
 
    	
GUITAR CENTER   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Tudor
    
	
 
    	
Name: John Tudor
    
	
 
    	
Title: Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GUITAR CENTER GIFT CARD   COMPANY, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland Smith
    
	
 
    	
Name: Leland Smith
    
	
 
    	
Title: Executive   Vice President, General Counsel and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HARMONY CENTRAL GROUP,   LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland Smith
    
	
 
    	
Name: Leland Smith
    
	
 
    	
Title: Executive   VP of Corporate Development, General Counsel and Secretary
    

 

[Signature Page — Intercreditor Agreement]Exhibit 10.13

 

 

GUITAR CENTER HOLDINGS, INC.

 

 

STOCKHOLDERS AGREEMENT

 

AMONG

 

GUITAR CENTER HOLDINGS, INC.

 

AND

 

THE STOCKHOLDERS

 

NAMED HEREIN

 

 

DATED AS OF OCTOBER 9, 2007

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
EFFECTIVENESS; DEFINITIONS
    	
1
    
	
 
    	
1.1.
    	
Closing
    	
1
    
	
 
    	
1.2.
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
VOTING AGREEMENT
    	
2
    
	
 
    	
2.1.
    	
Election of Directors
    	
2
    
	
 
    	
2.2.
    	
Significant Transactions
    	
2
    
	
 
    	
2.3.
    	
Grant of Proxy
    	
2
    
	
 
    	
2.4.
    	
The Company
    	
2
    
	
 
    	
2.5.
    	
Period
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
TRANSFER RESTRICTIONS
    	
2
    
	
 
    	
3.1.
    	
Permitted Transferees
    	
2
    
	
 
    	
3.2.
    	
Tag Alongs, Drag Alongs, Etc.
    	
3
    
	
 
    	
3.3.
    	
Impermissible Transfer
    	
4
    
	
 
    	
3.4.
    	
Period
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
“TAG ALONG” AND “DRAG ALONG” RIGHTS
    	
4
    
	
 
    	
4.1.
    	
Tag Along
    	
4
    
	
 
    	
4.2.
    	
Drag Along
    	
5
    
	
 
    	
4.3.
    	
Miscellaneous
    	
6
    
	
 
    	
4.4.
    	
Period
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
RIGHT OF PARTICIPATION
    	
8
    
	
 
    	
5.1.
    	
Right of Participation
    	
8
    
	
 
    	
5.2.
    	
Post-Issuance Notice
    	
11
    
	
 
    	
5.3.
    	
Excluded Transactions
    	
11
    
	
 
    	
5.4.
    	
Acquired Shares
    	
12
    
	
 
    	
5.5.
    	
Period
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
REGISTRATION RIGHTS
    	
12
    
	
 
    	
6.1.
    	
Demand Registration Rights
    	
12
    
	
 
    	
6.2.
    	
Piggyback Registration Rights
    	
14
    
	
 
    	
6.3.
    	
Certain Other Provisions
    	
15
    
	
 
    	
6.4.
    	
Indemnification and Contribution
    	
17
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
REMEDIES
    	
20
    
	
 
    	
7.1.
    	
Generally
    	
20
    
	
 
    	
7.2.
    	
Deposit
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
LEGENDS
    	
20
    
	
 
    	
8.1.
    	
Restrictive Legend
    	
20
    
	
 
    	
8.2.
    	
1933 Act Legends
    	
21
    

 

i

 

	
 
    	
8.3.
    	
Stop Transfer Instruction
    	
21
    
	
 
    	
8.4.
    	
Termination of 1933 Act Legend
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
AMENDMENT,   TERMINATION, ETC.
    	
21
    
	
 
    	
9.1.
    	
Oral Modifications
    	
21
    
	
 
    	
9.2.
    	
Written Modifications
    	
22
    
	
 
    	
9.3.
    	
Effect of Termination
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
DEFINITIONS
    	
22
    
	
 
    	
10.1.
    	
Certain Matters of Construction
    	
22
    
	
 
    	
Definitions
    	
22
    
	
 
    	
 
    	
 
    
	
11.
    	
MISCELLANEOUS
    	
27
    
	
 
    	
11.1.
    	
Authority; Effect
    	
27
    
	
 
    	
11.2.
    	
Notices
    	
28
    
	
 
    	
11.3.
    	
Binding Effect, Etc.
    	
29
    
	
 
    	
11.4.
    	
Descriptive Headings
    	
29
    
	
 
    	
11.5.
    	
Counterparts
    	
29
    
	
 
    	
11.6.
    	
Severability
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
GOVERNING LAW
    	
30
    
	
 
    	
12.1.
    	
Governing Law
    	
30
    
	
 
    	
12.2.
    	
Consent to Jurisdiction
    	
30
    
	
 
    	
12.3.
    	
WAIVER OF JURY TRIAL
    	
30
    
	
 
    	
12.4.
    	
Exercise of Rights and Remedies
    	
31
    

 

ii

 

STOCKHOLDERS AGREEMENT

 

This Stockholders Agreement (the “Agreement”) is made as of October 9, 2007 by and among:

 

Guitar Center Holdings, Inc. (the “Company”);

 

Bain Capital Integral Investors 2006, LLC, BCIP TCV, LLC and BCIP Associates - G (together with their Permitted Transferees, the “Investors”);

 

Any Person identified on the signature page hereto as a Co-Investor (any such Person, together with its Permitted Transferees, a “Co-Investor”); and

 

The Persons who (i) acquire Common Stock pursuant to the exercise of Options in accordance with the Company’s 2007 Management Equity Plan or (ii) who otherwise acquire Common Stock and are identified on the signature pages hereto as a “Manager” (the “Managers” and together with the Investors and any Co-Investors, the “Stockholders”).

 

Recitals

 

1.                                       On or about the date hereof, VH MergerSub, Inc. (“MergerSub”), a wholly owned Subsidiary of the Company, will merge with and into Guitar Center, Inc. (“GTRC”), with GTRC being the surviving corporation, pursuant to an Agreement and Plan of Merger dated June 27, 2007, by and among the Company, MergerSub and GTRC (the “Merger Agreement”).

 

2.                                       Upon the Closing (as defined below), the Company’s outstanding Common Stock will be held as set forth on Schedule I hereto.

 

3.                                       In accordance with the terms and conditions of the Company’s 2007 Management Equity Plan, upon the exercise of any Options or Rollover Options (as defined therein), the holder thereof shall, automatically, and without further action, become a party to this Agreement as a Manager and Stockholder with respect to any and all shares of Common Stock held by such Manager.

 

4.                                       The parties believe that it is in the best interests of the Company and the Stockholders to set forth their agreements on certain matters.

 

Agreement

 

Now therefore for good and valuable consideration, the receipt and sufficing of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1.          EFFECTIVENESS; DEFINITIONS.

 

1.1.          Closing.  This Agreement shall become effective upon consummation of the closing under the Merger Agreement (the “Closing”).

 

1.2.          Definitions.  Certain terms are used in this Agreement as specifically defined herein.  These definitions are set forth or referred to in Section 10 hereof.

 

 

2.          VOTING AGREEMENT.

 

2.1.          Election of Directors.  Each holder of Shares hereby agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise to fix the number of members of the board of directors of the Company (the “Board”) at such number as may be specified from time to time by the Majority Investors and to elect members of the Board, such individuals as shall have been nominated by the Majority Investors.

 

The Company will cause the board of directors of GTRC to consist at all times of the same members as the Board.  The Company will cause the boards of directors (or similar governing bodies) of all other Subsidiaries of the Company to consist at all times of the members as directed by the Board.

 

2.2.          Significant Transactions.  Each holder of Shares agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, in the same proportion as Investor Shares are voted by the Investors to approve any sale, recapitalization, merger, consolidation, reorganization or any other transaction or series of transactions involving the Company or its Subsidiaries (or all or any portion of their respective assets) in connection with, or in furtherance of, the exercise by the Majority Investors of their rights under Section 4.2.

 

2.3.          Grant of Proxy.  Each holder of Shares other than the Investors hereby grants to the Investors an irrevocable proxy coupled with an interest to vote his Shares in accordance with his agreements contained in this Section 2, which proxy shall be valid and remain in effect until the provisions of this Section 2 expire pursuant to Section 2.5.

 

2.4.          The Company.  The Company agrees not to give effect to any action by any holder of Shares or any other Person which is in contravention of this Section 2.

 

2.5.          Period.  The foregoing provisions of this Section 2 shall expire on the earliest of (a) a Change of Control, (b) an Initial Public Offering and (c) the last date permitted by law.

 

3.          TRANSFER RESTRICTIONS.  No holder of Shares shall Transfer any of such Shares to any other Person except as provided in this Section 3.

 

3.1.          Permitted Transferees.

 

3.1.1             Affiliates.  Any holder of Shares may Transfer any or all of such Shares to an Affiliate of such holder or to a Charitable Organization.

 

3.1.2             Estate Planning.  Any holder of Shares who is a natural Person may Transfer any or all of such Shares (i) by gift to, or for the benefit of, any Member or Members of the Immediate Family of such holder, (ii) to a trust for the benefit of such holder and/or any Member or Members of the Immediate Family of such holder, or (iii) to any other trust in respect of which such holder serves as trustee; provided, however, that the trust instrument governing such trust shall provide that such holder, as

 

2

 

trustee, shall retain sole and exclusive control over the voting and disposition of such Shares until the termination of this Agreement.

 

3.1.3             Upon Death.  Upon the death of any holder of Shares who is a natural Person, such Shares may be distributed by the will or other instrument taking effect at death of such holder or by applicable laws of descent and distribution to such holder’s estate, executors, administrators and personal representatives, and then to such holder’s heirs, legatees or distributees, whether or not such recipients are Members of the Immediate Family of such holder or a Charitable Organization.

 

3.1.4             Investors and Company.  Any holder of Shares may Transfer any or all of such Shares (a) to any Investor or (b) pursuant to Article VIII and Article IX of the Company’s 2007 Management Equity Plan.

 

3.1.5             Additional Permitted Transfers by the Investors.  Any holder of Investor Shares may Transfer any or all of such Shares (a) to an Investor or an Affiliated Fund or (b) to its partners or members or to Affiliates of any of the foregoing.

 

3.1.6             Additional Permitted Transfers by Managers.  Any holder of Management Shares may Transfer any or all of such Shares to another Manager, with the prior written consent of (a) the Majority Investors and (b) the Board.

 

No Transfer permitted under the terms of this Section 3.1 shall be effective unless the transferee of such Shares (each, a “Permitted Transferee”) has delivered to the Company a written acknowledgment and agreement in form and substance reasonably satisfactory to the Company that such Shares to be received by such Permitted Transferee shall remain Investor Shares, Co-Investor Shares or Management Shares, as the case may be, and shall be subject to all of the provisions of this Agreement and that such Permitted Transferee shall be bound by, and shall be a party to, this Agreement as the holder of Investor Shares, Co-Investor Shares or Management Shares, as the case may be, hereunder; provided, however, that any Shares Transferred to any director, officer or employee of, or consultant or adviser to, the Company or any of its Subsidiaries by any holder of Shares shall thereafter become Management Shares hereunder; and provided  further that no Transfer by any holder of Shares to a Permitted Transferee shall relieve such holder of any of its obligations hereunder.

 

3.2.          Tag Alongs, Drag Alongs, Etc.  In addition to Transfers permitted under Section 3.1,

 

(a)        any holder of Investor Shares may Transfer such Shares at any time, subject to compliance with the “tag along” provisions contained in Section 4.1, if applicable; and

 

(b)        any holder of Shares may Transfer any or all of such Shares in accordance with the provisions, terms and conditions of Section 4.1 and 4.2.

 

Any Shares Transferred (other than to a Permitted Transferree) in accordance with Section 3.2(a) or Section 3.2(b) shall conclusively be deemed thereafter not to be Shares or Registrable Securities under this Agreement and not to be subject to any of the provisions hereof or entitled to the benefit of any of the provisions hereof.

 

3

 

3.3.          Impermissible Transfer.  Any attempted Transfer of Shares not permitted under the terms of this Section 3 shall be null and void, and the Company shall not in any way give effect to any such impermissible Transfer.

 

3.4.          Period.  The foregoing provisions of this Section 3 shall expire upon the earlier of (a) a Change of Control and (b) the closing of an Initial Public Offering.

 

4.          “TAG ALONG” AND “DRAG ALONG” RIGHTS.

 

4.1.          Tag Along.  If one or more holders of Investor Shares (each such holder, a “Prospective Selling Investor”) proposes to Transfer any such Shares to any Prospective Buyer in a transaction that would constitute a Tag-Along Sale, then as required by Section 3.2(a):

 

4.1.1             Notice.  The Prospective Selling Investors shall deliver a written notice (the “Tag Along Notice”) to each other holder of Shares (each, a “Tag Along Holder”) at least fifteen business days prior to such proposed Transfer.  The Tag Along Notice shall include:

 

(a)        The principal terms of the proposed Sale insofar as it relates to such Shares, including (i) the number and class of the Shares to be purchased from the Prospective Selling Investors, (ii) with respect to each class of Shares to be purchased from the Prospective Selling Investors, the fraction(s) expressed as a percentage, determined by dividing the number of Shares of such class to be purchased from the Prospective Selling Investors by the total number of Investor Shares owned by the Investors (the “Tag Along Sale Percentage”), (iii) the per share purchase price, (iv) the name and address of the Prospective Buyer and (v) the draft sale agreement with the Prospective Buyer (if available); and

 

(b)        An invitation to each Tag Along Holder to make an offer to include in the proposed Sale to the applicable Prospective Buyer an additional number of Shares of the applicable class held by such Tag Along Holder (not in any event to exceed in the case of a Tag Along Holder and all of his Permitted Transferees the Tag Along Sale Percentage of the total number of Shares of the applicable class owned by such Tag Along Holder and all of his Permitted Transferees), on the same terms and conditions (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities), with respect to each Share Sold, as the Prospective Selling Investors shall Sell each of their Shares.

 

4.1.2             Exercise.  Within ten business days after the effectiveness of the Tag Along Notice, each Tag Along Holder desiring to make an offer to include issued and outstanding Shares in the proposed Sale (each a “Participating Seller” and, together with the Prospective Selling Investors, collectively, the “Tag Along Sellers”) shall furnish a written notice (the “Tag Along Offer”) to the Prospective Selling Investors offering to include an additional number of Shares of the applicable class (not in any event to exceed the Tag Along Sale Percentage of the total number of Shares of the applicable class owned by such Participating Seller) which such Participating Seller desires to have

 

4

 

included in the proposed Sale.  Each Tag Along Holder who does not accept the Prospective Selling Investors’ invitation to make an offer to include Shares in the proposed Sale shall be deemed to have waived all of his rights with respect to such Sale, and the Tag Along Sellers shall thereafter be free to Sell to the Prospective Buyer, at a per share price no greater than the per share price set forth in the Tag Along Notice and on other principal terms which are not materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, without any further obligation to such non-accepting Tag Along Holder.

 

4.1.3             Irrevocable Offer.  The offer of each Participating Seller contained in his Tag Along Offer shall be irrevocable, and, to the extent such offer is accepted, such Participating Seller shall be bound and obligated to Sell in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Investors, up to such number of Shares as such Participating Seller shall have specified in his Tag Along Offer; provided, however, that if the principal terms of the proposed Sale change with the result that the per share price shall be less than the per share price set forth in the Tag Along Notice or the other principal terms shall be materially less favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, each Participating Seller shall be permitted to withdraw the offer contained in his Tag Along Offer and shall be released from his obligations thereunder.

 

4.1.4             Reduction of Shares Sold.  The Prospective Selling Investors shall attempt to obtain the inclusion in the proposed Sale of the entire number of Shares which each of the Tag Along Sellers requested to have included in the Sale (as evidenced in the case of the Prospective Selling Investors by the Tag Along Notice and in the case of each Participating Seller by such Participating Seller’s Tag Along Offer).  In the event the Prospective Selling Investors shall be unable to obtain the inclusion of such entire number of Shares in the proposed Sale, the number of Shares of each class to be sold in the proposed Sale by each Tag Along Seller shall be reduced in proportion, as nearly as practicable, to the respective number of Shares of such class owned by such Tag Along Seller.

 

4.1.5             Additional Compliance.  If the Prospective Selling Investors have not completed the proposed Sale by the end of the 180th day following the date of the effectiveness of the Tag Along Notice, each Participating Seller shall be released from his obligations under his Tag Along Offer, the Tag Along Notice shall be null and void, and it shall be necessary for a separate Tag Along Notice to be furnished, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1, unless the failure to complete such proposed Sale resulted from any failure by any Participating Seller to comply with the terms of this Section 4.1.

 

4.2.          Drag Along.  Each holder of Shares hereby agrees, if requested by the Majority Investors, to Sell the same percentage (the “Drag Along Sale Percentage”) of each class of such Shares, directly or indirectly, that is proposed to be sold by the holders of Investor

 

5

 

Shares (each such holder, a “Prospective Selling Investor”) to a Prospective Buyer in a Change of Control, in the manner and on the terms set forth in this Section 4.2.

 

4.2.1             Exercise.  If the Majority Investors elect to exercise their rights under this Section 4.2, the Prospective Selling Investors shall furnish a written notice (the “Drag Along Notice”) to each other holder of Shares.  The Drag Along Notice shall set forth the principal terms of the proposed Sale insofar as it relates to such Shares including (i) the number and class of Shares to be acquired from the Prospective Selling Investors, (ii) the Drag Along Sale Percentage applicable to each class of Shares, (iii) the per share consideration to be received in the proposed Sale applicable to each class of Shares (iv) the name and address of the Prospective Buyer and (v) the sale agreement with the Prospective Buyer.  If the Prospective Selling Investors consummate the proposed Sale to which reference is made in the Drag Along Notice, each other holder of Shares (each a “Participating Seller”, and, together with the Prospective Selling Investors, collectively, the “Drag Along Sellers”) shall be bound and obligated to Sell the applicable Drag Along Sale Percentage of his Shares of such class in the proposed Sale on the same terms and conditions, with respect to each Share sold (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Investors shall Sell each Investor Share of the same class in the Sale (subject to Section 4.3.4 in the case of Options and Warrants).  If at the end of the 180th day following the date of the effectiveness of the Drag Along Notice the Prospective Selling Investors have not completed the proposed Sale, the Drag Along Notice shall be null and void, each Participating Seller shall be released from his obligation under the Drag Along Notice and it shall be necessary for a separate Drag Along Notice to be furnished and the terms and provisions of this Section 4.2 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.2.

 

4.3.          Miscellaneous.  The following provisions shall be applied to any proposed Sale to which Section 4.1 or 4.2 applies:

 

4.3.1             Certain Legal Requirements.  In the event the consideration to be paid in exchange for Shares in a proposed Sale pursuant to Section 4.1 or Section 4.2 includes any securities, and the receipt thereof by a Participating Seller would require under applicable law (a) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities or (b) the provision to any Tag Along Seller or Drag Along Seller of any information regarding the Company, such securities or the issuer thereof, such Participating Seller shall not have the right to Sell Shares in such proposed Sale.  In such event, the Prospective Selling Investors shall cause to be paid to such Participating Seller in lieu thereof, against surrender of the Shares (in accordance with Section 4.3.6 hereof) which would have otherwise been Sold by such Participating Seller to the Prospective Buyer in the proposed Sale, an amount in cash equal to the fair market value (as determined in the good faith judgment of the Board) of such Shares as of the date such securities would have been issued in exchange for such Shares.

 

4.3.2             Further Assurances.  Each Participating Seller, whether in his capacity as a Participating Seller, stockholder, officer or director of the Company, or otherwise, shall

 

6

 

take or cause to be taken all such actions as may be necessary or reasonably desirable in order expeditiously to consummate each Sale pursuant to Section 4.1 or Section 4.2 and any related transaction, including executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; furnishing information and copies of documents; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Prospective Selling Investors and the Prospective Buyer.  Without limiting the generality of the foregoing, each Participating Seller agrees to execute and deliver such agreements as may be reasonably specified by the Prospective Selling Investors to which such Prospective Selling Investors will also be party, including agreements to (a) (i) make individual representations and warranties as to the unencumbered title to its Shares and the power, authority and legal right to Transfer such Shares and the absence of any Adverse Claim with respect to such Shares and (ii) be liable as to such representations and warranties and (b) be liable (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and agreements in respect of the Company and its Subsidiaries; provided, however, that the aggregate amount of liability described in this clause (b) in connection with any Sale of Shares shall not exceed the lesser of (i) such Participating Seller’s pro rata portion of any such liability, to be determined in accordance with such Participating Seller’s portion of the total value of Shares included in such Sale or (ii) the proceeds to such Participating Seller in connection with such Sale.

 

4.3.3             Sale Process.  The Majority Investors shall, in their sole discretion, decide whether or not to pursue, consummate, postpone or abandon any proposed Sale and the terms and conditions thereof.  No Investor or any Affiliate of any Investor shall have any liability to any other holder of Shares arising from, relating to or in connection with the pursuit, consummation, postponement, abandonment or terms and conditions of any proposed Sale except to the extent such Investor shall have failed to comply with the provisions of this Section 4.

 

4.3.4             Treatment of Options, Warrants and Convertible Securities.  Each Participating Seller agrees that to the extent he desires or is required to include Options, Warrants or Convertible Securities in any Sale of Shares pursuant to Section 4, he shall be deemed to have exercised, converted or exchanged such Options, Warrants or Convertible Securities immediately prior to the closing of such Sale to the extent necessary to Sell Common Stock to the Prospective Buyer, except to the extent permitted under the terms of any such Option, Warrant or Convertible Security (or any agreement applicable thereto) and agreed by the Prospective Buyer.  If any Participating Seller shall Sell Options, Warrants or Convertible Securities in any Sale pursuant to Section 4, such Participating Seller shall receive in exchange for such Options, Warrants or Convertible Securities consideration equal to the amount (if greater than zero) determined by multiplying (a) the purchase price per share of Common Stock received by the Prospective Selling Investors in such Sale less the exercise price, if any, per share of such Option, Warrant or Convertible Security by (b) the number of shares of Common Stock issuable upon exercise, conversion or exchange of such Option, Warrant or Convertible Security (to the extent exercisable, convertible or exchangeable at the time of such Sale),

 

7

 

subject to reduction for any tax or other amounts required to be withheld under applicable law.

 

4.3.5             Expenses.  All reasonable costs and expenses incurred by the Prospective Selling Investors or the Company in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated), including all attorneys fees and expenses, all accounting fees and charges and all finders, brokerage or investment banking fees, charges or commissions, shall be paid by the Company.  Any reasonable costs and expenses (including the reasonable fees and expenses for one counsel for the other Tag Along Seller(s) or Drag Along Seller(s), in each case, as appointed by the Majority Managers) incurred by or on behalf of any or all of the other Tag Along Seller(s) or Drag Along Seller(s) in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated) shall be borne by the Company.

 

4.3.6             Closing.  The closing of a Sale to which Section 4.1 or 4.2 applies shall take place at such time and place as the Prospective Selling Investors shall specify by notice to each Participating Seller.  At the closing of such Sale, each Participating Seller shall, against delivery of the applicable consideration, deliver the certificates evidencing the Shares to be Sold by such Participating Seller, duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer, free and clear of any liens or encumbrances, with any stock (or equivalent) transfer tax stamps affixed or in lieu of delivery of such certificates, an affidavit (with an appropriate indemnity or guarantee as determined by the Board in its good faith discretion) of such Participating Seller certifying that such certificates have been lost, stolen, destroyed or mutilated.

 

4.4.          Period.  The foregoing provisions of this Section 4 shall expire on the earlier of (a) a Change of Control or (b) the closing of an Initial Public Offering.

 

5.          RIGHT OF PARTICIPATION.  The Company shall not, and shall not permit any Subsidiary of the Company (the Company and each such Subsidiary, an “Issuer”) to, issue or sell any shares of any of its capital stock or any securities convertible into or exchangeable for any shares of its capital stock, issue or grant any options or warrants for the purchase of, or enter into any agreements providing for the issuance (contingent or otherwise) of, any of its capital stock or any stock or securities convertible into or exchangeable for any shares of its capital stock, in each case, to any Investor, Co-Investor or Affiliated Fund or any Affiliate of the foregoing (each an “Issuance” of “Subject Securities”), except in compliance with the provisions of Section 5.1 or 5.2.

 

5.1.          Right of Participation.

 

5.1.1             Offer.  Not fewer than fifteen business days prior to the consummation of an Issuance, a notice (the “Participation Notice”) shall be furnished by the Issuer to each holder of Shares (the “Participation Offerees”).  The Participation Notice shall include:

 

(a)        The principal terms of the proposed Issuance, including (i) the amount and kind of Subject Securities to be included in the Issuance, (ii) the number of Equivalent Shares represented by such Subject Securities (if applicable), (iii) the

 

8

 

percentage of the total number of Equivalent Shares outstanding as of immediately prior to giving effect to such Issuance which the number of Equivalent Shares held by such Participation Offeree in his capacity as a Participation Offeree constitutes (the “Participation Portion”), (iv) the maximum and minimum price (including if applicable, the maximum and minimum Price Per Equivalent Share) per unit of the Subject Securities, (v) the name and address of the Person to whom the Subject Securities will be issued (the “Prospective Subscriber”) and (vi) the sale agreement with the Prospective Subscriber; and

 

(b)        An offer by the Issuer to issue, at the option of each Participation Offeree, to such Participation Offeree such portion of the Subject Securities to be included in the Issuance as may be requested by such Participation Offeree (not to exceed the Participation Portion of the total amount of Subject Securities to be included in the Issuance), on the same terms and conditions, with respect to each unit of Subject Securities issued to the Participation Offerees, as each of the Prospective Subscribers shall be issued units of Subject Securities.

 

5.1.2             Exercise.

 

(a)        General.  Each Participation Offeree desiring to accept the offer contained in the Participation Notice shall send a written commitment to the Issuer within fifteen days after the effectiveness of the Participation Notice specifying the amount of Subject Securities (not in any event to exceed the Participation Portion of the total amount of Subject Securities to be included in the Issuance) which such Participation Offeree desires to be issued (each a “Participating Buyer”).  Each Participation Offeree who has not so accepted such offer shall be deemed to have waived all of his rights with respect to the Issuance, and the Issuer shall thereafter be free to issue Subject Securities in the Issuance to the Prospective Subscriber and any Participating Buyers, at a price not less than the minimum price set forth in the Participation Notice and on other principal terms not materially more favorable to the Prospective Subscriber than those set forth in the Participation Notice, without any further obligation to such non-accepting Participation Offerees.  If, prior to consummation, the terms of such proposed Issuance shall change with the result that the price shall be less than the minimum price set forth in the Participation Notice or the other principal terms shall be materially more favorable to the Prospective Subscriber than those set forth in the Participation Notice, it shall be necessary for a separate Participation Notice to be furnished, and the terms and provisions of this Section 5.1 separately complied with, in order to consummate such Issuance pursuant to this Section 5.1.

 

(b)        Irrevocable Acceptance.  The acceptance of each Participating Buyer shall be irrevocable except as hereinafter provided, and each such Participating Buyer shall be bound and obligated to acquire in the Issuance on the same terms and conditions, with respect to each unit of Subject Securities issued, as the Prospective Subscriber, such amount of Subject Securities as such Participating Buyer shall have specified in such Participating Buyer’s written commitment.

 

9

 

(c)        Time Limitation.  If at the end of the 180th day following the date of the effectiveness of the Participation Notice the Issuer has not completed the Issuance, each Participating Buyer shall be released from his obligations under the written commitment, the Participation Notice shall be null and void, and it shall be necessary for a separate Participation Notice to be furnished, and the terms and provisions of this Section 5.1 separately complied with, in order to consummate such Issuance pursuant to this Section 5.1.

 

5.1.3             Other Securities.  The Issuer may condition the participation of the Participation Offerees in an Issuance upon the purchase by such Participation Offerees of any securities (including debt securities) other than Subject Securities (“Other Securities”) in the event that the participation of the Prospective Subscriber in such Issuance is so conditioned.  In such case, each Participating Buyer shall acquire in the Issuance, together with the Subject Securities to be acquired by it, Other Securities in the same proportion to the Subject Securities to be acquired by it as the proportion of Other Securities to Subject Securities being acquired by the Prospective Subscriber in the Issuance, on the same terms and conditions, as to each unit of Subject Securities and Other Securities issued to the Participating Buyers, as the Prospective Subscriber shall be issued units of Subject Securities and Other Securities.

 

5.1.4             Certain Legal Requirements.  In the event that the participation in the Issuance by a holder of Shares as a Participating Buyer would require under applicable law (a) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities or (b) the provision to any holder of Shares of any information regarding the Company, such securities or the issuer thereof, such holder of Shares shall not have the right to participate in the Issuance.  Without limiting the generality of the foregoing, it is understood and agreed that neither the Company nor the Issuer shall be under any obligation to effect a registration of any such securities to be issued under this Section 5 under the Securities Act or similar state statutes.

 

5.1.5             Further Assurances.  Each Participation Offeree and each Stockholder to whom the Shares held by such Participation Offeree were originally issued, shall, whether in his capacity as a Participating Buyer, Stockholder, officer or director of the Company, or otherwise, take or cause to be taken all such reasonable actions as may be necessary or reasonably desirable in order expeditiously to consummate each Issuance pursuant to this Section 5.1 and any related transactions, including executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Company, the Issuer and the Prospective Subscriber.  Without limiting the generality of the foregoing, each such Participating Buyer and Stockholder agrees to execute and deliver such subscription and other agreements specified by the Company to which the Prospective Subscriber will be party.

 

5.1.6             Expenses.  All reasonable costs and expenses incurred by the holders of Investor Shares or the Issuer in connection with any proposed Issuance of Subject Securities (whether or not consummated), including all attorney’s fees and charges, all

 

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accounting fees and charges and all finders, brokerage or investment banking fees, charges or commissions, shall be paid by the Company.  Any reasonable costs and expenses (including the reasonable fees and expenses for one counsel for the other holders of Shares, as appointed by the Majority Managers) incurred by or on behalf of any or all of the other holders of Shares in connection with any such proposed Issuance of Subject Securities (whether or not consummated) shall be borne by the Company.

 

5.1.7             Closing.  The closing of an Issuance pursuant to Section 5.1 shall take place at such time and place as the Issuer shall specify by notice to each Participating Buyer.  At the Closing of any Issuance under this Section 5.1.7, each Participating Buyer shall be delivered the notes, certificates or other instruments evidencing the Subject Securities (and, if applicable, Other Securities) to be issued to such Participating Buyer, registered in the name of such Participating Buyer or his designated nominee, free and clear of any liens or encumbrances, with any transfer tax stamps affixed, against delivery by such Participating Buyer of the applicable consideration.

 

5.2.          Post-Issuance Notice.  Notwithstanding the notice requirements of Sections 5.1.1 and 5.1.2, the Company may proceed with any Issuance prior to having complied with the provisions of Section 5.1 if the Board determines that compliance with the requirements of Sections 5.1.1 and 5.1.2 would be unduly burdensome, time-consuming or costly; provided that the Issuer shall:

 

(a)        provide to each holder of Shares who would have been a Participation Offeree in connection with such Issuance (i) notice of such Issuance as promptly as practicable and, in any event, within five business days and (ii) the Participation Notice described in Section 5.1.1 in which the actual price per unit of Subject Securities (and, if applicable, actual Price Per Equivalent Share) shall be set forth; and

 

(b)        offer to issue to such holder of Shares such number of securities of the type issued in the Issuance as may be requested by such holder of Shares (not to exceed the Participation Portion that such holder of Shares would have been entitled to pursuant to Section 5.1 multiplied by the sum of (a) the number of Subject Securities included in the Issuance and (b) the aggregate number of shares issued pursuant to this Section 5.2 with respect to such Issuance) on the same economic terms and conditions with respect to such securities as the subscribers in the Issuance received; and

 

(c)        keep such offer open for a period of ten business days, during which period, each such holder may accept such offer by sending a written acceptance to the Issuer committing to purchase an amount of such securities (not in any event to exceed the Participation Portion that such holder would have been entitled to pursuant to Section 5.1 multiplied by the sum of (a) the number of Subject Securities included in such issuance and (b) the aggregate number of shares issued pursuant to this Section 5.2 with respect to such Issuance).

 

5.3.          Excluded Transactions.  The provisions of this Section 5 shall not apply to Issuances by the Company or any Subsidiary of the Company as follows:

 

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5.3.1             Any Issuance of Subject Securities upon the exercise or conversion of any Options, Warrants or Convertible Securities outstanding on the date hereof or Issued after the date hereof in compliance with the provisions of this Section 5;

 

5.3.2             Any Issuance of Subject Securities to officers, employees, directors or consultants of the Company or its Subsidiaries in connection with such Person’s employment, consulting arrangements or directorship with the Company or its Subsidiaries;

 

5.3.3             Any Issuance of Subject Securities in connection with (i) any business combination or acquisition transaction involving the Company or any of its Subsidiaries, (ii) any joint venture or strategic partnership with a Person who is not an Investor or Co-Investor or (iii) the incurrence or guarantee of indebtedness by the Company or any of its Subsidiaries;

 

5.3.4             Any Issuance of Subject Securities pursuant to a Public Offering;

 

5.3.5             The Issuance of Subject Securities to the Investors, any Co-Investor and Managers in connection with the Closing; or

 

5.3.6             Any Issuance of Subject Securities in connection with any stock split, stock dividend, stock combination or stock reclassification.

 

5.4.          Acquired Shares.  Any Subject Securities acquired by any holder of Shares pursuant to this Section 5 shall be deemed for all purposes hereof to be Investor Shares, Co-Investor Shares or Management Shares hereunder of like kind with the Shares then held by the acquiring holder.

 

5.5.          Period.  The foregoing provisions of this Section 5 shall expire on the earlier of (a) a Change of Control or (b) the closing of the Initial Public Offering.

 

6.          REGISTRATION RIGHTS.  The Company will perform and comply, and cause each of its Subsidiaries to perform and comply, with such of the following provisions as are applicable to it.  Each holder of Shares will perform and comply with such of the following provisions as are applicable to such holder.

 

6.1.          Demand Registration Rights.

 

6.1.1             General.  One or more holders of Investor Shares representing at least 25% of the total amount of Investor Shares then outstanding (“Initiating Investors”), by notice to the Company specifying the intended method or methods of disposition, may request that the Company effect the registration under the Securities Act for a Public Offering of all or a specified part of the Registrable Securities held by such Initiating Investors (for purposes of this Agreement, “Registrable Investor Securities” shall mean Registrable Securities constituting Investor Shares).  Upon receipt of any such request, the Company will use its reasonable best efforts to effect the registration under the Securities Act of the Registrable Securities which the Company has been requested to register by such Initiating Investors together with all other Registrable Securities which the Company has

 

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been requested to register pursuant to Section 6.2 by notice delivered to the Company within 20 days after the Company has given the notice required by Section 6.2.1 (which request shall specify the intended method of disposition of such Registrable Securities), all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities which the Company has been so requested to register; provided, however, that the Company shall not be obligated to take any action to effect any such registration pursuant to this Section 6.1.1:

 

(a)        Upon the request of the Company, provided that the Company shall be entitled to make such request only once per any 365 day period, in which case the Company may delay such registration until the later of (i) the 30th day following the effective date of any registration statement pertaining to an underwritten public offering of securities of the Company for its own account (other than a Rule 145 Transaction, or a registration relating solely to employee benefit plans) or (ii) the expiration of any lock-up agreement between the Investors or the Company and any underwriter; or

 

(b)        On any form other than Form S-3 (or any successor form) if the Company has previously effected four or more registrations of Registrable Securities under this Section 6.1.1 requested by Initiating Investors on any form other than Form S-3 (or any successor form); provided, however, that no registrations of Registrable Securities which shall not have become and remained effective in accordance with the provisions of this Section 6 and no registrations of Registrable Securities pursuant to which the Initiating Investors and all other holders of Registrable Investor Securities joining therein are not able to include at least 90% of the Registrable Securities which they desired to include, shall be included in the calculation of numbers of registrations contemplated by this clause (b).

 

6.1.2             Form.  Except as otherwise provided above, each registration requested pursuant to Section 6.1.1 shall be effected by the filing of a registration statement on Form S-1 (or any other form which includes substantially the same information as would be required to be included in a registration statement on such form as currently constituted), unless the use of a different form has been agreed to in writing by holders of at least a majority of the Registrable Securities to be included in the proposed registration statement in question (the “Majority Participating Investors”).

 

6.1.3             Payment of Expenses.  The Company shall pay all reasonable expenses of the Initiating Investors incurred in connection with each registration of Registrable Securities requested pursuant to this Section 6.1 (which shall include one legal counsel selected by the Initiating Investors), other than underwriting discount and commission, if any, and applicable transfer taxes, if any.

 

6.1.4             Additional Procedures.  In the case of a registration pursuant to Section 6.1 hereof, whenever the Majority Participating Investors shall request that such registration shall be effected pursuant to an underwritten offering, the Company shall include such information in the written notices to holders of Registrable Securities referred to in Section 6.2.  In such event, the right of any holder of Registrable Securities to have

 

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securities owned by such holder included in such registration pursuant to Section 6.1 shall be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed upon by the Majority Participating Investors and such holder).  If requested by such underwriters, the Company together with the holders of Registrable Securities proposing to distribute their securities through such underwriting will enter into an underwriting agreement with such underwriters for such offering containing such representations and warranties by the Company and such holders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including customary indemnity and contribution provisions (subject, in each case, to the limitations on such liabilities set forth in this Agreement).

 

6.2.          Piggyback Registration Rights.

 

6.2.1             Piggyback Registration.

 

(a)        General.  Each time the Company proposes to register any shares of Common Stock under the Securities Act on a form which would permit registration of Registrable Securities for sale to the public, for its own account and/or for the account of an Investor or an Affiliated Fund (pursuant to Section 6.1 or otherwise) for sale in a Public Offering, the Company will give notice to all holders of Registrable Securities of its intention to do so.  Any such holder may, by written response delivered to the Company within 20 days after the effectiveness of such notice, request that all or a specified part of the Registrable Securities held by such holder be included in such registration.  The Company thereupon will use its reasonable best efforts to cause to be included in such registration under the Securities Act all shares of Registrable Securities which the Company has been so requested to register by such holders, to the extent required to permit the disposition (in accordance with the methods to be used by the Company or other holders of shares of Common Stock in such Public Offering) of the Registrable Securities to be so registered.  No registration of Registrable Securities effected under this Section 6.2 shall relieve the Company of any of its obligations to effect registrations of Registrable Securities pursuant to Section 6.1 hereof.

 

(b)        Excluded Transactions.  The Company shall not be obligated to effect any registration of Registrable Securities under this Section 6.2 incidental to the registration of any of its securities in connection with:

 

(i)         Any Public Offering relating to employee benefit plans or dividend reinvestment plans;

 

(ii)        Any Public Offering relating to an acquisition or merger after the date hereof by the Company or any of its Subsidiaries of or with any other businesses; or

 

(iii)       The Initial Public Offering (unless such offering shall have been initiated by the Investors pursuant to Section 6.1.1, in which case (x) the

 

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Registrable Securities requested to be registered by such Investors shall be registered and (y) unless the underwriters thereof determine that the inclusion of such securities would have an adverse effect on such Initial Public Offering, the Registrable Securities requested to be registered by all other holders of Registrable Securities shall be registered.

 

6.2.2             Payment of Expenses.  The Company shall pay all reasonable expenses of the Investors incurred in connection with each registration of Registrable Securities requested pursuant to this Section 6.2 (which shall include one legal counsel selected by the Investors), other than underwriting discount and commission, if any, and applicable transfer taxes, if any.  Further, the Company shall pay all reasonable expenses of all other holders of Registrable Securities incurred in connection with each registration of Registrable Securities requested pursuant to this Section 6.2 (which shall include one legal counsel selected by the Majority Managers), other than underwriting discount and commission, if any, and applicable transfer taxes, if any.

 

6.2.3             Additional Procedures.  Holders of Shares participating in any Public Offering pursuant to this Section 6.2 shall take all such actions and execute all such documents and instruments that are reasonably requested by the Company to effect the sale of their Shares in such Public Offering, including being parties to the underwriting agreement entered into by the Company and any other selling shareholders in connection therewith and the other agreements (including customary selling stockholder representations, warranties, indemnifications and “lock-up” agreements) for the benefit of the underwriters; provided, however, that (a) with respect to individual representations, warranties, indemnities and agreements of sellers of Shares in such Public Offering, the aggregate amount of such liability shall not exceed such holder’s net proceeds from such offering and (b) to the extent selling stockholders give further representations, warranties and indemnities, then with respect to all other representations, warranties and indemnities of sellers of shares in such Public Offering, the aggregate amount of such liability shall not exceed the lesser of (i) such holder’s pro rata portion of any such liability, in accordance with such holder’s portion of the total number of Shares included in the offering or (ii) such holder’s net proceeds from such offering.

 

6.3.          Certain Other Provisions.

 

6.3.1             Underwriter’s Cutback.  In connection with any registration of shares, the underwriter may determine that marketing factors (including an adverse effect on the per share offering price) require a limitation of the number of shares to be underwritten.  Notwithstanding any contrary provision of this Section 6 and subject to the terms of this Section 6.3.1, the underwriter may limit the number of shares which would otherwise be included in such registration by excluding any or all Registrable Securities from such registration (it being understood that the number of shares which the Company seeks to have registered in such registration shall not be subject to exclusion, in whole or in part, under this Section 6.3.1 and that the underwriter may request the exclusion of Registrable Securities from one or more particular holders).  Upon receipt of notice from the underwriter of the need to reduce the number of shares to be included in the registration, the Company shall advise all holders of the Company’s securities that would otherwise

 

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be registered and underwritten pursuant hereto, and the number of shares of such securities, including Registrable Securities, that may be included in the registration shall be allocated in the following manner, unless the underwriter in its sole discretion shall determine in good faith that marketing factors require a different allocation:  shares, other than Registrable Securities, requested to be included in such registration by shareholders shall be excluded unless the Company has, with the consent of the Majority Investors, granted registration rights which are to be treated on an equal basis with Registrable Securities for the purpose of the exercise of the underwriter cutback; and, if a limitation on the number of shares is still required, the number of Registrable Securities and other shares of Common Stock that may be included in such registration shall be allocated among holders thereof in proportion, as nearly as practicable, to the respective amounts of Common Stock which each shareholder holds at the time of such registration.  For purposes of any underwriter cutback, all Common Stock held by any holder of Registrable Securities shall also include any Common Stock held by the partners, retired partners, shareholders or affiliated entities of such holder, or the estates and family members of any such holder or such partners and retired partners, any trusts for the benefit of any of the foregoing persons and, at the election of such holder or such partners, retired partners, trusts or affiliated entities, any Charitable Organization to which any of the foregoing shall have contributed Common Stock prior to the execution of the underwriting agreement in connection with such underwritten offering, and such holder and other persons shall be deemed to be a single selling holder, and any pro rata reduction with respect to such selling holder shall be based upon the aggregate amount of Common Stock owned by all entities and individuals included in such selling holder, as defined in this sentence.  No securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration.  Upon delivery of a written request that Registrable Securities be included in the underwriting pursuant to Section 6.1.1 or 6.2.1, the holder thereof may not thereafter elect to withdraw therefrom without the written consent of the Company and the Majority Investors.

 

6.3.2             Other Actions.  If and in each case when the Company is required to use its best efforts to effect a registration of any Registrable Securities as provided in this Section 6, the Company shall take appropriate and customary actions in furtherance thereof, including:  (a) promptly filing with the Commission a registration statement and using reasonable efforts to cause such registration statement to become effective, (b) preparing and filing with the Commission such amendments and supplements to such registration statements as may be required to comply with the Securities Act and to keep such registration statement effective for a period not to exceed 90 days (or 360 days in the case of a shelf registration) from the date of effectiveness or such earlier time as the Registrable Securities covered by such registration statement shall have been disposed of in accordance with the intended method of distribution therefor or the expiration of the time when a prospectus relating to such registration is required to be delivered under the Securities Act, (c) use its best efforts to register or qualify such Registrable Securities under the state securities or “blue sky” laws of such jurisdictions as the sellers shall reasonably request; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it would not otherwise be so subject; and

 

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(d) otherwise cooperate reasonably with, and take such customary actions as may reasonably be requested by the holders of Registrable Securities in connection with, such registration, including, without limitation, participation in due diligence sessions, drafting sessions, management presentations and “road shows” by its officers and employees.

 

6.3.3             Selection of Underwriters and Counsel.  The underwriters and legal counsel to be retained in connection with any Public Offering shall be selected by the Board or, in the case of an offering following a request therefor under Section 6.1.1, the Initiating Investors.

 

6.3.4             Lock-Up.  Unless otherwise agreed to by the underwriters managing any Public Offering (it being agreed that any such other agreement by such underwriters for the benefit of the Investors shall also be made available to the Co-Investors on a pro rata basis), for a period beginning seven days immediately preceding and ending on the 90th day (or in the case of the Initial Public Offering, 180th day) following the effective date of the registration statement used in connection with such offering, neither the Company nor any holder of Shares (whether or not a selling shareholder pursuant to such registration statement) shall (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise Transfer, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for such Common Stock or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of such Common Stock or such other securities, in cash or otherwise; provided, however, that the foregoing restrictions shall not apply to (i) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Initial Public Offering, (ii) Transfers to a Permitted Transferee of such holder in accordance with the terms of this Agreement, (iii) during the period preceding the execution of the underwriting agreement in connection with an underwritten offering, Transfers to a Charitable Organization or (iv) pursuant to a plan established in compliance with Rule 10b5-1 of the Exchange Act (so long as such plan was established after the consummation of the Initial Public Offering and at least 45 days prior to the effectiveness of the applicable registration statement).

 

6.3.5             Limitations on Subsequent Rights.  The Company shall not enter into any agreement that would provide any party the right to include securities in any registration filed under Section 6.1.1 or 6.2.1 if such agreement provides such party underwriters’ cutback rights that are more favorable than the underwriters’ cutback rights provided to holders of Registrable Securities pursuant to Section 6.3.1 of this Agreement.

 

6.4.          Indemnification and Contribution.

 

6.4.1             Indemnities of the Company.  In the event of any registration of any Registrable Securities or other debt or equity securities of the Company or any of its Subsidiaries under the Securities Act pursuant to this Section 6 or otherwise, and in connection with any registration statement or any other disclosure document produced by

 

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or on behalf of the Company or any of its Subsidiaries including reports required and other documents filed under the Exchange Act, and other documents pursuant to which any debt or equity securities of the Company or any of its Subsidiaries are sold (whether or not for the account of the Company or its Subsidiaries), the Company will, and hereby does, and will cause each of its Subsidiaries, jointly and severally, to indemnify and hold harmless each seller of Registrable Securities, any Person who is or might be deemed to be a controlling Person of the Company or any of its Subsidiaries within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, their respective direct and indirect partners, advisory board members, directors, officers, trustees, members and shareholders, and each other Person, if any, who controls any such seller or any such holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being referred to herein as a “Covered Person”), against any losses, claims, damages or liabilities (or actions or proceedings in respect thereof), joint or several, to which such Covered Person may be or become subject under the Securities Act, the Exchange Act, any other securities or other law of any jurisdiction, the common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained or incorporated by reference in any registration statement filed under the Securities Act, any preliminary prospectus or final prospectus included therein, or any related summary prospectus, or any amendment or supplement thereto, or any document incorporated by reference therein, or any other such disclosure document (including reports and other documents filed under the Exchange Act and any document incorporated by reference therein) or other document or report, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company or any of its Subsidiaries of any federal, state, foreign or common law rule or regulation applicable to the Company or any of its Subsidiaries and relating to action or inaction in connection with any such registration, disclosure document or other document or report, and will reimburse such Covered Person for any legal or any other expenses incurred by it in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that neither the Company nor any of its Subsidiaries shall be liable to any Covered Person in any such case to the extent that any such loss, claim, damage, liability, action or proceeding arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, incorporated document or other such disclosure document or other document or report, in reliance upon and in conformity with written information furnished to the Company or to any of its Subsidiaries through an instrument duly executed by such Covered Person specifically stating that it is for use in the preparation thereof.  The indemnities of the Company and of its Subsidiaries contained in this Section 6.4.1 shall remain in full force and effect regardless of any investigation made by or on behalf of such Covered Person and shall survive any transfer of securities.

 

6.4.2             Indemnities to the Company.  The Company and any of its Subsidiaries may require, as a condition to including any securities in any registration statement filed pursuant to this Section 6, that the Company and any of its Subsidiaries shall have

 

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received an undertaking satisfactory to it from the prospective seller of such securities, to indemnify and hold harmless the Company and any of its Subsidiaries, each director of the Company or any of its Subsidiaries, each officer of the Company or any of its Subsidiaries who shall sign such registration statement and each other Person (other than such seller), if any, who controls the Company and any of its Subsidiaries within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each other prospective seller of such securities with respect to any statement in or omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus included therein, or any amendment or supplement thereto, or any other disclosure document (including reports and other documents filed under the Exchange Act or any document incorporated therein) or other document or report, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company or any of its Subsidiaries through an instrument executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, incorporated document or other document or report.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company, any of its Subsidiaries or any such director, officer or controlling Person and shall survive any transfer of securities.

 

6.4.3             Contribution.  If the indemnification provided for in Sections 6.4.1 or 6.4.2 hereof is unavailable to a party that would have been entitled to indemnification pursuant to the foregoing provisions of this Section 6.4 (an “Indemnitee”) in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each party that would have been an indemnifying party thereunder shall, in lieu of indemnifying such Indemnitee, contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of such indemnifying party on the one hand and such Indemnitee on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof).  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or such Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties agree that it would not be just or equitable if contribution pursuant to this Section 6.4.3 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentence.  The amount paid or payable by a contributing party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 6.4.3 shall include any legal or other expenses reasonably incurred by such Indemnitee in connection with investigating or defending any such action or claim.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

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6.4.4             Limitation on Liability of Holders of Registrable Securities.  The liability of each holder of Registrable Securities in respect of any indemnification or contribution obligation of such holder arising under this Section 6.4 shall not in any event exceed an amount equal to the net proceeds to such holder (after deduction of all underwriters’ discounts and commissions) from the disposition of the Registrable Securities disposed of by such holder pursuant to such registration.

 

7.          REMEDIES.

 

7.1.          Generally.  The Company and each holder of Shares shall have all remedies available at law, in equity or otherwise in the event of any breach or violation of this Agreement or any default hereunder by the Company or any holder of Shares.  The parties acknowledge and agree that in the event of any breach of this Agreement, in addition to any other remedies which may be available, each of the parties hereto shall be entitled to specific performance of the obligations of the other parties hereto and, in addition, to such other equitable remedies (including preliminary or temporary relief) as may be appropriate in the circumstances.

 

7.2.          Deposit.  Without limiting the generality of Section 7.1, if any holder of Shares fails to deliver to the purchaser thereof the certificate or certificates evidencing Shares to be Sold pursuant to Section 4 hereof, such purchaser may, at its option, in addition to all other remedies it may have, deposit the purchase price (including any promissory note constituting all or any portion thereof) for such Shares with any national bank or trust company having combined capital, surplus and undivided profits in excess of One Hundred Million Dollars ($100,000,000) (the “Escrow Agent”) and the Company shall cancel on its books the certificate or certificates representing such Shares and thereupon all of such holder’s rights in and to such Shares shall terminate.  Thereafter, upon delivery to such purchaser by such holder of the certificate or certificates evidencing such Shares (duly endorsed, or with stock powers duly endorsed, for transfer, with signature guaranteed, free and clear of any liens or encumbrances, and with any transfer tax stamps affixed), such purchaser shall instruct the Escrow Agent to deliver the purchase price (without any interest from the date of the closing to the date of such delivery, any such interest to accrue to such purchaser) to such holder.

 

8.          LEGENDS.

 

8.1.          Restrictive Legend.  Each certificate representing Shares shall have the following legend endorsed conspicuously thereupon:

 

The voting of the shares of stock represented by this certificate, and the sale, encumbrance or other disposition thereof, are subject to the provisions of a Stockholders Agreement to which the issuer and certain of its stockholders are party, a copy of which may be inspected at the principal office of the issuer or obtained from the issuer without charge.

 

Each certificate representing Investor Shares shall also have the following legend endorsed conspicuously thereupon:

 

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The shares of stock represented by this certificate were originally issued to, or issued with respect to shares originally issued to, the following Investor:                     .

 

Each certificate representing Management Shares shall also have the following legend endorsed conspicuously thereupon:

 

The shares of stock represented by this certificate were originally issued to, or issued with respect to shares originally issued to, the following Manager:                     .

 

Each certificate representing Co-Investor Shares shall also have the following legend endorsed conspicuously thereupon:

 

The shares of stock represented by this certificate were originally issued to, or issued with respect to shares originally issued to, the following Co-Investor:                     .

 

Any person who acquires Shares which are not subject to all or part of the terms of this Agreement shall have the right to have such legend (or the applicable portion thereof) removed from certificates representing such Shares.

 

8.2.          1933 Act Legends.  Each certificate representing Shares shall have the following legend endorsed conspicuously thereupon:

 

The securities represented by this certificate were issued in a private placement, without registration under the Securities Act of 1933, as amended (the “Act”), and may not be sold, assigned, pledged or otherwise transferred in the absence of an effective registration under the Act covering the transfer or an opinion of counsel, satisfactory to the issuer, that registration under the Act is not required.

 

8.3.          Stop Transfer Instruction.  The Company will instruct any transfer agent not to register the Transfer of any Shares until the conditions specified in the foregoing legends are satisfied.

 

8.4.          Termination of 1933 Act Legend.  The requirement imposed by Section 8.2 hereof shall cease and terminate as to any particular Shares (a) when, in the opinion of Kirkland & Ellis LLP, or other counsel reasonably acceptable to the Company, such legend is no longer required in order to assure compliance by the Company with the Securities Act or (b) when such Shares have been effectively registered under the Securities Act or transferred pursuant to Rule 144.  Wherever (x) such requirement shall cease and terminate as to any Shares or (y) such Shares shall be transferable under paragraph (k) of Rule 144, the holder thereof shall be entitled to receive from the Company, without expense, new certificates not bearing the legend set forth in Section 8.2 hereof.

 

9.          AMENDMENT, TERMINATION, ETC.

 

9.1.          Oral Modifications.  This Agreement may not be orally amended, modified, extended or terminated, nor shall any oral waiver of any of its terms be effective.

 

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9.2.          Written Modifications.  This Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only by an agreement in writing signed by the Majority Investors; provided, however, that the consent of the Majority Managers shall be required for any amendment, modification, extension, termination or waiver which has a disproportionate adverse effect on the holders of Management Shares under this Agreement; provided, further, that the consent of a majority of the holders of Co-Investor Shares shall be required for any amendment, modification, extension, termination or waiver which has a disproportionate adverse effect on the holders of Co-Investor Shares under this Agreement.  Each such amendment, modification, extension, termination and waiver shall be binding upon each party hereto and each holder of Shares subject hereto.  In addition, each party hereto and each holder of Shares subject hereto may waive any right hereunder by an instrument in writing signed by such party or holder.

 

9.3.          Effect of Termination.  No termination under this Agreement shall relieve any Person of liability for breach prior to termination.

 

10.        DEFINITIONS.  For purposes of this Agreement:

 

10.1.        Certain Matters of Construction.  In addition to the definitions referred to or set forth below in this Section 10:

 

(a)        The words “hereof”, “herein”, “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement shall include all subsections thereof;

 

(b)        Definitions shall be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined;

 

(c)        The masculine, feminine and neuter genders shall each include the other; and

 

(d)        The words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation.”

 

Definitions.  The following terms shall have the following meanings:

 

“Adverse Claim” shall have the meaning set forth in Section 7-302 of the applicable Uniform Commercial Code.

 

“Affiliate” shall mean, with respect to any specified Person, (a) any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (b) with respect to any natural Person, any Member of the Immediate Family of such natural Person.

 

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“Affiliated Fund” shall mean each corporation, trust, limited liability company, general or limited partnership or other entity under common control with any Investor or that receives investment advice from the investment adviser to any Investor or an investment adviser affiliated with such investment adviser.

 

“Agreement” shall have the meaning set forth in the Preamble.

 

“Board” shall have the meaning set forth in Section 2.1.

 

“Change of Control” shall mean the occurrence of (a) any consolidation or merger of the Company with or into any other corporation or other Person, or any other corporate reorganization or transaction (including the acquisition of capital stock of the Company), whether or not the Company is a party thereto, in which the stockholders of the Company immediately prior to such consolidation, merger, reorganization or transaction, own capital stock either (i) representing directly, or indirectly through one or more entities, less than fifty percent (50%) of the economic interests in or voting power of the Company or other surviving entity immediately after such consolidation, merger, reorganization or transaction or (ii) that does not directly, or indirectly through one or more entities, have the power to elect a majority of the entire board of directors of the Company or other surviving entity immediately after such consolidation, merger, reorganization or transaction, (b) any transaction or series of related transactions, whether or not the Company is a party thereto, after giving effect to which in excess of fifty percent (50%) of the Company’s voting power is owned directly, or indirectly through one or more entities, by any Person and its “affiliates” or “associates” (as such terms are defined in the rules adopted by the Commission under the Exchange Act), other than the Investors and their respective Affiliated Funds, excluding, in any case referred to in clause (a) or (b) any Initial Public Offering or any bona fide primary or secondary public offering following the occurrence of an Initial Public Offering; or (c) a sale, lease or other disposition of all or substantially all of the assets of the Company.

 

“Charitable Organization” shall mean a charitable organization as described by Section 501(c)(3) of the Internal Revenue Code of 1986, as in effect from time to time.

 

“Closing” shall have the meaning set forth in Section 1.1.

 

“Co-Investor Shares” shall mean (a) all shares of Common Stock originally issued to, or issued with respect to shares originally issued to, or held by, a Co-Investor, whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities, (b) all Options, Warrants and Convertible Securities originally granted or issued to a Co-Investor (treating such Options, Warrants and Convertible Securities as a number of Shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).  All Co-Investor Shares that are Transferred by the holder thereof to such holder’s Permitted Transferees shall remain Co-Investor Shares in the hands of such Permitted Transferee.

 

“Commission” shall mean the Securities and Exchange Commission.

 

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“Common Stock” shall mean the common stock, par value $.01 per share of the Company.

 

“Company” shall have the meaning set forth in the Preamble.

 

“Convertible Securities” shall mean any evidence of indebtedness, shares of stock (other than Common Stock) or other securities (other than Options and Warrants) which are directly or indirectly convertible into or exchangeable or exercisable for shares of Common Stock.

 

“Covered Person” shall have the meaning set forth in Section 6.4.1.

 

“Drag Along Notice” shall have the meaning set forth in Section 4.2.1.

 

“Drag Along Sale Percentage” shall have the meaning set forth in Section 4.2.

 

“Drag Along Sellers” shall have the meaning set forth in Section 4.2.1.

 

“Equivalent Shares” shall mean, at any date of determination, (a) as to any outstanding shares of Common Stock, such number of shares of Common Stock and (b) as to any outstanding Options, Warrants or Convertible Securities which constitute Shares, the maximum number of shares of Common Stock for which or into which such Options, Warrants or Convertible Securities may at the time be exercised, converted or exchanged (or which will become exercisable, convertible or exchangeable on or prior to, or by reason of, the transaction or circumstance in connection with which the number of Equivalent Shares is to be determined).

 

“Escrow Agent” shall have the meaning set forth in Section 7.2.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as in effect from time to time.

 

“Indemnitee” shall have the meaning set forth in Section 6.4.3.

 

“Initial Public Offering” means the initial Public Offering registered on Form S-1 (or any successor form under the Securities Act).

 

“Initiating Investors” shall have the meaning set forth in Section 6.1.1.

 

“Investor Shares” shall mean (a) all shares of Common Stock originally issued to, or issued with respect to shares originally issued to, or held by, an Investor, whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities and (b) all Options, Warrants and Convertible Securities originally granted or issued to an Investor (treating such Options, Warrants and Convertible Securities as a number of Shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).

 

“Investors” shall have the meaning set forth in the Preamble.

 

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“Issuance” shall have the meaning set forth in Section 5.

 

“Majority Investors” shall mean, as of any date, the holders of a majority of the Investor Shares outstanding on such date.

 

“Majority Managers” shall mean, as of any date, the holders of a majority of the Management Shares outstanding on such date.

 

“Majority Participating Investors” shall have the meaning set forth in Section 6.1.2.

 

“Management Shares” shall mean (a) all shares of Common Stock originally issued to, or issued with respect to shares originally issued to, or held by, a Manager, whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities, (b) all Options, Warrants and Convertible Securities originally granted or issued to a Manager (treating such Options, Warrants and Convertible Securities as a number of Shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except (i) for purposes of Section 5 and (ii) as otherwise specifically set forth herein).  All Management Shares that are Transferred by the holder thereof to such holder’s Permitted Transferees shall remain Management Shares in the hands of such Permitted Transferee.

 

“Managers” shall have the meaning set forth in the Preamble.

 

“Members of the Immediate Family” shall mean, with respect to any individual, each spouse, parent, grandparent or child (whether biological or adopted) or other descendants of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his capacity as such custodian or guardian.

 

“Merger Agreement” shall have the meaning set forth in the Recitals.

 

“Options” shall mean any options to subscribe for, purchase or otherwise directly acquire Common Stock (including, without limitation, “Rollover Options” issued pursuant to the Company’s 2007 Management Equity Plan).

 

“Other Securities” shall have the meaning set forth in Section 5.1.3.

 

“Participating Buyer” shall have the meaning set forth in Section 5.1.2.

 

“Participating Seller” shall have the meaning set forth in Section 4.1.2 and 4.2.1.

 

“Participation Notice” shall have the meaning set forth in Section 5.1.1.

 

“Participation Offerees” shall have the meaning set forth in Section 5.1.1.

 

“Participation Portion” shall have the meaning set forth in Section 5.1.1(a).

 

“Permitted Transferee” shall have the meaning set forth in Section 3.1.

 

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“Person” shall mean any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.

 

“Price Per Equivalent Share” shall mean the Board’s good faith determination of the price per Equivalent Share of any Convertible Securities or Options which are the subject of an Issuance pursuant to Section 5 hereof.

 

“Prospective Buyer” shall mean any Person proposing to purchase shares from a Prospective Selling Investor.  Under no circumstances shall a Permitted Transferee be deemed a Prospective Buyer.

 

“Prospective Selling Investor” shall have the meaning set forth in Section 4.1 and 4.2.

 

“Prospective Subscriber” shall have the meaning set forth in Section 5.1.1(a).

 

“Public Offering” shall mean a public offering and sale of Common Stock for cash pursuant to an effective registration statement under the Securities Act.

 

“Registrable Investor Securities” shall have the meaning set forth in Section 6.1.1.

 

“Registrable Securities” shall mean (a) all shares of Common Stock, (b) all shares of Common Stock issuable upon exercise, conversion or exchange of any Option, Warrant or Convertible Security and (c) all shares of Common Stock directly or indirectly issued or issuable with respect to the securities referred to in clauses (a), or (b) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, in each case constituting Shares.  As to any particular Registrable Securities, such shares shall cease to be Registrable Securities when (i) such shares shall have been Transferred in a Sale to which Sections 4.1 or 4.2 apply; (ii) such shares shall have been Transferred in accordance with the terms of this Agreement by a holder of Shares to any person who is not a Permitted Transferee thereof or is not a Stockholder; (iii) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement; (iii) such securities shall have been Transferred pursuant to Rule 144; (iv) subject to the provisions of Section 7 hereof, such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration of them under the Securities Act and such securities may be distributed without volume limitation or other restrictions on transfer under Rule 144 (including without application of paragraphs (c), (e) (f) and (h) of Rule 144) or (v) such securities shall have ceased to be outstanding.

 

“Rule 144” shall mean Rule 144 under the Securities Act (or any successor Rule).

 

“Rule 145 Transaction” shall mean a registration on Form S-4 pursuant to Rule 145 of the Securities Act (or any successor Form or provision, as applicable).

 

“Sale” shall mean a Transfer for value.

 

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“Securities Act” shall mean the Securities Act of 1933, as in effect from time to time.

 

“Shares” shall mean all Investor Shares, Co-Investor Shares and Management Shares.

 

“Stockholders” shall have the meaning set forth in the Preamble.

 

“Subject Securities” shall have the meaning set forth in Section 5.

 

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such limited liability company, partnership, association or other business entity.

 

“Tag Along Notice” shall have the meaning set forth in Section 4.1.1.

 

“Tag Along Sale Percentage” shall have the meaning set forth in Section 4.1.1(a).

 

“Tag-Along Sale” shall mean any Transfer of Investor Shares (in a single transaction or series of related transactions) to a Prospective Buyer pursuant to which, after such Transfer, the amount of Investor Shares Transferred (in aggregate) to all Prospective Buyers exceeds 10% of the Investor Shares outstanding as of the date hereof.

 

“Tag Along Sellers” shall have the meaning set forth in Section 4.1.2.

 

“Transfer” shall mean any sale, pledge, assignment, encumbrance or other transfer or disposition of any Shares to any other Person, whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise.

 

“Warrants” shall mean any warrants to subscribe for, purchase or otherwise directly acquire Common Stock.

 

11.        MISCELLANEOUS.

 

11.1.        Authority; Effect.  Each party hereto represents and warrants to and agrees with each other party that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on behalf of such party and do not violate any agreement or other instrument applicable to such party or by which its assets are bound.  This Agreement does not, and shall not be construed to, give rise to the

 

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creation of a partnership among any of the parties hereto, or to constitute any of such parties members of a joint venture or other association.

 

11.2.        Notices.  All notices, requests, demands, claims and other communications required or permitted to be delivered, given or otherwise provided under this Agreement must be in writing and must be delivered, given or otherwise provided:

 

(a)        by hand (in which case, it will be effective upon delivery);

 

(b)        by facsimile (in which case, it will be effective upon receipt of confirmation of good transmission); or

 

(c)        by overnight delivery by a nationally recognized courier service (in which case, it will be effective on the Business Day after being deposited with such courier service);

 

in each case, to the address (or facsimile number) listed below.

 

If to the Company:

 

Guitar Center Holdings, Inc.
 c/o Guitar Center, Inc.
 5795 Lindero Canyon Road
 Westlake Village, CA 91362
 Attention:  General Counsel
 Facsimile No.:  (818) 735-4923

 

with copies (which shall not constitute notice) to:

 

c/o Bain Capital Partners, LLC
 111 Huntington Ave.
 Boston, MA 02199
 Attention:     Jordan Hitch
                          Matthew Levin
                          John Tudor
 Facsimile No.:  (617) 516-2010

 

Kirkland & Ellis LLP
 200 East Randolph Drive
 Chicago, IL 60601
 Attention:       Matthew E. Steinmetz, P.C.
                           Jon A. Ballis, P.C.
 Facsimile No.:  (312) 861-2200

 

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If to an Investor, to it:

 

c/o Bain Capital Partners, LLC
 111 Huntington Ave.
 Boston, MA 02199
 Attention:     Jordan Hitch
                          Matthew Levin
                          John Tudor
 Facsimile No.:  (617) 516-2010

 

with a copy (which shall not constitute notice) to:

 

Kirkland & Ellis LLP
 200 East Randolph Drive
 Chicago, IL 60601
 Attention:     Matthew E. Steinmetz, P.C.
                          Jon A. Ballis, P.C.
 Facsimile No.:  (312) 861-2200

 

If to a Manager or Co-Investor, to such person at the address or facsimile number set forth in the stock record book of the Company.

 

Notice to the holder of record of any shares of capital stock shall be deemed to be notice to the holder of such shares for all purposes hereof.

 

Unless otherwise specified herein, such notices or other communications shall be deemed effective (a) on the date received, if personally delivered or if sent via facsimile or electronic mail, (b) two business days after being sent by Federal Express, DHL or UPS and (c) three business days after deposit with the U.S. Postal Service, if sent by registered or certified mail.  Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.

 

11.3.        Binding Effect, Etc.  Except for the Company’s 2007 Management Equity Plan and any future agreement entered into between the Company and any Manager with respect to the purchase of Management Shares for cash, this Agreement constitutes the entire agreement of the parties with respect to its subject matter, supersedes all prior or contemporaneous oral or written agreements or discussions with respect to such subject matter, and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, successors and assigns.

 

11.4.        Descriptive Headings.  The descriptive headings of this Agreement are for convenience of reference only, are not to be considered a part hereof and shall not be construed to define or limit any of the terms or provisions hereof.

 

11.5.        Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one instrument.

 

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11.6.        Severability.  In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision shall be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law.  The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect any other provision hereof.

 

12.        GOVERNING LAW.

 

12.1.        Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

 

12.2.        Consent to Jurisdiction.  Each party to this Agreement, by its execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware for the purpose of any action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof, (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, and agrees not to allow any of its Subsidiaries to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such proceeding brought in one of the above-named courts is improper, or that this Agreement or the subject matter hereof or thereof may not be enforced in or by such court and (c) hereby agrees not to commence or maintain any action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof or thereof other than before one of the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation to any court other than one of the above-named courts whether on the grounds of inconvenient forum or otherwise.  Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this agreement, the court in which such litigation is being heard shall be deemed to be included in clause (a) above.  Each party hereto hereby consents to service of process in any such proceeding in any manner permitted by Delaware law, and agrees that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 11.2 hereof is reasonably calculated to give actual notice.

 

12.3.        WAIVER OF JURY TRIAL.  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS

 

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AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.  EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 12.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT.  ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12.3 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

12.4.        Exercise of Rights and Remedies.  No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any such delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.

 

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IN WITNESS WHEREOF, the undersigned has duly executed this Agreement.

 

 

	
MANAGER:
    	
 By:
    	
/s/   Gregory Trojan
    
	
 
    	
Name:
    	
Gregory   Trojan
    
	
 
    	
Date:
    	
3/13/08

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