Document:

exhibit10-1.htm

EXHIBIT 10.1

QUAINT OAK BANK

EMPLOYMENT AGREEMENT

FOR JOHN J. AUGUSTINE

THIS EMPLOYMENT AGREEMENT (the “Agreement”) between Quaint Oak Bank, a Pennsylvania-chartered stock savings bank with principal offices at 501 Knowles Avenue, Southampton, Pennsylvania 18966 (the “Bank”), and John J. Augustine (the “Executive”), is hereby adopted effective as of the 14th day of September, 2012.

WHEREAS, the Executive is presently employed as the Chief Financial Officer and Treasurer of the Bank;

WHEREAS, the Bank desires to be ensured of the Executive’s continued active participation in the business of the Bank; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the mutual promises and agreements set forth herein, the parties hereby agree as follows:

1.           Definitions.  The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a)           Average Annual Compensation.  The Executive’s “Average Annual Compensation” for purposes of this Agreement shall be deemed to mean the average amount of compensation paid to the Executive by the Bank and any parent or subsidiary thereof during the most recent three calendar years immediately preceding the year in which the Date of Termination occurs and included in the Executive’s gross income for tax purposes.

(b)           Base Salary.  “Base Salary” shall have the meaning set forth in Section 3(a) hereof.

(c)           Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, conviction of a felony, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order which in the reasonable judgment of the Board of Directors of the Bank will probably cause substantial economic damages to the Bank, willful or intentional breach or neglect by the Executive of his duties, or a material breach of any provision of this Agreement.  For purposes of this Agreement, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by him not in good faith and without reasonable belief that this action or omission was in the best interest of the Bank; provided that any act or omission to act on the Executive’s behalf in reliance upon an opinion of counsel to the Bank or counsel to the Executive shall not be deemed to be willful. The terms “incompetence” and “misconduct” shall be defined with reference to standards generally prevailing in the banking industry. In determining incompetence and misconduct, the Bank shall have the burden of proof with regard to the acts or omissions of the Executive and the standards prevailing in the banking industry.

  

  

  

(d)           Change in Control.  “Change in Control” shall mean a change in the ownership of the Corporation or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(e)           Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

(f)           Corporation.  “Corporation” shall mean Quaint Oak Bancorp, Inc., the holding company for the Bank.

(g)           Date of Termination.  “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(h)           Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.  In the event of any dispute between the Executive and the Bank as to the Executive’s Disability, the matter shall be decided by a majority vote of a panel of physicians, one of whom shall be selected by the Executive, one of whom shall be selected by the Bank, and one of whom shall be selected by the other two physicians.  The physicians’ fees and any other costs associated with the resolution of said dispute shall be borne by the Bank.

(i)           Good Reason.  “Good Reason” means the occurrence of any of the following events:

 

    (i) any material breach of this Agreement by the Bank, including without limitation any of the following: (A) a material diminution in the Executive’s base compensation, (B) a material diminution in the Executive’s authority, duties or responsibilities, or (C) any requirement that the Executive report to a corporate officer or employee of the Bank instead of reporting directly to the President and Chief Executive Officer and the Board of Directors of the Bank, or

 

    (ii) any material change in the geographic location at which the Executive must perform his services under this Agreement; provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Bank within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Bank shall thereafter have the right to remedy the condition within thirty (30) days of the date the Bank received the written notice from the Executive.  If the Bank remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition.  If the Bank does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

  

  

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(j)           Notice of Termination.  Any purported termination of the Executive’s employment by the Bank for any reason, including without limitation for Cause or Disability, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Bank’s termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 10 hereof.

(k)           Regulatory Agency.  “Regulatory Agency” means any governmental agency having regulatory or supervisory jurisdiction over the Bank at the time of reference.

2.           Term of Employment.

(a)           The Bank hereby employs the Executive as Chief Financial Officer and Treasurer, and the Executive hereby accepts said employment and agrees to render such services to the Bank on the terms and conditions set forth in this Agreement. Subject to the terms hereof, this Agreement shall terminate three (3) years after December 31, 2012.  Beginning on December 31, 2013 and on each December 31st thereafter, the term of this Agreement shall be extended for a period of one additional year, provided that the Bank has not given notice to the Executive in writing at least 30 days, and not more than 90 days, prior to such December 31st that the term of this Agreement shall not be extended further and/or the Executive has not given notice to the Bank of his election not to extend the term at least 30 days, and not more than 90 days, prior to any such December 31st. If any party gives timely notice that the term will not be extended as of any such December 31st, then this Agreement shall terminate at the conclusion of its remaining term.  References herein to the term of this Agreement shall refer both to the initial term and successive terms.

(b)           During the term of this Agreement, the Executive shall perform such executive services for the Bank as is consistent with his title of Chief Financial Officer and Treasurer and from time to time assigned to him by the Bank’s President and Chief Executive Officer or the Board of Directors.

  

  

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3.           Compensation and Benefits.

(a)           The Bank shall compensate and pay the Executive for his services during the term of this Agreement at a minimum base salary of One Hundred Fifty-Four Thousand and Five Hundred Dollars ($154,500.00) per year (“Base Salary”) payable no less frequently than in monthly installments, which may be increased from time to time in such amounts as may be determined by the Board of Directors of the Bank.  In addition to his Base Salary, the Executive shall be entitled to receive during the term of this Agreement such bonus payments as may be authorized and declared by the Board of Directors of the Bank in its sole discretion.

(b)           During the term of this Agreement, the Executive shall be entitled to participate in any benefit plans as the Bank may adopt for the benefit of its employees.  The Bank shall not make any changes in such benefit plans which would adversely affect the Executive’s rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all executive officers of the Bank and does not result in a proportionately greater adverse change in the rights of or benefits to the Executive as compared with any other executive officer of the Bank.  Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to Section 3(a) hereof.

(c)           During the term of this Agreement, the Executive shall be entitled to paid annual vacation as approved from time to time by the Board of Directors of the Bank.  The timing of paid vacations shall be scheduled in a reasonable manner by the Executive.  The Executive shall not be entitled to receive any additional compensation from the Bank for failure to take a vacation, nor shall the Executive be able to accumulate unused vacation time from one year to the next, except to the extent authorized by the Board of Directors of the Bank.

4.           Expenses.  The Bank shall reimburse the Executive or otherwise provide for or pay for all reasonable expenses incurred by the Executive in furtherance of or in connection with the business of the Bank, including, but not by way of limitation, traveling expenses for attending annual and periodic meetings of trade associations, subject to such reasonable documentation and other limitations as may be established by management of the Bank.  If such expenses are paid in the first instance by the Executive, the Bank shall reimburse the Executive therefor.  Such reimbursement shall be made promptly by the Bank and, in any event, no later than March 15th of the year immediately following the year in which such expenses were incurred.

5.           Termination.

(a)           The Bank shall have the right, at any time upon prior Notice of Termination, to terminate the Executive’s employment hereunder for any reason, including without limitation termination for Cause or Disability, and the Executive shall have the right, upon prior Notice of Termination, to terminate his employment hereunder for any reason.

(b)           In the event that (i) the Executive’s employment is terminated by the Bank for Cause, or (ii) the Executive terminates his employment hereunder other than for Good Reason, the Executive shall have no right pursuant to this Agreement to compensation or other benefits for any period after the applicable Date of Termination.

  

  

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(c)           In the event that the Executive’s employment is terminated as a result of Disability during the term of this Agreement, then the Bank shall pay to the Executive the following: (i) in a lump sum within thirty (30) days following the Date of Termination, a cash severance amount equal to one times the Executive’s then current Base Salary, plus (ii) in a lump sum payable at the time annual bonuses are normally paid, the pro rata portion of any annual bonus that the Executive would have anticipated earning for the year in which the Date of Termination occurs if he had remained in the employ of the Bank for the full calendar year, based upon the portion of the calendar year that the Executive was able to perform his duties prior to his termination due to Disability, provided that the pro rata bonus shall be paid no later than March 15th of the year immediately following the year in which the Date of Termination occurs.

(d)           In the event that the Executive’s employment is terminated as a result of the Executive’s death during the term of this Agreement, then the Bank shall pay to the Executive’s spouse or, if none, to his estate or legal representative, the following: (i) in a lump sum within thirty (30) days following the Date of Termination, a cash severance amount equal to one times the Executive’s then current Base Salary, plus (ii) in a lump sum payable at the time annual bonuses are normally paid, the pro rata portion of any bonus that the Executive would have anticipated earning for the year in which the Date of Termination occurs if he had remained in the employ of the Bank for the full calendar year, based upon the portion of the calendar year that Executive was able to perform his duties prior to his death, provided that the pro rata bonus shall be paid no later than March 15th of the year immediately following the year in which the Date of Termination occurs.

(e)           In the event that prior to a Change in Control the Executive’s employment is terminated either (i) by the Bank for other than Cause, Disability or the Executive’s death or (ii) by the Executive for Good Reason, then the Bank shall pay to the Executive, in a lump sum within thirty (30) days following the Date of Termination, a cash severance amount equal to three (3) times the Executive’s then current Base Salary.

(f)           In the event that concurrently with or subsequent to a Change in Control the Executive’s employment is terminated either (i) by the Bank for other than Cause, Disability or the Executive’s death or (ii) by the Executive for Good Reason, then the Bank shall pay to the Executive, in a lump sum within five (5) business days following the Date of Termination, a cash severance amount equal to 2.99 times the Executive’s Average Annual Compensation, subject to the provisions of Section 6 hereof, if applicable.

6.           Limitation of Benefits under Certain Circumstances.  If any payment pursuant to Section 5 hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Bank and the Corporation, would constitute a “parachute payment” under Section 280G of the Code, then the payment payable by the Bank pursuant to Section 5 hereof shall be reduced by the minimum amount necessary to result in no portion of the payment payable by the Bank under Section 5 being non-deductible to the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code.  The determination of any reduction in the payments to be made pursuant to Section 5 shall be based upon the opinion of independent tax counsel selected by the Bank and paid by the Bank.  Such counsel shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose.  Nothing contained in this Section 6 shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 6, or a reduction in the payments specified in Section 5 below zero.

  

  

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7.           Covenant Not to Compete.

(a)           Except as provided in Section 7(b) hereof, the Executive hereby covenants and agrees that, in the event of his termination of employment with the Bank for any reason prior to the expiration of the term of this Agreement, for a period of one year following the date of his termination of employment with the Bank, he shall not, without the written consent of the Bank, become an officer, employee, consultant, director or trustee of any savings bank, savings and loan association, savings and loan holding company, bank or bank holding company, credit union or any direct or indirect subsidiary or affiliate of any such entity, that entails working within Philadelphia, Montgomery, Bucks, Chester, Delaware, Lehigh, Berks or Northampton Counties, Pennsylvania.

(b)           The Executive shall not be subject to the provisions of Section 7(a) if (i) the Executive is terminated by the Bank for Cause and does not receive any further compensation or benefits from the Bank subsequent to the applicable Date of Termination or (ii) the Executive’s employment with the Bank is terminated by the Bank or the Executive subsequent to a Change in Control.

(c)           The Executive expressly agrees that (i) in the event of a violation of these noncompetition provisions by the Executive, monetary damages alone will be inadequate to compensate the Bank, (ii) the Bank will be entitled to injunctive relief against the Executive in addition to any other remedies provided by law or in equity and (iii) the noncompetition obligations contained herein shall be extended by the length of time during which the Executive shall have been in breach thereof.

8.           Mitigation; Exclusivity of Benefits.

(a)           The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.

(b)           The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Bank pursuant to employee benefit plans of the Bank or otherwise.

9.           Withholding.  All payments required to be made by the Bank hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Bank may reasonably determine should be withheld pursuant to any applicable law or regulation.

  

  

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10.           Assignability.  The Bank may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Bank may hereafter merge or consolidate or to which the Bank may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Bank hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

11.           Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

	 	
To the Bank:

	
Board of Directors

Quaint Oak Bank

501 Knowles Avenue

Southampton, Pennsylvania 18966

 

	 	
To the Executive:

	
John J. Augustine

At the address last appearing on the

personnel records of the Bank

12.           Amendment; Waiver.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Bank to sign on its behalf.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  In addition, notwithstanding anything in this Agreement to the contrary, the Bank may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code.

13.           Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the Commonwealth of Pennsylvania.

14.           Nature of Obligations.  Nothing contained herein shall create or require the Bank to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Bank hereunder, such right shall be no greater than the right of any unsecured general creditor of the Bank.

15.           Headings.  The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

  

  

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16.           Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

17.           Changes in Statutes or Regulations. If any statutory or regulatory provision referenced herein is subsequently changed or re-numbered, or is replaced by a separate provision, then the references in this Agreement to such statutory or regulatory provision shall be deemed to be a reference to such section as amended, re-numbered or replaced.

18.           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

19.           Regulatory Prohibitions and Actions.

(a)           Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDIA (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s termination of employment with the Bank for Cause, all employment relationships and managerial duties with the Bank shall immediately cease regardless of whether the Executive is in the employ of the Corporation following such termination.  Furthermore, following such termination for Cause, the Executive will not, directly or indirectly, influence or participate in the affairs or the operations of the Bank.

(b)           If the Bank is in default, as defined to mean an adjudication or other official determination of a court of competent jurisdiction or other public authority pursuant to which a conservator, receiver or other legal custodian is appointed for the Bank for the purpose of liquidation, all obligations under this Agreement shall terminate as of such date as a competent governmental authority may lawfully terminate this Agreement, but rights of the Executive to compensation earned prior to such termination shall not be affected.

(c)           If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs pursuant to notice served by any Regulatory Agency, then the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank shall (i) pay the Executive all the compensation withheld while contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

(d)           If the Executive is removed from office and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued by any Regulatory Agency, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but rights of the Executive to compensation earned as of the Date of Termination shall not be affected.

  

  

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(e)           All obligations under this Agreement are subject to termination by any Regulatory Agency in accordance with any applicable provisions of law or regulations granting such authority, but rights of the Executive to compensation earned as of the date of termination of the Agreement shall not be affected.

20.           Entire Agreement.  This Agreement embodies the entire agreement between the Bank and the Executive with respect to the matters agreed to herein.  All prior agreements between the Bank and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

 

[Signature page follows]

  

  

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

	
ATTEST:

	  	
QUAINT OAK BANK

	  	  	  	  	  
	
By:

	

/s/ Diane J. Coyler

	  	
By:

	

/s/ Robert T. Strong

	  	Diane J. Colyer 

Corporate Secretary

	  	     	Robert T. Strong 

President and Chief Executive Officer

	 	 	 	 
	  	  	  	
EXECUTIVE

	  	  	  	  	  
	  	  	  	
By:

	

/s/ John J. Augustine

	 	 	 	 	 John J. AugustineExhibit 10.1

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of
 September 17, 2012

 

MICHAELS STORES, INC.
 As Lead Borrower
 for

 

THE BORROWERS PARTY HERETO

 

THE FACILITY GUARANTORS PARTY HERETO

 

WELLS FARGO BANK, NATIONAL ASSOCIATION
 As Administrative Agent and Collateral Agent

 

JPMORGAN CHASE BANK, N.A.
 GOLDMAN SACHS BANK USA
 As Co-Syndication Agents

 

BARCLAYS BANK PLC
 DEUTSCHE BANK SECURITIES INC.
 BANK OF AMERICA, N.A.
 CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
 MORGAN STANLEY SENIOR FUNDING, INC.
 As Co-Documentation Agents

 

THE LENDERS PARTY HERETO

 

WELLS FARGO CAPITAL FINANCE, LLC
 J.P. MORGAN SECURITIES LLC
 As Joint Lead Arrangers

 

WELLS FARGO CAPITAL FINANCE, LLC
 J.P. MORGAN SECURITIES LLC
 As Joint Book Runners

 

 

TABLE OF CONTENTS

 

	
ARTICLE   I
    	
 
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 1.01
    	
Definitions
    	
 
    	
2
    
	
SECTION 1.02
    	
Terms Generally
    	
 
    	
57
    
	
SECTION 1.03
    	
Accounting Terms
    	
 
    	
59
    
	
SECTION 1.04
    	
Rounding
    	
 
    	
60
    
	
SECTION 1.05
    	
Times of Day
    	
 
    	
60
    
	
SECTION 1.06
    	
Letter of Credit Amounts
    	
 
    	
60
    
	
SECTION 1.07
    	
Certifications
    	
 
    	
60
    
	
SECTION 1.08
    	
Currency Equivalents Generally
    	
 
    	
61
    
	
SECTION 1.09
    	
Change of Currency
    	
 
    	
61
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II Amount and Terms of   Credit
    	
 
    	
61
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 2.01
    	
Commitment of the Lenders
    	
 
    	
61
    
	
SECTION 2.02
    	
Increase in Total Commitments
    	
 
    	
62
    
	
SECTION 2.03
    	
Reserves; Changes to Reserves
    	
 
    	
64
    
	
SECTION 2.04
    	
Making of Revolving Credit Loans
    	
 
    	
64
    
	
SECTION 2.05
    	
Overadvances
    	
 
    	
66
    
	
SECTION 2.06
    	
Swingline Loans
    	
 
    	
66
    
	
SECTION 2.07
    	
Notes
    	
 
    	
67
    
	
SECTION 2.08
    	
Interest on Revolving Credit Loans
    	
 
    	
67
    
	
SECTION 2.09
    	
Conversion and Continuation of Revolving Credit Loans
    	
 
    	
68
    
	
SECTION 2.10
    	
Alternate Rate of Interest for Revolving Credit Loans
    	
 
    	
69
    
	
SECTION 2.11
    	
Change in Legality
    	
 
    	
69
    
	
SECTION 2.12
    	
Default Interest
    	
 
    	
70
    
	
SECTION 2.13
    	
Letters of Credit
    	
 
    	
70
    
	
SECTION 2.14
    	
Increased Costs
    	
 
    	
78
    
	
SECTION 2.15
    	
Termination or Reduction of Commitments
    	
 
    	
80
    
	
SECTION 2.16
    	
Optional Prepayment of Revolving Credit Loans;   Reimbursement of Lenders
    	
 
    	
80
    
	
SECTION 2.17
    	
Mandatory Prepayment; Commitment Termination; Cash   Collateral
    	
 
    	
82
    
	
SECTION 2.18
    	
Cash Management
    	
 
    	
83
    
	
SECTION 2.19
    	
Fees
    	
 
    	
87
    
	
SECTION 2.20
    	
Maintenance of Loan Account; Statements of Account
    	
 
    	
89
    
	
SECTION 2.21
    	
Payments; Sharing of Setoff
    	
 
    	
89
    
	
SECTION 2.22
    	
Settlement Amongst Lenders
    	
 
    	
90
    
	
SECTION 2.23
    	
Taxes
    	
 
    	
91
    
	
SECTION 2.24
    	
Mitigation Obligations; Replacement of Lenders
    	
 
    	
94
    
	
SECTION 2.25
    	
Designation of Lead Borrower as Borrowers’ Agent
    	
 
    	
95
    
	
SECTION 2.26
    	
Provisions Applicable to Canadian Loan Parties
    	
 
    	
96
    
	
SECTION 2.27
    	
Extensions of Loans
    	
 
    	
97
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III Representations   and Warranties
    	
 
    	
100
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 3.01
    	
Existence, Qualification and Power; Compliance with Laws
    	
 
    	
100
    
	
SECTION 3.02
    	
Authorization; No Contravention
    	
 
    	
100
    
	
SECTION 3.03
    	
Governmental Authorization; Other Consents
    	
 
    	
101
    

 

 

	
SECTION 3.04
    	
Binding Effect
    	
 
    	
101
    
	
SECTION 3.05
    	
Financial Statements; No Material Adverse Effect
    	
 
    	
101
    
	
SECTION 3.06
    	
Litigation
    	
 
    	
102
    
	
SECTION 3.07
    	
No Default
    	
 
    	
102
    
	
SECTION 3.08
    	
Ownership of Property; Liens
    	
 
    	
102
    
	
SECTION 3.09
    	
Environmental Compliance
    	
 
    	
103
    
	
SECTION 3.10
    	
Taxes
    	
 
    	
104
    
	
SECTION 3.11
    	
ERISA; Plan Compliance
    	
 
    	
104
    
	
SECTION 3.12
    	
Subsidiaries; Equity Interests
    	
 
    	
105
    
	
SECTION 3.13
    	
Margin Regulations; Investment Company Act
    	
 
    	
105
    
	
SECTION 3.14
    	
Disclosure
    	
 
    	
105
    
	
SECTION 3.15
    	
Intellectual Property; Licenses, Etc.
    	
 
    	
106
    
	
SECTION 3.16
    	
Solvency
    	
 
    	
106
    
	
SECTION 3.17
    	
Subordination of Junior Financing
    	
 
    	
106
    
	
SECTION 3.18
    	
Labor Matters
    	
 
    	
106
    
	
SECTION 3.19
    	
Compliance with Laws and Agreements
    	
 
    	
107
    
	
SECTION 3.20
    	
Security Documents
    	
 
    	
107
    
	
SECTION 3.21
    	
Insurance
    	
 
    	
108
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV Conditions
    	
 
    	
108
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 4.01
    	
Conditions of Initial Credit Extension
    	
 
    	
108
    
	
SECTION 4.02
    	
Conditions Precedent to Each Revolving Credit Loan and Each   Letter of Credit
    	
 
    	
111
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V Affirmative   Covenants
    	
 
    	
112
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 5.01
    	
Financial Statements
    	
 
    	
112
    
	
SECTION 5.02
    	
Certificates; Other Information
    	
 
    	
114
    
	
SECTION 5.03
    	
Notices
    	
 
    	
116
    
	
SECTION 5.04
    	
Payment of Taxes, Etc.
    	
 
    	
117
    
	
SECTION 5.05
    	
Preservation of Existence, Etc.
    	
 
    	
117
    
	
SECTION 5.06
    	
Maintenance of Properties
    	
 
    	
118
    
	
SECTION 5.07
    	
Maintenance of Insurance
    	
 
    	
118
    
	
SECTION 5.08
    	
Compliance with Laws
    	
 
    	
119
    
	
SECTION 5.09
    	
Books and Records
    	
 
    	
119
    
	
SECTION 5.10
    	
Inspection Rights
    	
 
    	
119
    
	
SECTION 5.11
    	
Covenant to Become a Loan Party and Give Security
    	
 
    	
120
    
	
SECTION 5.12
    	
Compliance with Environmental Laws
    	
 
    	
123
    
	
SECTION 5.13
    	
Further Assurances and Post-Closing Conditions
    	
 
    	
123
    
	
SECTION 5.14
    	
Designation of Subsidiaries
    	
 
    	
123
    
	
SECTION 5.15
    	
Information Regarding Collateral
    	
 
    	
124
    
	
SECTION 5.16
    	
Physical Inventories
    	
 
    	
124
    
	
SECTION 5.17
    	
Use of Proceeds of Credit Extensions
    	
 
    	
124
    
	
SECTION 5.18
    	
Proceeds from Surplus Cash Deposits
    	
 
    	
124
    
	
SECTION 5.19
    	
Excess Collections, Canadian Investments, Etc.
    	
 
    	
125
    
	
SECTION 5.20
    	
Pension Plans
    	
 
    	
125
    
	
SECTION 5.21
    	
Corporate Separateness
    	
 
    	
125
    
	
SECTION 5.22
    	
Holdco
    	
 
    	
125
    

 

 

	
SECTION 5.23
    	
Compliance with Terms of Leaseholds
    	
 
    	
125
    
	
SECTION 5.24
    	
Financial Covenant
    	
 
    	
126
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI Negative Covenants
    	
 
    	
126
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 6.01
    	
Liens
    	
 
    	
126
    
	
SECTION 6.02
    	
Investments
    	
 
    	
130
    
	
SECTION 6.03
    	
Indebtedness
    	
 
    	
133
    
	
SECTION 6.04
    	
Fundamental Changes
    	
 
    	
136
    
	
SECTION 6.05
    	
Dispositions
    	
 
    	
137
    
	
SECTION 6.06
    	
Restricted Payments
    	
 
    	
140
    
	
SECTION 6.07
    	
Change in Nature of Business
    	
 
    	
143
    
	
SECTION 6.08
    	
Transactions with Affiliates
    	
 
    	
143
    
	
SECTION 6.09
    	
Burdensome Agreements
    	
 
    	
144
    
	
SECTION 6.10
    	
Accounting Changes
    	
 
    	
145
    
	
SECTION 6.11
    	
Prepayments, Etc., of Indebtedness
    	
 
    	
145
    
	
SECTION 6.12
    	
Equity Interests of the Lead Borrower and Restricted Subsidiaries
    	
 
    	
146
    
	
SECTION 6.13
    	
Amendment of Material Documents
    	
 
    	
146
    
	
SECTION 6.14
    	
Designated Account
    	
 
    	
146
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII Events of Default
    	
 
    	
147
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 7.01
    	
Events of Default
    	
 
    	
147
    
	
SECTION 7.02
    	
Remedies Upon Event of Default
    	
 
    	
151
    
	
SECTION 7.03
    	
Exclusion of Immaterial Subsidiaries
    	
 
    	
151
    
	
SECTION 7.04
    	
Application of Proceeds
    	
 
    	
152
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII The   Administrative Agent
    	
 
    	
153
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 8.01
    	
Appointment of Administrative Agent
    	
 
    	
153
    
	
SECTION 8.02
    	
Appointment of Collateral Agent
    	
 
    	
153
    
	
SECTION 8.03
    	
Solidary Interests/Quebec Liens (Hypothecs)
    	
 
    	
154
    
	
SECTION 8.04
    	
Sharing of Excess Payments
    	
 
    	
155
    
	
SECTION 8.05
    	
Agreement of Applicable Lenders
    	
 
    	
155
    
	
SECTION 8.06
    	
Liability of Agents
    	
 
    	
155
    
	
SECTION 8.07
    	
Notice of Default
    	
 
    	
157
    
	
SECTION 8.08
    	
Credit Decisions
    	
 
    	
157
    
	
SECTION 8.09
    	
Reimbursement and Indemnification
    	
 
    	
157
    
	
SECTION 8.10
    	
Rights of Agents
    	
 
    	
158
    
	
SECTION 8.11
    	
Notice of Transfer
    	
 
    	
158
    
	
SECTION 8.12
    	
Successor Agents
    	
 
    	
158
    
	
SECTION 8.13
    	
Relation Among the Lenders
    	
 
    	
159
    
	
SECTION 8.14
    	
Reports and Financial Statements
    	
 
    	
159
    
	
SECTION 8.15
    	
Agency for Perfection
    	
 
    	
160
    
	
SECTION 8.16
    	
Delinquent Lender; Deteriorating Lender
    	
 
    	
160
    
	
SECTION 8.17
    	
Collateral and Guaranty Matters
    	
 
    	
164
    
	
SECTION 8.18
    	
Co-Syndication Agents, Co-Documentation Agents, and   Arrangers
    	
 
    	
165
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX Miscellaneous
    	
 
    	
165
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 9.01
    	
Amendments, Etc.
    	
 
    	
165
    

 

 

	
SECTION 9.02
    	
Notices and Other Communications; Facsimile Copies
    	
 
    	
168
    
	
SECTION 9.03
    	
No Waiver; Cumulative Remedies
    	
 
    	
169
    
	
SECTION 9.04
    	
Attorney Costs and Expenses
    	
 
    	
170
    
	
SECTION 9.05
    	
Indemnification by the Lead Borrower
    	
 
    	
170
    
	
SECTION 9.06
    	
Payments Set Aside
    	
 
    	
172
    
	
SECTION 9.07
    	
Successors and Assigns
    	
 
    	
172
    
	
SECTION 9.08
    	
Confidentiality
    	
 
    	
176
    
	
SECTION 9.09
    	
Setoff
    	
 
    	
177
    
	
SECTION 9.10
    	
Interest Rate Limitation
    	
 
    	
177
    
	
SECTION 9.11
    	
Counterparts
    	
 
    	
177
    
	
SECTION 9.12
    	
Integration
    	
 
    	
178
    
	
SECTION 9.13
    	
Severability
    	
 
    	
178
    
	
SECTION 9.14
    	
GOVERNING LAW
    	
 
    	
178
    
	
SECTION 9.15
    	
WAIVER OF RIGHT TO TRIAL BY JURY
    	
 
    	
179
    
	
SECTION 9.16
    	
Binding Effect
    	
 
    	
179
    
	
SECTION 9.17
    	
Judgment Currency
    	
 
    	
179
    
	
SECTION 9.18
    	
Lender Action
    	
 
    	
180
    
	
SECTION 9.19
    	
PATRIOT ACT, ETC.; PROCEEDS OF CRIME ACT
    	
 
    	
180
    
	
SECTION 9.20
    	
No Advisory or Fiduciary Responsibility
    	
 
    	
180
    
	
SECTION 9.21
    	
Foreign Asset Control Regulations
    	
 
    	
181
    
	
SECTION 9.22
    	
Survival
    	
 
    	
181
    
	
SECTION 9.23
    	
Press Releases and Related Matters
    	
 
    	
182
    
	
SECTION 9.24
    	
Additional Waivers
    	
 
    	
182
    
	
SECTION 9.25
    	
Intercreditor Agreement
    	
 
    	
184
    
	
SECTION 9.26
    	
Existing Credit Agreement Amended and Restated
    	
 
    	
185
    

 

 

EXHIBITS

 

	
Exhibit   A:
    	
Form   of Assignment and Acceptance
    
	
Exhibit   B:
    	
Notice   of Borrowing
    
	
Exhibit   C:
    	
Form   of Revolving Credit Note
    
	
Exhibit   D:
    	
Form   of Swingline Note
    
	
Exhibit   E:
    	
Form   of Joinder
    
	
Exhibit   F:
    	
Form   of Credit Card Notification
    
	
Exhibit   G:
    	
Form   of Compliance Certificate
    
	
Exhibit   H:
    	
Form   of Borrowing Base Certificate
    
	
Exhibit   I:
    	
Closing   Agenda
    

 

 

SCHEDULES

 

	
Schedule   1.1:
    	
Lenders   and Commitments
    
	
Schedule   2.18(b):
    	
Credit   Card Arrangements
    
	
Schedule   2.18(c):
    	
Blocked   Accounts
    
	
Schedule   3.01:
    	
Organization   Information
    
	
Schedule   3.05:
    	
Financial   Statement Exceptions
    
	
Schedule   3.08(b)(i):
    	
Owned   Real Estate
    
	
Schedule   3.08(b)(ii):
    	
Leased   Real Estate
    
	
Schedule   3.09(b):
    	
Environmental   Matters
    
	
Schedule   3.09(d):
    	
Environmental   Investigation
    
	
Schedule   3.10:
    	
Taxes
    
	
Schedule   3.11:
    	
ERISA   and Other Pension Matters
    
	
Schedule   3.12:
    	
Subsidiaries;   Equity Interests
    
	
Schedule   3.15:
    	
Intellectual   Property
    
	
Schedule   4.01(b):
    	
Local   Counsel Opinions
    
	
Schedule   5.02(f):
    	
Reporting   Requirements
    
	
Schedule   5.02:
    	
Lead   Borrower’s Website
    
	
Schedule   5.07:
    	
Insurance
    
	
Schedule   5.14:
    	
Unrestricted   Subsidiaries
    
	
Schedule   6.01:
    	
Permitted   Encumbrances
    
	
Schedule   6.02:
    	
Permitted   Investments
    
	
Schedule   6.03:
    	
Existing   Indebtedness
    
	
Schedule   6.05:
    	
Permitted   Dispositions
    
	
Schedule   6.08:
    	
Affiliate   Transactions
    
	
Schedule   6.09:
    	
Burdensome   Agreements
    

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 17, 2012 among:

 

MICHAELS STORES, INC. (in such capacity, the “Lead Borrower”), a corporation organized under the laws of the State of Delaware, with its principal executive offices at 8000 Bent Branch Drive, Irving, Texas 75063, for itself and as agent for the Borrowers; and

 

THE BORROWERS AND THE FACILITY GUARANTORS from time to time party hereto; and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, having a place of business at One Boston Place, 18th Floor, Boston, Massachusetts 02108, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”), for its own benefit and the benefit of the other Secured Parties;

 

The LENDERS party hereto;

 

JPMORGAN CHASE BANK, N.A. and GOLDMAN SACHS BANK USA, each as a Co-Syndication Agent (each, in such capacity, a “Co-Syndication Agent”); and

 

BARCLAYS BANK PLC, DEUTSCHE BANK AG NEW YORK BRANCH, BANK OF AMERICA, N.A., CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, and MORGAN STANLEY BANK, N.A., each as a Co-Documentation Agent (each, in such capacity, a “Co-Documentation Agent”).

 

W  I  T  N  E  S  S  E  T  H:

 

WHEREAS, the Borrowers and the Facility Guarantors have entered into an Amended and Restated Credit Agreement, dated as of February 18, 2010 (as in effect, the “Existing Credit Agreement”), by, among others, such Borrowers and Facility Guarantors, the “Lenders” as defined therein, and Bank of America, N.A. as “Administrative Agent” and “Collateral Agent”; and

 

WHEREAS, pursuant to the Resignation of Agent dated as of the date hereof, Bank of America has resigned as Administrative Agent, Collateral Agent, and Swingline Lender in accordance with the terms of the Existing Credit Agreement; and

 

WHEREAS, pursuant to the Appointment of Agent dated as of the date hereof among Wells Fargo, the Required Lenders (as defined in the Existing Credit Agreement) and the Lead Borrower, Wells Fargo has been appointed successor Administrative Agent, Collateral Agent, and Swingline Lender, all in accordance with the terms of the Existing Credit Agreement;

 

WHEREAS, pursuant to the Assignment and Acceptance dated as of the date hereof among the lenders under the Existing Credit Agreement, such lenders (other than Wells Fargo) have assigned their Commitments and Revolving Credit Loans owing to such Lenders to Wells Fargo, as a result of which assignment Wells Fargo holds all of the Commitments and Revolving Credit Loans under the Existing Credit Agreement and upon the effectiveness of this Agreement,

 

1

 

Wells Fargo shall have been deemed to assign to the other Lenders, without representation or recourse and otherwise on the terms set forth on Exhibit A hereto, that portion of the Commitments set forth next to each such Lender’s name on Schedule 1.1 annexed hereto;

 

WHEREAS, in accordance with SECTION 9.01 of the Existing Credit Agreement, the parties hereto desire to amend and restate the Existing Credit Agreement as provided herein; and

 

WHEREAS, by executing this Agreement, each Lender party hereto agrees that it has assumed that portion of the Commitments set forth next to its name on Schedule 1.1 annexed hereto.

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned hereby agree that the Existing Credit Agreement shall be amended and restated in its entirety to read as follows (it being agreed that this Agreement shall not be deemed to evidence or result in a novation or repayment and reborrowing of the Obligations under the Existing Credit Agreement):

 

ARTICLE I

 

SECTION 1.01     Definitions.

 

As used in this Agreement, the following terms have the meanings specified below:

 

“ABL Priority Collateral” has the meaning set forth in the Intercreditor Agreement.

 

“ACH” means automated clearing house transfers.

 

“Accommodation Payment” has the meaning provided in SECTION 9.24.

 

“Account(s)” means “accounts” as defined in the UCC or the PPSA, as applicable, 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.

 

“Acquisition” means, with respect to a specified Person, (a) an Investment in or a purchase of a fifty percent (50%) or greater interest in the Capital Stock of any other Person, (b) a purchase or acquisition of all or substantially all of the assets of any other Person, (c) a purchase or acquisition of a Real Estate portfolio or Stores from any other Person or assets constituting a business unit, line of business or division of any other Person, or (d) any merger, amalgamation or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a fifty percent (50%) or greater interest in the Capital Stock of, any Person, in each case in any transaction or group of transactions which are part of a common plan.

 

2

 

“Additional Commitment Lender” shall have the meaning provided in SECTION 2.02(c).

 

“Adjusted LIBO Rate” means:

 

(a)           for any Interest Period with respect to any LIBO Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of one percent) equal to (i) the LIBO Rate for such Interest Period multiplied by (ii) the Statutory Reserve Rate; and

 

(b)           for any interest rate calculation with respect to any Prime Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of one percent), as determined on any day, equal to (i) the LIBO Rate for an Interest Period commencing on the date of such calculation and ending on the date that is one (1) month thereafter multiplied by (ii) the Statutory Reserve Rate.

 

The Adjusted LIBO Rate will be adjusted automatically as of the effective date of any change in the Statutory Reserve Rate.

 

“Adjustment Date” has the meaning provided in clause (b) of the definition of “Applicable Margin.”

 

“Administrative Agent” has the meaning provided in the preamble to this Agreement.

 

“Advisory Agreements” means collectively, (i) the Advisory Agreement dated as of October 31, 2006 by and among Michaels Stores, Inc., a Delaware corporation, and Bain Capital Partners, LLC and Blackstone Management Partners V LLC, as amended and in effect from time to time in a manner not prohibited hereunder, and (ii) the Advisory Agreement dated as of October 31, 2006 by and among Michaels Stores, Inc., a Delaware corporation, and Highfields Capital, as amended and in effect from time to time in a manner not prohibited hereunder.

 

“Advisory Fees” means management, monitoring, consulting and advisory fees, closing fees, and termination fees, payments by the Lead Borrower and its Restricted Subsidiaries to the Sponsors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with Acquisitions or divestitures), and related indemnities and related expenses payable by the Loan Parties pursuant to the Advisory Agreements, as they are in effect on the Restatement Date or such increased amount as may be agreed to in writing by the Administrative Agent in its sole commercially reasonable discretion.

 

“Affiliate” means, 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.

 

“Agents” means collectively, the Administrative Agent and the Collateral Agent.

 

“Agreement” means this Second Amended and Restated Credit Agreement, as modified, amended, supplemented or restated, and in effect from time to time.

 

3

 

“Amendment Transaction Expenses” means any fees or expenses incurred or paid by the Lead Borrower or any Restricted Subsidiary in connection with (a) the amendment and restatement of the Existing Credit Agreement, and (b) the consummation of any other transactions in connection with the foregoing.

 

“Applicable Law” means as to any Person: (a) any and all federal, state, provincial, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, codes, ordinances, decrees, permits, concessions, grants, franchises, licenses, agreements, governmental restrictions or other requirements having the force of law; and (b) all court orders, decrees, judgments, injunctions, enforceable notices, binding agreements and/or rulings, in each case of or by any Governmental Authority which has jurisdiction over such Person, or any property of such Person.

 

“Applicable Lenders” means the Required Lenders, all Lenders or affected Lenders, in each case as applicable.

 

“Applicable Margin” means:

 

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

 

(b)           On the first day of each Fiscal Quarter (each, an “Adjustment Date”) commencing with the Fiscal Quarter beginning on October 28, 2012, the Applicable Margin shall be determined from such pricing grid based upon average daily Availability for the most recently ended Fiscal Quarter immediately preceding such Adjustment Date.

 

	
Level
    	
 
    	
Average Daily
   Availability
    	
 
    	
LIBO
   Applicable
   Margin
    	
 
    	
Prime Rate
   Applicable
   Margin
    	
 
    
	
I
    	
 
    	
Greater   than or equal to $400,000,000
    	
 
    	
1.50
    	
%
    	
0.50
    	
%
    
	
II
    	
 
    	
Less   than $400,000,000 but greater than or equal to $200,000,000
    	
 
    	
1.75
    	
%
    	
0.75
    	
%
    
	
III
    	
 
    	
Less   than $200,000,000
    	
 
    	
2.00
    	
%
    	
1.00
    	
%
    

 

“Applicable Unused Fee Rate” means:

 

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

 

(b)           On each Adjustment Date from and after October 28, 2012, the Applicable Unused Fee Rate shall be determined from such grid based upon the average daily

 

4

 

Unused Commitments for the most recently ended Fiscal Quarter immediately preceding such Adjustment Date.

 

	
Level
    	
 
    	
Average Daily Unused
   Commitments
    	
 
    	
Applicable Unused
   Fee Rate
    	
 
    
	
I
    	
 
    	
Average   daily Unused Commitments less than or equal to 50% of the Total Commitments
    	
 
    	
0.25
    	
%
    
	
II
    	
 
    	
Average   daily Unused Commitments greater than 50% of the Total Commitments
    	
 
    	
0.375
    	
%
    

 

“Appraised Value” means the net appraised recovery value of the Borrowers’ Inventory as set forth in the Borrowers’ stock ledger (expressed as a percentage of the Cost of such Inventory) as reasonably determined from time to time by reference to the most recent appraisal received by the Administrative Agent conducted by an independent appraiser reasonably satisfactory to the Administrative Agent.

 

“Approved Bank” has the meaning specified in clause (iii) of the definition of “Cash Equivalents.”

 

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

 

“Arrangers” means, collectively, WFCF and J.P. Morgan Securities LLC.

 

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by SECTION 9.07), and accepted by the Administrative Agent, in substantially the form of Exhibit A, or any other form approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

 

“Auto-Extension Letter of Credit” shall have the meaning specified in SECTION 2.13(b)(iii).

 

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

 

(a)           The Loan Cap

 

5

 

Minus

 

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

 

“Availability Reserves” means, without duplication of any other Reserves or items that are otherwise addressed or excluded through eligibility criteria, such reserves as the Administrative Agent, from time to time determines in its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith as being appropriate (a) to reflect any impediments to the realization upon the Collateral included in the Borrowing Base (including, without limitation, claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the realization upon such Collateral), (b) to reflect events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base, the Collateral or the validity or enforceability of this Agreement or the other Loan Documents or any of the material rights or remedies of the Secured Parties hereunder or thereunder, and (c) to reflect any restrictions in the Senior Note Documents, the Senior Subordinated Note Documents, the Subordinated Discount Note Documents, or the Term Loan Agreement on the incurrence of Indebtedness by the Loan Parties, but only to the extent that such restrictions reduce, or with the passage of time could reduce, the amounts available to be borrowed hereunder (including, without limitation as a result of the Loan Parties’ receipt of net proceeds from asset sales) in order for the Loan Parties to comply with the Senior Note Documents, Senior Subordinated Note Documents, the Subordinated Discount Note Documents and the Term Loan Agreement.  Availability Reserves shall include, without limitation, and without duplication, the Priority Payable Reserves, the Wage Earner Protection Act Reserve, the Cash Management Reserves, the Bank Product Reserves, and the Debt Maturity Reserve.

 

“Bank Products” means any services or facilities (other than Cash Management Services) provided to any Loan Party by any Lender or any Affiliate of a Lender (and with respect to Swap Contracts, any Lender or Affiliate of a Lender who (x) was a Lender or an Affiliate of a Lender at the time such Swap Contract was entered into and who is no longer a Lender or an Affiliate of a Lender, and (y) is, and at all times remains, in compliance with the provisions of SECTION 8.14(a) and (z) agrees in writing that the Agents and the other Secured Parties shall have no duty to such Person (other than the payment of any amounts to which such Person may be entitled under SECTION 7.04) and acknowledges that the Agents and the other Secured Parties may deal with the Loan Parties and the Collateral as they deem appropriate (including the release of any Loan Party or all or any portion of the Collateral) without notice or consent from such Person, whether or not such action impairs the ability of such Person to be repaid its Other Liabilities), on account of (a) Swap Contracts, to the extent designated by the Lead Borrower at the time such Swap Contract is entered into as being Obligations under this Agreement, (b) Factored Receivables, to the extent designated in writing by the Lead Borrower and agreed in writing by the Administrative Agent as being Obligations under this Agreement, and (c) supply chain finance services including, without limitation, trade payable services and supplier accounts receivable purchases, in each case set forth in this clause (c), to the extent designated in writing by the Lead Borrower and agreed in writing by the Administrative Agent as being Obligations under this Agreement; provided that any Bank Product for the benefit of  Michaels of Canada, ULC or any Foreign Subsidiary shall name the Lead Borrower as the party thereto

 

6

 

“Bank Product Reserves” means such reserves as the Administrative Agent, from time to time after the occurrence and during the continuation of a Cash Dominion Event, determines in its commercially reasonable discretion exercised in good faith as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Bank Products then provided or outstanding.

 

“Bankruptcy Code” means (i) Title 11 of the United States Code (11 U.S.C. Section 101 et seq.) as now or hereafter in effect, or any successor thereto and (ii) the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-up and Restructuring Act (Canada), in each case as now or hereafter in effect, or any successor thereto.

 

“Blocked Account” has the meaning provided in SECTION 2.18(c).

 

“Blocked Account Agreement” has the meaning provided in SECTION 2.18(c).

 

“Blocked Account Banks” means the banks with whom deposit accounts are maintained in which material amounts (as reasonably determined by the Administrative Agent) of funds of any of the Loan Parties from one or more DDAs are concentrated and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

 

“Borrower Minimum Extension Condition” has the meaning provided in SECTION 2.27(b).

 

“Borrowers” means, collectively, the Lead Borrower, the Borrowers identified on the signature pages hereto and each other Person (other than a Canadian Loan Party or a Foreign Subsidiary) who owns assets of the type included in the Borrowing Base and becomes a Borrower hereunder in accordance with the terms of this Agreement.

 

“Borrowing” means (a) the incurrence of Revolving Credit Loans (other than Swingline Loans) of a single Type, on a single date and having, in the case of LIBO Loans, a single Interest Period, or (b) a Swingline Loan.

 

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

 

(a)           the face amount of Eligible Credit Card Receivables of the Loan Parties multiplied by the Credit Card Advance Rate;

 

plus

 

(b)           the Cost of Eligible Inventory of the Loan Parties, net of Inventory Reserves, multiplied by the Inventory Advance Rate multiplied by the Appraised Value of Eligible Inventory of the Loan Parties;

 

plus

 

(c)           with respect to any Eligible Letter of Credit, the lesser of (i) the Cost of Inventory of the Loan Parties supported by such Eligible Letter of Credit, net of

 

7

 

Inventory Reserves, multiplied by the Inventory Advance Rate for such Inventory, multiplied by the Appraised Value of the Inventory supported by such Eligible Letter of Credit or (ii) the Stated Amount of such Eligible Letter of Credit, multiplied by the Inventory Advance Rate, multiplied by the Appraised Value of the Inventory supported by such Eligible Letter of Credit;

 

minus

 

(d)           the then amount of all Availability Reserves.

 

“Borrowing Base Certificate” has the meaning provided in SECTION 5.01(e).

 

“Borrowing Request” means a request by the Lead Borrower on behalf of any of the Borrowers for a Borrowing in accordance with SECTION 2.04.

 

“Breakage Costs” has the meaning provided in SECTION 2.16(b).

 

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Boston, Massachusetts are authorized or required by law to remain closed (or are in fact closed), provided, however, that when used in connection with a LIBO Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

 

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

 

“Canadian Guarantee” means the Amended and Restated Facility Guarantee, dated as of the Restatement Date and executed and delivered by Michaels of Canada, ULC to the Administrative Agent for the benefit of the Secured Parties, as amended and in effect from time to time, and any other Facility Guaranty executed and delivered by any other Canadian Loan Party pursuant to SECTION 5.11.

 

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

 

“Canadian Security Agreements” means the Amended and Restated Security Agreements dated as of the Restatement Date and executed and delivered by Michaels of Canada, ULC to the Administrative Agent for the benefit of the Secured Parties, as amended and in effect from time to time and any Deed of Immovable and Moveable Hypothec or other Security Document thereafter executed and delivered by any Canadian Loan Party to the Administrative Agent for the benefit of the Secured Parties as provided in SECTION 5.11.

 

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

 

“Capital Expenditures” means, with respect to the Loan Parties for any period, all expenditures that would be reflected as capital expenditures on a Consolidated statement of cash flows of the Lead Borrower and its Restricted Subsidiaries for such period prepared in accordance with GAAP; provided that “Capital Expenditures” shall not include (i) any additions

 

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to property and equipment and other capital expenditures made with the proceeds of any equity securities issued or capital contributions received by any Loan Party or any Subsidiary, (ii) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, restored or repaired, or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (iii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iv) the purchase of property, plant or equipment to the extent financed with the proceeds of Permitted Dispositions that are not required to be applied to prepay the Obligations or the Term Loan Facility, (v) expenditures that are accounted for as capital expenditures by the Lead Borrower or any Restricted Subsidiary and that actually are paid for by a Person other than the Lead Borrower or any Restricted Subsidiary to the extent neither the Lead Borrower nor any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such Person or any other Person (whether before, during or after such period), (vi) any expenditures which are contractually required to be, and are, advanced or reimbursed to the Loan Parties in cash by a third party (including landlords) during such period of calculation, (vii) the book value of any asset owned by the Lead Borrower or any Restricted Subsidiary prior to or during such period to the extent that such book value is included as a Capital Expenditure during such period as a result of such Person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period, provided that (A) any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period in which such expenditure actually is made and (B) such book value shall have been included in Capital Expenditures when such asset was originally acquired, (viii) expenditures that constitute Permitted Acquisitions, or (ix) that portion of interest on Indebtedness incurred for Capital Expenditures which is paid in cash and capitalized in accordance with GAAP.

 

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.

 

“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, without limitation, 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 Account” means an interest bearing account established by the Loan Parties with the Collateral Agent, for its own benefit and the benefit of the other Secured Parties,

 

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under the sole and exclusive dominion and control of the Collateral Agent, in the name of the Collateral Agent or as the Collateral Agent shall otherwise direct, in which deposits are required to be made in accordance with SECTION 2.13(g).

 

“Cash Collateralize” has the meaning specified in SECTION 2.13(g).  Derivatives of such term have corresponding meanings.

 

“Cash Dominion Event” means any of the following:  (a) the occurrence and continuance of any Specified Default, or (b) the failure of the Borrowers to maintain Availability at least equal to twelve and one-half percent (12.5%) of the Loan Cap for five (5) consecutive Business Days, or (c) the failure of the Borrowers to maintain Availability at least equal to $65,000,000 at any time.  For purposes of this Agreement, the occurrence of a Cash Dominion Event shall be deemed continuing (unless the Administrative Agent otherwise agrees in its commercially reasonable discretion or the Administrative Agent, in its reasonable judgment, has determined that the circumstances surrounding such Specified Default cease to exist) (a) so long as such Specified Default is continuing or has not been waived, and/or (b) if the Cash Dominion Event arises as a result of the Borrowers’ failure to achieve Availability as required hereunder, until Availability has exceeded the amount required by clause (b) above for thirty (30) consecutive days, in which case a Cash Dominion Event shall no longer be deemed to be continuing for purposes of this Agreement, provided, that a Cash Dominion Event may not be so cured on more than three (3) occasions in any period of 365 consecutive days.  The termination of a Cash Dominion Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Cash Dominion Event in the event that the conditions set forth in this definition again arise.

 

“Cash Equivalents” means any of the following types of Investments, to the extent owned by the Lead Borrower or any Restricted Subsidiary:

 

(i)            Dollars, Canadian Dollars, Euros (or any national currency of any participating member state of the European Union) or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business;

 

(ii)           readily marketable obligations issued or directly and fully guaranteed or insured by the government or any agency or instrumentality of (i) the United States, or Canada, or (ii) any member nation of the European Union, in each case having average maturities of not more than twenty-four (24) months from the date of acquisition thereof; provided that the full faith and credit of the United States or Canada or a member nation of the European Union is pledged in support thereof;

 

(iii)          time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) is a Lender or (ii) (A) is organized under the laws of the United States, any state thereof, the District of Columbia or any member nation of the Organization for Economic Cooperation and Development or is the principal banking Subsidiary of a bank holding company organized under the laws of the United States, any state thereof, the District of Columbia or any member nation of the Organization for Economic Cooperation and Development, and is a member of the

 

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Federal Reserve System, and (B) has combined capital and surplus of at least $250,000,000 (any such bank in the foregoing clauses (i) or (ii) being an “Approved Bank”), in each case with average maturities of not more than twelve (12) months from the date of acquisition thereof;

 

(iv)          commercial paper and variable or fixed rate notes issued by an Approved Bank (or by the parent company thereof) or any variable or fixed rate note issued by, or guaranteed by, a corporation rated A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or better by Moody’s, in each case with average maturities of not more than twenty-four (24) months from the date of acquisition thereof;

 

(v)           repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer, in each case, having capital and surplus in excess of $250,000,000 for direct obligations issued by or fully guaranteed or insured by the government or any agency or instrumentality of the United States or Canada or any member nation of the European Union, in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least one hundred percent (100%) of the amount of the repurchase obligations;

 

(vi)          securities with average maturities of twenty-four (24) months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government having an investment grade rating from either S&P or Moody’s (or the equivalent thereof);

 

(vii)         Investments with average maturities of twenty-four (24) months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s;

 

(viii)        instruments equivalent to those referred to in clauses (i) through (vii) above denominated in Canadian Dollars, Euros, Pounds Sterling or any other foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Restricted Subsidiary organized in such jurisdiction; and

 

(ix)          Investments, classified in accordance with GAAP as current assets of the Lead Borrower or any Restricted Subsidiary, in money market investment programs which are registered under the Investment Company Act of 1940 or which are administered by financial institutions having capital of at least $250,000,000, and, in either case, the portfolios of which are limited such that substantially all of such investments are of the character, quality and maturity described in clauses (i) through (viii) of this definition.

 

“Cash Management Reserves” means such reserves as the Administrative Agent, from time to time after the occurrence and during the continuation of a Cash Dominion Event,

 

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determines in its commercially reasonable discretion exercised in good faith as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.

 

“Cash Management Services” means any cash management services or facilities provided to any Loan Party by a Lender or any Affiliate of a Lender, including, without limitation: (a) ACH transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange facilities, (d) credit or debit cards, (e) credit card processing services, (f) purchase cards, and (g) Commercial Letter of Credit Facilities.

 

“Cash Receipts” has the meaning provided in SECTION 2.18(d).

 

“Casualty Event” means any event that gives rise to the receipt by the Lead Borrower or any of its Restricted Subsidiaries of any insurance proceeds or condemnation awards in respect of any Inventory, equipment, fixed assets or Real Estate (including any improvements thereon).

 

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

 

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

 

“Change in Control” means the earliest to occur of:

 

(a)          the Permitted Holders ceasing to have the power, directly or indirectly, to vote or direct the voting of securities having a majority of the ordinary voting power for the election of directors of the Parent; provided that the occurrence of the foregoing event shall not be deemed a Change in Control if,

 

(i)            at any time prior to the consummation of a Qualifying IPO, and for any reason whatsoever, (A) one or more of the Permitted Holders otherwise have the right, directly or indirectly, to designate (and do so designate) a majority of the board of directors of the Parent or (B) one or more of the Permitted Holders own, directly or indirectly, of record and beneficially an amount of common stock of the Parent equal to an amount more than fifty percent (50%) of the amount of common stock of the Parent owned, directly or indirectly, by the Permitted Holders of record and beneficially as of the Restatement Date and such ownership by one or more of the Permitted Holders represents the largest single block of voting securities of the Parent held by any Person or related group for purposes of Section 13(d) of the Exchange Act, or

 

(ii)           at any time after the consummation of a Qualifying IPO, and for any reason whatsoever, (A) any Person or Persons (other than the Permitted Holders) that are together a “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act or are acting, for the purpose of acquiring, holding or disposing of securities, as a group (within the meaning of Rule 13d-5(1) under the Exchange Act), but in any case excluding any employee benefit plan of such Person and its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or

 

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administrator of any such plan), by way of purchase, merger, consolidation, or other business combination, shall not become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of more than the greater of (x) thirty-five percent (35%) of the shares outstanding of the Parent and (y) the percentage of the then outstanding voting stock of the Parent owned, directly or indirectly, beneficially by the Permitted Holders, and (B) during each period of twelve (12) consecutive months, the board of directors of the Parent shall consist of a majority of the Continuing Directors; or

 

(b)           any “Change in Control” (or any comparable term) in any document pertaining to the Term Loan Facility, the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, or any other Material Indebtedness; or

 

(c)           after the formation of Holdco, the failure of Holdco to own one hundred percent (100%) of the Capital Stock of the Lead Borrower.

 

“Change in Law” means (a) the adoption of any Applicable Law after the Closing Date, (b) any change in any Applicable Law or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Credit Party (or, for purposes of SECTION 2.14, by any lending office of such Credit Party or by such Credit Party’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date applicable to the Loan Parties.  For purposes of clarity, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Civil Code” means the Civil Code of Quebec and all regulations thereunder, as amended from time to time, and any successor statutes.

 

“Closing Date” means October 31, 2006.

 

“Co-Documentation Agent” has the meaning provided in the preamble to this Agreement.

 

“Co-Syndication Agent” has the meaning provided in the preamble to this Agreement.

 

“Code” means the Internal Revenue Code of 1986 and the Treasury regulations promulgated thereunder, as amended from time to time.

 

“Collateral” means any and all “Collateral”, “Pledged Collateral” or words of similar intent as defined in any applicable Security Document.

 

“Collateral Access Agreement” means an agreement reasonably satisfactory in form and substance to the Collateral Agent executed by (a) a bailee or other Person in possession of Collateral, including, without limitation, any warehouseman, and (b) a landlord of Real Estate

 

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leased by any Loan Party (including, without limitation, any warehouse or distribution center), pursuant to which such Person (i) acknowledges the Collateral Agent’s Lien on the Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral held by such Person or located on such Real Estate, (iii) agrees to furnish the Collateral Agent with access to the Collateral in such Person’s possession or on the Real Estate for the purposes of conducting a Liquidation, and (iv) makes such other agreements with the Collateral Agent as the Collateral Agent may reasonably require.

 

“Collateral Agent” has the meaning provided in the preamble to this Agreement.

 

“Collection Account” has the meaning provided in SECTION 2.18(d).

 

“Commercial Letter of Credit” means any Letter of Credit issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by a Borrower or a Restricted Subsidiary in the ordinary course of business of such Borrower or Restricted Subsidiary.

 

“Commercial Letter of Credit Agreement” means the Commercial Letter of Credit Agreement relating to the issuance of a Commercial Letter of Credit in the form from time to time in use by the applicable Issuing Bank.

 

“Commercial Letter of Credit Facility” means, with respect to the Lead Borrower or any of its Restricted Subsidiaries, a facility or other arrangement with any Lender or any Affiliate of any Lender providing for the issuance of commercial letters of credit, including any instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals or restatements thereof and any facility or arrangement with any Lender or any Affiliate of any Lender that replaces all or any part of such facility or arrangement, including any such facility or arrangement that increases the aggregate face value of commercial letters of credit to be issued thereunder, whether by the same or any other issuing bank which is a Lender or an Affiliate of a Lender.

 

“Commitment” means, as to each Lender, its obligation to (a) make Revolving Credit Loans to the Borrowers pursuant to SECTION 2.01, (b) purchase participations in Letter of Credit Outstandings, and (c) purchase participations in Swingline Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.1 or in the Assignment and Acceptance pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Commitment Increase” shall have the meaning provided in SECTION 2.02(a).

 

“Commitment Percentage” shall mean, with respect to each Lender, that percentage of the Commitments of all Lenders hereunder to make Credit Extensions to the Borrowers, in the amount set forth opposite such Lender’s name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be increased or reduced from time to time pursuant to SECTIONS 2.02 and 2.15 of this Agreement, or if the Commitments have been terminated, such percentage as calculated immediately prior to such termination.

 

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“Compliance Certificate” has the meaning provided in SECTION 5.02(b).

 

“Confirmation of Ancillary Documents” means that certain Confirmation of Ancillary Documents dated as of the Effective Date among Bank of America, N.A. (as predecessor-in-interest to the Agents) and the Loan Parties.

 

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

 

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a Consolidated basis and otherwise determined in accordance with GAAP.

 

“Consolidated EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period

 

(a)           increased (without duplication of either (1) any item described in any other clause, below, or (2) any item excluded in the calculation of Consolidated Net Income) by:

 

(i)            provision for Consolidated Taxes paid or accrued during such period to the extent the same were deducted (and not added back) in computing Consolidated Net Income; plus

 

(ii)           Consolidated Interest Expense of such Person for such period plus amounts excluded from Consolidated Interest Expense as set forth in clauses (i) through (vii) of the definition thereof, to the extent the same were deducted (and not added back) in calculating such Consolidated Net Income; plus

 

(iii)          Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same was deducted (and not added back) in computing Consolidated Net Income; plus

 

(iv)          any non-cash charges, including (i) any write offs or write downs, (ii) equity based awards compensation expense, (iii) losses on sales, disposals or abandonment of, or any impairment charges or asset write off, related to intangible assets, long-lived assets and investments in debt and equity securities, (iv) all losses from investments recorded using the equity method, and (v) other non-cash charges, non-cash expenses or non-cash losses reducing Consolidated Net Income for such period (provided that if any such non-cash charges referred to in clauses (i) through (v) of this clause represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus

 

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(v)           the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-wholly-owned Subsidiary deducted (and not added back) in such period in calculating Consolidated Net Income; plus

 

(vi)          Advisory Fees paid or accrued in such period to the Sponsors or Highfields Capital to the extent otherwise permitted hereunder; plus

 

(vii)         the amount of net cost savings projected by the Lead Borrower in good faith to be realized as a result of specified actions taken during such period (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably identifiable and factually supportable, and (y) such cost savings do not exceed in the aggregate $40,000,000 in any four consecutive Fiscal Quarters (or such greater amount reasonably approved in good faith by the Administrative Agent); plus

 

(viii)        any costs or expense incurred by the Lead Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Lead Borrower or net cash proceeds of an issuance of Capital Stock of the Lead Borrower (other than Disqualified Capital Stock); plus

 

(ix)          any net loss from disposed or discontinued operations; plus

 

(x)           cash receipts (or reduced cash expenditures) to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to clause (b) below for any previous period,

 

(b)                   decreased by (without duplication)

 

(i)            non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period and any non-cash gains with respect to cash actually received in such period or received in a prior period; plus

 

(ii)           any net income from disposed or discontinued operations; and

 

(c)                   increased or decreased by (without duplication), as applicable, any adjustments resulting from the application of FASB Interpretation No. 45 (Guarantees).

 

“Consolidated Fixed Charge Coverage Ratio” means, with respect to the Lead Borrower and its Restricted Subsidiaries for any period, the ratio of (a) (i) Consolidated EBITDA for such period, plus (ii) Net Proceeds of capital contributions received or Permitted Equity Issuances made during such period to the extent used to make payments on account of Debt Service Charges or Taxes, minus (iii) Capital Expenditures paid in cash which are not financed with the

 

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Net Proceeds of Permitted Indebtedness (other than the Obligations) during such period, to (b) the sum of (i) Debt Service Charges payable in cash during such period plus (ii) federal, state and foreign income Taxes paid in cash (net of cash refunds received) during such period, plus (iii) Restricted Payments permitted by SECTION 6.06(k) paid in cash to the holders of Capital Stock of the Lead Borrower during such period (but excluding Restricted Payments to the extent funded by an issuance by the Lead Borrower of Permitted Indebtedness, a Permitted Equity Issuance or a capital contribution to the Lead Borrower).

 

“Consolidated Interest Expense” means, with respect to the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis for any period, determined in accordance with GAAP, (a) total interest expense payable in cash (including that attributable to obligations with respect to Capitalized Leases in accordance with GAAP but excluding any imputed interest as a result of purchase accounting) of the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis with respect to all outstanding Indebtedness of the Lead Borrower and its Restricted Subsidiaries, including, without limitation, the Obligations and all commissions, discounts and other fees and charges owed with respect thereto, but excluding (i) any non-cash interest or deferred financing costs, (ii) any amortization or write-down of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (iii) the accretion or accrual of discounted liabilities, (iv) all non-recurring cash interest expense including liquidated damages for failure to timely comply with registration rights obligations and any non-recurring expense or loss attributable to the early extinguishment or conversion of Indebtedness, (v) in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for any purpose other than clause (vi) below, any expensing of bridge, commitment and other financing fees, (vi) in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any expensing of bridge, commitment and other financing fees only to the extent reasonably approved in good faith by the Administrative Agent, and (vii) penalties and interest related to Taxes, and reduced by interest income received or receivable in cash for such period.  For purposes of the foregoing, interest expense of the Lead Borrower and its Restricted Subsidiaries shall be determined after giving effect to any net payments made or received by such Persons with respect to interest rate Swap Contracts.

 

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,

 

(a)           (i) any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses; Amendment Transaction Expenses; severance; relocation costs; integration costs; pre-opening, opening, consolidation and closing costs for facilities (including Stores); signing, retention or completion bonuses; transition costs; costs incurred in connection with acquisitions after the Closing Date; restructuring costs, charges or reserves; and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded, provided that in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any

 

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such items which are cash gains, losses, costs or expenses shall be excluded only to the extent reasonably approved in good faith by the Administrative Agent; and (ii) Specified Legal Expenses shall be excluded;

 

(b)           the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,

 

(c)           any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,

 

(d)           any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business shall be excluded,

 

(e)           the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Lead Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period by such Person,

 

(f)            solely for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, the Net Income for such period of any Restricted Subsidiary (other than any Borrower or Facility Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived, provided that Consolidated Net Income of the Lead Borrower will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Lead Borrower or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

 

(g)           effects of adjustments (including the effects of such adjustments pushed down to the Lead Borrower and its Restricted Subsidiaries) in the merchandise inventory, property and equipment, goodwill, intangible assets, deferred revenue and debt line items in such Person’s consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded,

 

(h)           any after-tax effect of income (loss) from the early extinguishment or conversion of Indebtedness or Swap Contracts or other derivative instruments shall be excluded, provided that in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any such items shall be excluded only to the extent reasonably approved in good faith by the Administrative Agent,

 

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(i)            any impairment charge or asset write-off or write-down, in each case, pursuant to GAAP and the amortization of intangibles arising pursuant to GAAP shall be excluded,

 

(j)            any non-cash compensation charge or expense, including any such charge or expense arising from the grant of stock appreciation or similar rights, stock options, restricted stock or other equity-incentive programs shall be excluded,

 

(k)           any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with any Acquisition, Investment, Dispositions, issuance or repayment of Indebtedness, issuance of Capital Stock, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded, provided that in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any such items which are cash fees, expenses, charges or costs shall be excluded only to the extent reasonably approved in good faith by the Administrative Agent,

 

(l)            any net gain or loss resulting from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk) and any foreign currency translation gains or losses shall be excluded, and

 

(m)          any unrealized net gains and losses resulting from Swap Contracts and the application of Statement of Financial Accounting Standards No. 133 shall be excluded.

 

In addition, to the extent not already included in the Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement.

 

“Consolidated Taxes” means, as of any date for the applicable period ending on such date with respect to the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis, the aggregate of all taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes (such as the Pennsylvania capital tax and Texas margin tax) and foreign withholding taxes of such Person as determined in accordance with GAAP, to the extent the same are paid (whether by the Lead Borrower, its Restricted Subsidiaries or Holdco) or accrued during such period.

 

“Continuing Directors” means the directors of the Lead Borrower on the Restatement Date, and each other director, if, in each case, such other directors’ nomination for election to the board of directors of the Parent is recommended by a majority of the then Continuing Directors or such other director receives the vote of one or more of the Sponsors in his or her election by the stockholders of the Parent.

 

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

 

“Cost” means the cost of the Loan Parties’ Inventory as determined in accordance with the Lead Borrower’s Accounting Policy as in effect as of the Restatement Date, furnished to the Administrative Agent and as reported on the Loan Parties’ stock ledger, as such policy may be modified with the consent of the Administrative Agent, whose consent will not be unreasonably withheld.

 

“Covenant Compliance Event” means that Availability at any time is less than the greater of (i) ten percent (10%) of the Loan Cap, or (ii) $50,000,000 (such greater amount, the “Threshold Amount”).  For purposes hereof, the occurrence of a Covenant Compliance Event shall be deemed continuing until Availability has exceeded the Threshold Amount for thirty (30) consecutive calendar days, in which case a Covenant Compliance Event shall no longer be deemed to be continuing for purposes of this Agreement.  The termination of a Covenant Compliance Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Covenant Compliance Event in the event that the conditions set forth in this definition again arise.

 

“Credit Card Advance Rate” means ninety percent (90%).

 

“Credit Card Notifications” has the meaning provided in SECTION 2.18(c).

 

“Credit Extensions” as of any day, shall be equal to the sum of (a) the principal balance of all Revolving Credit Loans (including Swingline Loans) then outstanding, and (b) the then amount of the Letter of Credit Outstandings.

 

“Credit Party” means (a) the Lenders, (b) the Agents and their respective Affiliates and branches, (c) each Issuing Bank, (d) the Arrangers and their respective Affiliates and branches and (e) the successors and permitted assigns of each of the foregoing.

 

“Credit Party Expenses” means, without limitation, all of the following to the extent incurred in connection with this Agreement and the other Loan Documents: (a) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent and WFCF, including the reasonable fees, charges and documented out-of-pocket disbursements of one counsel for the Administrative Agent, the Collateral Agent and their Affiliates (plus local counsel in any other jurisdiction to the extent reasonably necessary), outside consultants for the Administrative Agent and the Collateral Agent consisting of one inventory appraisal firm and one commercial finance examination firm in connection with the preparation and administration of the Loan Documents, the syndication of the credit facilities provided for herein, or any amendments, modifications or waivers requested by a Loan Party of the provisions hereof or thereof (whether or not any such amendments, modifications or waivers shall be consummated), (b) all reasonable and documented out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (c) all reasonable and documented out-of-pocket expenses

 

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incurred by the Administrative Agent or the Collateral Agent and, subject to the proviso below any Lender and their respective Affiliates and branches, including the reasonable fees, charges and disbursements of one counsel for the Administrative Agent, the Collateral Agent and their Affiliates (plus local counsel in any other jurisdiction to the extent reasonably necessary) and outside consultants for the Administrative Agent and the Collateral Agent (including, without limitation, inventory appraisal firms and commercial finance examination firms) in connection with the enforcement and protection of their rights in connection with the Loan Documents, including all such documented out-of-pocket expenses incurred during any workout, restructuring or related negotiations in respect of such Revolving Credit Loans or Letters of Credit; provided that the Lenders, the Administrative Agent or the Collateral Agent or Affiliates of the Administrative Agent or the Collateral Agent shall be entitled to reimbursement for no more than one counsel representing all such Lenders (absent a conflict of interest in which case the affected Lenders may engage and be reimbursed for one additional counsel representing such affected Lenders). Credit Party Expenses shall not include the allocation of any overhead expenses of any Credit Party.

 

“Customer Credit Liabilities” means, at any time, the aggregate remaining balance reflected on the books and records of the Loan Parties at such time of (a) outstanding gift certificates and gift cards of the Loan Parties entitling the holder thereof to use all or a portion of the gift certificate or gift card to pay all or a portion of the purchase price for any Inventory, and (b) outstanding merchandise credits and customer deposits of the Loan Parties.

 

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

 

“Debt Reserve Period” means the period beginning on the 45th day prior to the stated maturity date of any Specified Debt and in each case ending on the date that is the earlier to occur of (i) the Repayment in full of such Indebtedness, or (ii) the extension of the maturity date of such Specified Debt to a date which is at least one hundred eighty (180) days after the Initial Maturity Date.  If and to the extent that such Indebtedness is Repaid by virtue of any Permitted Refinancing, a subsequent Debt Maturity Reserve shall be imposed in an amount equal to the outstanding principal balance of such Permitted Refinancing Indebtedness from and after the date that is forty-five (45) days prior to the stated maturity date of such Permitted Refinancing Indebtedness and ending on the date that is the earlier to occur of (i) the Repayment in full of such Permitted Refinancing Indebtedness, or (ii) the extension of the maturity date of such Permitted Refinancing Indebtedness to a date which is at least one hundred eighty (180) days after the Latest Maturity Date.

 

“Debt Maturity Reserve” means during any Debt Reserve Period, an amount equal to the outstanding principal balance of (i) any class of the Loans as defined in and under the Term Loan Agreement, (ii) the Senior Subordinated Notes, (iii) the Subordinated Discount Notes, or (iv) any Permitted Refinancing Indebtedness refinancing the Indebtedness described in clauses (i) through (iii) above (collectively, the “Specified Debt”), as applicable (but shall be reduced to give effect to any Repayment of Indebtedness made during such Debt Reserve Period to the extent such Repayment is permitted hereunder) solely to the extent that, on the date which is

 

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forty-five (45) days prior to the stated maturity date of such Specified Debt, (x) such Specified Debt has not been Repaid in full, or (y) the maturity date of such Specified Debt has not been extended to a date which is at least one hundred eighty (180) days after the Initial Maturity Date or with respect to Permitted Refinancing Indebtedness, the Latest Maturity Date.  The Debt Maturity Reserve shall remain in place at all times during the Debt Reserve Period.  The release of any Debt Maturity Reserve with respect to any one category of Specified Debt shall not derogate from the Administrative Agent’s right to impose a subsequent Debt Maturity Reserve with respect to any other category of Specified Debt in accordance with the terms hereof.

 

“Debt Service Charges” means, for any period, the sum of (a) Consolidated Interest Expense required to be paid or paid in cash, plus (b) scheduled principal payments made or required to be made on account of Indebtedness for borrowed money, including the full amount of any non-recourse Indebtedness (after giving effect to any prepayments paid in cash that reduce the amount of such required payments) (excluding the Obligations and any AHYDO Amount (as such term is defined in the Subordinated Discount Note Indenture), but including, without limitation, obligations with respect to Capitalized Leases) for such period, plus (c) scheduled mandatory payments on account of Disqualified Capital Stock (whether in the nature of dividends, redemption, repurchase or otherwise) required to be made during such period, in each case determined in accordance with GAAP.

 

“Default” means any event or condition described in SECTION 7.01 that constitutes an Event of Default or that upon notice, lapse of any cure period set forth in SECTION 7.01, or both, would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning provided in SECTION 2.12.

 

“Delinquent Lender” has the meaning provided in SECTION 8.16.

 

“Deteriorating Lender” means any Delinquent Lender or any Lender as to which (a) the Administrative Agent and either of the Issuing Bank or the Swingline Lender reasonably determines that such Lender has defaulted in fulfilling its obligations under one or more other syndicated credit facilities, or (b) such Lender or a Person that Controls such Lender has been deemed insolvent or become the subject of a bankruptcy, insolvency or similar proceeding.

 

“Designated Account” has the meaning provided in SECTION 2.18(d).

 

“Disbursement Accounts” has the meaning provided in SECTION 2.18(g).

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property (including, without limitation, any Capital Stock of any other Person held by a specified Person) by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

“Disqualified Capital Stock” means any Capital Stock which, by its terms (or by the terms of any security or other Capital Stock into which it is convertible or for which it is exchangeable), is putable or exchangeable, or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Capital Stock (other than

 

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Disqualified Capital Stock)), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of all Obligations and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Capital Stock (other than Disqualified Capital Stock)), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Capital Stock that would constitute Disqualified Capital Stock, in each case, prior to the date that is ninety-one (91) days after the Maturity Date.

 

“Documents” has the meaning assigned to such term in the Security Agreement.

 

“Dollars” or “$” refers to lawful money of the United States of America.

 

“Effective Date” means February 18, 2010.

 

“Eligible Assignee” means a commercial bank, insurance company, or company engaged in the business of making commercial loans or a commercial finance company, which Person, together with its Affiliates, has a combined capital and surplus in excess of $1,000,000,000, or any Affiliate of any Credit Party under common control with such Credit Party, or an Approved Fund of any Credit Party, provided that in any event, “Eligible Assignee” shall not include (x) any Loan Party, (y) any natural person, or (z) the Sponsors or any of their respective Affiliates (other than Sponsor Affiliated Lenders).

 

“Eligible Credit Card Receivables” means, as of any date of determination, Accounts due to a Loan Party from major credit card and debit card processors (including, but not limited to, JCB, VISA, Mastercard, American Express, Diners Club, DiscoverCard, Interlink, NYCE, Star/Mac, Tyme, Pulse, Accel, AFF, Shazam, CU244, Alaska Option, First Data Merchant Services, ISD, Paymentech, Global Payments Canada, Eigen Development and Maestro) as arise in the ordinary course of business and which have been earned by performance and that are not excluded as ineligible by virtue of one or more of the criteria set forth below (without duplication of any Reserves established by the Administrative Agent).  None of the following shall be deemed to be Eligible Credit Card Receivables:

 

(a)           Accounts due from major credit card and debit card processors that have been outstanding for more than five (5) Business Days from the date of sale, or for such longer period(s) as may be approved by the Administrative Agent in its commercially reasonable discretion;

 

(b)           Accounts due from major credit card and debit card processors with respect to which a Loan Party does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral Agent for its own benefit and the benefit of the other Secured Parties pursuant to the Security Documents, Liens in favor of any agent or trustee under the Term Loan Facility, and Permitted Encumbrances);

 

(c)           Accounts due from major credit card and debit card processors that are not subject to a first priority security interest in favor of the Collateral Agent for its own

 

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benefit and the benefit of the other Secured Parties (other than Permitted Encumbrances having priority by operation of Applicable Law over the Lien of the Collateral Agent) (the foregoing not being intended to limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves on account of any such Liens);

 

(d)           Accounts due from major credit card and debit card processors which are disputed, or with respect to which a claim, counterclaim, offset or chargeback (other than chargebacks in the ordinary course by the credit card processors) has been asserted, by the related credit card processor (but only to the extent of such dispute, counterclaim, offset or chargeback);

 

(e)           Except as otherwise approved by the Administrative Agent, Accounts due from major credit card and debit card processors as to which the credit card processor or debit card processor has the right under certain circumstances to require a Loan Party to repurchase the Accounts from such credit card or debit card processor;

 

(f)            Except as otherwise approved by the Administrative Agent (such approval not to be unreasonably withheld), Accounts arising from any private label credit card program of the Loan Parties; and

 

(g)           Accounts due from major credit card and debit card processors (other than JCB, VISA, Mastercard, American Express, Diners Club, DiscoverCard, Interlink, NYCE, Star/Mac, Tyme, Pulse, Accel, AFF, Shazam, CU244, Alaska Option, First Data Merchant Services, ISD, Paymentech, Global Payments Canada, Eigen Development and Maestro) which the Administrative Agent determines in its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith and upon notice to the Lead Borrower to be unlikely to be collected.

 

“Eligible Inventory” means, as of any date of determination, without duplication, items of Inventory of a Loan Party that are finished goods, merchantable and readily saleable to the public in the ordinary course (including goods manufactured by the Lead Borrower pursuant to, and commodity goods of, its Artistree division, custom floral goods and custom framing goods), or (ii) items of “non PI” Inventory that are finished goods, merchantable and readily saleable to the public in the ordinary course, in each case, that are not excluded as ineligible by virtue of one or more of the criteria set forth below (without duplication of any Reserves established by the Administrative Agent).  None of the following shall be deemed to be Eligible Inventory:

 

(a)           Inventory with respect to which a Loan Party does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral Agent for its own benefit and the benefit of the other Secured Parties pursuant to the Security Documents, Liens in favor of any agent or trustee under the Term Loan Facility, and Permitted Encumbrances), or is leased by or is on consignment to a Loan Party, or that is not solely owned by a Loan Party;

 

(b)           Inventory that is not located in the United States of America or Canada at a location that is owned or leased by a Loan Party, except (i) Inventory in transit in the continental United States of America or Canada between such owned or leased locations,

 

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or (ii) to the extent that the Loan Parties have furnished the Collateral Agent with (A) any UCC financing statements or PPSA registration statements or other filings that the Collateral Agent may reasonably determine to be necessary to perfect its security interest in such Inventory at such location, and (B) unless otherwise agreed by the Administrative Agent (such agreement not to be unreasonably withheld), a Collateral Access Agreement executed by the Person owning any such location on terms reasonably acceptable to the Collateral Agent;

 

(c)           Inventory that represents goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor and which is no longer reflected in the Loan Parties’ stock ledger, (iii) are special-order items, work in process, raw materials, or that constitute spare parts, shipping materials or supplies used or consumed in a Borrower’s business, or (iv) are bill and hold goods;

 

(d)           Except as otherwise agreed by the Administrative Agent, Inventory that represents goods that do not conform in all material respects to the representations and warranties contained in this Agreement or any of the Security Documents;

 

(e)           Inventory that is not subject to a perfected first priority security interest in favor of the Collateral Agent for its own benefit and the benefit of the other Secured Parties (subject only to Permitted Encumbrances having priority by operation of Applicable Law);

 

(f)            Inventory which consists of samples, labels, bags, packaging materials, and other similar non-merchandise categories (for greater clarity, display models are not deemed a non-merchandise category);

 

(g)           Inventory as to which casualty insurance in compliance with the provisions of SECTION 5.07 hereof is not in effect;

 

(h)           Inventory which has been sold but not yet delivered or Inventory to the extent that any Loan Party has accepted a deposit therefor and which is no longer reflected in the Loan Parties’ stock ledger; and

 

(i)            Inventory acquired in a Permitted Acquisition, unless the Administrative Agent shall have received or conducted (A) appraisals, from appraisers reasonably satisfactory to the Administrative Agent, of such Inventory to be acquired in such Acquisition and (B) such other due diligence as the Administrative Agent may reasonably require, all of the results of the foregoing to be reasonably satisfactory to the Administrative Agent.  As long as the Administrative Agent has received reasonable prior notice of such Permitted Acquisition and the Loan Parties reasonably cooperate (and cause the Person being acquired to reasonably cooperate) with the Administrative Agent, the Administrative Agent shall use reasonable best efforts to complete such due diligence and a related appraisal on or prior to the closing date of such Permitted Acquisition.

 

“Eligible Letter of Credit” means, as of any date of determination thereof, a Commercial Letter of Credit issued under this Agreement which supports the purchase of Inventory, (i) for

 

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which no documents of title have then been issued; (ii) which Inventory when the purchase thereof is completed would otherwise constitute Eligible Inventory, (iii) which Commercial Letter of Credit has an initial expiry, subject to the proviso hereto, within 120 days after the date of initial issuance of such Commercial Letter of Credit, provided that ninety percent (90%) of the maximum Stated Amount of all such Commercial Letters of Credit shall not, at any time, have an initial expiry greater than ninety (90) days after the original date of issuance of such Commercial Letters of Credit, and (iv) which Commercial Letter of Credit provides that it may be drawn only after the Inventory is completed and after documents of title have been issued for such Inventory reflecting a Loan Party or the Collateral Agent as consignee of such Inventory; provided that the Administrative Agent may, in its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith and upon notice to the Lead Borrower, exclude any particular Inventory from the definition of “Eligible Letter of Credit” in the event the Administrative Agent reasonably determines that such Inventory is subject to any Person’s right or claim which is (or is capable of being) senior to, or pari passu with, the Lien of the Collateral Agent (such as, without limitation, a right of stoppage in transit) or may otherwise adversely impact the ability of the Collateral Agent to realize upon such Inventory.  For purposes of clarity, a Commercial Letter of Credit issued under any Commercial Letter of Credit Facility shall not constitute an Eligible Letter of Credit hereunder.

 

“Environmental Laws” means all Applicable Laws relating to pollution, the protection of the environment, natural resources, or, to the extent relating to exposure to Hazardous Materials, human health or to the release of any materials into the environment, including those related to Hazardous Materials, air emissions and discharges to waste or public systems.

 

“Environmental Liability” means any liability, contingent or otherwise (including, without limitation, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight costs, fines, penalties or indemnities), of any Loan Party directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time and the regulations promulgated and rulings issued thereunder.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with Lead Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

 

“ERISA Event” means in the case of a Plan or Multiemployer Plan subject to ERISA, (a) any “reportable event”, as defined in Section 4043 of ERISA with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA) that would reasonably be expected to result in a Material Adverse Effect, whether or not

 

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waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Lead Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Lead Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Lead Borrower or any ERISA Affiliate of any liability that would reasonably be expected to result in a Material Adverse Effect with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Lead Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Lead Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability that would reasonably be expected to result in a Material Adverse Effect or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

 

“Event of Default” has the meaning provided in SECTION 7.01. An “Event of Default” shall be deemed to have occurred and to be continuing unless and until that Event of Default has been duly waived in writing by the Required Lenders in accordance with the terms of this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Subsidiary” means (a) any Subsidiary that is not a wholly owned Subsidiary, (b) any Subsidiary that is prohibited by Applicable Law from guaranteeing the Obligations, (c) any Foreign Subsidiary, (d) any Immaterial Subsidiary, (e) any Unrestricted Subsidiary, and (f) any Foreign Subsidiary Holding Company.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) income Taxes on (or measured by) its gross or net income or profits, and franchise or similar Taxes, imposed by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or imposed as a result of any present or former connection between the jurisdiction imposing such Tax and such recipient other than a connection arising solely as a result of such recipient having performed its obligations or received payment hereunder or under any Loan Document, or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which any Borrower is located,  (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by a Borrower under SECTION 2.24(b)), any United States withholding Tax that is imposed on amounts payable to such Foreign Lender (i) at the time such Foreign Lender becomes a party to this Agreement (or designates a New Lending Office other than at the request of a Borrower under SECTION 2.24), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a New Lending Office (or assignment), to receive additional amounts from the Borrowers with respect to such withholding Tax pursuant to SECTION 2.23(a), or (ii) is attributable to such Foreign Lender’s failure to comply with SECTION 2.23(e), and (d) any U.S. federal withholding tax imposed under FATCA.

 

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“Existing Credit Agreement” has the meaning set forth in the Recitals hereof.

 

“Existing Letters of Credit” means each of the letters of credit issued or deemed issued under the Existing Credit Agreement.

 

“Existing Revolver Tranche” has the meaning provided in SECTION 2.27(a).

 

“Extended Commitments” has the meaning provided in SECTION 2.27(a).

 

“Extending Lender” has the meaning provided in SECTION 2.27(b).

 

“Extension Amendment” has the meaning provided in SECTION 2.27(d).

 

“Extension Request” has the meaning provided in SECTION 2.27(a).

 

“Extension Election” has the meaning provided in SECTION 2.27(b).

 

“Extension Series” has the meaning provided in SECTION 2.27(a).

 

“Facility Guarantee” means any Guarantee of the Obligations executed by the Parent and its Subsidiaries which are or hereafter become Facility Guarantors in favor of any Agent or any  other Secured Parties, including, without limitation, that certain Amended and Restated Guarantee Agreement dated as of the Restatement Date by and among the Loan Parties and the Administrative Agent, together with any Guarantee Agreement Supplements (as defined in such Amended and Restated Guarantee Agreement) executed in connection therewith, in each case as amended and in effect from time to time.

 

“Facility Guarantors” means any Person executing a Facility Guarantee, but in all events shall not include the Excluded Subsidiaries.

 

“Factored Receivables” means any Accounts originally owed or owing by a Loan Party to another Person which have been purchased by or factored with any Lender or any of its Affiliates pursuant to a factoring arrangement or otherwise with the Person that sold the goods or rendered the services to the Loan Party which gave rise to such Account.

 

“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.

 

“Federal Funds Effective Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day shall be the average rate (rounded

 

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upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Wells Fargo on such day on such transactions as determined by the Administrative Agent.

 

“Fee Letter”  means the Fee Letter dated July 30, 2012, by and among the Lead Borrower, Wells Fargo and WFCF, as amended, restated, supplemented or otherwise modified and in effect from time to time.

 

“Financial Officer” means, with respect to any Loan Party, the chief financial officer, chief accounting officer, treasurer, assistant treasurer, controller or assistant controller of such Loan Party.

 

“Fiscal Month”  means any fiscal month of any Fiscal Year, which month shall generally consist of either four (4) or five (5) weeks and shall generally end on the last Saturday of each calendar month in accordance with the fiscal accounting calendar of the Lead Borrower and its Subsidiaries.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally consist of thirteen (13) weeks or fourteen (14) weeks and shall generally end on the last Saturday of each April, July, October and January of such Fiscal Year in accordance with the fiscal accounting calendar of the Lead Borrower and its Subsidiaries.

 

“Fiscal Year” means any period of twelve (12) consecutive months ending on the Saturday closest to January 31 of any calendar year.

 

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.

 

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia, provided, that Michaels of Canada, ULC and any other Canadian Subsidiary designated by the Lead Borrower shall not be deemed a Foreign Subsidiary so long as it remains a Facility Guarantor.

 

“Foreign Subsidiary Holding Company” means any Subsidiary that is organized under the laws of the United States of America, any State thereof or the District of Columbia that is a disregarded entity for United States Federal income tax purposes and substantially all of the assets of which consist of Equity Interests in one or more Foreign Subsidiaries.

 

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

 

“Fronting Exposure” means, at any time there is a Delinquent Lender or Deteriorating Lender, (a) with respect to any Issuing Bank, such Delinquent Lender’s or Deteriorating Lender’s, as applicable, Commitment Percentage of the Letter of Credit Outstandings other than Letter of Credit Outstandings as to which such Delinquent Lender’s or Deteriorating Lender’s, as applicable, obligations have been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swingline Lender, such Delinquent Lender’s or Deteriorating Lender’s, as applicable, Commitment Percentage of Swingline Loans

 

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other than Swingline Loans as to which such Delinquent Lender’s or Deteriorating Lender’s, as applicable, participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

 

“Fronting Fee” shall have the meaning set forth in SECTION 2.19(d) hereof.

 

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

 

“FSCO” means the Financial Services Commission of Ontario and any Person succeeding to the functions  thereof and includes the Superintendent under such statute and any other Governmental Authority empowered or created by the PBA.

 

“GAAP” means generally accepted accounting principles in effect from time to time in the United States of America which are consistent with those promulgated or adopted by the Financial Accounting Standards Board and its predecessors (or successors) in effect and applicable to that accounting period in respect of which reference to GAAP is being made.

 

“General Intangibles” has the meaning assigned to such term in the Security Agreement.

 

“Governmental Authority” means any nation or government, any state, provincial, municipal or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

“Guarantee” means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); or (c) to be an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term “Guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or

 

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customary and reasonable indemnity obligations in effect on the Restatement Date or entered into in connection with any acquisition or Disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness).  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

 

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

 

“Highfields Capital” means Highfields Capital I LP, Highfields Capital II LP and Highfields Capital III LP and each Affiliate thereof (excluding portfolio companies of any of the foregoing).

 

“Holdco” means a holding company to be formed as the direct parent company of the Lead Borrower, the primary purpose of which is to own one hundred percent (100%) of the Capital Stock of the Lead Borrower.

 

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

 

“Immaterial Subsidiary” means a Subsidiary of the Lead Borrower for which (a) the assets of such Subsidiary constitute less than or equal to one percent (1%) of the total assets of the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis and collectively with all Immaterial Subsidiaries, less than or equal to five percent (5%) of the total assets of the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis, and (b) the revenues of such Subsidiary account for less than or equal to one percent (1%)  of the total revenues of the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis and collectively with all Immaterial Subsidiaries, less than or equal to five percent (5%) of the total revenues of the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis.

 

“Increase Effective Date” has the meaning specified in SECTION 2.02(d).

 

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

 

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

 

(ii)           the maximum amount (after giving effect to any prior drawings which may have been reimbursed or reductions) of all Letters of Credit (including Standby Letters of Credit and Commercial Letters of Credit), bankers’ acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;

 

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

 

(iv)          all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade payables or similar obligations in the ordinary course of business and (ii) any earn-out obligation until such obligation becomes due and payable and only to the extent that the contingent consideration relating to such earn-out is not paid within 30 days after such date);

 

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

 

(vi)          all Attributable Indebtedness;

 

(vii)         all obligations of such Person in respect of Disqualified Capital Stock;

 

(viii)        The principal and interest portions of all rental obligations of such Person under any Synthetic Lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP; and

 

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

 

For all purposes hereof, the Indebtedness of any Person shall (A) include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, except to the extent such Person’s liability for such Indebtedness is otherwise limited, and (B) in the case of the Parent and its Subsidiaries, exclude (i) any sale-leaseback transactions to the extent the lease or sublease thereunder is not required to be recorded under GAAP as a Capitalized Lease, (ii) any obligations relating to overdraft protection and netting services, (iii) any preferred stock required to be included as Indebtedness in accordance with GAAP or (iv) items that would appear as a liability on a balance sheet prepared in accordance with GAAP as a result of the application of EITF 97-10, “The Effects of Lessee Involvement in Asset Construction”.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitee” has the meaning provided in SECTION 9.05.

 

“Information” has the meaning provided in SECTION 9.08.

 

“Initial Maturity Date” means September 17, 2017.

 

“Instruments” has the meaning assigned to such term in the Security Agreement.

 

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“Intellectual Property” means all present and future: trade secrets, know-how and other proprietary information; trademarks, Internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing), indicia and other source and/or business identifiers, all of the goodwill related thereto, and all registrations and applications for registrations thereof; works of authorship and other copyrighted works (including copyrights for computer programs), and all registrations and applications for registrations thereof; inventions (whether or not patentable) and all improvements thereto; patents and patent applications, together with all continuances, continuations, divisions, revisions, extensions, reissuances, and reexaminations thereof; industrial design applications and registered industrial designs; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; all rights to sue and recover at law or in equity for any past, present or future infringement, dilution or misappropriation, or other violation thereof; and all common law and other rights throughout the world in and to all of the foregoing.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Closing Date by and among Bank of America, N.A. (as predecessor-in-interest to the Administrative Agent), Deutsche Bank AG New York Branch, as administrative agent and as collateral agent under the Term Loan Facility, and the Loan Parties, as amended and in effect from time to time.

 

“Interest Payment Date” means (a) with respect to any Prime Rate Loan (including a Swingline Loan), the first day of each calendar quarter, and (b) with respect to any LIBO Loan, the last day of the Interest Period applicable to the Borrowing of which such LIBO Loan is a part, and, in addition, if such LIBO Loan has an Interest Period of greater than ninety (90) days, on the last day of every third month of such Interest Period.

 

“Interest Period” means, as to each LIBO Loan, the period commencing on the date such LIBO Loan is disbursed or converted to or continued as a LIBO Loan and ending on the date one (1), two (2), three (3) or six (6) months thereafter, and, if agreed to by all of the Lenders, seven (7) or fourteen (14) days thereafter or nine (9) or twelve (12) months thereafter, as selected by the Lead Borrower in its Borrowing Request; provided that:

 

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

 

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

 

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

 

(d)                                                                                 there shall not be more than two Borrowings having an Interest Period of seven or fourteen days outstanding at any time.

 

“Inventory” has the meaning assigned to such term in the Security Agreement.

 

“Inventory Advance Rate” means ninety percent (90%).

 

“Inventory Reserves” means such reserves as may be established from time to time by the Administrative Agent, in its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith and not inconsistent with past practice, with respect to changes in the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as negatively affect the market value of the Eligible Inventory.

 

“Investment” means, as to any Person, any direct or indirect Acquisition or investment by such Person, whether by means of (a) the purchase or other Acquisition of Capital Stock or debt or other securities or equity interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person or (c) any other Acquisition.  Notwithstanding the foregoing, neither the creation of accounts receivable, credit card receivables and debit card receivables due to a Loan Party nor the obtaining of trade credit and the deferred payment of other expenses, in each case, incurred in the ordinary course of business, nor the incurrence of contingent obligations or performance guaranties in the ordinary course of business in respect of obligations not constituting Indebtedness, shall be deemed “Investments.”  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment less all cash returns, cash dividends and cash distributions (or the fair market value of any non-cash returns, dividends and distributions) received by such Person).

 

“IP Rights” shall have the meaning given such term in SECTION 3.15.

 

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

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit Application, the Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable, and any other document, agreement and instrument entered into by the applicable Issuing Bank and the Borrower (or any Restricted Subsidiary) or in favor of such Issuing Bank and relating to any such Letter of Credit.

 

“Issuing Bank” means, individually and collectively, each of Wells Fargo, Bank of America, N.A., JPMorgan Chase Bank, N.A., and no more than two other Lenders selected by the Lead Borrower which have agreed to become an Issuing Bank hereunder and have been approved by the Administrative Agent in its reasonable discretion, each in its capacity as issuer of Letters of Credit hereunder.  Any Issuing Bank may, in its commercially reasonable

 

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discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“ITA” means the Income Tax Act (Canada) and the regulations promulgated thereunder, as amended from time to time.

 

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

 

“Junior Financing” shall mean the Senior Subordinated Notes, the Subordinated Discount Notes, and any other Indebtedness that is required to be subordinated to the Obligations pursuant to the terms of the Loan Documents.

 

“Landlord Lien State” means any state in which a landlord’s claim for rent has priority by operation of Applicable Law over the lien of the Collateral Agent in any of the Collateral.

 

“Latest Maturity Date” means, at any date of determination, the latest Maturity Date applicable to any Revolving Credit Loan or Commitment hereunder at such time, including the latest termination date of any Extended Commitment or New Commitment, as applicable, as extended in accordance with this Agreement from time to time.

 

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

 

“Lead Borrower” has the meaning set forth in the preamble to this Agreement.

 

“Lease” means any agreement pursuant to which a Loan Party is entitled to the use or occupancy of any space in a structure, land, improvements or premises for any period of time.

 

“Lenders” means the Lenders having Commitments from time to time or at any time, and each assignee that becomes a party to this Agreement as set forth in SECTION 9.07, each Additional Commitment Lender that becomes a party to this Agreement as set forth in SECTION 2.02 and each New Commitment Lender that becomes a party to this Agreement as set forth in SECTION 2.27.

 

“Letter of Credit” means (a) each Existing Letter of Credit, and (b) a letter of credit that (i) is issued by an Issuing Bank pursuant to this Agreement for the account of a Borrower or a Restricted Subsidiary, (ii) constitutes a Standby Letter of Credit or Commercial Letter of Credit (and for which such Issuing Bank is not otherwise prohibited from issuing such letter of credit due to the internal general policies of such Issuing Bank), and (iii) is in form reasonably satisfactory to such Issuing Bank.

 

“Letter of Credit Application” means an application for the issuance or amendment of a Letter of Credit in the form from time to time in use by the applicable Issuing Bank.

 

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

 

“Letter of Credit Fees” means the fees payable in respect of Letters of Credit pursuant to SECTION 2.19(c).

 

“Letter of Credit Outstandings” means, at any time, the sum of (a) the Stated Amount of all Letters of Credit outstanding at such time, plus, without duplication, (b) all amounts theretofore drawn or paid under Letters of Credit for which the applicable Issuing Bank has not then been reimbursed.  For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with SECTION 1.06.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of any Rule under the ISP or any article of UCP 600, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

“Letter-of-Credit Rights” has the meaning assigned to such term in the Security Agreement.

 

“Letter of Credit Sublimit” means, at any time, $200,000,000, as such amount may be increased or reduced in accordance with the provisions of this Agreement.  The Letter of Credit Sublimit is part of, and not in addition to, the Commitments.

 

“LIBO Borrowing” means a Borrowing comprised of LIBO Loans.

 

“LIBO Loan” shall mean any Revolving Credit Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.

 

“LIBO Rate” means

 

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

 

(b)                                 for any interest calculation with respect to a Prime Rate Loan on any date, the rate per annum equal to (i) BBA LIBOR, as published by Reuters (or other

 

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commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time determined two (2) Business Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one (1) month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Prime Rate Loan being made or maintained and with a term equal to one (1) month would be offered to Wells Fargo by major banks in the London interbank eurodollar market in which Wells Fargo participates at its request at the date and time of determination.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing) whether or not filed, recorded or perfected under Applicable Law, and in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“Liquidation” means the exercise by the Administrative Agent or the Collateral Agent of those rights and remedies accorded to the Administrative Agent or the Collateral Agent under the Loan Documents and Applicable Law as a creditor of the Loan Parties, including (after the occurrence and during the continuation of an Event of Default) the conduct by any or all of the Loan Parties, acting with the consent of the Administrative Agent, of any public, private or “Going-Out-Of-Business Sale” or other Disposition of Collateral for the purpose of liquidating the Collateral.  Derivations of the word “Liquidation” (such as “Liquidate”) are used with like meaning in this Agreement.

 

“Loan Account” has the meaning provided in SECTION 2.20.

 

“Loan Cap” means, at any time of determination, the lesser of (A) the then Borrowing Base and (B) the then Total Commitments.

 

“Loan Documents” means this Agreement, the Notes, the Letters of Credit, the Issuer Documents, the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the Credit Card Notifications, the Security Documents, the Facility Guarantees, the Canadian Guarantee, the Canadian Security Agreements, the Intercreditor Agreement, the Confirmation of Ancillary Documents, any Extension Amendment, and any other agreement now or hereafter executed and delivered in connection herewith (excluding agreements entered into in connection with any transaction arising out of any Bank Products or Cash Management Services), each as amended and in effect from time to time.

 

“Loan Party” or “Loan Parties” means the Borrowers and the Facility Guarantors.

 

“Margin Stock” has the meaning assigned to such term in Regulation U.

 

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“Master Agreement” has the meaning specified in the definition of “Swap Contract.”

 

“Material Adverse Effect” means any event, facts, development, circumstances, or effect that, individually or in the aggregate with all other facts, events, circumstances, developments, and effects has a material adverse effect on (i) the business, operations, assets, liabilities (actual or contingent) or financial condition of the Loan Parties taken as a whole, or (ii) the validity or enforceability of this Agreement or the other Loan Documents, taken as a whole, or the rights or remedies of the Secured Parties hereunder or thereunder, taken as a whole.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties, individually or in the aggregate, having an aggregate principal amount exceeding $50,000,000.  In any event, all Indebtedness under the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, and the Term Loan Facility shall be deemed Material Indebtedness, regardless of the outstanding balance thereunder from time to time.

 

“Maturity Date” means the Initial Maturity Date or the Latest Maturity Date, as applicable.

 

“Maximum Rate” has the meaning provided in SECTION 9.10.

 

“Minority Lenders” has the meaning provided in SECTION 9.01.

 

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

 

“Mortgages” means the mortgages, charge/mortgage of land, collateral mortgages, immovable hypothecs, and deeds of trust and any other security documents granting a Lien on Real Estate between the Loan Party owning the Real Estate encumbered thereby and the Collateral Agent for its own benefit and the benefit of the other Secured Parties.

 

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

 

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Restricted Payments.

 

“Net Proceeds” means,

 

(a)                                 with respect to the Disposition of any asset by the Parent or any other Loan Party or any Casualty Event, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such Disposition or Casualty Event (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received and, with respect to any Casualty Event, any insurance proceeds or condemnation awards in respect of such Casualty Event actually received by or paid to or for the account of the Parent or any other Loan Party) over (ii) the sum of (A) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness

 

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that is secured by the asset subject to such Disposition or Casualty Event, but only to the extent that the Lien securing such Indebtedness is senior to the Lien of the Collateral Agent and that is required to be repaid (and is timely repaid) in connection with such Disposition or Casualty Event (other than Indebtedness under the Loan Documents), (B) the out-of-pocket expenses (including attorneys’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred by the Parent or any other Loan Party in connection with such Disposition or Casualty Event, (C) taxes paid or reasonably estimated to be actually payable in connection therewith (after taking into account any available tax credits or deductions), provided that the Administrative Agent may, in its commercially reasonable discretion, establish an Availability Reserve in the amount of any taxes so deducted in calculating Net Proceeds, and (D) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Parent or any other Loan Party after such sale or other Disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction and it being understood that “Net Proceeds” shall include any cash or Cash Equivalents (i) received upon the Disposition of any non-cash consideration received by the Parent or any other Loan Party in any such Disposition and (ii) upon the reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in clause (D) of the preceding sentence or, if such liabilities have not been satisfied in cash and such reserve is not reversed within three hundred and sixty-five (365) days after such Disposition or Casualty Event, the amount of such reserve; and

 

(b)                                 with respect to the incurrence or issuance of any Capital Stock or Indebtedness by the Parent or any other Loan Party, the excess, if any, of (i) the sum of the cash received in connection with such incurrence or issuance over (ii) the investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other customary expenses, incurred by the Parent or any other Loan Party in connection with such incurrence or issuance.

 

“New Commitment” has the meaning provided in SECTION 2.27(c).

 

“New Commitment Lender” has the meaning provided in SECTION 2.27(c).

 

“New Lending Office” shall have the meaning provided in SECTION 2.23(e)(i).

 

“Noncompliance Notice” shall have the meaning provided in SECTION 2.06(c).

 

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

 

“Non-Performing Deteriorating Lender” means any Deteriorating Lender that is also a Delinquent Lender.

 

“Notes” means, collectively, (i) Revolving Credit Notes and (ii) the Swingline Note, each as may be amended, supplemented or modified from time to time.

 

“NPL” means the National Priorities List under CERCLA.

 

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“Obligations” means (x) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Revolving Credit Loan, Swingline Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including charges, interest, expenses, fees, attorneys’ fees, indemnities and other amounts that accrue after the commencement by or against any Loan Party of any proceeding under the Bankruptcy Code or any other federal, state, or provincial bankruptcy, insolvency, receivership or similar law, naming such Person as the debtor in such proceeding, regardless of whether such charges, interest, expenses, fees, attorneys’ fees, indemnities and other amounts are allowed claims in such proceeding, and (y) obligations of any Loan Party arising with respect to any Other Liabilities. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Subsidiaries to the extent that they have obligations under the Loan Documents) include (a) the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit commissions, reimbursement obligations, charges, expenses, fees, attorneys’ fees, indemnities and other amounts payable by any Loan Party or its Subsidiaries under any Loan Document, including charges, interest, expenses, fees, attorneys’ fees, indemnities and other amounts that accrue after the commencement by or against any Loan Party or Subsidiary of any proceeding under the Bankruptcy Code or any other federal, state, or provincial bankruptcy, insolvency, receivership or similar law, naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) the obligation of any Loan Party or any of its Subsidiaries to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party or such Subsidiary in accordance with, and to the extent permitted, by the Loan Documents.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any unlimited liability company, the memorandum of association, and (d) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“Other Liabilities” means outstanding liabilities with respect to or arising from (a) any Cash Management Services furnished to any of the Loan Parties or, to the extent guaranteed by any Loan Party, any of their Subsidiaries which are not Loan Parties, and/or (b) any transaction which arises out of any Bank Product entered into with any Loan Party, as each may be amended from time to time.

 

“Other Taxes” means any and all current or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies in the nature of a Tax arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document, but not including, for the avoidance of doubt, any Excluded Taxes.

 

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“Overadvance” means a Revolving Credit Loan, advance, or providing of credit support (such as the issuance of a Letter of Credit) to the Borrowers to the extent that, immediately after the making of such loan or advance or the providing of such credit support, Availability is less than zero.

 

“Parent” shall mean the Lead Borrower unless and until Holdco is established from and after which “Parent” shall mean Holdco.

 

“Participant” shall have the meaning provided in SECTION 9.07(d).

 

“Participant Register” shall have the meaning provided in SECTION 9.07(e).

 

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) and the regulations promulgated thereunder, as amended from time to time.

 

“Payment Conditions” means, at the time of determination with respect to a Specified Payment, that (a) no Event of Default then exists or would arise as a result of the consummation of such Specified Payment, (b) the Pro Forma Availability Condition shall have been satisfied after giving effect to the consummation of such Specified Payment, and (c) either (i) Availability immediately following, and after giving effect to, the consummation of such Specified Payment, will be greater than twenty-five percent (25%) of the Loan Cap, or (ii) after giving effect to the consummation of such Specified Payment, the Consolidated Fixed Charge Coverage Ratio, on a Pro Forma Basis for the four Fiscal Quarters most recently preceding the consummation of such Specified Payment (provided, that, if any such Specified Payment is to be consummated within thirty (30) days after the end of any Fiscal Quarter, such calculation shall be made with respect to the four Fiscal Quarters most recently preceding such Specified Payment for which financial statements have been required to be delivered pursuant to SECTIONS 5.01(a), (b) or (c) hereof), is equal to or greater than 1.00:1.00.  In accordance with SECTION 5.02(i) hereof, at least five (5) Business Days prior to the consummation of any Specified Payment (or such later date approved by the Administrative Agent in its discretion), the Loan Parties shall deliver to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that the conditions contained in clauses (b) and (c) have been satisfied.

 

“Payment Intangibles” has the meaning assigned to such term in the Security Agreement.

 

“PBA” means the Pension Benefits Act (Ontario) or similar legislation of any other Canadian federal or provincial jurisdiction, and the regulations promulgated thereunder, as amended from time to time.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions or any Governmental Authority of another jurisdiction exercising similar functions in respect of any Plan of a Loan Party (including the Pension Benefit Guarantee Fund of Ontario).

 

“Pension Event” means (a) the whole or partial withdrawal of a Loan Party or any Subsidiary from a Plan during a plan year; or (b) the filing of a notice of interest to terminate in

 

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whole or in part a Plan or the treatment of a Plan amendment as a termination or partial termination; or (c) the institution of proceedings by any Governmental Authority to terminate in whole or in part or have a trustee appointed to administer a Plan; or (d) any other event or condition which might constitute grounds for the termination of, winding up or partial termination or winding up or the appointment of trustee to administer, any Plan.

 

“Performing Lender” means any Lender that is not a Delinquent Lender or a Non-Performing Deteriorating Lender.

 

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

 

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

 

(b)                                 If the Acquisition is an Acquisition of Capital Stock, the Person being acquired shall become a Subsidiary of the Lead Borrower;

 

(c)                                  Any material assets acquired shall be utilized in, and if the Acquisition involves a merger, amalgamation, consolidation or stock acquisition, the Person which is the subject of such Acquisition shall be engaged in, a business otherwise permitted to be engaged in by a Borrower under this Agreement; and

 

(d)                                 The Borrowers shall have satisfied the Payment Conditions.

 

“Permitted Disposition” shall have the meaning set forth in SECTION 6.05.

 

“Permitted Encumbrances” has the meaning set forth in SECTION 6.01.

 

“Permitted Equity Issuance” means any sale or issuance of any Capital Stock of the Parent to the extent permitted hereunder (including any capital contribution).

 

“Permitted Foreign Restructuring” means the transfer or other Disposition of the Capital Stock of certain Foreign Subsidiaries (as elected by the Lead Borrower) by the Lead Borrower or its Subsidiaries to a Foreign Subsidiary of the Lead Borrower and, in the case of Michaels of Canada, ULC, the re-designation by the Lead Borrower of Michaels of Canada, ULC as a Foreign Subsidiary (which may occur only if no Event of Default then exists or would arise therefrom).  For the avoidance of doubt, upon consummation of the Permitted Foreign Restructuring, Michaels of Canada, ULC shall be an Excluded Subsidiary hereunder and shall no longer be required to be a Loan Party hereunder and shall be released from the Canadian Guarantee and the Canadian Security Agreement shall be terminated.

 

“Permitted Holdco Debt” means unsecured Indebtedness of Holdco that (A) is not subject to any Guarantee by the Lead Borrower or any Restricted Subsidiary, (B) will not mature prior to the date that is ninety-one (91) days after the Maturity Date, (C) has no scheduled amortization or mandatory redemption of principal (excluding customary offers to purchase under certain circumstances, such as a “change in control”) prior to the date that is ninety-one (91) days after the Maturity Date, (D) does not permit payments in cash of interest or other amounts in the

 

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nature of interest prior to the earlier to occur of (A) the date that is four (4) years from the date of issuance or incurrence thereof, and (B) the date that is ninety-one (91) days after the Maturity Date, and (E) has covenants, defaults and remedies provisions customary for senior discount notes of an issuer that is the parent of a borrower under senior credit facilities, and in any event, are no more restrictive than those set forth in the Indentures governing the Senior Subordinated Notes and the Subordinated Discount Notes taken as a whole (other than more restrictive provisions customary for senior discount notes of a holding company), provided that a certificate of a Responsible Officer of the Lead Borrower delivered to the Administrative Agent at least five (5) Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of documentation relating thereto, stating that the Lead Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Lead Borrower within such five (5) Business Day period that it disagrees with such determination (except that the Administrative Agent shall not have the right to contest the Lead Borrower’s determination if all of the Net Proceeds of such Indebtedness are contributed to the Lead Borrower or its Restricted Subsidiaries), and provided further that any such Indebtedness shall constitute Permitted Holdco Debt only if before and after giving effect to the issuance or the incurrence thereof, no Event of Default shall have occurred and be continuing.

 

“Permitted Holders” means the Sponsors and any investment funds advised or managed by any of the Sponsors, and, subject to the proviso hereto, Highfields Capital and members of management of the Lead Borrower who are holders of Capital Stock of the Lead Borrower on the Restatement Date; provided that Highfields Capital and members of management of the Lead Borrower shall be considered Permitted Holders only as long as the aggregate number of shares of Capital Stock of the Lead Borrower entitled to vote for the election of directors held directly or indirectly by the Sponsors shall exceed the aggregate amount of such Capital Stock held by the Permitted Holders who are not the Sponsors; and further provided that for purposes of clause (i) of the definition of “Change in Control”, the term “one of more of the Permitted Holders” shall always include at least one of the Sponsors.

 

“Permitted Indebtedness” has the meaning set forth in SECTION 6.03.

 

“Permitted Investments” has the meaning set forth in SECTION 6.02.

 

“Permitted Overadvance” means an Overadvance made by the Administrative Agent, in its commercially reasonable discretion, which:

 

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

 

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

 

(c)                                  Is made to pay any other amount chargeable to any Borrower hereunder; and

 

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(d)                                 Together with all other Permitted Overadvances then outstanding, shall not (i) exceed five percent (5%) of the then Borrowing Base in the aggregate outstanding at any time or (ii) unless a Liquidation is taking place, remain outstanding for more than forty-five (45) consecutive Business Days;

 

provided  however, that the foregoing shall not (i) modify or abrogate any of the provisions of (A) SECTION 2.13 regarding any Lender’s obligations with respect to Letters of Credit, or (B) SECTION 2.06 and SECTION 2.22 regarding any Lender’s obligations with respect to participations in Swingline Loans and settlements thereof, or (ii) result in any claim or liability against the Administrative Agent (regardless of the amount of any Overadvance) for “inadvertent Overadvances” (i.e. where an Overadvance results from changed circumstances beyond the control of the Administrative Agent (such as a reduction in the collateral value)), and further provided that in no event shall the Administrative Agent make an Overadvance, if after giving effect thereto, the principal amount of the Revolving Credit Extensions would exceed the Total Commitments (as in effect prior to any termination of the Commitments pursuant to SECTION 7.01 hereof).

 

“Permitted Payment” has the meaning set forth in SECTION 6.11.

 

“Permitted Refinancing” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable amounts paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to SECTION 6.03(e), such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended (except by virtue of prior amortization or prior prepayments of the Indebtedness being modified, refinanced, refunded, renewed or extended), (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to SECTION 6.03(e), at the time thereof, no Event of Default shall have occurred and be continuing, (d) such modification, refinancing, refunding, renewal or extension shall not include: (i) Indebtedness of a Subsidiary of the Lead Borrower that is not a Facility Guarantor or a Borrower that refinances Indebtedness of the Lead Borrower; (ii) Indebtedness of a Subsidiary of the Lead Borrower that is not a Facility Guarantor or a Borrower that refinances Indebtedness of a Facility Guarantor or a Borrower; or (iii) Indebtedness of the Lead Borrower or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary, (e) the collateral, if applicable, granted pursuant to any such refinancing Indebtedness is the same or less than the collateral under the Indebtedness being extended, renewed or replaced, and (f) to the extent such Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, (i) such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified,

 

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refinanced, refunded, renewed or extended, and (ii) the other terms and conditions (including, if applicable, as to collateral, but excluding as to interest rate, redemption premium and, except to the extent prohibited by the terms of clause (f)(i) above, any change to the incurrence of liens covenant related to any change in any definition of “senior indebtedness”, “senior debt”, “designated senior debt” or any similar term) of any such modified, refinanced, refunded, renewed or extended Indebtedness, taken as a whole, are not materially less favorable to the Loan Parties and/or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended.

 

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

 

“Plan” means (a) any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five (5) plan years, or (b) any plan, employee benefit plan or pension plan which is not subject to ERISA but which is covered by Applicable Laws (including the PBA and the ITA) other than ERISA in respect of which the failure by a Loan Party to remit payments or contributions would give rise to a Lien on the assets of such Loan Party.

 

“Post-Closing Letter” means that certain letter, dated as of the Restatement Date, among the Administrative Agent and the Loan Parties.

 

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

 

“Prepayment Event” means the occurrence of any of the following events:

 

(a)                                 Any sale, transfer or other Disposition (including pursuant to a sale and leaseback transaction) of any Collateral (other than the transfer of any Collateral among Stores and other locations of the Loan Parties) unless the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Collateral Agent; or

 

(b)                                 Any Casualty Event unless the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Collateral Agent.

 

“Prime Rate”  means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate, as in effect from time to time, plus one-half of one percent (0.50%), (b) the Adjusted LIBO Rate plus one percent (1.00%), and (c) the rate of interest in effect for such day as publicly announced from time to time by Wells Fargo as its “prime rate.”

 

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The “prime rate” is a rate set by Wells Fargo based upon various factors including Wells Fargo’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by Wells Fargo shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“Prime Rate Loan” means any Revolving Credit Loan bearing interest at a rate determined by reference to the Prime Rate in accordance with the provisions of Article II.

 

“Priority Payable Reserves” means reserves established in the commercially reasonable discretion of the Administrative Agent (from the perspective of an asset-based lender exercised in good faith) for amounts secured by any Liens, choate or inchoate, which rank or are capable of ranking in priority to the Collateral Agent’s and/or Lenders’ Liens and/or for amounts which may represent costs relating to the enforcement of the Collateral Agent’s Liens including, without limitation, in the Administrative Agent’s commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith, any such amounts due and not paid for vacation pay and/or wages, amounts due and not paid under any legislation relating to workers’ compensation or to employment insurance, all amounts deducted or withheld and not paid and remitted when due under the ITA, amounts currently or past due and not paid for realty, municipal or similar taxes (to the extent impacting personal or moveable property) and all amounts currently or past due and not contributed, remitted or paid to any Plan (including in respect of any unfunded liability, wind-up deficiency or solvency deficiency, whether or not yet due or payable) or under the Canada Pension Plan, the PBA or any similar legislation.

 

“Pro Forma Availability” shall mean, for any date of calculation, Availability as of the date of any Specified Payment or Restricted Payment, as applicable, and the projected Availability at the end of each Fiscal Month during any projected six (6) Fiscal Months.

 

“Pro Forma Availability Condition” shall mean, for any date of calculation with respect to any Specified Payment or Restricted Payment, as applicable, the Pro Forma Availability following, and after giving effect to, such Specified Payment or Restricted Payment, as applicable, will be equal to or greater than fifteen percent (15%) of the Loan Cap.

 

“Pro Forma Balance Sheet” shall have the meaning given such term in SECTION 3.05(a).

 

“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” mean, with respect to compliance with any test or covenant hereunder, that all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of the first day of the applicable period of measurement in such test or covenant:  (a) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, (i) in the case of a Disposition of all or substantially all Capital Stock in or assets of any Subsidiary of the Lead Borrower or any division, business unit, line of business or facility used for operations of the Lead Borrower or any of its Subsidiaries, shall be excluded, and (ii) in the case of a Permitted Acquisition or Investment described in the definition of  “Specified Transaction”, shall be included, (b) any retirement of Indebtedness, and (c) any Indebtedness incurred or assumed by the Lead Borrower or any of its Restricted Subsidiaries in

 

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connection therewith and if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination.

 

“Pro Forma Financial Statements” shall have the meaning given such term in SECTION 3.05(a).

 

“Proceeds of Crime Act” means the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and the regulations promulgated thereunder, as amended from time to time.

 

“Projections” shall have the meaning given such term in SECTION 5.01(d).

 

“Qualified Capital Stock” means any Capital Stock that is not Disqualified Capital Stock.

 

“Qualifying IPO” means the issuance by the Lead Borrower (or Holdco) of its common Capital Stock in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering), resulting in gross proceeds to the Lead Borrower (or, if applicable, Holdco) of at least $100,000,000.

 

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

 

“Register” has the meaning provided in SECTION 9.07(c).

 

“Regulation U” means Regulation U of the FRB as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

“Regulation X” means Regulation X of the FRB as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

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

 

“Release” has the meaning provided in Section 101(22) of CERCLA.

 

“Repayment” means, with respect to any Indebtedness, the defeasance, redemption, purchase, repurchase, prepayment, repayment, discharge, acquisition or retirement of such Indebtedness.  Derivatives of such term have corresponding meanings.

 

“Reports” has the meaning provided in SECTION 8.14.

 

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“Required Lenders” means, at any time, Lenders (other than Delinquent Lenders and Non-Performing Deteriorating Lenders) having Commitments aggregating more than fifty percent (50%) of the Total Commitments (other than Commitments held by Delinquent Lenders or Non-Performing Deteriorating Lenders), or if the Commitments have been terminated, Lenders (other than Delinquent Lenders and Non-Performing Deteriorating Lenders) whose percentage of the outstanding Credit Extensions (calculated assuming settlement and repayment of all Swingline Loans by the Lenders) aggregate more than fifty percent (50%) of all such Credit Extensions (other than Credit Extensions made by Delinquent Lenders and Non-Performing Deteriorating Lenders).

 

“Reserves” means all (if any) Inventory Reserves and Availability Reserves (including, without limitation, and without duplication, Priority Payable Reserves, the Wage Earner Protection Act Reserve, Cash Management Reserves, Bank Product Reserves, Debt Maturity Reserves and reserves for Customer Credit Liabilities).

 

“Responsible Officer” means the chief executive officer, president, vice president, chief financial officer, treasurer or assistant treasurer or other similar officer of a Loan Party and, as to any document delivered on the Closing Date, the Effective Date or the Restatement Date, any secretary or assistant secretary of a Loan Party.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

“Restatement Date” means the first date all the conditions precedent in SECTION 4.01 are satisfied or waived in accordance with SECTION 9.01.

 

“Restricted Cash” means when referring to cash or Cash Equivalents of the Lead Borrower or any of its Subsidiaries, that such cash or Cash Equivalents (i) appears (or would be required to appear) as “restricted” on a consolidated balance sheet of the Lead Borrower or of any such Subsidiary (unless such appearance is related to the Loan Documents or Liens created thereunder), (ii) are subject to any Lien in favor of any Person other than the Collateral Agent for the benefit of the Secured Parties (except for (a) those Liens securing the Term Loan Facility or Liens securing any Other Pari Passu Lien Obligations (as defined in and to the extent permitted under the Term Loan Agreement as amended and in effect from time to time) and (b) Liens permitted pursuant to SECTION 6.01(l), (s) and (t)) or (iii) are not otherwise generally available for use by the Lead Borrower or such Subsidiary.

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock of the Parent or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Capital Stock, or on account of any return of capital to the Parent’s stockholders, partners or members (or the equivalent Persons thereof).

 

“Restricted Subsidiary” means any Subsidiary of the Parent other than an Unrestricted Subsidiary.  For avoidance of doubt, until the formation of Holdco, a “Restricted Subsidiary”

 

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shall be limited to Subsidiaries of the Lead Borrower; upon the formation of Holdco, the Lead Borrower and its Restricted Subsidiaries shall each be a Restricted Subsidiary of Holdco.

 

“Revolving Credit Loans” means all loans at any time made by any Lender pursuant to Article II and, to the extent applicable, shall include Swingline Loans made by the Swingline Lender pursuant to SECTION 2.06.

 

“Revolving Credit Notes” means the promissory notes of the Borrowers substantially in the form of Exhibit C, each payable to the order of a Lender, evidencing the Revolving Credit Loans made to the Borrowers.

 

“RP Conditions” means, at the time of determination with respect to the making of a Restricted Payment, that (a) no Event of Default then exists or would arise as a result of the making of such Restricted Payment, (b) the Pro Forma Availability Condition shall have been satisfied after giving effect to the making of such Restricted Payment, and (c) either (i) Availability following, and after giving effect to, the making of such Restricted Payment, will be greater than twenty-five percent (25%) of the Loan Cap, or (ii) after giving effect to the making of such Restricted Payment, the Consolidated Fixed Charge Coverage Ratio, on a Pro Forma Basis for the four Fiscal Quarters most recently preceding the making of such Restricted Payment (provided, that, if any such Restricted Payment is to be consummated within thirty (30) days after the end of any Fiscal Quarter, such calculation shall be made with respect to the four Fiscal Quarters most recently preceding such Restricted Payment for which financial statements have been required to be delivered pursuant to SECTIONS 5.01(a), (b) or (c) hereof), is equal to or greater than 1.10:1.00.  In accordance with SECTION 5.02(i) hereof, at least five (5) Business Days(or such later date approved by the Administrative Agent) prior to the making of any Restricted Payment, the Loan Parties shall deliver to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that the conditions contained in clauses (b) and (c) have been satisfied.

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.

 

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

 

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

 

“Secured Party” means (a) each Credit Party, (b) any Person providing Cash Management Services or entering into or furnishing any Bank Products to or with any Loan Party, (c) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document, and (d) the successors and, subject to any limitations contained in this Agreement, assigns of each of the foregoing.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Agreement” means collectively, (i) the Amended and Restated Security Agreement dated as of the Restatement Date among the Loan Parties and the Collateral Agent for its benefit and for the benefit of the other Secured Parties, and (ii) the Amended and Restated

 

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General Security Agreement dated as of the Restatement Date among the Canadian Loan Parties and the Collateral Agent for its benefit and for the benefit of the other Secured Parties, in each case together with any Security Agreement Supplements (as defined in such Amended and Restated Security Agreement or Amended and Restated General Security Agreement, as applicable) executed in connection therewith

 

“Security Documents” means the Security Agreement, the Canadian Security Agreements, the Mortgages, the Facility Guarantee, the Canadian Guarantee, and each other security agreement or other instrument or document executed and delivered pursuant to this Agreement or any other Loan Document that creates a Lien in favor of the Collateral Agent to secure any of the Obligations.

 

“Senior Notes” means the $800,000,000 aggregate principal amount of the Lead Borrower’s 7 3/4% Senior Notes due 2018 issued on October 21, 2010 and any senior notes issued in exchange or substitution therefor pursuant to the registration rights agreement related thereto entered into by the Lead Borrower on October 21, 2010.

 

“Senior Note Documents” means the documents, instruments and other agreements now or hereafter executed and delivered in connection with the Senior Notes, including, without limitation, the Indenture dated as of October 21, 2010 among the Lead Borrower, the guarantors party thereto and Law Debenture Trust Company of New York, as Trustee or any supplemental indenture.

 

“Senior Subordinated Notes” means the $400,000,000 aggregate principal amount of the Lead Borrower’s 11 3/8% Senior Subordinated Notes due 2016 issued on the Closing Date and any senior subordinated notes issued in exchange or substitution therefor pursuant to the registration rights agreement related thereto entered into by the Lead Borrower on the Closing Date.

 

“Senior Subordinated Note Documents” means the documents, instruments and other agreements now or hereafter executed and delivered in connection with the Senior Subordinated Notes, including, without limitation, the Indenture dated as of October 31, 2006 among the Lead Borrower, the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee or any supplemental indenture.

 

“Settlement Date” has the meaning provided in SECTION 2.22(b).

 

“Software” has the meaning assigned to such term in the Security Agreement.

 

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (i) (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (ii) as to any

 

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Person incorporated or organized under the laws of Canada or any province or territory thereof, such Person is not an “insolvent person” as defined in the Bankruptcy and Insolvency Act (Canada).  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“Specified Debt” has the meaning provided in the definition of “Debt Maturity Reserve”.

 

“Specified Default” means the occurrence of any Event of Default specified in SECTION 7.01(a), SECTION 7.01(b) (but only with respect to (i) SECTION 2.18(d), (ii) SECTION 2.18(e), (iii) SECTION 2.18(f), (iv) the second sentence of SECTION 2.18(h), (v) SECTION 5.01(e), (vi) SECTION 5.07 (but only with respect to fire and extended coverage policies maintained with respect to any Collateral), (vii) SECTION 5.17, (viii) SECTION 5.18, (ix) SECTION 5.19, (x) SECTION 5.22, or (xi) SECTION 5.24), SECTION 7.01(d) (but only with respect to any representation made or deemed to be made by or on behalf of any Loan Party in any Borrowing Base Certificate or any certificate of a Financial Officer accompanying any financial statement), SECTION 7.01(f) or SECTION 7.01(g) hereof.

 

“Specified Legal Expenses” means all attorneys’ and experts’ fees and expenses and all other costs and expenses paid or payable in connection with investigating or defending or preparing to investigate or defend any threatened, pending, completed or future claim, demand, action, suit, proceeding, inquiry or investigation (whether civil, criminal, administrative or investigative) arising out of or related to (i) the Lead Borrower’s compensation practices (including option grants) prior to the Closing Date, (ii) any disclosure or alleged lack of disclosure on the part of the Lead Borrower or any of its directors or officers regarding the beneficial ownership of any securities of the Lead Borrower prior to the Closing Date by any such director or officer (or any trust established for the benefit of any such director or officer or any family member thereof), (iii) any transaction prior to the Closing Date involving any securities of the Lead Borrower alleged to have been engaged in by any such Person, (iv) any alleged deficiencies in the Lead Borrower’s financial reporting, internal control over financial reporting or disclosure controls prior to the Closing Date and procedures relating to any of the foregoing, and (v) any alleged bad faith, breach of fiduciary duty or other act or omission on the part of any director or officer of the Lead Borrower relating to any of the foregoing, together in each case with all damages, losses, liabilities, judgments, fines, penalties and amounts paid in settlement arising out of or incurred in connection with any of the foregoing (including all amounts paid to or on behalf of other Persons in connection with any of the foregoing pursuant to any indemnification agreements, arrangements or obligations).

 

“Specified Payment” means any Permitted Acquisition, Investment, loan, advance, incurrence of or payment with respect to Indebtedness or other transaction made subject to satisfaction of the Payment Conditions or any component thereof.

 

“Specified Transaction” means, with respect to any period, any Investment, Disposition of all or substantially all of the Capital Stock in or assets of any Restricted Subsidiary of the Lead Borrower or any division, business unit, line of business or facility used for the operations of the Lead Borrower or any of its Restricted Subsidiaries, incurrence or repayment of Indebtedness, the making of any Restricted Payment, designation or redesignation of a

 

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Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary, or any asset classified as discontinued operations by the Lead Borrower or any Restricted Subsidiary that by the terms of this Agreement requires “Pro Forma Compliance” with a test or covenant hereunder or requires such test or covenant to be tested on a “Pro Forma Basis.”

 

“Sponsor Affiliated Lender” means financial institutions (including commercial finance companies), investment funds or managed accounts with respect to which any Sponsor or an Affiliate of such Sponsor is an Affiliate or an advisor or manager in the ordinary course of business, provided, that, such Person executes a waiver in form and substance reasonably satisfactory to the Administrative Agent which provides that, so long as such Person is an Affiliate of a Sponsor, it and other Sponsor Affiliated Lenders shall have no right whatsoever with respect to that portion of the Commitments which all Sponsor Affiliated Lenders hold in the aggregate in excess of twenty-five percent (25%) of the Commitments of all Lenders (and such Sponsor Affiliated Lender shall agree that Lenders other than the Sponsor Affiliated Lenders shall be permitted to vote the outstanding Credit Extensions held by the Sponsor Affiliated Lenders in the aggregate in excess of twenty-five percent (25%) of the Commitments of all Lenders on a pro rata basis, based on such Lenders’ respective Commitment Percentage of the then outstanding Credit Extensions): (a) to consent to any amendment, modification, waiver, consent or other such action with respect to any of the terms of any Loan Document, (b) otherwise to vote on any matter related to any Loan Document, or (c) to require Agents or any Lender to undertake any action (or refrain from taking any action) with respect to any Loan Document.  Furthermore, no Sponsor Affiliated Lender may (x) attend any meeting with the Administrative Agent or any Lender or receive any information from the Administrative Agent or any Lender, or (y) make or bring any claim, in its capacity as Lender, against any Agent with respect to the fiduciary duties of such Agent or Lender and the other duties and obligations of the Agents hereunder.  Notwithstanding the foregoing, no amendment, modification or waiver to any Loan Document shall deprive any Sponsor Affiliated Lender of its pro rata share of any payments to which such Lender is entitled to share hereunder.  In the case of any Sponsor Affiliated Lender which is a financial institution, including a commercial finance company, investment fund or managed account (such type of Sponsor Affiliated Lender being referred to herein as, the “Voting Sponsor Affiliated Lenders”), none of the restrictions set forth in clauses (c), (x) and (y) shall apply to a Voting Sponsor Affiliated Lender so long as any information obtained by such Voting Sponsor Affiliated Lender(s) in its capacity as a Lender is not provided to any Sponsor or other Affiliate of Sponsor.  All Voting Sponsor Affiliated Lenders, are deemed to have agreed in favor of the Agents, the Issuing Bank and the other Lenders parties hereto, by their signatures below or to any Assignment and Acceptance in respect of this Agreement in respect of which they become a Lender, that such financial institution/commercial finance company will not provide any of the information it receives in its capacity as a Lender with any Sponsor or any Loan Party.

 

“Sponsors” means collectively, Bain Capital, LLC, The Blackstone Group, LP, and each of their respective Affiliates, and any fund administered, managed or advised by any such Person, but not including, however, any portfolio companies of any of the foregoing.

 

“Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit.

 

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“Standby Letter of Credit Agreement” means the Standby Letter of Credit Agreement relating to the issuance of a Standby Letter of Credit in the form from time to time in use by the applicable Issuing Bank.

 

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

 

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

 

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

 

“Subordinated Discount Notes” means the $469,449,000 aggregate principal amount at maturity of the Lead Borrower’s 13% Subordinated Discount Notes due 2016 issued on the Closing Date and any notes issued in exchange or substitution therefor pursuant to the registration rights agreement related thereto entered into by the Lead Borrower on the Closing Date.

 

“Subordinated Discount Note Documents” means the documents, instruments and other agreements now or hereafter executed and delivered in connection with the Subordinated Discount Notes, including, without limitation, the Indenture dated as of October 31, 2006 among the Lead Borrower, the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee or any supplemental indenture.

 

“Subordinated Indebtedness” means Indebtedness which is expressly subordinated in right of payment to the prior payment in full of the Obligations on terms reasonably acceptable to the Administrative Agent, it being understood that subordination terms set forth in the Senior Subordinated Note Documents and the Subordinated Discount Note Documents shall also be deemed to be acceptable for other Subordinated Indebtedness incurred.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company, unlimited liability company, or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled, directly, or indirectly through one or more intermediaries, or both, by such

 

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Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Lead Borrower.

 

“Supporting Obligations” has the meaning assigned to such term in the Security Agreement.

 

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

 

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

 

“Swingline Lender” means Wells Fargo, in its capacity as lender of Swingline Loans hereunder to the Borrowers hereunder.

 

“Swingline Loan” means a Revolving Credit Loan made by the Swingline Lender to the Borrowers pursuant to SECTION 2.06.

 

“Swingline Loan Ceiling” means $75,000,000, as such amount may be increased or reduced in accordance with the provisions of this Agreement.

 

“Swingline Note” means the promissory note of the Borrowers substantially in the form of Exhibit D, payable to the order of the Swingline Lender, evidencing the Swingline Loans made by the Swingline Lender to the Borrowers.

 

“Synthetic Lease” means any lease or other agreement for the use or possession of property creating obligations which do not appear as Indebtedness on the balance sheet of the lessee thereunder but which, upon the insolvency or bankruptcy of such Person, may be characterized as Indebtedness of such lessee without regard to the accounting treatment.

 

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“Taxes” means any and all current or future taxes, levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges) or withholdings in the nature of taxes imposed by any Governmental Authority, and any and all interest and penalties related thereto.

 

“Termination Date” means the earlier to occur of (i) the Latest Maturity Date, or (ii) the date on which the maturity of the Obligations (other than the Other Liabilities) is accelerated (or deemed accelerated) and the Commitments are irrevocably terminated (or deemed terminated) in accordance with Article VII.

 

“Term Loan Agreement” means that certain Credit Agreement dated October 31, 2006 by and among the Lead Borrower, as borrower, Deutsche Bank AG New York Branch as administrative agent and as collateral agent, and the lenders identified therein.

 

“Term Loan Documents” means the Term Loan Agreement and the related guaranties, pledge agreements, security agreements, mortgages, notes and other agreements and instruments entered into in connection with the Term Loan Agreement.

 

“Term Loan Facility” means the term loan facility established pursuant to the Term Loan Agreement in a principal amount not to exceed $2,400,000,000, as amended, modified, or supplemented from time to time to the extent permitted pursuant to SECTION 6.13 hereof and pursuant to the Intercreditor Agreement, and any one or more Permitted Refinancings of any portion thereof.

 

“Term Priority Collateral” has the meaning set forth in the Intercreditor Agreement.

 

“Threshold Amount” has the meaning provided in the definition of “Covenant Compliance Event”.

 

“Threshold Minimum Extension Condition” has the meaning provided in SECTION 2.27(b).

 

“Total Commitments” means the aggregate of the Commitments of all Lenders, as such amount may be increased or reduced in accordance with the terms of this Agreement.  As of the Restatement Date, the Total Commitments are $650,000,000.

 

“Type” (i) when used in reference to any Revolving Credit Loan or Borrowing, refers to whether the rate of interest on such Revolving Credit Loan, or on the Revolving Credit Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Prime Rate, and (ii) when used with respect to commitments, refers to whether such commitment is a Commitment, an Extended Commitment of a given Extension Series or a New Commitment.

 

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

 

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in a jurisdiction other than New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

“UCP 600” means the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce and in effect as of July 1, 2007 (or such later version thereof as may be in effect at the time of issuance).

 

“Unanimous Consent” means the consent of Lenders (other than Delinquent Lenders and Non-Performing Deteriorating Lenders) holding one hundred percent (100%) of the Commitments (other than Commitments held by a Delinquent Lender or a Non-Performing Deteriorating Lender), or if the Commitments have been terminated, the consent of Lenders (other than Delinquent Lenders and Non-Performing Deteriorating Lenders) holding one hundred percent (100%) of the outstanding Credit Extensions (calculated assuming settlement and repayment of all Swingline Loans by the Lenders) (other than Credit Extensions made by Delinquent Lenders and Non-Performing Deteriorating Lenders).

 

“Uncontrolled Cash” means an amount equal to the lesser of (a) the sum of $7,000,000 plus all Restricted Cash then held by Michaels Stores Card Services, LLC and Michaels Finance Company, Inc. which was received in the ordinary course of business, or (b) $30,000,000.

 

“Unfunded Pension Liability” means, at a point in time, the excess of a Plan’s benefit liabilities, over the current value of that Plan’s assets, determined in accordance with the assumptions used for funding the Plan pursuant to applicable laws for the applicable plan year and includes any unfunded liability or solvency deficiency as determined for the purposes of the PBA.

 

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

 

“Unrestricted Subsidiaries” means (i) each Subsidiary of the Parent listed on Schedule 5.14 and (ii) any Subsidiary of the Parent designated by the board of directors of the Parent as an Unrestricted Subsidiary pursuant to SECTION 5.14 subsequent to the date hereof, provided that no Subsidiary may be designated as an Unrestricted Subsidiary if any of its assets are included in the calculation of the Borrowing Base immediately prior to such Subsidiary’s being designated as an Unrestricted Subsidiary.

 

“Unused Commitment” shall mean, on any day, (i) the Total Commitments, minus (ii) the sum of (A) the principal amount of Revolving Credit Loans (other than Swingline Loans) of the Borrowers then outstanding, and (B) the then Letter of Credit Outstandings.

 

“Unused Fee” has the meaning provided in SECTION 2.19.

 

“US Loan Party” means a Loan Party that is organized under the laws of the United States, any state thereof or the District of Columbia.

 

“Wage Earner Protection Act Reserve” means, on any date of determination, an Availability Reserve established from time to time by the Administrative Agent in its

 

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commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith in such amount as the Administrative Agent determines reflects the amounts which would give rise to a Lien under the Wage Earner Protection Program Act with respect to the employees of any Loan Party employed in Canada with priority under Applicable Law over the Lien of the Collateral Agent.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:  (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

 

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association, and its successors.

 

“WFCF” means Wells Fargo Capital Finance, LLC, a Delaware limited liability company.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.

 

SECTION 1.02              Terms Generally.

 

With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

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

 

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replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (vii) all references to “$” or “dollars” or to amounts of money and all calculations of Availability, Borrowing Base, permitted “baskets” and other similar matters shall be deemed to be references to the lawful currency of the United States of America, and (viii) references to “knowledge” of any Loan Party means the actual knowledge of a Responsible Officer.

 

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

 

(c)                                  For purposes of any Collateral located in the Province of Quebec or charged by any deed of hypothec (or any other Loan Document) and for all other purposes pursuant to which the interpretation or construction of a Loan Document may be subject to the laws of the Province of Quebec or a court or tribunal exercising jurisdiction in the Province of Québec, (q) “personal property” shall be deemed to include “movable property”, (r) “real property” shall be deemed to include “immovable property”, (s) “tangible property” shall be deemed to include “corporeal property”, (t) “intangible property” shall be deemed to include “incorporeal property”, (u) “security interest” and “mortgage” shall be deemed to include a “hypothec”, (v) all references to filing, registering or recording under the UCC or the PPSA shall be deemed to include publication under the Civil Code of Québec, (w) all references to “perfection” of or “perfected” Liens shall be deemed to include a reference to the “opposability” of such Liens to third parties, (x) any “right of offset”, “right of setoff” or similar expression shall be deemed to include a “right of compensation”, (y) “goods” shall be deemed to include “corporeal movable property” other than chattel paper, documents of title, instruments, money and securities, and (z) an “agent” shall be deemed to include a “mandatary”.

 

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

 

(e)                                  This Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Loan Parties and the Administrative Agent and are the product of discussions and negotiations among all parties.  Accordingly, this Agreement and the other Loan Documents are not intended to be construed against the Administrative Agent or any of the Lenders merely on account of the Administrative Agent’s or any Lender’s involvement in the preparation of such documents.

 

(f)                                   Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (or, in the case of contingent reimbursement obligations with respect to Letters of Credit and Bank Products (other than Swap

 

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Contracts), providing Cash Collateralization) of all of the Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Swap Contracts) other than (i) unasserted contingent indemnification Obligations, (ii) any Obligations relating to Bank Products (other than Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or Cash Collateralized, and (iii) any Obligations relating to Swap Contracts that, at such time, are allowed by the applicable provider of such Swap Contracts to remain outstanding without being required to be repaid.

 

SECTION 1.03              Accounting Terms.

 

(a)                                 Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, except as otherwise specifically prescribed in SECTION 1.03(b) below.  All amounts used for purposes of financial calculations required to be made shall be without duplication.

 

(b)                                 Issues Related to GAAP.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Lead Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Lead Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided  that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Lead Borrower shall provide to the Administrative Agent and the Lenders as reasonably requested hereunder a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.  In addition, the definitions set forth in the Loan Documents and any financial calculations required by the Loan Documents shall be computed to exclude (a) the effect of purchase accounting adjustments to merchandise inventories, property and equipment, intangible assets, goodwill and deferred revenue and deferred debt line items in connection with any Permitted Acquisition, any Acquisition consummated prior to the Closing Date or any merger, amalgamation, consolidation or other similar transaction permitted by this Agreement, or the amortization, write-up, write-down or write-off of any amounts thereof, (b) the application of FAS 133, FAS 150, FASB Interpretation No. 45 or FAS 123r (to the extent that the pronouncements in FAS 123r result in recording an equity award as a liability on the Consolidated balance sheet of the Lead Borrower and its Subsidiaries in the circumstance where, but for the application of the pronouncements, such award would have been classified as equity), (c) any mark-to-market adjustments to any derivatives (including embedded derivatives contained in other debt or equity instruments under FAS 133), and (d) any non-cash compensation charges resulting from the application of FAS 123r.

 

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(c)                                  Notwithstanding anything to the contrary herein, for purposes of determining compliance with any test or covenant contained in this Agreement with respect to any period during which any Specified Transaction occurs, the Consolidated Fixed Charge Coverage Ratio shall be calculated with respect to such period and such Specified Transaction on a Pro Forma Basis.

 

(d)                                 The principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP.

 

(e)                                  Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Loan Parties or any Restricted Subsidiary at “fair value”, as defined therein, and (ii) unless otherwise agreed pursuant to SECTION 1.03(b), in a manner such that any obligations relating to a lease that was accounted for by a Person as an operating lease as of the Restatement Date and any similar lease entered into after the Restatement Date by such Person shall be accounted for as obligations relating to an operating lease and not as a Capitalized Lease.

 

SECTION 1.04              Rounding.

 

Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

SECTION 1.05              Times of Day.

 

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

 

SECTION 1.06              Letter of Credit Amounts.

 

Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit, whether or not such maximum face amount is in effect at such time.

 

SECTION 1.07              Certifications.

 

All certifications to be made hereunder by an officer or representative of a Loan Party shall be made by such person in his or her capacity solely as an officer or a representative of such Loan Party, on such Loan Party’s behalf and not in such person’s individual capacity.

 

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SECTION 1.08              Currency Equivalents Generally.

 

Any amount specified in this Agreement (other than in Article 2) or any of the other Loan Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount to be determined at the rate of exchange quoted by the Reuters World Currency Page for the applicable currency at 11:00 a.m. (London time) on such day (or, in the event such rate does not appear on any Reuters World Currency Page, by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Lead Borrower, or, in the absence of such agreement, such rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m. (New York City time) on such date for the purchase of Dollars for delivery two Business Days later).  Notwithstanding the foregoing, for purposes of determining compliance with SECTION 6.01, SECTION 6.02, SECTION 6.03, SECTION 6.05, SECTION 6.06 and SECTION 6.11, (i) any amount in a currency other than Dollars will be converted to Dollars based on the exchange rate for such currency as determined above, and (ii) no Default shall be deemed to have occurred solely as a result of changes in rates of exchange occurring after the time any transaction described in any of such Sections is consummated; provided that, for the avoidance of doubt, the foregoing provisions of this SECTION 1.08 shall otherwise apply to such Sections, including with respect to determining whether any such transaction described in such Sections may be consummated at any time under such Sections.

 

SECTION 1.09              Change of Currency.

 

Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify with the Lead Borrower’s consent to appropriately reflect a change in currency of any country and any relevant market conventions or practices relating to such change in currency.

 

ARTICLE II

 

Amount and Terms of Credit

 

SECTION 2.01              Commitment of the Lenders.

 

(a)                                 Each Lender, severally and not jointly with any other Lender, agrees, upon the terms and subject to the conditions herein set forth, to make Credit Extensions to or for the benefit of the Borrowers, on a revolving basis, subject in each case to the following limitations:

 

(i)                                     The aggregate outstanding amount of the Credit Extensions to the Borrowers shall not at any time cause Availability to be less than zero;

 

(ii)                                  Letters of Credit shall be available from the Issuing Banks to the Borrowers and their Restricted Subsidiaries, provided that the Borrowers shall not at any time permit the aggregate Letter of Credit Outstandings at any time to exceed the Letter of Credit Sublimit; and provided further that any Letter of Credit issued for the benefit of Michaels of Canada, ULC or any Foreign Subsidiary shall be issued naming the Lead

 

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Borrower as the account party on any such Letter of Credit but such Letter of Credit may contain a statement that it is being issued for the benefit of Michaels of Canada, ULC or such Foreign Subsidiary;

 

(iii)                               No Lender shall be obligated to make any Credit Extension to the Borrowers in excess of such Lender’s Commitment;

 

(iv)                              The aggregate outstanding amount of the Credit Extensions shall not exceed the Loan Cap; and

 

(v)                                 Subject to all of the other provisions of this Agreement, Revolving Credit Loans to the Borrowers that are repaid may be reborrowed prior to the Termination Date.

 

(b)                                 Each Borrowing of Revolving Credit Loans to the Borrowers (other than Swingline Loans) shall be made by the Lenders pro  rata in accordance with their respective Commitment Percentages.  The failure of any Lender to make any Revolving Credit Loan to the Borrowers shall neither relieve any other Lender of its obligation to fund its Revolving Credit Loan to the Borrowers in accordance with the provisions of this Agreement nor increase the obligation of any such other Lender.

 

SECTION 2.02              Increase in Total Commitments.

 

(a)                                 Request for Increase.  Provided no Default or Event of Default then exists or would arise therefrom, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Lead Borrower may from time to time, request an increase in the Total Commitments by an amount (for all such requests) not exceeding $200,000,000 (collectively, the “Commitment Increases”); provided that (i) any such request for an increase shall be in a minimum amount of at least $25,000,000 and in integral multiples of $5,000,000 in excess thereof, (ii) the Lead Borrower may make a maximum of four (4) such requests, and (iii) the amount of the Total Commitments, as the same may be increased pursuant to this SECTION 2.02, shall not exceed $850,000,000 at any time.  At the time of sending such notice, the Lead Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten calendar days from the date of delivery of such notice to the Lenders).

 

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

 

(c)                                  Notification by Agent; Additional Lenders.  The Administrative Agent shall notify the Lead Borrower and each Lender of the Lenders’ responses to each request made hereunder.  To achieve the full amount of a requested increase and subject to the approval of the Administrative Agent, the Issuing Banks and the Swingline Lender (which approvals shall not be unreasonably withheld), to the extent that the existing Lenders decline to increase their Commitments, or decline to increase their Commitments to the amount requested by the Lead Borrower, the Administrative Agent, in consultation with the Lead Borrower, will use its reasonable efforts to arrange for other Eligible

 

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Assignees to become a Lender hereunder and to issue commitments in an amount equal to the amount of the increase in the Total Commitments requested by the Lead Borrower and not accepted by the existing Lenders (and the Lead Borrower may also invite additional Eligible Assignees to become Lenders) (each such Lender providing additional Commitments pursuant to this SECTION 2.02, an “Additional Commitment Lender”), provided, however, that without the consent of the Administrative Agent, at no time shall the Commitment of any Additional Commitment Lender be less than $5,000,000.

 

(d)                                 Effective Date and Allocations.  If the Total Commitments are increased in accordance with this Section, the Administrative Agent, in consultation with the Lead Borrower, shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase.  The Administrative Agent shall promptly notify the Lead Borrower and the Lenders (including any Additional Commitment Lenders) of the final allocation of such increase and the Increase Effective Date and on the Increase Effective Date (i) the Total Commitments under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Commitment Increases, and (ii) this Agreement and Schedule 1.1 shall be deemed amended and modified, without further action, to reflect the revised Commitments and Commitment Percentages of the Lenders (including the Additional Commitment Lenders).  Any such increase shall be on the same terms and with the same maturity as provided in respect of the Total Commitments in effect immediately prior to such increase.

 

(e)                                  Conditions to Effectiveness of Commitment Increase.  As a condition precedent to such Commitment Increase, (i) the Lead Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such Commitment Increase, and (B) in the case of the Borrowers, certifying that, before and after giving effect to such Commitment Increase, (1) the representations and warranties contained in ARTICLE III and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date, other than representations and warranties that relate solely to an earlier date, which are true and correct in all material respects as of such earlier date (provided that any representations and warranties which are qualified as to “materiality”, “Material Adverse Effect” or similar language are true and correct in all respects as of such respective dates), and except that for purposes of this SECTION 2.02, the representations and warranties contained in subsections (a)(i) and (a)(ii) of SECTION 3.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of SECTION 5.01, and (2) no Default or Event of Default exists or would arise therefrom, (ii) the Borrowers, the Administrative Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Administrative Agent shall reasonably require; (iii) the Borrowers shall have paid such fees and other compensation to, the Additional Commitment Lenders as the Lead Borrower and such Additional Commitment Lenders shall agree; (iv) the Borrowers shall have paid such arrangement fees to the Administrative Agent as the Lead Borrower and the Administrative Agent may agree; (v) if requested by the Administrative Agent, the Borrowers shall deliver to the Administrative Agent and the Lenders an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrowers reasonably satisfactory to the Administrative Agent and dated such date; (vi) the Borrowers and the Additional Commitment Lender shall have delivered such other instruments, documents and agreements as the Administrative Agent may reasonably have requested; and (vii) no Default or Event of Default exists.  The Borrowers shall prepay any Revolving Credit Loans

 

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outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to SECTION 2.16) to the extent necessary to keep the outstanding Revolving Credit Loans ratable with any revised Commitment Percentages arising from any nonratable increase in the Commitments under this Section.

 

(f)                                   Conflicting Provisions.  This Section shall supersede any provisions in SECTIONS 8.04 or 9.01 to the contrary.

 

SECTION 2.03              Reserves; Changes to Reserves.

 

(a)                                 The initial Inventory Reserves and Availability Reserves as of the Restatement Date are as set forth in the Borrowing Base Certificate delivered pursuant to SECTION 4.01(d).

 

(b)                                 The Administrative Agent may hereafter establish additional Reserves or change any of the foregoing Reserves, in the exercise of its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith,  provided that such Reserves shall not be established or changed except upon not less than six (6) Business Days’ notice to the Borrowers (during which period the Administrative Agent shall be available to discuss any such proposed Reserve with the Borrowers and the Borrowers may take such action as may be required so that the event, condition or matter that is the basis for such Reserve no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent); provided  further that no such prior notice shall be required for changes to any Reserves resulting solely by virtue of mathematical calculations of the amount of the Reserve in accordance with the methodology of calculation previously utilized (such as, but not limited to, rent and Customer Credit Liabilities).  The amount of any Reserve established by the Administrative Agent shall have a reasonable relationship to the event, condition or other matter that is the basis for the Reserve.  Notwithstanding anything herein to the contrary, Reserves shall not duplicate eligibility criteria contained in the definition of Eligible Inventory, or reserves or criteria deducted in computing the Appraised Value of Eligible Inventory.

 

SECTION 2.04              Making of Revolving Credit Loans.

 

(a)                                 Except as set forth in SECTION 2.09, SECTION 2.10 and SECTION 2.11, Revolving Credit Loans (other than Swingline Loans) shall be either Prime Rate Loans or LIBO Loans as the Lead Borrower on behalf of the Borrowers may request (which request shall substantially be made in the form attached hereto as Exhibit B) subject to and in accordance with this SECTION 2.04.  All Swingline Loans shall be only Prime Rate Loans. All Revolving Credit Loans made pursuant to the same Borrowing shall, unless otherwise specifically provided herein, be Revolving Credit Loans of the same Type.  Each Lender may fulfill its Commitment with respect to any Revolving Credit Loan by causing any lending office of such Lender to make such Revolving Credit Loan; provided, however, that any such use of a lending office shall not affect the obligation of the Borrowers to repay such Revolving Credit Loan in accordance with the terms of the applicable Revolving Credit Note.  Each Lender shall, subject to its overall policy considerations, use reasonable efforts to select a lending office which will not result in the payment of increased costs by the Borrowers.  Subject to the other provisions of this SECTION 2.04 and the provisions of SECTION 2.10 and SECTION 2.11, Borrowings of Revolving Credit Loans of more than one Type may be incurred at the same time, but in any event no more than ten (10) Borrowings of LIBO Loans may be outstanding at any time.

 

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(b)                                 The Lead Borrower shall give the Administrative Agent (w) two (2) Business Days’ prior written notice (which notice may be in electronic form) of each Borrowing of LIBO Loans, and (x) prior written notice (which notice may be in electronic form) of each Borrowing of Prime Rate Loans by the Borrowers on the same Business Day requested for such Borrowing.  Any such notice, to be effective, must be received by the Administrative Agent not later than 12:30 p.m. on the second Business Day prior to the date on which such Borrowing is to be made, in the case of LIBO Loans, and not later than 12:00 noon on the Business Day on which such Borrowing is to be made, in the case of Prime Rate Loans. Such notice shall be irrevocable (except to the extent set forth in SECTION 2.10 or SECTION 2.11 hereof), shall contain disbursement instructions and shall specify: (i) whether the Borrowing then being requested is to be a Borrowing of Prime Rate Loans or LIBO Loans and, if LIBO Loans, the Interest Period with respect thereto; (ii) the amount of the proposed Borrowing (which shall be in an integral multiple of $1,000,000); and (iii) the date of the proposed Borrowing (which shall be a Business Day).  If no election of Interest Period is specified in any such notice for a Borrowing of LIBO Loans, such notice shall be deemed a request for an Interest Period of one (1) month.  If no election is made as to the Type of Revolving Credit Loan, such notice shall be deemed a request for Borrowing of Prime Rate Loans.  The Administrative Agent shall promptly notify each Lender of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date specified in such notice, each Lender shall make its share of the Borrowing available by federal funds wire transfer to the account designated by the Administrative Agent or at the office of the Administrative Agent at One Boston Place, 18th Floor, Boston, Massachusetts 02108 (or such other place as the Administrative Agent may request), no later than 3:00 p.m., in immediately available funds.  Unless the Administrative Agent shall have received notice from a Lender no later than (i) 1:00 p.m. on the proposed date of any Borrowing of Prime Rate Loans, or (ii) 1:00 p.m. on the Business Day prior to the proposed date of LIBO Loans, that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with this SECTION 2.04 and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount.  In the event a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent, forthwith on demand such corresponding amount, with interest thereon for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, or (ii) in the case of the Borrowers, the interest rate applicable to Prime Rate Loans.  If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Revolving Credit Loan included in such Borrowing.  Upon receipt of the funds made available by the Lenders to fund any borrowing hereunder, the Administrative Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Lead Borrower and shall use reasonable efforts to make the funds so received from the Lenders available to the Borrowers no later than 5:00 p.m.

 

(c)                                  To the extent not paid by the Borrowers when due (after taking into consideration any applicable grace period), the Administrative Agent, without the request of the Lead Borrower, may advance any interest or fee payable pursuant to SECTION 2.19 or other payment to which any Credit Party is entitled from the Loan Parties pursuant hereto or any other Loan Document and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby.  The

 

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Administrative Agent shall advise the Lead Borrower of any such advance or charge promptly after the making thereof.  Such action on the part of the Administrative Agent shall not constitute a waiver of the Administrative Agent’s rights and the Borrowers’ obligations under SECTION 2.17(a).  Any amount which is added to the principal balance of the Loan Account as provided in this SECTION 2.04(c) shall bear interest at the interest rate then and thereafter applicable to Prime Rate Loans.

 

SECTION 2.05              Overadvances.

 

(a)                                 None of the Administrative Agent, the Collateral Agent and the Lenders shall have any obligation to make any Revolving Credit Loan (including, without limitation, any Swingline Loan) or to provide any Letter of Credit if an Overadvance would result.

 

(b)                                 The Administrative Agent may, in its discretion, make Permitted Overadvances to the Borrowers without the consent of the Lenders and each Lender shall be bound thereby.  Any Permitted Overadvances may constitute Swingline Loans. The making of a Permitted Overadvance is for the benefit of the Borrowers and shall constitute a Revolving Credit Loan and an Obligation.  The making of any such Permitted Overadvance on any one occasion shall not obligate the Administrative Agent or any Lender to make or permit any Permitted Overadvance on any other occasion or to permit such Permitted Overadvances to remain outstanding, nor shall the making of any such Permitted Overadvance modify or abrogate the Borrowers’ obligations under SECTION 2.17(a) hereof.

 

(c)                                  The making by the Administrative Agent of a Permitted Overadvance shall not modify or abrogate any of the provisions of (i) SECTION 2.13(c) regarding the Lenders’ obligations with respect to Letters of Credit, or (ii) SECTION 2.06 and SECTION 2.22 regarding the Lenders’ obligations with respect to participations in Swingline Loans and settlements thereof.

 

SECTION 2.06              Swingline Loans.

 

(a)                                 The Swingline Lender is authorized by the Lenders to, and shall make, Swingline Loans at any time (subject to SECTION 2.06(c)) to the Borrowers up to the amount of the sum of (i) the Swingline Loan Ceiling, upon a notice of Borrowing from Lead Borrower received by the Administrative Agent and the Swingline Lender (which notice, at the Swingline Lender’s discretion, may be submitted prior to 3:00 p.m. on the Business Day on which such Swingline Loan is requested), plus (ii) any Permitted Overadvances; provided that the Swingline Lender shall not be obligated to make any Swingline Loan in its commercially reasonable discretion if any Lender at such time is a Deteriorating Lender or Delinquent Lender hereunder, unless the Swingline Lender has entered into satisfactory arrangements with the Borrowers or such Lender to eliminate the Swingline Lender’s actual or potential Fronting Exposure (after giving effect to SECTION 8.16(e)) with respect to such Deteriorating Lender or Delinquent Lender arising from such Swingline Loan as it may elect in its reasonable discretion.

 

(b)                                 Swingline Loans shall be Prime Rate Loans bearing interest and shall be subject to periodic settlement with the Lenders under SECTION 2.22 below.

 

(c)                                  The Lead Borrower’s request for a Swingline Loan shall be deemed a representation that the applicable conditions for borrowing under SECTION 4.02 are satisfied (unless such conditions have been waived).  If the conditions for borrowing under SECTION 4.02 cannot in fact be fulfilled, (x) the Lead Borrower shall give immediate notice (a “Noncompliance Notice”)

 

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thereof to the Administrative Agent and the Swingline Lender, and the Administrative Agent shall promptly provide each Lender with a copy of the Noncompliance Notice, and (y) the Required Lenders may direct the Swingline Lender to, and the Swingline Lender thereupon shall, cease making Swingline Loans (other than Permitted Overadvances) until such conditions can be satisfied or are waived in accordance with SECTION 9.01. Unless the Required Lenders so direct the Swingline Lender, the Swingline Lender may, but is not obligated to, continue to make Swingline Loans commencing one (1) Business Day after the Noncompliance Notice is furnished to the Lenders.  Notwithstanding the foregoing, no Swingline Loans (other than Permitted Overadvances) shall be made pursuant to this SECTION 2.06(c) if the Credit Extensions and/or the aggregate outstanding amount of the Credit Extensions and Swingline Loans would exceed the limitations set forth in SECTION 2.01.

 

SECTION 2.07              Notes.

 

(a)                                 Upon the request of any Lender, the Revolving Credit Loans made by such Lender shall be evidenced by a Revolving Credit Note, duly executed on behalf of the Borrowers, dated the Closing Date, the Effective Date or the Restatement Date, as applicable, payable to the order of such Lender in an aggregate principal amount equal to such Lender’s Commitment.

 

(b)                                 Upon the request of the Swingline Lender, the Revolving Credit Loans made by the Swingline Lender with respect to Swingline Loans shall be evidenced by a Swingline Note, duly executed on behalf of the Borrowers, dated the Restatement Date, payable to the order of the Swingline Lender, in an aggregate principal amount equal to the Swingline Loan Ceiling.

 

(c)                                  Each Lender is hereby authorized by the Borrowers to endorse on a schedule attached to each Note delivered to such Lender (or on a continuation of such schedule attached to such Note and made a part thereof), or otherwise to record in such Lender’s internal records, an appropriate notation evidencing the date and amount of each Revolving Credit Loan from such Lender, each payment and prepayment of principal of any such Revolving Credit Loan, each payment of interest on any such Revolving Credit Loan and the other information provided for on such schedule; provided, however, that the failure of any Lender to make such a notation or any error therein shall not affect the obligation of any Borrower to repay the Revolving Credit Loans made by such Lender in accordance with the terms of this Agreement and the applicable Notes.

 

(d)                                 Upon receipt of an affidavit and indemnity of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrowers will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor at such Lender’s expense.

 

SECTION 2.08              Interest on Revolving Credit Loans.

 

(a)                                 Subject to SECTION 2.12, each Prime Rate Loan made by a Lender shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable) at a rate per annum that shall be equal to the then Prime Rate plus the Applicable Margin for Prime Rate Loans.

 

(b)                                 Subject to SECTION 2.09 through SECTION 2.12, each LIBO Loan made by a Lender shall bear interest (computed on the basis of the actual number of days elapsed over a year of

 

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360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBO Rate for such Interest Period, plus the Applicable Margin for LIBO Loans.

 

(c)                                  Accrued interest on all Revolving Credit Loans shall be payable in arrears on each Interest Payment Date applicable thereto, at the Termination Date and thereafter on demand.

 

SECTION 2.09              Conversion and Continuation of Revolving Credit Loans.

 

(a)                                 The Lead Borrower shall have the right at any time, on three (3) Business Days’ prior notice to the Administrative Agent (which notice, to be effective, must be received by the Administrative Agent not later than 12:30 p.m. on the third Business Day preceding the date of any conversion), (i) to convert any outstanding Borrowings of Prime Rate Loans to Borrowings of LIBO Loans, or (ii) to continue an outstanding Borrowing of LIBO Loans for an additional Interest Period, or (iii) to convert any outstanding Borrowings of LIBO Loans to a Borrowing of Prime Rate Loans, subject in each case to the following:

 

(i)                                     No Borrowing of Revolving Credit Loans may be converted into, or continued as, LIBO Loans at any time when any Event of Default has occurred and is continuing (nothing contained herein being deemed to obligate the Borrowers to incur Breakage Costs upon the occurrence and during the continuance of an Event of Default unless the Obligations are accelerated);

 

(ii)                                  If less than a full Borrowing of Revolving Credit Loans is converted, such conversion shall be made pro  rata among the Lenders based upon their Commitment Percentages in accordance with the respective principal amounts of the Revolving Credit Loans comprising such Borrowing held by such Lenders immediately prior to such conversion;

 

(iii)                               The aggregate principal amount of Prime Rate Loans being converted into or continued as LIBO Loans shall be in a minimum amount of $1,000,000 and in integral multiples thereof;

 

(iv)                              Each Lender shall effect each conversion by applying the proceeds of its new LIBO Loan or Prime Rate Loan, as the case may be, to its Revolving Credit Loan being so converted;

 

(v)                                 The Interest Period with respect to a Borrowing of LIBO Loans effected by a conversion or in respect to the Borrowing of LIBO Loans being continued as LIBO Loans shall commence on the date of conversion or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be;

 

(vi)                              A Borrowing of LIBO Loans may not be converted prior to the last day of an Interest Period applicable thereto, unless the applicable Borrower pays all Breakage Costs incurred in connection with such conversion; and

 

(vii)                           Each request for a conversion or continuation of a Borrowing of LIBO Loans which fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one (1) month.

 

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(b)                                 If the Lead Borrower does not give notice to convert any Borrowing of LIBO Loans, or does not give notice to continue, or does not have the right to continue, any Borrowing as LIBO Loans, in each case as provided in SECTION 2.09(a) above, such Borrowing shall automatically be converted to, or continued as, as applicable, a Borrowing of LIBO Loans with an Interest Period of one (1) month, at the expiration of the then-current Interest Period, provided that if an Event of Default then exists and is continuing, such Borrowing shall be converted to, or continued as a Prime Rate Loan. The Administrative Agent shall, after it receives notice from the Lead Borrower, promptly give each Lender notice of any conversion, in whole or part, of any Revolving Credit Loan made by such Lender.

 

SECTION 2.10              Alternate Rate of Interest for Revolving Credit Loans.

 

If prior to the commencement of any Interest Period for a LIBO Borrowing, the Administrative Agent:

 

(a)                                 Reasonably determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate (in accordance with the terms of the definition thereof) for such Interest Period; or

 

(b)                                 Is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Required Lenders of making or maintaining their Revolving Credit Loans included in such Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Lead Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Lead Borrower and the applicable Lenders that the circumstances giving rise to such notice no longer exist (which notice the Administrative Agent shall deliver promptly upon obtaining knowledge of the same), (i) any Borrowing Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a LIBO Borrowing shall be ineffective and (ii) if any Borrowing Request requests a LIBO Borrowing, such Borrowing shall be made as a Borrowing of Prime Rate Loans unless withdrawn by the Lead Borrower.

 

SECTION 2.11              Change in Legality.

 

(a)                                 Notwithstanding anything to the contrary contained elsewhere in this Agreement, if any Change in Law occurring after the Closing Date shall make it unlawful for a Lender to make or maintain a LIBO Loan or to give effect to its obligations as contemplated hereby with respect to a LIBO Loan, then, by written notice to the Lead Borrower, such Lender may (x) declare that LIBO Loans will not thereafter be made by such Lender hereunder, whereupon any request by the Lead Borrower for a LIBO Borrowing shall, as to such Lender only, be deemed a request for a Prime Rate Loan unless such declaration shall be subsequently withdrawn; and (y) require that all outstanding LIBO Loans made by such Lender be converted to Prime Rate Loans, in which event all such LIBO Loans shall be automatically converted to Prime Rate Loans as of the effective date of such notice as provided in SECTION 2.09(b).  In the event any Lender shall exercise its rights hereunder, all payments and prepayments of principal which would otherwise have been applied to repay the LIBO

 

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Loans that would have been made by such Lender or the converted LIBO Loans of such Lender, shall instead be applied to repay the Prime Rate Loans made by such Lender in lieu of, or resulting from the conversion of, such LIBO Loans.

 

(b)                                 For purposes of this SECTION 2.11, a notice to the Lead Borrower pursuant to SECTION 2.11(a) above shall be effective, if lawful, and if any LIBO Loans shall then be outstanding, on the last day of the then-current Interest Period; and otherwise such notice shall be effective on the date of receipt by the Lead Borrower.

 

(c)                                  The provisions of this SECTION 2.11 shall survive the repayment or assignment of the Obligations and the termination of the Commitments.

 

SECTION 2.12              Default Interest.

 

Effective upon written notice from the Administrative Agent (which notice shall be given only at the direction of the Required Lenders after the occurrence of any Specified Default) and at all times thereafter while such Specified Default is continuing, interest shall accrue on all overdue amounts owing by the Borrowers (after as well as before judgment, as and to the extent permitted by law) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days as applicable) (the “Default Rate”) equal to the rate (including the Applicable Margin for Revolving Credit Loans) in effect from time to time plus two percent (2.00%) per annum and such interest shall be payable on each Interest Payment Date (or any earlier maturity of the Revolving Credit Loans).

 

SECTION 2.13              Letters of Credit.

 

(a)                                 The Letter of Credit Commitment.

 

(i)                                     Subject to the terms and conditions set forth herein, (A) the Issuing Banks agree, in reliance upon the agreements of the Lenders set forth in this SECTION 2.13, (1) from time to time on any Business Day during the period from the Restatement Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrowers or any Restricted Subsidiary, and to amend or extend Letters of Credit previously issued by it, in accordance with SECTION 2.13(b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrowers or a Restricted Subsidiary and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the aggregate amount of all outstanding Credit Extensions shall not exceed the Loan Cap, (y) the aggregate outstanding amount of the Loans of any Lender, plus such Lender’s Commitment Percentage of the Letter of Credit Outstandings, plus such Lender’s Commitment Percentage of the outstanding amount of all Swingline Loans shall not exceed such Lender’s Commitment, and (z) the Letter of Credit Outstandings shall not exceed the Letter of Credit Sublimit.  Each request by the Lead Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrowers that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers’ ability to

 

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obtain Letters of Credit shall be fully revolving, and accordingly the Borrowers may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  Any Issuing Bank (other than Wells Fargo or any of its Affiliates) shall notify the Administrative Agent in writing on each Business Day of all Letters of Credit issued on the prior Business Day by such Issuing Bank, provided that (A) until the Administrative Agent advises any such Issuing Bank that the provisions of SECTION 4.02 are not satisfied, or (B) until the aggregate amount of the Letters of Credit issued in any such week exceeds such amount as shall be agreed by the Administrative Agent and the applicable Issuing Bank, such Issuing Bank shall be required to so notify the Administrative Agent in writing only once each week of the Letters of Credit issued by such Issuing Bank during the immediately preceding week as well as the daily amounts outstanding for the prior week, such notice to be furnished on such day of the week as the Administrative Agent and such Issuing Bank may agree.  All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Restatement Date shall be subject to and governed by the terms and conditions hereof.  For purposes of clarity, the Loan Parties shall remain liable for all obligations in respect of Letters of Credit issued for the account of a Restricted Subsidiary (whether or not such Restricted Subsidiary is a Loan Party), and such obligations shall constitute Obligations hereunder.

 

(ii)                                  No Letter of Credit shall be issued if:

 

(A)                               subject to SECTION 2.13(b)(iii), the expiry date of such requested Standby Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the applicable Issuing Bank and the Required Lenders have approved such expiry date; or

 

(B)                               subject to SECTION 2.13(b)(iii), the expiry date of such requested Commercial Letter of Credit would occur more than 120 days after the date of issuance or last extension, unless the applicable Issuing Bank and the Required Lenders have approved such expiry date; provided that notwithstanding the foregoing, the applicable Issuing Bank may, in its sole discretion, elect to issue such Commercial Letter of Credit having an expiry date of more than 120 days but less than twelve months after the date of issuance or last extension; or

 

(C)                               the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless either such Letter of Credit is Cash Collateralized on or prior to the date of issuance of such Letter of Credit (or such later date as to which the Administrative Agent and the applicable Issuing Bank may agree) or all the Lenders have approved such expiry date.

 

(iii)                               No Letter of Credit shall be issued by any Issuing Bank without the prior consent of the Administrative Agent and such Issuing Bank if:

 

(A)                               any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any Law applicable to such Issuing Bank or any

 

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request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over applicable Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Restatement Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Restatement Date and which such Issuing Bank in good faith deems material to it;

 

(B)                               the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank applicable to letters of credit generally;

 

(C)                               except as otherwise agreed by the Administrative Agent and such Issuing Bank, such Letter of Credit is in an initial Stated Amount less than $100,000, in the case of a Commercial Letter of Credit, or $500,000, in the case of a Standby Letter of Credit;

 

(D)                               such Letter of Credit is to be denominated in a currency other than Dollars; provided that if such Issuing Bank, in its discretion, issues a Letter of Credit denominated in a currency other than Dollars, all reimbursements by the Borrowers of the honoring of any drawing under such Letter of Credit shall be paid in Dollars based on the spot rate of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted;

 

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

 

(F)                                 a default of any Lender’s obligations to fund under SECTION 2.13(c) exists or any Lender is at such time a Deteriorating Lender or Delinquent Lender hereunder, unless the Administrative Agent or the applicable Issuing Bank has entered into satisfactory arrangements with the Borrowers or such Lender to eliminate such Issuing Bank’s actual or potential Fronting Exposure (after giving effect to SECTION 8.16(e)) with respect to the Deteriorating Lender or Delinquent Lender arising from that Letter of Credit and all other Letter of Credit Outstandings as to which such Issuing Bank has actual or potential Fronting Exposure, as it may elect in its reasonable discretion.

 

(B)                               No Issuing Bank shall amend any Letter of Credit if (A) such Issuing Bank would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

 

(C)                               Each Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each Issuing Bank shall have all of the benefits and immunities (A) provided to the Administrative Agent in

 

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ARTICLE VIII with respect to any acts taken or omissions suffered by such Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in ARTICLE VIII included such Issuing Bank with respect to such acts or omissions, and (B) as additionally provided herein with respect to such Issuing Bank.

 

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

 

(i)                                     Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Lead Borrower delivered to applicable Issuing Bank (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Lead Borrower.  Such Letter of Credit Application must be received by the applicable Issuing Bank and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such other date and time as the Administrative Agent and such Issuing Bank may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the Administrative Agent and the applicable Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the Administrative Agent or such Issuing Bank may reasonably require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the Administrative Agent and the applicable Issuing Bank (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the Administrative Agent or such Issuing Bank may reasonably require.  Additionally, the Lead Borrower shall furnish to the applicable Issuing Bank and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, and any Issuer Documents (including, if requested by such Issuing Bank, a Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable), as such Issuing Bank or the Administrative Agent may reasonably require.

 

(ii)                                  Promptly after receipt of any Letter of Credit Application, the applicable Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Lead Borrower and, if not, such Issuing Bank will provide the Administrative Agent with a copy thereof.  Unless the applicable Issuing Bank has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied or unless such Issuing Bank would not be permitted, or would

 

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have no obligation, at such time to issue such Letter of Credit under the terms hereof (by reason of the provisions of clause (ii) or (iii) of SECTION 2.13(a) or otherwise), then, subject to the terms and conditions hereof, the such Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the applicable Borrower (or the applicable Restricted Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with such Issuing Bank’s usual and customary business practices.  Immediately upon the issuance or amendment of each Letter of Credit, each Lender shall be deemed to (without any further action), and hereby irrevocably and unconditionally agrees to, purchase from such Issuing Bank, without recourse or warranty, a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Commitment Percentage times the Stated Amount of such Letter of Credit.  Upon any change in the Commitments under this Agreement, it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new Commitment Percentages of the assigning and assignee Lenders.

 

(iii)                               If the Lead Borrower so requests in any applicable Letter of Credit Application, the applicable Issuing Bank may, in its sole and absolute discretion, agree to issue a Standby Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit such Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Standby Letter of Credit is issued.  Unless otherwise directed by the Administrative Agent or such Issuing Bank, the Lead Borrower shall not be required to make a specific request to the Administrative Agent or such Issuing Bank for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) such Issuing Bank to permit the extension of such Standby Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the Administrative Agent shall instruct such Issuing Bank not to permit any such extension if (A) such Issuing Bank has determined that it would not be permitted, or would have no obligation, at such time to issue such Standby Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of SECTION 2.13(a) or otherwise), or (B) such Issuing Bank has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Lead Borrower that one or more of the applicable conditions specified in SECTION 4.02 is not then satisfied, and in each such case directing such Issuing Bank not to permit such extension.

 

(iv)                              Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable Issuing Bank will also deliver to the Lead Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

 

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(c)                                  Drawings and Reimbursements; Funding of Participations.

 

(i)                                     Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the applicable Issuing Bank shall notify the Lead Borrower and the Administrative Agent thereof not less than two (2) Business Days prior to the Honor Date (as defined below); provided, however, that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse such Issuing Bank and the Lenders with respect to any such payment.  On the date of any payment by any Issuing Bank under a Letter of Credit (each such date, an “Honor Date”), the Borrowers shall be deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the amount of such payment, without regard to whether the conditions set forth in SECTION 4.02 have been met.  Any notice given by any Issuing Bank or the Administrative Agent pursuant to this SECTION 2.13(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)                                  Each Lender’s obligation to make Committed Loans to reimburse an Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this SECTION 2.13(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against any Issuing Bank, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing, and without regard to whether the conditions set forth in SECTION 4.02 have been met.

 

(d)                                 Repayment of Participations.  If any payment received by any Issuing Bank pursuant to SECTION 2.13(c)(i) is required to be returned under any of the circumstances described in SECTION 9.06 (including pursuant to any settlement entered into by any Issuing Bank in its discretion), each Lender shall pay to the Administrative Agent for the account of the applicable Issuing Bank its Commitment Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)                                  Obligations Absolute.  The obligation of the Borrowers to reimburse each applicable Issuing Bank for each drawing under each Letter of Credit shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

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

 

(ii)                                  the existence of any claim, counterclaim, setoff, defense or other right that the Borrowers or any Subsidiary may have at any time against any beneficiary

 

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or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the applicable Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

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

 

(iv)                              any payment by the applicable Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by such Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under the Bankruptcy Code or any other debtor relief law;

 

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

 

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

 

The Lead Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Lead Borrower’s instructions or other irregularity, the Lead Borrower will immediately notify the Administrative Agent and the applicable Issuing Bank.  The Borrowers shall be conclusively deemed to have waived any such claim against such Issuing Bank and its correspondents unless such notice is given as aforesaid.

 

(f)                                   Role of Issuing Banks.  Each Lender and the Borrowers agree that, in paying any drawing under a Letter of Credit, no Issuing Bank shall have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of any Issuing Bank, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of any Issuing Bank shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; (iii) any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit or any error in interpretation of technical terms; or (iv) the due

 

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execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The Borrowers hereby assume all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrowers’ pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of any Issuing Bank, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of any Issuing Bank shall be liable or responsible for any of the matters described in clauses (i) through (v) of SECTION 2.13(e) or for any action, neglect or omission under or in connection with any Letter of Credit or Issuer Documents, including, without limitation, the issuance or any amendment of any Letter of Credit, the failure to issue or amend any Letter of Credit, or the honoring or dishonoring of any demand under any Letter of Credit, and such action or neglect or omission will bind the Borrowers; provided, however, that anything in such clauses to the contrary notwithstanding, the Borrowers may have a claim against the applicable Issuing Bank, and such Issuing Bank may be liable to the Borrowers, to the extent, but only to the extent, of any direct, as opposed to consequential, exemplary or punitive damages suffered by the Borrowers which the Borrowers prove were caused by such Issuing Bank’s willful misconduct or gross negligence or such Issuing Bank’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit; provided further, however, that any claim against such Issuing Bank by the Borrowers for any loss suffered or incurred by the Borrowers shall be reduced by an amount equal to the sum of (i) the amount (if any) saved by the Borrowers as a result of the breach or other wrongful conduct that allegedly caused such loss, and (ii) the amount (if any) of the loss that would have been avoided had the Borrowers taken all reasonable steps to mitigate such loss, including, without limitation, by enforcing their rights against any beneficiary and, in case of a claim of wrongful dishonor, by specifically and timely authorizing such Issuing Bank to cure such dishonor.  In furtherance and not in limitation of the foregoing, each Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary (or such Issuing Bank may refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit and may disregard any requirement in a Letter of Credit that notice of dishonor be given in a particular manner and any requirement that presentation be made at a particular place or by a particular time of day), and such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.  No Issuing Bank shall be responsible for the wording of any Letter of Credit (including, without limitation, any drawing conditions or any terms or conditions that are ineffective, ambiguous, inconsistent, unduly complicated or reasonably impossible to satisfy), notwithstanding any assistance such Issuing Bank may provide to the Borrowers with drafting or recommending text for any Letter of Credit Application or with the structuring of any transaction related to any Letter of Credit, and the Borrowers hereby acknowledge and agree that any such assistance will not constitute legal or other advice by such Issuing Bank or any representation or warranty by such Issuing Bank that any such wording or such Letter of Credit will be effective.  Without limiting the foregoing, the applicable Issuing Bank may, as it deems appropriate, modify or alter and use in any Letter of Credit the terminology contained on the Letter of Credit Application for such Letter of Credit.

 

(g)                                  Cash Collateral.  Upon the request of the Administrative Agent, (i) if any Issuing Bank has honored any full or partial drawing request under any Letter of Credit and such drawing has

 

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resulted in any Letter of Credit Outstandings, or (ii) if, as of the Letter of Credit Expiration Date, any Letter of Credit Outstandings remain, the Borrowers shall, in each case, immediately Cash Collateralize the then Letter of Credit Outstandings.  SECTIONS 2.16, 2.17 and 7.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder.  For purposes of this SECTION 2.13, SECTIONS 2.16, 2.17 and 7.02(c), “Cash Collateralize” means to pledge and deposit into the Cash Collateral Account, for the benefit of the Agents and the other Credit Parties, as collateral for the Letter of Credit Outstandings, cash or deposit account balances in an amount equal to 103% of all Letter of Credit Outstandings (other than Letter of Credit Outstandings with respect to Letters of Credit denominated in a currency other than Dollars, which Letter of Credit Outstandings shall be Cash Collateralized in an amount equal to 115% of such Letter of Credit Outstandings), pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the Issuing Banks (which documents are hereby consented to by the Lenders).  The Borrowers hereby grant to the Administrative Agent a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.  If at any time the Administrative Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent or that the total amount of such funds is less than the aggregate amount of all Letter of Credit Outstandings, the Borrowers will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate amount over (y) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent determines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the Issuing Banks and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations.

 

(h)                                 Applicability of ISP and UCP 600.  Unless otherwise expressly agreed by the applicable Issuing Bank and the Lead Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP and the UCP 600 shall apply to each Standby Letter of Credit, and (ii) the rules of the UCP 600 shall apply to each Commercial Letter of Credit.

 

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

 

SECTION 2.14              Increased Costs.

 

(a)                                 If any Change in Law shall:

 

(i)                                     impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any holding company of any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank;

 

(ii)                                  subject any Lender or any Issuing Bank to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LIBO Loan made by it, or change the basis of taxation of payments to such Lender or such Issuing Bank in respect thereof (except for Indemnified

 

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Taxes or Other Taxes covered by SECTION 2.23 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or such Issuing Bank); or

 

(iii)                               impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense affecting LIBO Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost in any material amount in excess of those incurred by similarly situated lenders to such Lender of making, converting into, continuing or maintaining any LIBO Loan (or of maintaining its obligation to make any such Revolving Credit Loan) or to increase the cost in any material amount in excess of those incurred by similarly situated lenders to such Lender or any Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount in any material respect of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)                                 If any Lender or any Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Revolving Credit Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company would have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

 

(c)                                  A certificate of a Lender or any Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this SECTION 2.14 and setting forth in reasonable detail the manner in which such amount or amounts were determined shall be delivered to the Lead Borrower and shall be conclusive absent manifest error. The Borrowers shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within fifteen (15) Business Days after receipt thereof.

 

(d)                                 Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this SECTION 2.14 shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation, provided  that the Borrowers shall not be required to compensate a Lender or any Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor, and provided  further  that, if the Change in Law giving rise to such increased costs or reductions is

 

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retroactive, then the 90 day period referred to above shall be extended to include the period of retroactive effect thereof.

 

(e)                                  The provisions of this SECTION 2.14 shall survive the repayment or assignment of the Obligations and the termination of the Commitments.

 

SECTION 2.15              Termination or Reduction of Commitments.

 

(a)                                 Termination or Reduction of Commitments.  Upon at least two (2) Business Days’ prior written notice to the Administrative Agent, the Lead Borrower may, at any time, in whole permanently terminate, or from time to time in part permanently reduce, the Total Commitments.  Each such reduction shall be in the principal amount of $1,000,000 or any integral multiple thereof.  Each such reduction or termination shall be applied ratably to the Commitments of each Lender, and (ii) be irrevocable at the effective time of any such termination or reduction.  The Borrowers shall pay to the Administrative Agent for application as provided herein (i) at the effective time of any such termination (but not any partial reduction), all earned and unpaid fees under the Fee Letter and all Unused Fees accrued on the Commitments so terminated, and (ii) at the effective time of any such reduction or termination, all Breakage Costs incurred in connection therewith and any amount by which the Credit Extensions to the Borrowers outstanding on such date exceed the amount to which the Commitments are to be reduced effective on such date.  Notwithstanding the foregoing, the Lead Borrower may rescind or postpone any notice of termination of the Commitments if such termination would have resulted from a refinancing of all or a portion of the Commitments, which refinancing shall not be consummated or otherwise shall be delayed.

 

(b)                                 Termination Date  Upon the Termination Date, the Commitments of the Lenders and the credit facility provided hereunder shall be terminated in full and the Borrowers shall pay, in full and in cash, all outstanding Revolving Credit Loans and all other outstanding Obligations then owing by them to the Lenders (including, without limitation, all Breakage Costs incurred in connection therewith).

 

SECTION 2.16              Optional Prepayment of Revolving Credit Loans; Reimbursement of Lenders.

 

(a)                                 The Borrowers shall have the right at any time and from time to time to prepay without premium or penalty (but subject to payment of Breakage Costs as provided herein) (without a reduction in the Total Commitments) outstanding Revolving Credit Loans in whole or in part, (x) with respect to LIBO Loans, upon at least two (2) Business Days’ prior written, telex or facsimile notice to the Administrative Agent, prior to 12:00 noon, and (y) with respect to Prime Rate Loans, on the same Business Day as such notice is furnished to the Administrative Agent, prior to 12:00 noon, subject in each case to the following limitations:

 

(i)                                     Subject to SECTION 2.17, all prepayments shall be paid to the Administrative Agent for application (except as otherwise directed by the applicable Borrower), first, to the prepayment of outstanding Swingline Loans, second, to the prepayment of other outstanding Revolving Credit Loans (other than Swingline Loans) ratably in accordance with each Lender’s Commitment Percentage, and third, if a

 

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Specified Default then exists, to the Cash Collateralizing of all Letter of Credit Outstandings;

 

(ii)                                  Subject to the foregoing, outstanding Prime Rate Loans of the Borrowers shall be prepaid before outstanding LIBO Loans of the Borrowers are prepaid (except as otherwise directed by the Lead Borrower). Each partial prepayment of LIBO Loans shall be in a minimum amount of $1,000,000 and in integral multiples thereof).  No prepayment of LIBO Loans shall be permitted pursuant to this SECTION 2.16 prior to the last day of an Interest Period applicable thereto, unless the Borrowers reimburse the Lenders for all Breakage Costs associated therewith within five (5) Business Days of receiving a written demand for such reimbursement which sets forth the calculation of such Breakage Costs in reasonable detail.  No partial prepayment of a Borrowing of LIBO Loans shall result in the aggregate principal amount of the LIBO Loans remaining outstanding pursuant to such Borrowing being less than $1,000,000 (unless all such outstanding LIBO Loans are being prepaid in full); and

 

(iii)                               Each notice of prepayment shall specify the prepayment date, the principal amount and Type of the Revolving Credit Loans to be prepaid and, in the case of LIBO Loans, the Borrowing or Borrowings pursuant to which such Revolving Credit Loans were made.  Each notice of prepayment shall be revocable, provided that, within five (5) Business Days of receiving a written demand for such reimbursement which sets forth the calculation of such Breakage Costs in reasonable detail, the Borrowers shall reimburse the Lenders for all Breakage Costs associated with the revocation of any notice of prepayment.  The Administrative Agent shall, promptly after receiving notice from the Lead Borrower hereunder, notify each applicable Lender of the principal amount and Type of the Revolving Credit Loans held by such Lender which are to be prepaid, the prepayment date and the manner of application of the prepayment.

 

(b)                                 The Borrowers shall reimburse each Lender as set forth below for any loss incurred or to be incurred by the Lenders in the reemployment of the funds (i) resulting from any prepayment (for any reason whatsoever, including, without limitation, conversion to Prime Rate Loans or acceleration by virtue of, and after, the occurrence and during the continuance of an Event of Default) of any LIBO Loan required or permitted under this Agreement, if such Revolving Credit Loan is prepaid prior to the last day of the Interest Period for such Revolving Credit Loan (including, without limitation, on account of any replacement of a Lender pursuant to SECTION 2.24 or otherwise in accordance with the terms of this Agreement) or (ii) in the event that after the Lead Borrower delivers a notice of borrowing under SECTION 2.04 in respect of LIBO Loans, such Revolving Credit Loans are not made on the first day of the Interest Period specified in such notice of borrowing for any reason other than a breach by such Lender of its obligations hereunder or the delivery of any notice pursuant to SECTION 2.09, SECTION 2.10 or SECTION 2.11, or (iii) in the event that after a Borrower delivers a notice of commitment reduction under SECTION 2.15 or a notice of prepayment under SECTION 2.16 in respect of LIBO Loans, such commitment reductions or such prepayments are not made on the day specified in such notice of reduction or prepayment.  Such loss shall be the amount (herein, collectively, “Breakage Costs”) as reasonably determined by such Lender as the excess, if any, of (A) the amount of interest which would have accrued to such Lender on the amount so paid, not prepaid or not borrowed at a rate of interest equal to the Adjusted LIBO Rate for such Revolving Credit Loan (but specifically excluding any Applicable Margin), for the period from the

 

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date of such payment or failure to borrow or failure to prepay to the last day (x) in the case of a payment or refinancing of a LIBO Loan with Prime Rate Loans prior to the last day of the Interest Period for such Revolving Credit Loan or the failure to prepay a LIBO Loan, of the then current Interest Period for such Revolving Credit Loan or (y) in the case of such failure to borrow, of the Interest Period for such LIBO Loan which would have commenced on the date of such failure to borrow, over (B) the amount of interest which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank market.  Any Lender demanding reimbursement for such loss shall deliver to the Lead Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Lender and setting forth in reasonable detail the manner in which such amount was determined and such amounts shall be due within ten (10) Business Days after the receipt of such notice.

 

(c)                                  Whenever any partial prepayment of Revolving Credit Loans are to be applied to LIBO Loans, such LIBO Loans shall be prepaid in the chronological order of their Interest Payment Dates or as the Lead Borrower may otherwise designate in writing.

 

SECTION 2.17              Mandatory Prepayment; Commitment Termination; Cash Collateral.

 

The outstanding Obligations shall be subject to prepayment as follows:

 

(a)                                 If at any time the amount of the Credit Extensions by the Lenders causes Availability to be less than zero, the Borrowers will, immediately upon notice from the Administrative Agent: (y) prepay the Revolving Credit Loans (including Swingline Loans) in an amount necessary to eliminate such deficiency; and (y) if, after giving effect to the prepayment in full of all outstanding Revolving Credit Loans such deficiency has not been eliminated, Cash Collateralize all Letter of Credit Outstandings.

 

(b)                                 The Revolving Credit Loans shall be repaid daily in accordance with (and to the extent required under) the provisions of SECTION 2.18, to the extent then applicable.

 

(c)                                  (i) Without limiting the provisions of SECTION 2.17(b) or SECTION 2.18, if a Cash Dominion Event is then continuing, all Net Proceeds on account of any Prepayment Event (other than, until the Term Loan Facility is repaid in full, a Prepayment Event arising in connection with the Term Priority Collateral) shall be paid to the Administrative Agent for application to the Obligations, and (ii) if a Cash Dominion Event is not then continuing but would result from the occurrence of a Prepayment Event of the type described in clauses (l), (m), (o), (p), (r)(i) or (s) of SECTION 6.05 (other than, until the Term Loan Facility is repaid in full, a Prepayment Event arising in connection with the Term Priority Collateral), all Net Proceeds on account of any such Prepayment Event (other than, until the Term Loan Facility is repaid in full, a Prepayment Event arising in connection with the Term Priority Collateral) shall be paid to the Administrative Agent for application to the Obligations.

 

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(d)                                 Except during the continuance of a Cash Dominion Event, any Net Proceeds, Cash Receipts and other payments received by the Administrative Agent shall be applied as the Lead Borrower shall direct the Administrative Agent in writing.

 

(e)                                  Subject to the foregoing, except as otherwise directed by the Lead Borrower (whose direction may be given only if a Cash Dominion Event has not occurred and is not continuing), outstanding Prime Rate Loans shall be prepaid before outstanding LIBO Loans are prepaid.  No prepayment of LIBO Loans shall be permitted pursuant to this SECTION 2.17 prior to the last day of an Interest Period applicable thereto, unless the Borrowers reimburse the Lenders for all Breakage Costs associated therewith within five (5) Business Days of receiving a written demand for such reimbursement which sets forth the calculation of such Breakage Costs in reasonable detail.  In order to avoid such Breakage Costs, as long as no Specified Default has occurred and is continuing, at the request of the Lead Borrower, the Administrative Agent shall hold all amounts required to be applied to LIBO Loans in the Cash Collateral Account and will apply such funds to the applicable LIBO Loans at the end of the then pending Interest Period therefor (provided that the foregoing shall in no way limit or restrict the Administrative Agent’s or the Collateral Agent’s rights upon the occurrence and during the continuance of any other Event of Default).  No partial prepayment of a Borrowing of LIBO Loans shall result in the aggregate principal amount of the LIBO Loans remaining outstanding pursuant to such Borrowing being less than $1,000,000.  A prepayment of the Revolving Credit Loans pursuant to SECTION 2.16 or SECTION 2.17 shall not permanently reduce the Total Commitments.

 

(f)                                   The Borrowers shall repay the Obligations as required pursuant to SECTION 2.15(b).

 

SECTION 2.18              Cash Management.

 

(a)                                 Within thirty (30) days of the occurrence of a Specified Default, or immediately upon the occurrence of any other Cash Dominion Event, the Borrowers, upon the request of the Administrative Agent, shall deliver to the Administrative Agent a schedule of all DDAs, that to the knowledge of the Responsible Officers of the Loan Parties, are maintained by the Loan Parties, which schedule includes, with respect to each depository (i) the name and address of such depository; (ii) the account number(s) maintained with such depository; and (iii) a contact person at such depository.

 

(b)                                 Annexed hereto as Schedule 2.18(b) is a list describing, as of the Restatement Date, all arrangements to which any Loan Party is a party with respect to the payment to such Loan Party of the proceeds of all credit card and debit card charges for sales by such Loan Party.

 

(c)                                  On or prior to the Restatement Date, to the extent not previously delivered, each Loan Party shall:

 

(i)                                     deliver to the Collateral Agent notifications (each, a “Credit Card Notification”) substantially in the form attached hereto as Exhibit F which have been executed on behalf of such Loan Party and addressed to such Loan Party’s credit card and debit card clearinghouses and processors listed on Schedule 2.18(b); and

 

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(ii)                                  enter into a blocked account agreement (each, a “Blocked Account Agreement”), reasonably satisfactory to the Administrative Agent, with any Blocked Account Bank, including, without limitation, with respect to the DDAs existing as of the Restatement Date and listed on Schedule 2.18(c) attached hereto (collectively, the “Blocked Accounts”).  For the avoidance of doubt, no Blocked Account Agreements shall be required with respect to (x) the Designated Account, (y) payroll, trust and tax withholding accounts funded in the ordinary course of business and required by Applicable Law, or (z) unless an Event of Default is then continuing, any petty cash accounts funded in the ordinary course of business, the deposits in which do not aggregate more than $25,000,000 or exceed $5,000,000 with respect to any one account (or in each case, such greater amounts to which the Administrative Agent (or if an Event of Default is continuing, the Required Lenders) may agree).

 

(d)                                 Each Credit Card Notification and Blocked Account Agreement entered into by a US Loan Party shall require, during the continuance of a Cash Dominion Event (and delivery of notice thereof from the Collateral Agent), the ACH or wire transfer on each Business Day (and whether or not there is then an outstanding balance in the Loan Account) of all available cash receipts (the “Cash Receipts”) (other than Uncontrolled Cash which may be deposited into a segregated DDA (not to be located in the Province of Quebec, Canada) which the Lead Borrower designates in writing to the Administrative Agent as being the “Uncontrolled Cash Account” (the “Designated Account “)) to the collection account maintained by the Administrative Agent at Wells Fargo (the “Collection Account”), from:

 

(i)                                     the sale of Inventory and other Collateral (whether or not constituting a Prepayment Event, but excluding, until the Term Loan Facility is repaid in full, any Term Priority Collateral);

 

(ii)                                  all proceeds of collections of Accounts (whether or not constituting a Prepayment Event);

 

(iii)                               all Net Proceeds on account of any Prepayment Event (other than, until the Term Loan Facility is repaid in full, a Prepayment Event arising in connection with the Term Priority Collateral);

 

(iv)                              each Blocked Account (including all cash deposited therein from each DDA); and

 

(v)                                 the cash proceeds of all credit card and debit card charges.

 

If, at any time during the continuance of a Cash Dominion Event, any cash or Cash Equivalents owned by any US Loan Party (other than (i) amounts on deposit in the Designated Account, which funds, shall not be funded from, or when withdrawn from the Designated Account, shall not be replenished by, funds constituting proceeds of Collateral so long as such Cash Dominion Event continues, (ii) petty cash accounts funded in the ordinary course of business, the deposits in which shall not aggregate more than $25,000,000 or exceed $5,000,000 with respect to any one account (or in each case, such greater amounts to which the Administrative Agent (or if an Event of Default is

 

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continuing, the Required Lenders) may agree), and (iii) payroll, trust and tax withholding accounts funded in the ordinary course of business and required by Applicable Law) are deposited to any account, or held or invested in any manner, otherwise than in a Blocked Account that is subject to a Blocked Account Agreement (or a DDA which is swept daily to a Blocked Account), the Collateral Agent may require the applicable US Loan Party to close such account and have all funds therein transferred to a Blocked Account, and all future deposits made to a Blocked Account which is subject to a Blocked Account Agreement.  In addition to the foregoing, during the continuance of a Cash Dominion Event, the US Loan Parties shall provide the Collateral Agent with an accounting of the contents of the Blocked Accounts, which shall identify, to the satisfaction of the Collateral Agent, the proceeds from the Term Priority Collateral which were deposited into a Blocked Account and swept to the Collection Account.  Upon the receipt of (x) the contents of the Blocked Accounts, and (y) such accounting, the Collateral Agent agrees to promptly remit to the agent under the Term Loan Facility the proceeds of the Term Priority Collateral received by the Administrative Agent.  Notwithstanding anything in any Loan Document to the contrary, (i) so long as the Obligations have not been accelerated, no DDAs maintained by any Canadian Loan Party nor credit card or debit card processing accounts maintained by any Canadian Loan Party shall be subject to the dominion and control of the Administrative Agent, and (ii) all Canadian Loan Parties shall provide the Collateral Agent with a monthly accounting of the contents of, and a copy of the bank statement for, each Blocked Account maintained in Canada for the immediately preceding month.

 

(e)                                  The provisions of this subsection (e) shall apply to Cash Receipts from Canadian operations and DDAs and Blocked Accounts maintained by the Canadian Loan Parties in Canada.

 

(i)                                     All Cash Receipts relating to the Canadian Loan Parties’ operations in Canada shall be deposited into one or more DDAs established for the account of the applicable Canadian Loan Party in Canada.

 

(ii)                                  So long as the Obligations have not been accelerated:

 

(A)                               the Canadian Loan Parties may direct, and shall have sole control over, the manner of disposition of their funds in the DDAs in Canada, the Blocked Accounts in Canada and each Disbursement Account in Canada; and

 

(B)                               the Loan Parties shall cause the wire transfer of all available and collected Cash Receipts in each such DDA in Canada to a Blocked Account in Canada not less frequently than once each week (or with such greater frequency as the Administrative Agent in its discretion may require).

 

(iii)                               On and after the date on which the Obligations have been accelerated:

 

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(A)                               upon notice to a Canadian Blocked Account Bank (which the Agents agree not to give unless the Obligations have been accelerated), no Loan Party shall have any access to or right of withdrawal from the Canadian Blocked Accounts maintained with such Canadian Blocked Account Bank; and

 

(B)                               in the event that, notwithstanding the provisions of this SECTION 2.18(e), the Loan Parties receive or otherwise have dominion and control of any such proceeds or collections, such proceeds and collections shall be held in trust by the Loan Parties for the Administrative Agent and shall not be commingled with any of the Loan Parties’ other funds or deposited in any account of any Loan Party other than as instructed by the Administrative Agent.

 

(f)                                   The Loan Parties may close DDAs or Blocked Accounts and/or open new DDAs or Blocked Accounts, subject to the execution and delivery to the Collateral Agent of appropriate Blocked Account Agreements (except with respect to any payroll, trust and tax withholding accounts or unless expressly waived by the Collateral Agent) consistent with the provisions of this SECTION 2.18 and otherwise reasonably satisfactory to the Collateral Agent (provided that, the Loan Parties shall not be required to deliver a Blocked Account Agreement with respect to any DDA acquired by a Loan Party in connection with a Permitted Acquisition until the date that is thirty (30) days (or such later date as the Administrative Agent may agree in its discretion) after the consummation of such Permitted Acquisition).  The Loan Parties shall furnish the Collateral Agent with prior written notice of their intention to open or close a Blocked Account and the Collateral Agent shall promptly notify the Lead Borrower as to whether the Collateral Agent shall require a Blocked Account Agreement with the Person with whom such account will be maintained. Unless consented to in writing by the Collateral Agent, the Borrowers shall not enter into any agreements with credit card or debit card processors other than the ones expressly contemplated herein unless contemporaneously therewith, a Credit Card Notification, is executed and delivered to the Collateral Agent.

 

(g)                                  The Borrowers may also maintain one or more disbursement accounts (the “Disbursement Accounts”) to be used by the Borrowers for disbursements and payments (including payroll) in the ordinary course of business or as otherwise permitted hereunder.

 

(h)                                 The Collection Account shall at all times be under the sole dominion and control of the Collateral Agent.  Each Borrower hereby acknowledges and agrees that (i) such Borrower has no right of withdrawal from the Collection Account, (ii) the funds on deposit in the Collection Account shall at all times continue to be collateral security for all of the Obligations, and (iii) the funds on deposit in the Collection Account shall be applied as provided in this Agreement.  In the event that, notwithstanding the provisions of this SECTION 2.18, during the continuation of a Cash Dominion Event, any Borrower receives or otherwise has dominion and control of any such proceeds or collections, such proceeds and collections shall be held in trust by such Borrower for the Collateral Agent, shall not be commingled with any of such Borrower’s other funds or deposited in any account of such Borrower and shall promptly be deposited into the Collection Account or dealt with in such other fashion as such Borrower may be instructed by the Collateral Agent.

 

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(i)                                     Any amounts received in the Collection Account at any time when all of the Obligations then due have been and remain fully repaid shall be remitted to the operating account of the Borrowers maintained with the Administrative Agent.

 

(j)                                    The Collateral Agent shall promptly (but in any event within one Business Day) furnish written notice to each Person with whom a Blocked Account is maintained of any termination of a Cash Dominion Event.

 

(k)                                 The following shall apply to deposits and payments under and pursuant to this Agreement:

 

(i)                                     Funds shall be deemed to have been deposited to the Collection Account on the Business Day on which deposited, provided that such deposit is available to the Administrative Agent by 4:00 p.m. on that Business Day (except that if the Obligations are being paid in full, by 2:00 p.m. Boston time, on that Business Day);

 

(ii)                                  Funds paid to the Administrative Agent, other than by deposit to the Collection Account, shall be deemed to have been received on the Business Day when they are good and collected funds, provided that such payment is available to the Administrative Agent by 4:00 p.m. on that Business Day (except that if the Obligations are being paid in full, by 2:00 p.m. Boston time, on that Business Day);

 

(iii)                               If a deposit to the Collection Account or payment is not available to the Administrative Agent until after 4:00 p.m. on a Business Day, such deposit or payment shall be deemed to have been made at 9:00 a.m. on the then next Business Day;

 

(iv)                              If any item deposited to the Collection Account and credited to the Loan Account is dishonored or returned unpaid for any reason, whether or not such return is rightful or timely, the Administrative Agent shall have the right to reverse such credit and charge the amount of such item to the applicable Loan Account and the Borrowers shall indemnify the Secured Parties against all out-of-pocket claims and losses resulting from such dishonor or return;

 

(v)                                 All amounts received under this SECTION 2.18 shall be applied in the manner set forth in SECTION 7.04.

 

SECTION 2.19              Fees.

 

(a)                                 The Borrowers shall pay to the Administrative Agent and WFCF, for their respective accounts, the fees set forth in the Fee Letter as and when payment of such fees is due as therein set forth.

 

(b)                                 The Borrowers shall pay the Administrative Agent, for the account of the Lenders, an aggregate fee (the “Unused Fee”) equal to the Applicable Unused Fee Rate per annum (on the basis of actual days elapsed in a year of 360 days) multiplied by the average daily balance of the Lenders’ respective Unused Commitment during the Fiscal Quarter just ended (or relevant period with respect to the payment being made through the first Fiscal Quarter ending after the Restatement Date or on the Termination Date).  The Unused Fee shall be paid in arrears, on the first day of each Fiscal

 

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Quarter after the execution of this Agreement and on the Termination Date.  The Administrative Agent shall pay the Unused Fee to the Lenders upon the Administrative Agent’s receipt of the Unused Fee based upon each Lender’s Commitment Percentage of the average daily balance of the Lenders’ Unused Commitment.

 

(c)                                  The Borrowers shall pay the Administrative Agent, for the account of the Lenders in accordance with their respective Commitment Percentages, on the first day of each Fiscal Quarter and on demand after the Letter of Credit Expiration Date, in arrears, a fee calculated on the basis of a 360-day year, and actual days elapsed (each, a “Letter of Credit Fee”), equal to the following per annum percentages of the daily Stated Amount (whether or not any applicable maximum amount is then in effect) of the following categories of Letters of Credit outstanding during the three month period then ended:

 

(i)                                     Standby Letters of Credit: for the account of each Lender in accordance with its Commitment Percentage, at a per annum rate equal to the then Applicable Margin for LIBO Loans;

 

(ii)                                  Commercial Letters of Credit: for the account of each Lender in accordance with its Commitment Percentage, at a per annum rate equal to fifty percent (50%) of the then Applicable Margin for LIBO Loans;

 

(iii)                               After the occurrence and during the continuance of a Specified Default, at any time that the Administrative Agent is not holding in the Cash Collateral Account an amount in cash equal to 103% of the amount of all Letter of Credit Outstandings (other than Letter of Credit Outstandings with respect to Letters of Credit denominated in a currency other than Dollars, which Letter of Credit Outstandings shall be Cash Collateralized in an amount equal to 115% of the amount of such Letter of Credit Outstandings), as of such date, plus accrued and unpaid interest on any unreimbursed drawings of such Letter of Credit Outstandings, effective upon written notice from the Administrative Agent (which notice may be given at the election of the Administrative Agent or at the direction of the Required Lenders after the occurrence of any Specified Default), the Letter of Credit Fees set forth in clauses (i) and (ii) of this SECTION 2.19(c) shall be increased, at the option of the Administrative Agent or the Required Lenders, by an amount equal to two percent (2%) per annum.

 

For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with SECTION 1.06.

 

(d)                                 The Borrowers shall pay directly to each applicable Issuing Bank, for its own account, a fronting fee (the “Fronting Fee”) with respect to each Letter of Credit, at a rate equal to 0.125% per annum, computed on the amount of such Letter of Credit, and payable upon the issuance thereof on demand.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with SECTION 1.06.  In addition, the Borrowers shall pay directly to each applicable Issuing Bank, for its own account, the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Issuing Bank relating to letters of credit as from time to time in

 

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effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(e)                                  All fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for the account of the Administrative Agent and other Credit Parties as provided herein. Once due, all fees shall be fully earned and shall not be refundable under any circumstances.

 

SECTION 2.20              Maintenance of Loan Account; Statements of Account.

 

(a)                                 The Administrative Agent shall maintain an account on its books in the name of the Borrowers (each, the “Loan Account”) which will reflect (i) all Revolving Credit Loans and other advances made by the Lenders to the Borrowers or for the Borrowers’ account, (ii) all Letter of Credit Outstandings and fees and interest that have become payable with respect thereto as herein set forth, and (iii) any and all other monetary Obligations that have become payable.

 

(b)                                 The Loan Account will be credited with all amounts received by the Administrative Agent from the Borrowers or from other Persons for the Borrowers’ account, including all amounts received in the Collection Account from the Blocked Account Banks, and the amounts so credited shall be applied as set forth in and to the extent required by SECTION 2.17 or SECTION 7.04, as applicable.  After the end of each month, the Administrative Agent shall send to the Borrowers a statement accounting for the charges (including interest), loans, advances and other transactions occurring among and between the Administrative Agent, the Lenders and the Borrowers during that month.  The monthly statements, absent manifest error, shall be deemed presumptively correct.

 

SECTION 2.21              Payments; Sharing of Setoff.

 

(a)                                 The Borrowers shall make each payment required to be made hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of drawings under Letters of Credit, of amounts payable under SECTION 2.14, SECTION 2.16(b), SECTION 2.23, SECTION 9.04, SECTION 9.05 or otherwise) prior to 2:00 p.m. on the date when due, in immediately available funds, without setoff or counterclaim.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Administrative Agent by federal funds wire transfer to the account designated by the Administrative Agent or at its offices at One Boston Place, 18th Floor, Boston, Massachusetts 02108 (or such other place as the Administrative Agent may direct), except payments to be made directly to each Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to SECTION 2.14, SECTION 2.16(b), SECTION 2.23, SECTION 9.04 and SECTION 9.05 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein.  The Administrative Agent shall distribute any such payments to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, except with respect to LIBO Borrowings, the date for payment shall be extended to the next succeeding Business Day, and, if any payment due with respect to LIBO Borrowings shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, unless such succeeding Business Day is in the next calendar month, in case the date of such payment shall be on the next

 

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preceding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.

 

(b)                                 All funds received by and available to the Administrative Agent to pay principal, unreimbursed drawings under Letters of Credit, interest, fees and other amounts then due hereunder, shall be applied in accordance with the provisions of SECTION 2.17 or SECTION 7.04 ratably among the parties entitled thereto in accordance with the amounts of principal, unreimbursed drawings under Letters of Credit, interest, fees and other amounts then due to such respective parties. For purposes of calculating interest due to a Lender, that Lender shall be entitled to receive interest on the actual amount contributed by that Lender towards the principal balance of the Revolving Credit Loans outstanding during the applicable period covered by the interest payment made by the Borrowers.  Any net principal reductions to the Revolving Credit Loans received by the Administrative Agent in accordance with the Loan Documents during such period shall not reduce such actual amount so contributed, for purposes of calculation of interest due to that Lender, until the Administrative Agent has distributed to the applicable Lender its Commitment Percentage thereof.  All credits against the Obligations shall be conditioned upon final payment to the Administrative Agent of the items giving rise to such credits. If any item credited to the Loan Account is dishonored or returned unpaid for any reason, whether or not such return is rightful or timely, the Administrative Agent shall have the right to reverse such credit and charge the amount of such item to the Loan Account and the Borrowers shall indemnify the Secured Parties against all claims and losses resulting from such dishonor or return.

 

(c)                                  Unless the Administrative Agent shall have received notice from the Lead Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Banks hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as the case may be, the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

SECTION 2.22              Settlement Amongst Lenders.

 

(a)                                 The Swingline Lender may, at any time (but, in any event shall weekly, as provided in SECTION 2.22(b)), on behalf of the Borrowers (which hereby authorize the Swingline Lender to act on their behalf in that regard) request the Administrative Agent to cause the Lenders to make a Revolving Credit Loan (which shall be a Prime Rate Loan) in an amount equal to such Lender’s Commitment Percentage of the outstanding amount of Swingline Loans made in accordance with SECTION 2.06, which request may be made regardless of whether the conditions set forth in Article IV have been satisfied. Upon such request, each Lender shall make available to the Administrative Agent the proceeds of such Revolving Credit Loan for the account of the Swingline Lender.  If the Swingline Lender requires a Revolving Credit Loan to be made by the Lenders and the request therefor is received prior to 12:00 noon on a Business Day, such transfers shall be made in

 

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immediately available funds no later than 3:00 p.m. that day; and, if the request therefor is received after 12:00 noon, then no later than 3:00 p.m. on the next Business Day. The obligation of each such Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent or the Swingline Lender.  If and to the extent any Lender shall not have so made its transfer to the Administrative Agent, such Lender agrees to pay to the Administrative Agent, forthwith on demand, such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

(b)                                 The amount of each Lender’s Commitment Percentage of outstanding Revolving Credit Loans (including outstanding Swingline Loans) shall be computed weekly (or more frequently in the Administrative Agent’s discretion) and shall be adjusted upward or downward based on all Revolving Credit Loans (including Swingline Loans) and repayments of Revolving Credit Loans (including Swingline Loans) received by the Administrative Agent as of 3:00 p.m. on the first Business Day (such date, the “Settlement Date”) following the end of the period specified by the Administrative Agent.

 

(c)                                  The Administrative Agent shall deliver to each of the Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Revolving Credit Loans (including Swingline Loans) for the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the Administrative Agent shall transfer to each Lender, its Commitment Percentage of repayments, and (ii) each Lender shall transfer to the Administrative Agent (as provided below) or the Administrative Agent shall transfer to each Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Revolving Credit Loans made by each Lender with respect to Revolving Credit Loans to the Borrowers (including Swingline Loans) shall be equal to such Lender’s Commitment Percentage of Revolving Credit Loans, as applicable (including Swingline Loans) outstanding as of such Settlement Date.  If the summary statement requires transfers to be made to the Administrative Agent by the Lenders and is received prior to 12:00 noon on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 12:00 noon, then no later than 3:00 p.m. on the next Business Day. The obligation of each Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent.  If and to the extent any Lender shall not have so made its transfer to the Administrative Agent, such Lender agrees to pay to the Administrative Agent, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent, at the Federal Funds Effective Rate.

 

SECTION 2.23              Taxes.

 

(a)                                 Except as otherwise expressly provided in this SECTION 2.23, any and all payments by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes; provided, however, that if a Loan Party or an Agent or a Lender shall be required to deduct, withhold or remit any such Taxes from such payments, then (i) in the case of any Indemnified Taxes or Other Taxes, the sum payable shall be increased as necessary so that after making all required deductions, withholdings, or remittances for such Taxes (including deductions or withholdings applicable to additional sums payable under this SECTION 2.23) the applicable Credit

 

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Party receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the Loan Party shall make such deductions or withholdings and (iii) the Loan Party shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law.

 

(b)                                 In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

 

(c)                                  The Loan Parties shall indemnify each Credit Party, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid or payable by such Credit Party on or with respect to any payment by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this SECTION 2.23) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto; provided  that if any Loan Party reasonably believes that such Taxes were not correctly or legally asserted, each Lender will use reasonable efforts to cooperate with such Loan Party to obtain a refund of such Taxes so long as such efforts would not, in the sole determination of such Lender, result in any additional costs, expenses or risks or be otherwise disadvantageous to it; provided  further, that the Loan Parties shall not be required to compensate any Lender pursuant to this SECTION 2.23 for any amounts incurred in any fiscal year for which such Lender is claiming compensation if such Lender does not furnish notice of such claim within six (6) months from the end of such fiscal year; provided  further, that if the circumstances giving rise to such claim have a retroactive effect, then the beginning of such six (6) month period shall be extended to include such period of retroactive effect. A certificate as to the amount of such payment or liability delivered to the Lead Borrower by a Credit Party, or by the Administrative Agent on its own behalf or on behalf of any other Credit Party, setting forth in reasonable detail the manner in which such amount was determined, shall be conclusive absent manifest error.

 

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

 

(e)                                  (i)                                     Any Foreign Lender that is entitled to an exemption from or reduction in United States withholding Tax shall deliver to the Lead Borrower and the Administrative Agent two (2) copies of (i) either United States Internal Revenue Service Form W-8BEN (claiming a treaty benefit) or Form W-8ECI, or any subsequent versions thereof or successors thereto, or, (ii) in the case of a Foreign Lender claiming exemption from or reduction in U.S. federal withholding Tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a (A) Form W-8BEN, or any subsequent versions thereof or successors thereto and (B) a certificate representing that such Foreign Lender (1) is not a bank for purposes of Section 881(c) of the Code, (2) is not a 10 percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of any Loan Party and (3) is not a controlled foreign corporation related to the Loan Parties (within the meaning of Section 864(d)(4) of the Code)), in all cases, properly completed and duly executed by such Foreign Lender claiming, as applicable, complete exemption from or reduced rate of, U.S. federal withholding tax on payments by the Loan Parties under this Agreement and the other Loan Documents, or in the case of a

 

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Foreign Lender claiming exemption for “portfolio interest” certifying that it is not a foreign corporation, partnership, estate or trust. Such forms shall be delivered by each Foreign Lender on or before the date it becomes a party to this Agreement (or, in the case of a transferee that is a participation holder, on or before the date such participation holder becomes a transferee hereunder) and on or before the date, if any, such Foreign Lender changes its applicable lending office by designating a different lending office (a “New Lending Office”).  In addition, each Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender.  Any Lender shall, if reasonably requested by a Loan Party, deliver such other documentation prescribed by Applicable Law or as reasonably requested by such Loan Party, as will enable such Loan Party to determine whether such Lender is subject to withholding under the laws of Canada, is entitled to an exemption from such withholding or is eligible for a reduced rate of withholding in Canada.  Notwithstanding any other provision of this SECTION 2.23(e), a Lender shall not be required to deliver any form pursuant to this SECTION 2.23(e) that such Lender is not legally able to deliver.

 

(ii)                                  Each Lender that is a “United States person” as defined under Section 7701(a)(30) of the Code (a “U.S. Lender”) shall deliver to the Lead Borrower and the Administrative Agent such form or forms, certificates or documentation, including two original copies of United States Internal Revenue Service Form W-9, as reasonably requested by any Borrower to confirm or establish that such U.S. Lender is not subject to deduction, withholding, or backup withholding of United States federal income Tax with respect to any payments to such U.S. Lender.  Such forms shall be delivered by each U.S. Lender to the Borrower on or before the date such U.S. Lender becomes a party to this Agreement (or, in the case of a transferee that is a participation holder, on or before the date such participation holder becomes a transferee).

 

(f)                                   The Loan Parties shall not be required to indemnify any Lender or to pay any additional amounts to any Lender in respect of U.S. federal or Canadian withholding Tax pursuant to paragraph (a) or (c) above, to the extent that the obligation to pay such additional amounts would not have arisen but for a failure by such Lender to comply with the provisions of paragraph (e) above.  Should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Loan Parties shall, at such Lender’s expense, take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

 

(g)                                  If any Loan Party shall be required pursuant to this SECTION 2.23 to pay any additional amount to, or to indemnify, any Credit Party to the extent that such Credit Party becomes subject to Indemnified Taxes or Other Taxes subsequent to the Closing Date (or, if applicable, subsequent to the date such Person becomes a party to this Agreement) as a result of any change in the circumstances of such Credit Party (other than a change in Applicable Law), including without limitation a change in the residence, place of incorporation, principal place of business of such Credit Party or a change in the branch or lending office of such Credit Party, as the case may be, such Credit Party shall use reasonable efforts to avoid or minimize any amounts which might otherwise be payable pursuant to this SECTION 2.23(g); provided, however, that such efforts shall not include the taking of any actions by such Credit Party that would result in any Tax, costs or other expense to such Credit Party (other than a Tax, cost or other expense for which such Credit Party shall have been reimbursed or indemnified by the Loan Parties pursuant to this Agreement or otherwise) or any action which would or might in the reasonable opinion of such Credit Party have an adverse effect upon its business, operations or financial condition or otherwise be disadvantageous to such Credit Party.

 

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(h)                                 If any Lender is entitled to a reduction in (and not complete exemption from) the applicable withholding Tax, the Borrowers may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding Tax after taking into account such reduction.

 

(i)                                     If any Credit Party reasonably determines that it has actually and finally realized, by reason of a refund, deduction or credit of any Taxes paid or reimbursed by the Loan Parties pursuant to subsection (a) or (c) above in respect of payments under the Loan Documents (which refund, deduction or credit is provided by the jurisdiction imposing such Taxes), a current monetary benefit that it would otherwise not have obtained and that would result in the total payments under this SECTION 2.23 exceeding the amount needed to make such Credit Party whole, such Credit Party shall pay to the Lead Borrower, with reasonable promptness following the date upon which it actually realizes such benefit, an amount equal to the amount of such refund, deduction or credit, net of all out of pocket expenses incurred in securing such refund, deduction or credit.  This SECTION 2.23(i) shall not be construed to require any Credit Party to make available its Tax returns (or any other confidential information relating to its Taxes) to any Loan Party.  Notwithstanding anything to the contrary in this SECTION 2.23(i), in no event will any Credit Party be required to pay any amount to any Loan Party pursuant to this SECTION 2.23(i) the payment of which would place such Credit Party in a less favorable net after-Tax position than such Credit Party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid.

 

(j)                                    If a payment made to a Lender under any Loan Document would be subject to United States federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Lead Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Lead Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Lead Borrower or the Administrative Agent as may be necessary for the Lead Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this SECTION 2.23(j), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(k)                                 The provisions of this SECTION 2.23 shall survive the repayment or assignment of the Obligations and the termination of the Commitments.

 

SECTION 2.24              Mitigation Obligations; Replacement of Lenders.

 

(a)                                 If any Lender requests compensation under SECTION 2.14 or cannot make Revolving Credit Loans under SECTION 2.11, or if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.23, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Revolving Credit Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to SECTION 2.14 or SECTION 2.23, as the case may be, in the future and (ii) would not subject such

 

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Lender to any unreimbursed cost or expense. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment; provided, however, that the Borrowers shall not be liable for such costs and expenses of a Lender requesting compensation if (i) such Lender becomes a party to this Agreement on a date after the Restatement Date and (ii) the relevant Change in Law occurs on a date prior to the date such Lender becomes a party hereto.

 

(b)                                 (i) If any Lender requests compensation under SECTION 2.14 or cannot make Revolving Credit Loans under SECTION 2.11 for thirty (30) consecutive days, or (ii) if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.23, or (iii) if any Lender becomes a Delinquent Lender or otherwise defaults in its obligation to fund Revolving Credit Loans hereunder, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in SECTION 9.07), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, however, that (i) the Lead Borrower shall have received the prior written consent of the Administrative Agent, the Issuing Banks and the Swingline Lender, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans and participations in Letters of Credit and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under SECTION 2.14 or payments required to be made pursuant to SECTION 2.23, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

 

SECTION 2.25              Designation of Lead Borrower as Borrowers’ Agent.

 

(a)                                 Each Borrower hereby irrevocably designates and appoints the Lead Borrower as such Borrower’s agent to obtain Revolving Credit Loans and Letters of Credit, the proceeds of which shall be available to each Borrower for such uses as are permitted under this Agreement.  As the disclosed principal for its agent, each Borrower shall be obligated to the Administrative Agent and each Lender on account of Revolving Credit Loans so made and Letters of Credit so issued as if made directly by the Lenders to such Borrower, notwithstanding the manner by which such Revolving Credit Loans and Letters of Credit are recorded on the books and records of the Lead Borrower and of any other Borrower.

 

(b)                                 Each Borrower represents to the Credit Parties that it is an integral part of a consolidated enterprise, and that each Loan Party will receive direct and indirect benefits from the availability of the joint credit facility provided for herein, and from the ability to access the collective credit resources of the consolidated enterprise which the Loan Parties comprise.  Each Borrower recognizes that credit available to it hereunder is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor is its joining in the credit facility contemplated herein with all other Borrowers.  Consequently, each Borrower hereby assumes

 

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and agrees to discharge all Obligations of each of the other Borrowers as if the Borrower which is so assuming and agreeing were each of the other Borrowers.

 

(c)                                  The Lead Borrower shall act as a conduit for each Borrower (including itself, as a Borrower) on whose behalf the Lead Borrower has requested a Revolving Credit Loan.  None of the Agents nor any other Credit Party shall have any obligation to see to the application of such proceeds.

 

(d)                                 The authority of the Lead Borrower to request Revolving Credit Loans and Letters of Credit on behalf of, and to bind, the Borrowers, shall continue unless and until the Administrative Agent actually receives written notice of: (i) the termination of such authority, and (ii) the subsequent appointment of a successor Lead Borrower, which notice is signed by the respective Financial Officers of each Borrower; and (iii) written notice from such successive Lead Borrower accepting such appointment and acknowledging that from and after the date of such appointment, the newly appointed Lead Borrower shall be bound by the terms hereof, and that as used herein, the term “Lead Borrower” shall mean and include the newly appointed Lead Borrower.

 

SECTION 2.26              Provisions Applicable to Canadian Loan Parties.

 

(a)                                 For the purposes of the Interest Act (Canada), and to the extent applicable, whenever any interest payable by a Canadian Loan Party is calculated on the basis of a period of time other than a year of 365 or 366 days, as applicable, the annual rate of interest to which each rate of interest utilized pursuant to such calculation is equivalent is such rate so utilized multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by the number of days in such calculation.

 

(b)                                 Notwithstanding any provision herein to the contrary, and to the extent applicable, in no event will the aggregate “interest” (as defined in section 347 of the Criminal Code (Canada)) payable by a Canadian Loan Party under any Loan Document exceed the maximum effective annual rate of interest on the “credit advanced” (as defined in that section 347) permitted under that section and, if any payment, collection or demand pursuant to such Loan Document in respect of “interest” (as defined in that section 347) is determined to be contrary to the provisions of such section 347, such payment, collection or demand will be deemed to have been made by mutual mistake of such Canadian Loan Party, the Administrative Agent and the applicable Lender or Lenders and the amount of such payment or collection will be refunded to such Canadian Loan Party only to the extent of the amount which is greater than the maximum effective annual rate permitted under such law.  For purposes of determining compliance with such section 347, the effective annual rate of interest will be determined in accordance with generally accepted actuarial practices and principles over the term of this Agreement and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Administrative Agent will be prima facie evidence for the purposes of such determination.

 

(c)                                  For the purposes of the Interest Act (Canada), to the extent applicable, the principle of deemed reinvestment of interest will not apply to any interest calculation under the Loan Documents, and the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.

 

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SECTION 2.27              Extensions of Loans.

 

(a)                                 Extension of Commitments.  The Borrowers may at any time and from time to time request that all or a portion of the Commitments of a given Type (each, an “Existing Revolver Tranche”) be amended to extend the Maturity Date with respect to all or a portion of any principal amount of such Commitments (any such Commitments which have been so amended, “Extended Commitments”) and to provide for other terms consistent with this SECTION 2.27; provided that there shall be no more than two (2) Types of Revolving Credit Loans and Commitments outstanding at any time.  In order to establish any Extended Commitments, the Borrowers shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the applicable Existing Revolver Tranche) (each, an “Extension Request”) setting forth the proposed terms (which shall be determined in consultation with the Administrative Agent) of the Extended Commitments to be established, which shall be offered pro rata to each Lender under such Existing Revolver Tranche and satisfy the following:  (i) except as to interest rates, fees and final maturity date, Extended Commitments shall have the same terms as the Existing Revolver Tranche from which such Extended Commitments are to be amended; (ii) the Maturity Date of the Extended Commitments shall be later than the Maturity Date of the Commitments of such Existing Revolver Tranche; (iii) all Borrowings under the Commitments and repayments thereunder shall be made on a pro rata basis (except for (I) payments of interest and fees at different rates on Extended Commitments (and related outstandings) and (II) repayments required upon the termination date of the non-extending Commitments); (iv) the Extension Amendment may provide for other covenants and terms that apply solely to any period after the Latest Maturity Date that is in effect on the effective date of the Extension Amendment (immediately prior to the establishment of such Extended Commitments); (v) the Threshold Minimum Extension Condition shall be satisfied; and (vi) any applicable Borrower Minimum Extension Condition shall be satisfied unless waived by the Lead Borrower with the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed); provided further, that (A) the conditions precedent to a Borrowing set forth in SECTION 4.02  shall be satisfied as of the date of such Extension Amendment and at the time when any Revolving Credit Loans are made in respect of any Extended Commitment, (B) in no event shall the final maturity date of any Extended Commitments of a given Extension Series at the time of establishment thereof be earlier than the then Latest Maturity Date of any other Revolving Commitments hereunder, (C) any such Extended Commitments (and the Liens securing the same) shall be permitted by the terms of the Intercreditor Agreement (to the extent any Intercreditor Agreement is then in effect) and (D) all documentation in respect of the such Extension Amendment shall be consistent with the foregoing.  Any Extended Commitments amended pursuant to any Extension Request shall be designated a series (each, an “Extension Series”) of Extended Commitments for all purposes of this Agreement; provided that any Extended Commitments amended from an Existing Revolver Tranche may, to the extent provided in the applicable Extension Amendment, be designated as an increase in any previously established Extension Series with respect to such Existing Revolver Tranche.

 

(b)                                 Extension Request.  The Lead Borrower shall provide the applicable Extension Request at least ten (10) Business Days (or such shorter period as may be agreed by the Administrative Agent) prior to the date on which Lenders under the Existing Revolver Tranche are requested to respond, and shall agree to such procedures, if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably, to accomplish the purposes of this SECTION 2.27.  No Lender shall have any obligation to agree to provide any Extended Commitment pursuant to any Extension Request and any Lender not responding within such time period shall be deemed to have declined to provide any Extended Commitment.  Any Lender (each, an “Extending Lender”)

 

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wishing to have all or a portion of its Commitments under the Existing Revolver Tranche subject to such Extension Request amended into Extended Commitments shall notify the Administrative Agent (each, an “Extension Election”) on or prior to the date specified in such Extension Request of the amount of its Commitments under the Existing Revolver Tranche which it has elected to request be amended into Extended Commitments (subject to any minimum denomination requirements imposed by the Administrative Agent in its reasonable discretion).  In the event that the aggregate principal amount of Commitments under the Existing Revolver Tranche in respect of which applicable Lenders shall have accepted the relevant Extension Request exceeds the amount of Extended Commitments requested to be extended pursuant to the Extension Request, Commitments subject to Extension Elections shall be amended to reflect allocations of the Extended Commitments, which Extended Commitments shall be allocated as agreed by the Administrative Agent and the Borrowers.  The Extended Commitments for any Extension Series incurred under this SECTION 2.27 shall be in an aggregate principal amount equal to not less than $100,000,000 (the “Threshold Minimum Extension Condition”).  The Lead Borrower may, at its election and with the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), specify as a condition (the “Borrower Minimum Extension Condition”) to consummating any such Extension Amendment that a minimum amount (to be determined and specified in the relevant Extension Request but in no event to be less than the Threshold Minimum Extension Condition) of Commitments become Extended Commitments.

 

(c)                                  New Revolving Commitment Lenders.  Following any Extension Request made by the Borrowers in accordance with SECTIONS 2.27(a) and 2.27(b), if the Lenders shall have declined to agree during the period specified in SECTION 2.27(b) above to provide Extended Commitments in an aggregate principal amount equal to the amount requested by the Borrowers in such Extension Request, the Borrowers may request that banks, financial institutions or other institutional lenders or investors other than the Lenders or Extending Lenders which qualify as Eligible Assignees (the “New Commitment Lenders”), provide an Extended Commitment hereunder (a “New Commitment”); provided that such Extended Commitments of such New Commitment Lenders (i) shall be in an aggregate principal amount for all such New Commitment Lenders not to exceed the aggregate principal amount of Extended Commitments so declined to be provided by the existing Lenders and (ii) shall be on identical terms to the terms applicable to the terms specified in the applicable Extension Request (and any Extended Commitments provided by existing Lenders in respect thereof); provided further that, as a condition to the effectiveness of any Extended Commitment of any New Commitment Lender, the Administrative Agent, the Issuing Banks and the Swingline Lender shall have consented (such consent not to be unreasonably withheld) to each New Commitment Lender if such consent would be required under SECTION 9.07 for an assignment of Commitments to such Person.  Notwithstanding anything herein to the contrary, any Extended Commitment provided by New Commitment Lenders shall be pro rata to each New Commitment Lender.  Upon effectiveness of the Extension Amendment to which each such New Commitment Lender is a party, (a) the Commitments of all existing Lenders of each Type specified in the Extension Amendment in accordance with this SECTION 2.27 will be permanently reduced pro rata by an aggregate amount equal to the aggregate principal amount of the Extended Commitments of such New Commitment Lenders and (b) the Commitment of each such New Commitment Lender will become effective.  The Extended Commitments of New Commitment Lenders will be incorporated as Commitments hereunder in the same manner in which Extended Commitments of existing Lenders are incorporated hereunder pursuant to this SECTION 2.27, and for the avoidance of doubt, all Borrowings and repayments of Revolving Credit Loans from and after the effectiveness of such

 

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Extension Amendment shall be made pro rata across all Types of Commitments including such New Commitment Lenders (based on the outstanding principal amounts of the respective Types of Commitments) except for (x) payments of interest and fees at different rates for each Type of Commitments and (y) repayments required on the Maturity Date for any particular Type of Commitments.  Upon the effectiveness of each New Commitment pursuant to this SECTION 2.27(c), (a) each Lender of all applicable existing Types of Commitments immediately prior to such effectiveness will automatically and without further act be deemed to have assigned to each New Commitment Lender, and each such New Commitment Lender will automatically and without further act be deemed to have assumed, a portion of such Lender’s participations hereunder in outstanding Letters of Credit and Swingline Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the outstanding (i) participations hereunder in Letters of Credit and (ii) participations hereunder in Swingline Loans held by each Lender of each Type of Commitments (including each such New Commitment Lender) will equal the percentage of the Total Commitments of all Types of Lenders represented by such Lender’s Commitment and (b) if, on the date of such effectiveness, there are any Revolving Credit Loans outstanding, such Revolving Credit Loans shall on or prior to the effectiveness of such New Commitment be prepaid from the proceeds of Revolving Credit Loans outstanding after giving effect to such New Commitments, which prepayment shall be accompanied by accrued interest on the Revolving Credit Loans being prepaid and any costs incurred by any Lender in accordance with SECTION 2.14.  The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.

 

(d)                                 Extension Amendment.  Extended Commitments and New Commitments shall be established pursuant to an amendment (each, an “Extension Amendment”) to this Agreement among the Borrowers, the Administrative Agent and each Extending Lender and each New Commitment Lender, if any, providing an Extended Commitment or a New Commitment, as applicable, thereunder, which shall be consistent with the provisions set forth in SECTIONS 2.27(a), (b) and (c) above (but which shall not require the consent of any other Lender).  The effectiveness of any Extension Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in SECTION 4.02 and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (i) legal opinions, board resolutions and officers’ certificates consistent with those delivered on the Restatement Date other than changes to such legal opinion resulting from a Change in Law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent and (ii) reaffirmation agreements and/or such amendments to the Security Documents as may be reasonably requested by the Administrative Agent in order to ensure that the Extended Commitments or the New Commitments, as the case may be, are provided with the benefit of the applicable Loan Documents.  The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Extension Amendment.  Each of the parties hereto hereby agrees that this Agreement and the other Loan Documents may be amended pursuant to an Extension Amendment, without the consent of any other Lenders, to the extent (but only to the extent) necessary to (i) reflect the existence and terms of the Extended Commitments or the New Commitments, as the case may be, incurred pursuant thereto, and (ii) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Lead Borrower, to effect the provisions of this Section, and the Required Lenders hereby expressly authorize the Administrative Agent to enter into any such Extension Amendment; provided that no changes or amendments under this clause (ii) which otherwise would have required the consent

 

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of any non-Extending Lender under the proviso to SECTION 9.01 shall be made without the consent of such non-Extending Lender.

 

(e)                                  No conversion of Revolving Credit Loans pursuant to any Extension in accordance with this SECTION 2.27 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.

 

ARTICLE III

 

Representations and Warranties

 

To induce the Credit Parties to make the Revolving Credit Loans (including Swingline Loans) and to issue Letters of Credit, the Loan Parties, jointly and severally, make the following representations and warranties to each Credit Party with respect to each Loan Party:

 

SECTION 3.01              Existence, Qualification and Power; Compliance with Laws.

 

Each Loan Party and each of its Restricted Subsidiaries (a) is a Person duly organized or formed, validly existing and in good standing under the Applicable Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and in good standing under the Applicable Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Applicable Laws, orders, writs, injunctions and orders and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case referred to in clause (c), (d) or (e), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.  Schedule 3.01 annexed hereto sets forth, as of the Restatement Date, each Loan Party’s name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization, and its federal employer identification number.

 

SECTION 3.02              Authorization; No Contravention.

 

The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents, (b) conflict with or result in any breach or contravention of, or the creation of any Lien under or require any payment to be made under (i) any contractual obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Restricted Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Applicable Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause

 

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(b)(i), to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.03              Governmental Authorization; Other Consents.

 

No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Security Documents, (c) the perfection or maintenance of the Liens created under the Security Documents (including the priority thereof) or (d) the exercise by the Administrative Agent, the Collateral Agent or any Lender of their rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Security Documents, except for (i) filings necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.04              Binding Effect.

 

This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto.  This Agreement and each other Loan Document constitutes, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and by general principles of equity.

 

SECTION 3.05              Financial Statements; No Material Adverse Effect.

 

(a)                                 The Lead Borrower has heretofore furnished to the Administrative Agent the Consolidated balance sheets, statements of income, stockholders’ equity, and cash flows for the Lead Borrower and its Subsidiaries (i) as of and for the Fiscal Year ending January 28, 2012, audited by Ernst & Young LLP, independent registered public accountants, and (ii) as of and for the three (3) months ending April 28, 2012, certified under the applicable provisions of the Sarbanes-Oxley Act by a Financial Officer of the Lead Borrower.  Except for those matters set forth on Schedule 3.05, such financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of the Lead Borrower and its Subsidiaries as of such dates and for such periods in accordance with GAAP (except that such financial statements shall not be required to comply with Rule 3-10 of Regulation S-X promulgated under the Exchange Act), subject to year end adjustments and the absence of footnotes.

 

(b)                                 Since January 28, 2012, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

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(c)                                  The forecasts of Consolidated balance sheets, income statements and cash flow statements of the Lead Borrower and its Subsidiaries for each Fiscal Year ending after the Restatement Date until the Fiscal Year ending February 3, 2018, copies of which have been furnished to the Administrative Agent prior to the Restatement Date in a form reasonably satisfactory to the Administrative Agent, have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such forecasts, it being understood that actual results may vary from such forecasts and that such variations may be material.

 

(d)                                 As of the Restatement Date, neither the Lead Borrower nor any Subsidiary has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) the liabilities reflected on Schedule 6.03, (ii) obligations arising under this Agreement, (iii) the Term Loan Facility, the Senior Notes, the Senior Subordinated Notes, and the Subordinated Discount Notes, and (iv) liabilities incurred in the ordinary course of business) that, either individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.06              Litigation.

 

Except as disclosed in the Lead Borrower’s annual report (filed on Form 10-K) for the Fiscal Year ending January 28, 2012 and on the quarterly report (filed on Form 10-Q) for the Fiscal Quarter ending April 28, 2012, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Loan Party, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Parent or any of its Subsidiaries or against any of their properties or revenues that (a) either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) involve any of the Loan Documents, which could reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.07              No Default.

 

Neither the Parent nor any Subsidiary is in default under or with respect to, or a party to, any contractual obligation or Material Indebtedness that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.08              Ownership of Property; Liens.

 

(a)                                 Each Loan Party and each of its Restricted Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, or easements or other limited property interests in, all real property necessary in the ordinary conduct of its business, free and clear of all Liens except (i) for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes, (ii) Liens permitted by SECTION 6.01 and except (iii) where the failure to have such title or leasehold interests could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b)                                 Schedule 3.08(b)(i) sets forth the address (including county) of all Real Estate that is owned by the Loan Parties as of the Restatement Date.  Schedule 3.08(b)(ii) sets forth the address (including county) of all Real Estate that is leased by the Loan Parties as of the Restatement Date, together with a list of the lessor with respect to each such Lease.  Except as would not reasonably be expected to result in a Material Adverse Effect, to the knowledge of the Responsible Officers of the

 

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Loan Parties each of such Leases is in full force and effect and the Loan Parties are not in default of the terms thereof.

 

SECTION 3.09              Environmental Compliance.

 

(a)                                 There are no claims, actions, suits, or proceedings alleging potential liability or responsibility for violation of, or otherwise relating to, any Environmental Law that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Except as specifically disclosed in Schedule 3.09(b) or except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) none of the properties currently or formerly owned, leased or operated by any Loan Party or any of its Restricted Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state, provincial or local list or is adjacent to any such property; (ii) to the knowledge of the Loan Parties, there are no, and never have been, any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property currently owned, leased or operated by any Loan Party or any of its Restricted Subsidiaries or, to its knowledge, on any property formerly owned or operated by any Loan Party or any of its Restricted Subsidiaries; (iii) to the knowledge of the Loan Parties, there is no asbestos or asbestos-containing material, the renewal or remediation of which is required by any Environmental Law, on any property currently owned or operated by any Loan Party or any of its Restricted Subsidiaries; and (iv) to the knowledge of the Loan Parties, Hazardous Materials have not been released, discharged or disposed of by any Person on any property currently or formerly owned, leased or operated by any Loan Party or any of its Restricted Subsidiaries and Hazardous Materials have not otherwise been released, discharged or disposed of by any of the Loan Parties and their Restricted Subsidiaries at any other location.

 

(c)                                  The properties owned, leased or operated by the Loan Parties and their Restricted Subsidiaries do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, (ii) require remedial action under, or (iii) could give rise to liability under, Environmental Laws, which violations, remedial actions and liabilities, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

 

(d)                                 Except as specifically disclosed in Schedule 3.09(d), neither any Loan Party nor any of their Restricted Subsidiaries is undertaking, or has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law except for such investigation or assessment or remedial or response action that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

(e)                                  All Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party

 

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or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result, individually or in the aggregate, in a Material Adverse Effect.

 

(f)                                   Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect, none of the Loan Parties and their Subsidiaries has contractually assumed any liability or obligation under or relating to any Environmental Law.

 

(g)                                  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not require any notification, registration, filing, reporting, disclosure, investigation, remediation or cleanup pursuant to any applicable Environmental Law, except for any requirement the noncompliance with which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(h)                                 As of the Restatement Date, the Lead Borrower has made available to the Administrative Agent and the Lenders all material documents, studies, and reports in the possession, custody or control of the Loan Parties concerning compliance with or liability under Environmental Law, including those concerning the actual or suspected existence of Hazardous Material at Real Estate or facilities currently or formerly owned, operated, leased or used by the Loan Parties which could reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.10              Taxes.

 

Except as set forth in Schedule 3.10 and except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Parent and its Restricted Subsidiaries have filed all federal, state, provincial and other tax returns and reports required to be filed, and have paid all federal, state, provincial and other Taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those (a) which are not overdue by more than thirty (30) days or (b) which are being contested in good faith by appropriate actions diligently conducted and for which adequate reserves have been provided in accordance with GAAP.  As of the Restatement Date, none of the Parent or its Restricted Subsidiaries is a party to any tax sharing agreement.

 

SECTION 3.11              ERISA; Plan Compliance.

 

(a)                                 Except as set forth in Schedule 3.11 or as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance in with the applicable provisions of ERISA, the Code, the PBA and other federal, state or provincial Applicable Laws.

 

(b)                                 (i) No ERISA Event has occurred during the five year period prior to the date on which this representation is made or deemed made with respect to any Plan; (ii) no Plan has an “accumulated funding deficiency” (as defined in Section 412 of the Code), whether or not waived; (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability)

 

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under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, except, with respect to each of the foregoing clauses of this SECTION 3.11(b), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(c)                                  The Loan Parties are in compliance with the requirements of the PBA and other federal, provincial or state laws with respect to each Plan, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect.  No fact or situation that may reasonably be expected to result in a Material Adverse Effect exists in connection with any Plan.  No Loan Party has any material withdrawal liability in connection with a Plan.  No Pension Event has occurred which could reasonably be expected to result in a Material Adverse Effect.  No lien has arisen, choate or inchoate, in respect of a Loan Party or its Subsidiaries or their property in connection with any Plan (except for contribution amounts not yet due).  As of the Restatement Date, no Canadian Loan Party maintains or contributes to any Plan that provides benefits on a defined basis.

 

SECTION 3.12              Subsidiaries; Equity Interests.

 

As of the Restatement Date, neither the Lead Borrower nor any Loan Party has any Subsidiaries other than those specifically disclosed in Schedule 3.12, and all of the outstanding Capital Stock in their respective Subsidiaries has been validly issued, is fully paid and nonassessable (other than with respect to Michaels of Canada, ULC) and all Capital Stock owned by the Lead Borrower or a Loan Party is owned free and clear of all Liens except (i) those created under the Security Documents, (ii) those to secure the Term Loan Facility, and (iii) any nonconsensual Lien that is permitted under SECTION 6.01.  As of the Restatement Date, Schedule 3.12 (a) sets forth the name and jurisdiction of each Subsidiary, and (b) sets forth the ownership interest of the Lead Borrower and any other Subsidiary in each Subsidiary, including the percentage of such ownership.

 

SECTION 3.13              Margin Regulations; Investment Company Act.

 

(a)                                 No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Borrowings will be used for any purpose that violates Regulation U.

 

(b)                                 None of the Lead Borrower, any Person Controlling the Lead Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

 

SECTION 3.14              Disclosure.

 

No report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party to any Credit Party in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to

 

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make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information and pro  forma financial information, the Lead Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation; it being understood that such projections may vary from actual results and that such variances may be material.

 

SECTION 3.15              Intellectual Property; Licenses, Etc.

 

Schedule 3.15 sets forth, as of the Restatement Date, with respect to each Loan Party a list of all of the registered Intellectual Property owned by such Loan Party and all applications for the registrations or issuance thereof.  Each such registration and application that is necessary to the business of such Loan Party is subsisting.  Each of the Loan Parties and their Subsidiaries own, license or possess the right to use, all of the trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how database rights, design rights and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of their respective businesses as currently conducted, and, without conflict with the rights of any Person, except to the extent such conflicts, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  No IP Rights, advertising, product, process, method, substance, part or other material used by any Loan Party or any Subsidiary in the operation of their respective businesses as currently conducted infringes upon any rights held by any Person except for such infringements, individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect.  No claim or litigation regarding any of the IP Rights, is pending or, to the knowledge of any Borrower, threatened against any Loan Party or Subsidiary, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.16              Solvency.

 

On the Restatement Date, after giving effect to the transactions contemplated by this Agreement, the Loan Parties, on a Consolidated basis, are Solvent.

 

SECTION 3.17              Subordination of Junior Financing.

 

The Obligations are “Senior Debt,” “Senior Indebtedness,” “Guarantor Senior Debt” “Designated Senior Indebtedness” or “Senior Secured Financing” (or any comparable term) under, and as defined in, any Senior Subordinated Note Documents, any Subordinated Discount Note Documents and any other Junior Financing.

 

SECTION 3.18              Labor Matters.

 

Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect or as disclosed in the Lead Borrower’s annual report (filed on Form 10-K) for the Fiscal Year ending January 28, 2012 and on the quarterly report (filed on Form 10-Q) for the Fiscal Quarter ending April 28, 2012:  (a) there are no strikes or other labor disputes against any of the Parent or its Subsidiaries pending or, to the knowledge of the Lead Borrower, threatened; (b) hours worked by and payment made to employees of each of the Parent or its Restricted Subsidiaries have not been in violation of the Fair Labor Standards Act or any other Applicable

 

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Laws dealing with such matters; and (c) all payments due from any of the Parent or its Restricted Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.  Except as disclosed in the Lead Borrower’s annual report (filed on Form 10-K) for the Fiscal Year ending January 28, 2012 and on the quarterly report (filed on Form 10-Q) for the Fiscal Quarter ending April 28, 2012, as of the Restatement Date, no Loan Party is a party to or bound by any collective bargaining agreement or any similar agreement. As of the Restatement Date, there are no representation proceedings pending or, to the actual knowledge of any Responsible Officer of any Loan Party, threatened to be filed with the National Labor Relations Board or other applicable Governmental Authority, and no labor organization or group of employees of any Loan Party has made a pending demand in writing for recognition. As of the Restatement Date, the consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party is bound to the extent that such would be reasonably expected to result in a Material Adverse Effect.

 

SECTION 3.19              Compliance with Laws and Agreements.

 

Each Loan Party is in compliance with all Applicable Law, except where the failure to comply, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.  Without limiting the generality of the foregoing, each Loan Party has obtained all permits, licenses and other authorizations which are required with respect to the ownership and operations of its business, except where the failure to obtain such permits, licenses or other authorizations, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  Each Loan Party is in compliance with all terms and conditions of all such permits, licenses, orders and authorizations, except where the failure to comply with such terms or conditions, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.20              Security Documents.

 

The Security Documents create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest and hypothec in the Collateral described therein as security for the Obligations to the extent that a legal, valid, binding and enforceable security interest in such Collateral may be created under any Applicable Law of the United States of America and any states thereof, including, without limitation, the applicable Uniform Commercial Code, and under any Applicable Law of Canada and any provinces or territories thereof, including, without limitation, the PPSA and the Civil Code, and the Security Documents constitute, or will upon the filing of financing statements and the obtaining of “control”, in each case, as applicable, with respect to the relevant Collateral as required under the applicable Uniform Commercial Code, PPSA or Civil Code, the creation of a fully perfected first priority Lien on, and security interest and hypothec in, all right, title and interest of the Borrowers and each Facility Guarantor thereunder in such Collateral, in each case prior and superior in right to any other Person (other than Permitted Encumbrances having priority under Applicable Law and with respect to the Term Priority Collateral), except as permitted hereunder or under any other Loan Document, in each case to the extent that a security interest may be perfected by the filing of a financing statement or hypothec under the applicable Uniform Commercial Code, PPSA or Civil Code, or by obtaining “control”.

 

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SECTION 3.21              Insurance.

 

The properties of the Loan Parties are insured, with financially sound and reputable insurance companies, against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Parent and its Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons.  Schedule 5.07 sets forth a description of all insurance maintained by or on behalf of the Loan Parties as of the Restatement Date. As of the Restatement Date, each insurance policy listed on Schedule 5.07 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

 

ARTICLE IV

 

Conditions

 

SECTION 4.01              Conditions of Initial Credit Extension.

 

The effectiveness of this Agreement is subject to satisfaction of the following conditions precedent (except as expressly set forth in the Post-Closing Letter):

 

(a)                                 The Administrative Agent (or its counsel) shall have received from each Loan Party and the Required Lenders either (i) a counterpart of this Agreement and all other applicable Loan Documents signed on behalf of each such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission or electronic pdf copy of a signed signature page of this Agreement) that each such party has signed a counterpart of this Agreement and all other Loan Documents.

 

(b)                                 The Administrative Agent shall have received a written opinion (addressed to the Administrative Agent, the Collateral Agent and the Lenders and dated the Restatement Date) of Ropes & Gray LLP, counsel for the Loan Parties, McInnes Cooper, Canadian counsel for the Loan Parties, and each law firm set forth on Schedule 4.01(b), in each case covering such matters relating to the Loan Parties, the Loan Documents or the transactions contemplated thereby as the Administrative Agent shall reasonably request. The Loan Parties hereby request such counsel to deliver such opinions.

 

(c)                                  The Administrative Agent shall have received Organization Documents and such other documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization and existence of each Loan Party, the authorization of the transactions contemplated by the Loan Documents, incumbency certificates evidencing the identity, authority and capacity of each of certain Responsible Officers thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party on the Restatement Date and any other legal matters relating to the Loan Parties, the Loan Documents or the transactions contemplated thereby, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.

 

(d)                                 The Administrative Agent shall have received a Borrowing Base Certificate dated as of the Restatement Date, relating to the month ended August 31, 2012, and executed by a Financial Officer of the Lead Borrower.

 

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(e)                                  The Administrative Agent shall have received a certificate, reasonably satisfactory in form and substance to the Administrative Agent, certifying that after giving effect to the consummation of the transactions contemplated under this Agreement and the other Loan Documents as of the Restatement Date, no Default or Event of Default exists and the Loan Parties, taken as a whole, are Solvent;

 

(f)                                   All representations and warranties contained in this Agreement and the other Loan Documents or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects on and as of the Restatement Date, other than representations and warranties that relate solely to an earlier date, which shall be true and correct in all material respects as of such earlier date, provided that any representations and warranties which are qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such respective dates.

 

(g)                                  No Material Adverse Effect shall have occurred since January 28, 2012 and the Administrative Agent shall have received a certificate from a Responsible Officer of the Lead Borrower to that effect.

 

(h)                                 There shall not be any other Material Indebtedness of the Loan Parties outstanding immediately after the Restatement Date other than under (i) the Senior Notes, (ii) the Senior Subordinated Notes, (iii) the Subordinated Discount Notes, (iv) the Term Loan Facility, (v) this Agreement, and (vi) Permitted Indebtedness.

 

(i)                                     There shall not be any Capital Stock of the Lead Borrower (or securities convertible into or exchangeable for Capital Stock or rights or options to acquire Capital Stock) outstanding immediately after the Restatement Date other than Capital Stock directly, or indirectly through one or more holding companies, held by the Sponsors, Highfields Capital, members of management and other co-investors reasonably acceptable to the Administrative Agent.

 

(j)                                    Lenders (other than Wells Fargo) having Commitments aggregating at least $450,000,000 shall have become Lenders hereunder.

 

(k)                                 The Collateral Agent shall have received results of searches or other evidence reasonably satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to the Collateral Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Encumbrances and Liens for which termination statements and releases or subordination agreements are being tendered on the Restatement Date.

 

(l)                                     The Administrative Agent shall be reasonably satisfied with the amount, types and terms and conditions of all insurance maintained by the Loan Parties; and the Administrative Agent shall have received endorsements naming the Collateral Agent, on behalf of the Lenders, as an additional insured or lender’s loss payee, as the case may be, under all insurance policies to be maintained with respect to the properties of the Loan Parties forming part of the Collateral.

 

(m)                             The Administrative Agent shall be reasonably satisfied that all fees due on the Restatement Date, and, to the extent invoiced at least one (1) Business Day prior to the Restatement Date, all Credit Party Expenses incurred in connection with the establishment of the credit facility

 

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contemplated hereby (including the reasonable fees and expenses of counsel to the Administrative Agent and the Collateral Agent), shall be paid in full.

 

(n)                                 After giving effect to this Agreement and the transactions contemplated hereby, no Default or Event of Default shall be continuing.

 

(o)                                 After giving effect to this Agreement and the transactions contemplated hereby, Availability shall be not less than $200,000,000.

 

(p)                                 The Collateral Agent shall have received the Security Documents (together with endorsements to title insurance in form, scope and amount reasonably satisfactory in all respects to the Collateral Agent) and certificates evidencing any stock being pledged thereunder, together with undated stock powers executed in blank, each duly executed by the applicable Loan Parties.

 

(q)                                 The Collateral Agent shall have received (i) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create or perfect in the United States the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the reasonable satisfaction of the Collateral Agent, (ii) the Credit Card Notifications and Blocked Account Agreements required pursuant to SECTION 2.18 hereof, and (iii) with respect to any Loan Party located in or organized under the laws of Canada, all filings and recordations required by Applicable Law of Canada (including, without limitation, under the PPSA and the Civil Code) or reasonably requested by the Collateral Agent to be filed, registered or recorded to create or perfect in Canada the Collateral Agent’s Lien in any Collateral located in Canada.

 

(r)                                    The Administrative Agent shall have received, at least five (5) Business Days prior to the Restatement Date, all documentation and other information that is required by regulatory authorities and/or the Administrative Agent’s due diligence investigation under applicable “know your customer” and anti-money laundering rules and regulations, including the KYC Provisions (as defined in SECTION 9.19 below), to the extent such documentation and other information has been requested in writing by the Administrative Agent at least ten (10) Business Days prior to the Restatement Date, and the results of such investigation shall be reasonably satisfactory to the Administrative Agent.

 

(s)                                   The Administrative Agent shall have received and be satisfied with detailed financial projections, including, in each case, a consolidated income statement, balance sheet, statement of cash flow, Availability analysis and business assumptions for the Borrowers on (x) a monthly basis for the twelve month period following the Restatement Date, and (y) on an annual basis, for each Fiscal Year thereafter through the Maturity Date.

 

(t)                                    To the extent not otherwise set forth in this SECTION 4.01, there shall have been delivered to the Administrative Agent each of the instruments, agreements, opinions, certificates and other documents identified on the closing agenda attached hereto as Exhibit I as being required on or before the Restatement Date.

 

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SECTION 4.02              Conditions Precedent to Each Revolving Credit Loan and Each Letter of Credit.

 

The obligation of the Lenders to make each Revolving Credit Loan and of the Issuing Banks to issue each Letter of Credit on or after the Restatement Date is also subject to the satisfaction by the Loan Parties or the waiver of each of the following conditions precedent:

 

(a)                                 The Administrative Agent shall have received a notice with respect to such Borrowing or issuance, as the case may be, as required by Article II, and in the case of the issuance of a Letter of Credit, the applicable Issuing Bank shall have received notice with respect thereto in accordance with SECTION 2.13.

 

(b)                                 All representations and warranties contained in this Agreement and the other Loan Documents or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date, other than representations and warranties that relate solely to an earlier date, which shall be true and correct in all material respects as of such earlier date, provided that any representations and warranties which are qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such respective dates.

 

(c)                                  On the date of each Borrowing hereunder and the issuance, amendment and extension of each Letter of Credit and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing.

 

(d)                                 Before and after giving effect to each Borrowing hereunder, the proceeds of which will be used to fund a Restricted Payment or a payment in respect of Subordinated Indebtedness, the Loan Parties, on a Consolidated basis, shall be Solvent.

 

(e)                                  The aggregate outstanding amount of Credit Extensions to, or for the account of, the Borrowers, after giving effect to the applicable Borrowing or issuance or renewal of a Letter of Credit, shall not exceed the Loan Cap on such date (except for Permitted Overadvances).

 

Each Notice of Borrowing (other than a notice of Borrowing requesting only a conversion of Revolving Credit Loans to the other Type or a continuation of LIBO Loans, but including any request for a Swingline Loan) and Letter of Credit Application submitted by the Lead Borrower shall be deemed to be a representation and warranty by the Borrowers that the conditions specified in SECTION 4.02 have been satisfied on and as of the date of the applicable Credit Extension.  The conditions set forth in this SECTION 4.02 are for the sole benefit of the Credit Parties but until the Required Lenders direct the Administrative Agent to cease making Revolving Credit Loans (including Swingline Loans) and the Issuing Banks to cease issuing Letters of Credit, the Lenders will fund their Commitment Percentage of all Revolving Credit Loans and participate in all Swingline Loans and Letters of Credit whenever made or issued, which are requested by the Lead Borrower and which, notwithstanding the failure of the Loan Parties  to comply with the provisions of this ARTICLE IV, agreed to by the Administrative Agent and, with respect to the issuance of Letters of Credit only, the applicable Issuing Bank; provided, however, the making of any such Revolving Credit Loans or the issuance of any

 

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Letters of Credit shall not be deemed a modification or waiver by any Credit Party of the provisions of this ARTICLE IV on any future occasion or a waiver of any rights of the Credit Parties as a result of any such failure to comply.

 

ARTICLE V

 

Affirmative Covenants

 

Until (i) the Commitments have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan (including Swingline Loans) and all fees and other Obligations (other than contingent indemnity obligations with respect to then unasserted claims and the Other Liabilities) shall have been paid in full, (iii) all Letters of Credit shall have expired or terminated (or been cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and (iv) all Letter of Credit Outstandings have been reduced to zero (or cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank), each Loan Party covenants and agrees with the Credit Parties that:

 

SECTION 5.01              Financial Statements.

 

The Lead Borrower will deliver to the Administrative Agent for prompt further distribution to each Lender:

 

(a)                                 as soon as available, but in any event within ninety (90) days after the end of each Fiscal Year of the Lead Borrower, a Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related Consolidated statements of income or operations, stockholders’ equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of Ernst & Young, LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

 

(b)                                 as soon as available, but in any event within forty-five (45) days after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of the Lead Borrower, a Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and the related (i) Consolidated statements of income or operations for such Fiscal Quarter and for the portion of the Fiscal Year then ended and (ii) Consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail and certified by a Responsible Officer of the Lead Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Lead Borrower and its Subsidiaries in accordance with GAAP, subject only to year-end adjustments and the absence of footnotes;

 

(c)                                  as soon as available, but in any event within thirty-five (35) days after the end of each of the first two (2) Fiscal Months of each Fiscal Quarter of the Lead Borrower, a Consolidated

 

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balance sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Month, and the related (i) Consolidated statements of income or operations for such Fiscal Month and for the portion of the Fiscal Year then ended and (ii) Consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Month of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail and certified by a Responsible Officer of the Lead Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Lead Borrower and its Subsidiaries in accordance with GAAP, subject only to year-end adjustments and the absence of footnotes;

 

(d)                                 as soon as available, and in any event no later than ninety (90) days after the end of each Fiscal Year of the Lead Borrower, a detailed consolidated budget by quarter (or, upon request of the Administrative Agent, by month) for the following Fiscal Year (including a projected Consolidated balance sheet of the Lead Borrower and its Subsidiaries as of the end of each quarter (or, upon request of the Administrative Agent, as of the end of each month) of the following Fiscal Year, the related Consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such Fiscal Year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on estimates, information and assumptions believed to be reasonable and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect;

 

(e)                                  On the 10th Business Day of each month (or more frequently as the Lead Borrower may elect), a certificate in the form of Exhibit H (a “Borrowing Base Certificate”) showing the Borrowing Base as of the close of business on the last day of the immediately preceding Fiscal Month (or in the case of a voluntary delivery of a Borrowing Base Certificate at the election of the Lead Borrower, a subsequent date), each Borrowing Base Certificate to be certified as complete and correct in all material respects on behalf of the Lead Borrower by a Financial Officer of the Lead Borrower; provided  that if Availability is less than (x) fifteen percent (15%) of the Loan Cap for five (5) consecutive Business Days, or (y) at any time, $65,000,000, then such Borrowing Base Certificate shall be furnished on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), as of the close of business on the immediately preceding Saturday, and the Lead Borrower shall continue to furnish a Borrowing Base Certificate on such basis until such time as Availability shall have exceeded such amount for thirty (30) consecutive days; provided  further that if the Borrowers elect to furnish the Administrative Agent with a Borrowing Base Certificate on a more frequent basis than is otherwise required pursuant to this SECTION 5.01(e), then the Lead Borrower shall continue to furnish a Borrowing Base Certificate on such basis from the date of such election through the remainder of the Fiscal Year in which such election was made; provided  further that in addition to the foregoing, the Lead Borrower shall, contemporaneously with the occurrence of any Disposition of the type described in clauses (l), (m), (o), (p), (r) or (s) of SECTION 6.05, furnish a Borrowing Base Certificate showing the Borrowing Base after giving effect to such Disposition;

 

(f)                                   simultaneously with the delivery of each set of Consolidated financial statements referred to in SECTION 5.01(a), SECTION 5.01(b) and SECTION 5.01(c) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such Consolidated financial statements; and

 

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(g)                                  promptly upon receipt thereof, copies of all management letters from the Loan Parties’ independent certified public accountants submitted by such accountants to management in connection with their annual audit (i) commenting on any material weakness in the Loan Parties’ internal controls, and (ii) subject to the consent of such accountants (which consent the Loan Parties shall in good faith seek to obtain), commenting on any other matters relating to the Loan Parties’ internal controls.

 

Notwithstanding the foregoing, the obligations in paragraphs (a), (b) and (c) of this SECTION 5.01 may be satisfied with respect to financial information of the Lead Borrower and its Restricted Subsidiaries by furnishing (A) the Consolidated financial statements of Holdco (or any direct or indirect parent of Holdco), or (B) the Lead Borrower’s or Holdco’s (or any direct or indirect parent of Holdco), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC, provided that to the extent that such information relates to Holdco (or any direct or indirect parent of Holdco), such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdco (or such direct or indirect parent) and its Restricted Subsidiaries, on the one hand, and the Lead Borrower and its Restricted Subsidiaries on the other hand, and (ii) to the extent such information is in lieu of information required to be provided under SECTION 5.01(a), such materials are accompanied by a report and opinion of Ernst & Young LLP or any other independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit.

 

SECTION 5.02              Certificates; Other Information.

 

The Lead Borrower will deliver to the Administrative Agent for prompt further distribution to each Lender:

 

(a)                                 [Reserved]

 

(b)                                 contemporaneously with the delivery of the financial statements referred to in SECTION 5.01(a), SECTION 5.01(b) and SECTION 5.01(c), a duly completed Compliance Certificate signed by a Responsible Officer of the Lead Borrower in the form of Exhibit G hereto (a “Compliance Certificate”) (i) certifying as to whether a Default or Event of Default has occurred and, if a Default or Event of Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations with respect to the average daily Availability (based on the most recent monthly and/or weekly Borrowing Base Certificates furnished to the Administrative Agent) and the Consolidated Fixed Charge Coverage Ratio for such period; provided that such calculations of the Consolidated Fixed Charge Coverage Ratio shall not be required to be included with any Compliance Certificate delivered contemporaneously with the financial statements referred to in SECTION 5.01(c), (iii) detailing all Store openings and Store closings during the immediately preceding fiscal period, and stating the aggregate number of the Loan Parties’ Stores as of the first day of the current fiscal period, (iv) setting forth in reasonable detail the status of rental payments for each of the Loan Parties’ (A) warehouses and distribution centers, and (B) other leased locations in the Landlord Lien States designated by the Administrative Agent in its

 

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commercially reasonable judgment (which, as of the Restatement Date, are Washington, Pennsylvania and Virginia), and (v) stating whether any change in GAAP or in the application thereof has occurred since the date of the Lead Borrower’s most recent audited financial statements and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such Compliance Certificate;

 

(c)                                  promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which the Lead Borrower or Holdco files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

 

(d)                                 promptly after the furnishing thereof, copies of any material requests or material notices received by any Loan Party (other than in the ordinary course of business) or material statements or material reports furnished to any holder of debt securities of any Loan Party or of any of its Restricted Subsidiaries pursuant to the terms of the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, or the Term Loan Facility and not otherwise required to be furnished to the Lenders pursuant to any other clause of this SECTION 5.02;

 

(e)                                  together with the delivery of each Compliance Certificate pursuant to SECTION 5.02(b), (i) a report setting forth the information required by Section 4.01(e) of the Security Agreement or confirming that there has been no change in such information since the Restatement Date or the date of the last such report), and (ii) a list of each Subsidiary that identifies each Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary as of the date of delivery of such Compliance Certificate;

 

(f)                                   The financial and collateral reports described on Schedule 5.02(f) hereto, at the times set forth in such Schedule 5.02(f); and

 

(g)                                  After the occurrence and during the continuance of a Cash Dominion Event, a detailed summary of all Net Proceeds received from any Prepayment Event, in each case within five (5) Business Days after receipt of such Net Proceeds other than from sales of Inventory in the ordinary course of business;

 

(h)                                 promptly when available, (i) a copy of the acquisition agreement and other acquisition documents relating to any Permitted Acquisition and (ii) updated schedules to this Agreement and the Security Agreement after giving effect to such Permitted Acquisition, appropriate financial statements of the Person which is the subject of such Permitted Acquisition and financial statements prepared on a Pro Forma Basis (to the extent available) after giving effect to such Permitted Acquisition (including balance sheets, cash flows and income statements);

 

(i)                                     at least five (5) Business Days (or such later date approved by the Administrative Agent in its sole discretion) prior to the making of (A) any Specified Payment, or

 

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(B) any Restricted Payment of the type described in SECTION 6.06(k), a detailed calculation of the Consolidated Fixed Charge Coverage Ratio (solely to the extent required), Pro Forma Availability Condition and Availability (solely to the extent required), and all components of each of the foregoing, with such supporting documentation as the Administrative Agent may reasonably request; and

 

(j)                                    promptly, such additional information regarding the business, legal, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.

 

Documents required to be delivered pursuant to SECTION 5.01(a), SECTION 5.01(b), SECTION 5.01(c) or SECTION 5.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Lead Borrower posts such documents, or provides a link thereto on the Lead Borrower’s website on the Internet at the website address listed on Schedule 5.02; or (ii) on which such documents are posted on the Lead Borrower’s behalf on IntraLinks/IntraAgency, SyndTrak or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that:  (i) upon written request by the Administrative Agent, the Lead Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Lead Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Lead Borrower shall be required to provide paper copies of the Compliance Certificates required by SECTION 5.02(b) to the Administrative Agent.  Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.

 

SECTION 5.03              Notices.

 

Promptly after obtaining knowledge thereof, the Lead Borrower shall notify the Administrative Agent in writing:

 

(a)                                 of the occurrence of any Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and

 

(b)                                 of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including arising out of or resulting from (i) breach or non-performance of, or any default or event of default under, a contractual obligation of any Loan Party or any Subsidiary, (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary and any Governmental Authority, (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary, including pursuant to any applicable Environmental Laws or in respect of IP Rights or the assertion or occurrence of any

 

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noncompliance by any Loan Party or any of its Subsidiaries with, or liability under, any Environmental Law or permit, (iv) any strikes, lockouts or slowdowns against any Loan Party, or (v) the occurrence of any ERISA Event or any Pension Event.

 

(c)                                  Any change in any Loan Party’s chief executive officer or chief financial officer;

 

(d)                                 Any material change in any Loan Party’s accounting or financial reporting practices;

 

(e)                                  The filing of any Lien for unpaid Taxes against any Loan Party in excess of $25,000,000;

 

(f)                                   The discharge by any Loan Party of its present independent accountants or any withdrawal or resignation by such independent accountants;

 

(g)                                  Any casualty or other insured damage to any portion of the Collateral included in the Borrowing Base in excess of $25,000,000, or the commencement of any action or proceeding for the taking of any interest in a portion of the Collateral included in the Borrowing Base in excess of $25,000,000 or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding, and

 

(h)                                 The receipt of any notice of default by a Loan Party under, or notice of termination of, any Lease for any of the Loan Parties’ distribution centers or warehouses.

 

Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Lead Borrower (x) that such notice is being delivered pursuant to this SECTION 5.03, and (y) setting forth details of the occurrence referred to therein and stating what action the Lead Borrower has taken and proposes to take with respect thereto.

 

SECTION 5.04              Payment of Taxes, Etc.

 

The Loan Parties shall pay, discharge or otherwise satisfy as the same shall become due and payable, all its obligations and liabilities in respect of Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, except, in each case, (a) where the validity or amount thereof is being contested in good faith by appropriate actions and such Loan Party or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, and such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, or (b) to the extent the failure to pay or discharge the same could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 5.05              Preservation of Existence, Etc.

 

The Loan Parties shall (a) preserve, renew and maintain in full force and effect their legal existence under the Applicable Laws of the jurisdiction of its organization except in a transaction permitted by SECTION 6.04 or SECTION 6.05, and (b) take all reasonable action to maintain all rights, privileges (including its good standing), permits, licenses and franchises necessary or desirable in the normal conduct of its business, except (i) to the extent that failure to do so could

 

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not reasonably be expected to have a Material Adverse Effect or (ii) pursuant to a transaction permitted by SECTION 6.04 or SECTION 6.05.

 

SECTION 5.06              Maintenance of Properties.

 

Unless the failure to do so could not reasonably be expected to have a Material Adverse Effect, each Loan Party shall (a) maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice.

 

SECTION 5.07              Maintenance of Insurance.

 

(a)                                 The Loan Parties shall maintain with financially sound and reputable insurance companies, insurance with respect to their properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Parent and its Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons.  The Loan Parties shall furnish to the Administrative Agent, upon written request, full information as to the insurance carried.

 

(b)                                 Fire and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a non-contributing mortgage clause (regarding improvements to real property) and a lenders’ loss payable clause (regarding personal property), in form and substance reasonably satisfactory to the Administrative Agent, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies jointly to a Loan Party and the Administrative Agent (it being understood and agreed that such Loan Party shall promptly provide any endorsements with respect to such proceeds or otherwise remit such proceeds directly to the Administrative Agent to the extent required hereby), (ii) a provision to the effect that none of the Loan Parties, Credit Parties (in their capacity as such) or any other Affiliate of a Loan Party shall be a co-insurer (the foregoing not being deemed to limit the amount of self-insured retention or deductibles under such policies, which self-insured retention or deductibles shall be consistent with business practices in effect on the Restatement Date or as otherwise determined by the Responsible Officers of the Loan Parties acting reasonably in their business judgment), and (iii) such other provisions as the Administrative Agent may reasonably require from time to time to protect the interests of the Credit Parties. Commercial general liability policies shall be endorsed to name the Administrative Agent as an additional insured. The Loan Parties shall use commercially reasonable efforts to obtain endorsements to each such casualty or liability policy referred to in this SECTION 5.07(b) providing (a) that such policy shall not be canceled, modified in any manner that would cause this SECTION 5.07 to be violated, or not renewed (i) by reason of nonpayment of premium except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Administrative Agent (giving the Administrative Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Administrative Agent, and (b) that notice of any cancellation by the insurer shall be provided to the Administrative Agent in addition to the named insured under such policy. The Lead Borrower shall deliver to the Administrative Agent, prior to the

 

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cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent, including an insurance binder) together with evidence satisfactory to the Administrative Agent of payment of the premium therefor.

 

(c)                                  The Administrative Agent acknowledges that the insurance policies described on Schedule 5.07 are satisfactory to it as of the Restatement Date and are in compliance with the provisions of this SECTION 5.07.

 

SECTION 5.08              Compliance with Laws.

 

Each Loan Party shall comply in all material respects with the requirements of all Applicable Laws applicable to it or to its business or property, except where the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 5.09              Books and Records.

 

Each Loan Party shall maintain proper books of record and account, in which entries that are full, true and correct in all material respects shall be made of all material financial transactions and matters involving the assets and business of the Lead Borrower or its Restricted Subsidiaries, as the case may be and shall cause financial statements to be prepared in conformity with GAAP consistently applied.

 

SECTION 5.10              Inspection Rights.

 

(a)                                 Each Loan Party will permit any representatives designated by the Administrative Agent, upon reasonable prior notice, to visit and inspect its properties, to discuss its affairs, finances and condition with its officers and to examine and make extracts from its books and records, all at such reasonable times during normal business hours and as may be reasonably requested upon reasonable advance notice to the Lead Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise the rights of the Administrative Agent and the Lenders under this SECTION 5.10(a) and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year, absent the existence of an Event of Default and only one (1) such time shall be at the Lead Borrower’s expense; provided  further that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Lead Borrower at any time during normal business hours and upon reasonable advance notice.  The Administrative Agent and the Lenders shall give the Lead Borrower the opportunity to participate in any discussions with the Lead Borrower’s independent public accountants.  Nothing contained in this SECTION 5.10(a) shall be deemed to limit or modify the rights of the Administrative Agent under SECTION 5.10(b) hereof.

 

(b)                                 Each Loan Party will from time to time upon the request of the Administrative Agent, permit the Administrative Agent or professionals (including consultants, accountants, lawyers and appraisers) retained by the Administrative Agent, on reasonable prior notice and during normal business hours, to conduct appraisals and commercial finance examinations, including, without limitation, of (i) the Borrowers’ practices in the computation of the then Borrowing Base, and (ii) the assets included in the then Borrowing Base and related financial information such as, but not limited

 

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to, sales, gross margins, payables, accruals and reserves.  Subject to the following, the Loan Parties shall pay the reasonable out-of-pocket fees and expenses of the Administrative Agent or such professionals with respect to such evaluations and appraisals.

 

(i)             The Administrative Agent may conduct one (1) commercial finance examination in each twelve month period, at the Loan Parties’ expense; provided that, if Availability is less than the greater of (i) twenty-five percent (25%) of the Loan Cap, or (ii) $100,000,000, in each case for five (5) consecutive Business Days, the Administrative Agent may conduct up to two (2) commercial finance examinations in the subsequent twelve (12) month period, each at the Loan Parties’ expense.  Notwithstanding anything to the contrary contained herein, the Administrative Agent (A) may undertake two (2) additional commercial finance examinations in each twelve month period at the sole expense of the Lenders, and (B) after the occurrence and during the continuance of any Specified Default, may cause such additional commercial finance examinations to be taken as the Administrative Agent, in its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith, determines are necessary or appropriate (each, at the expense of the Loan Parties).

 

(ii)          The Administrative Agent may conduct one (1) appraisal of the Loan Parties’ Inventory in each twelve month period, at the Loan Parties’ expense; provided that, if Availability is less than the greater of (i) twenty-five percent (25%) of the Loan Cap, or (ii) $100,000,000, in each case for five (5) consecutive Business Days, the Administrative Agent may conduct up to two (2) appraisals of the Loan Parties’ Inventory in the subsequent twelve (12) month period, each at the Loan Parties’ expense.  Notwithstanding anything to the contrary contained herein, the Administrative Agent (A) may undertake two (2) additional appraisals of the Loan Parties’ Inventory in each twelve month period at the sole expense of the Lenders, and (B) after the occurrence and during the continuance of any Specified Default, may cause such additional appraisals of the Loan Parties’ Inventory to be taken as the Administrative Agent, in its commercially reasonable discretion from the perspective of an asset-based lender exercised in good faith, determines are necessary or appropriate (each, at the expense of the Loan Parties)

 

(c)                                  The Loan Parties shall at all times retain independent certified public accountants of national standing and shall instruct such accountants to cooperate with, and be available to, the Administrative Agent or its representatives to discuss the annual audited statements, the Loan Parties’ financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such accountants for such audited statements, as may be raised by the Administrative Agent; subject, however, if requested by such accountants, to the execution of an access agreement by the Administrative Agent and such accountants in form reasonably satisfactory to each of them; provided  that a representative of the Lead Borrower shall be given the opportunity to be present all such discussions.

 

SECTION 5.11              Covenant to Become a Loan Party and Give Security.

 

At the Lead Borrower’s expense, the Loan Parties shall take all action necessary or reasonably requested by the Administrative Agent to ensure that all Persons who are obligated to become a Loan Party, including, without limitation, Holdco and any Persons acquired in a

 

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Permitted Acquisition, and to grant Liens in favor of the Collateral Agent in the Collateral shall have done so, including:

 

(a)                                 upon the formation or acquisition of Holdco or any new direct or indirect wholly owned Subsidiary (in each case, other than an Excluded Subsidiary) by any Loan Party or the designation in accordance with SECTION 5.14 of any existing direct or indirect wholly owned Subsidiary as a Restricted Subsidiary:

 

(i)                                     within thirty (30) days after such formation, acquisition or designation or such longer period as the Administrative Agent may agree in its discretion:

 

(a)                                 cause Holdco and each such Restricted Subsidiary that is required to become a Loan Party to execute and deliver to the Administrative Agent a Joinder Agreement;

 

(b)                                 cause Holdco and each such Restricted Subsidiary that is required to become a Loan Party to furnish to the Administrative Agent a description of the real and immovable properties owned or leased by Holdco or such Restricted Subsidiary, as applicable, in detail reasonably satisfactory to the Administrative Agent;

 

(c)                                  cause (x) Holdco and each such Restricted Subsidiary that is required to become a Loan Party to duly execute and deliver to the Administrative Agent Mortgages, Security Agreements, and other Security Documents, as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Security Documents in effect on the Restatement Date), in each case granting Liens to the Collateral Agent to secure the Obligations and (y) each direct or indirect parent of each such Restricted Subsidiary that is required to be a Loan Party to duly execute and deliver to the Administrative Agent such Security Documents as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Security Documents in effect on the Restatement Date), in each case granting Liens to the Collateral Agent to secure the Obligations;

 

(d)                                 (x) cause Holdco and each such Restricted Subsidiary that is required to become a Loan Party to deliver any and all certificates representing Capital Stock (to the extent certificated) that are required to be pledged pursuant to the Security Documents, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank and instruments evidencing the intercompany Indebtedness held by such Restricted Subsidiary and required to be pledged pursuant to the Security Documents, endorsed in blank to the Collateral Agent and (y) cause each direct or indirect parent of such Restricted Subsidiary that is required to be a Loan Party to deliver any and all certificates representing the outstanding Capital Stock (to the extent certificated) of such Restricted Subsidiary that are required to be pledged pursuant to the Security Documents, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank and instruments evidencing the

 

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intercompany Indebtedness issued by such Restricted Subsidiary and required to be pledged in accordance with the Security Documents, endorsed in blank to the Collateral Agent;

 

(e)                                  take and cause Holdco and each such Restricted Subsidiary and each direct or indirect parent of such Restricted Subsidiary to take whatever action (including the recording of Mortgages, the filing of UCC, PPSA or Civil Code financing statements and delivery of stock and membership interest certificates) as may be necessary in the reasonable opinion of the Administrative Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid Liens to the extent required under the Loan Documents, enforceable against all third parties in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and by general principles of equity,

 

(ii)                                  within thirty (30) days after the request therefor by the Administrative Agent, deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent, the Collateral Agent and the other Credit Parties, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this SECTION 5.11(a) as the Administrative Agent may reasonably request, and

 

(iii)                               as promptly as practicable after the request therefor by the Administrative Agent, deliver to the Administrative Agent with respect to each parcel of real property (A) that is owned by Holdco or such Restricted Subsidiary and has a fair market value in excess of $5,000,000, any existing title reports, surveys or environmental assessment reports, as well as a certificate indicating whether such real property is located in a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and, to the extent such real property is so located in a “flood hazard area”, obtain flood insurance in such total amount as is reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Parent and its Restricted Subsidiaries, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time.

 

(b)                                 After the Closing Date, concurrently with (x) the acquisition of any material personal property by any Loan Party or of any personal property in connection with a Permitted Acquisition, or (y) the acquisition of any owned Real Estate by any Loan Party with a fair market value in excess of $5,000,000, and if such personal property or owned real property shall not already be subject to a perfected Lien in favor of the Collateral Agent, the Lead Borrower shall give notice thereof to the Administrative Agent and promptly thereafter shall cause such assets to be subjected to a Lien to the extent required by the Loan Documents and will take, or cause the relevant Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect or record such Lien, including, as applicable, the actions referred to in SECTION 5.11(a)(iii) with respect to real property.

 

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(c)                                  Notwithstanding the foregoing, no Loan Party shall be required to perfect the security interests granted to the Collateral Agent under any Security Documents if and to the extent that the Collateral Agent shall have reasonably determined that the cost of obtaining a first priority security interest in any Collateral subject to such security interest exceeds the practical benefits to the Secured Parties afforded thereby.

 

SECTION 5.12              Compliance with Environmental Laws.

 

Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Loan Parties shall comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and permits; obtain and renew all permits necessary for its operations and properties; and, in each case to the extent required by Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws.

 

SECTION 5.13              Further Assurances and Post-Closing Conditions.

 

Each Loan Party will execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), that may be required under any Applicable Law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties.  Without limiting the foregoing, the Loan Parties shall use commercially reasonable efforts to obtain a Collateral Access Agreement from any Person from whom a Loan Party enters into a Lease after the Closing Date for a warehouse or distribution center prior to entering into such Lease.

 

SECTION 5.14              Designation of Subsidiaries.

 

The board of directors of the Lead Borrower may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) after giving effect to such designation, the Payment Conditions shall have been satisfied, (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if such Subsidiary is a Borrower or if such Subsidiary owns any property of the type (e.g. Inventory and Accounts) included in the Borrowing Base, (iv) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a “Restricted Subsidiary” for the purpose of the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes or the Term Loan Facility, as applicable, and (v) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary.  The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by the Lead Borrower therein at the date of designation in an amount equal to the net book value of the Lead Borrower’s or Restricted Subsidiary’s (as applicable) investment therein.  The designation of any

 

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Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time.

 

SECTION 5.15                                      Information Regarding Collateral.

 

The Lead Borrower will furnish to the Administrative Agent prompt written notice of any change in: (a) any Loan Party’s name; (b) the location of any Loan Party’s chief executive office or its principal place of business; (c) any Loan Party’s organizational structure or jurisdiction of incorporation or formation; or (d) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its state or province of organization. The Loan Parties agree not to effect or permit any change referred to in the preceding sentence unless all filings, publications and registrations, have been made (or will be made in a timely fashion) under the UCC, PPSA, Civil Code or other Applicable Law that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest to the extent required under the Security Documents (subject only to Permitted Encumbrances having priority under Applicable Law) in all the Collateral for its own benefit and the benefit of the other Secured Parties.

 

SECTION 5.16                                      Physical Inventories.

 

The Loan Parties, at their own expense, shall cause not less than one (1) physical count of Inventory to be undertaken in each twelve (12) month period (or alternatively, periodic cycle counts) in conjunction with the preparation of its annual audited financial statements, conducted following such methodology as is consistent with the methodology used in the immediately preceding Inventory (or cycle count) or as otherwise may be reasonably satisfactory to the Administrative Agent.  Following the completion of such Inventory count, and in any event by the next date required for the delivery of a Borrowing Base Certificate hereunder, the Borrowers shall deliver the results of such physical inventory to the Administrative Agent and shall post such results to the Loan Parties’ stock ledgers and general ledgers, as applicable.

 

SECTION 5.17                                      Use of Proceeds of Credit Extensions.

 

The proceeds of Revolving Credit Loans made hereunder and of Letters of Credit issued hereunder will be used only (a) to finance the acquisition of working capital assets of the Borrowers and their Subsidiaries, including the purchase of inventory and equipment, in each case in the ordinary course of business, (b) to finance Capital Expenditures of the Borrowers and their Subsidiaries, (c) to finance Permitted Acquisitions, and (d) for general corporate purposes (including, without limitation, to finance Amendment Transaction Expenses), all to the extent permitted in this Agreement.  No part of the proceeds of any Revolving Credit Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the FRB, including Regulations U and X.

 

SECTION 5.18                                      Proceeds from Surplus Cash Deposits.

 

If any Canadian Loan Party has on deposit in any bank account unapplied cash (being surplus cash not to be used for general working capital needs and other corporate purposes) exceeding $5,000,000 at any time a Cash Dominion Event exists and is continuing, it shall transfer such unapplied cash to a Borrower by loan, distribution or other intercompany transfer.

 

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SECTION 5.19                                      Excess Collections, Canadian Investments, Etc.

 

At any time a Cash Dominion Event exists and is continuing, no Canadian Loan Party shall have, in the aggregate, a sum exceeding the equivalent amount of $5,000,000  plus cash to be used for general working capital needs and other corporate purposes in the form of (i) a deposit of cash in any bank account, (ii) securities, and/or (iii) property that is an Investment.

 

SECTION 5.20                                      Pension Plans.

 

Each Loan Party shall cause each of its Plans to be duly qualified and administered in all respects in compliance with all Applicable Laws, and the terms of the Plans and any agreements relating thereto, except for such non-compliance as would not reasonably be expected to have a Material Adverse Effect.  Each Loan Party and each of its Subsidiaries shall use reasonable commercial efforts to ensure that it, except where failure to do so would not reasonably be expected to have a Material Adverse Effect: (a) has no Unfunded Pension Liability in respect of any Plan, including any Plan to be established and administered by it or them; and (b) does not engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that could reasonably be expected to result in liability.  No Canadian Loan Party shall maintain or contribute to any Plan that provides benefits on a defined basis.

 

SECTION 5.21                                      Corporate Separateness. (a)  Each Loan Party shall satisfy, and cause each of its Restricted Subsidiaries and Unrestricted Subsidiaries to satisfy, customary corporate and other formalities, including, as applicable, the holding of regular board of directors’ and shareholders’ meetings or action by directors or shareholders without a meeting and the maintenance of corporate offices and records.

 

(b)                                 Each Loan Party shall ensure that (i) no payment is made by it or any of its Restricted Subsidiaries to a creditor of any Unrestricted Subsidiary in respect of any liability of any Unrestricted Subsidiary, (ii) no bank account of any Unrestricted Subsidiary shall be commingled with any bank account of the Parent or any of its Restricted Subsidiaries, and (iii) any financial statements distributed to any creditors of any Unrestricted Subsidiary shall clearly establish or indicate the corporate separateness of such Unrestricted Subsidiary from the Parent and its Restricted Subsidiaries.

 

SECTION 5.22                                      Holdco.

 

A Holdco may be formed subject to the following conditions:

 

(a)                                 The Lead Borrower shall furnish the Administrative Agent ten (10) Business Days’ prior written notice of the formation of any such Holdco.

 

(b)                                 Holdco shall become a Loan Party, grant a Lien on its assets and take such other actions as are required under SECTION 5.11 hereof.

 

SECTION 5.23                                      Compliance with Terms of Leaseholds.

 

Each Loan Party shall (a) make all payments and otherwise perform all obligations in respect of all Leases to which any Loan Party or any of its Subsidiaries is a party, and keep such

 

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Leases in full force and effect, (b) not allow such Leases to lapse or be terminated or any rights to renew such Leases to be forfeited or cancelled, and (c) cause each of its Subsidiaries to do the foregoing, except in any case (i) as otherwise expressly permitted hereunder, or (ii) where the failure to do so, either individually or in the aggregate, could not be reasonably expected to have a Material Adverse Effect.

 

SECTION 5.24                                      Financial Covenant.

 

During the continuation of a Covenant Compliance Event, the Loan Parties shall maintain a Consolidated Fixed Charge Coverage Ratio, calculated as of the end of each month on a trailing twelve months basis commencing as of the end of the month immediately preceding the date on which Availability is less than the Threshold Amount, of not less than 1.0:1.0 until such time as Availability is equal to or greater than the Threshold Amount for thirty (30) consecutive days.

 

ARTICLE VI

 

Negative Covenants

 

Until (i) the Commitments have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan (including Swingline Loans) and all fees and other Obligations (other than contingent indemnity obligations with respect to then unasserted claims and the Other Liabilities) shall have been paid in full, (iii) all Letters of Credit shall have expired or terminated (or been cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and (iv) all Letter of Credit Outstandings have been reduced to zero (or cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank), each Loan Party covenants and agrees with the Credit Parties that:

 

SECTION 6.01                                      Liens.

 

No Loan Party will create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following (each a “Permitted Encumbrance”):

 

(a)                                 Liens securing any Obligations;

 

(b)                                 Liens existing on the Restatement Date and listed on Schedule 6.01 and any modifications, replacements, renewals or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under SECTION 6.03, and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by SECTION 6.03;

 

(c)                                  Liens for taxes, assessments or governmental charges which are not required to be paid pursuant to SECTION 5.04;

 

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(d)                                 statutory Liens of landlords, consensual Liens granted in favor of landlords in the Province of Quebec securing the payment of rent which are subordinate to the Lien of the Collateral Agent, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens imposed by Applicable Law arising in the ordinary course of business which secure amounts not overdue for a period of more than thirty (30) days and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation;

 

(e)                                  (i) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Lead Borrower or any Restricted Subsidiary;

 

(f)                                   deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;

 

(g)                                  easements, rights-of-way, restrictions, encroachments, servitudes, rights of way, licenses, protrusions, site plan agreements, development agreements, contract zoning agreements and other similar encumbrances, rights, agreements and minor title defects affecting real property which, in the aggregate, do not in any case materially interfere with the ordinary conduct of the business of the Lead Borrower or any Restricted Subsidiary (other than an Immaterial Subsidiary);

 

(h)                                 Liens securing judgments for the payment of money not constituting an Event of Default under SECTION 7.01(h);

 

(i)                                     Liens securing Indebtedness permitted under SECTION 6.03(e); provided that (i) such Liens attach concurrently with or within two hundred and seventy (270) days after the acquisition, repair, replacement, construction or improvement (as applicable) of the property subject to such Liens, (ii) such Liens do not at any time encumber any property except for accessions to such property other than the property financed by such Indebtedness and the proceeds and the products thereof and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for accessions to such assets) other than the assets subject to such Capitalized Leases; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender; and Liens securing any Permitted Refinancing of Indebtedness under SECTION 6.03(e) that do not extend to any property that was not subject to the Lien securing the Indebtedness being refinanced;

 

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(j)                                    leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Lead Borrower or any Restricted Subsidiary (other than an Immaterial Subsidiary), or (ii) secure any Indebtedness;

 

(k)                                 Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business which payments are not overdue for a period of more than thirty (30) days and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation;

 

(l)                                     Liens (i) arising by operation of law under Article 4 of the UCC in connection with collection of items provided for therein, and (ii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

 

(m)                             Liens (i) on cash advances in favor of the seller of any property to be acquired in a Permitted Acquisition to be applied against the purchase price for such Permitted Acquisition, and (ii) consisting of an agreement to dispose of any property in a Permitted Disposition, in each case, solely to the extent such Permitted Acquisition or Permitted Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;

 

(n)                                 Liens on property (i) of any Foreign Subsidiary that is not a Loan Party and (ii) that does not constitute Collateral, which Liens secure Indebtedness of the applicable Foreign Subsidiary permitted under SECTION 6.03;

 

(o)                                 Liens in favor of the Lead Borrower or a Restricted Subsidiary securing Indebtedness permitted under SECTION 6.03(d);

 

(p)                                 Liens existing on property (other than Inventory and Accounts) at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to SECTION 5.14), in each case after the Restatement Date (other than Liens on the Capital Stock of any Person that becomes a Restricted Subsidiary); provided that (i) such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, and (ii) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and accessions or additions thereto);

 

(q)                                 any interest or title of a licensor, sublicensor, lessor or sublessor under licenses and leases entered into by the Lead Borrower or any of its Restricted Subsidiaries in the ordinary course of business;

 

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(r)                                    Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Lead Borrower or any of its Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;

 

(s)                                   Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

 

(t)                                    Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Parent or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Parent and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Lead Borrower or any Restricted Subsidiary in the ordinary course of business;

 

(u)                                 Liens solely on any cash earnest money deposits made by the Parent or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;

 

(v)                                 Liens in respect of the Term Loan Facility, subject at all times to the terms of the Intercreditor Agreement;

 

(w)                               Liens arising from precautionary UCC filings or PPSA filings regarding “true” operating leases or the consignment of goods to a Loan Party;

 

(x)                                 Liens placed on the Capital Stock of any joint venture entity in the form of a transfer restriction, purchase option, call or similar right of a third party joint venture partner;

 

(y)                                 ground leases in respect of real property on which facilities owned or leased by the Lead Borrower or any of its Subsidiaries are located;

 

(z)                                  Liens existing on title insurance policies relating to any Mortgages;

 

(aa)                          Liens on insurance proceeds incurred in the ordinary course of business in connection with the financing of insurance premiums;

 

(bb)                          Liens on securities which are the subject of repurchase agreements incurred in the ordinary course of business, provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;

 

(cc)                            Liens arising by operation of law in the United States under Article 2 of the UCC in favor of a reclaiming seller of goods or buyer of goods;

 

(dd)                          Security given to a public or private utility or any Governmental Authority as required in the ordinary course of business;

 

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(ee)                            With respect to any Real Property located in Canada, any rights, reservations, limitations and conditions contained in the grant from the Crown or any Crown Patent;

 

(ff)                              Rights of a seller of unpaid goods in respect of such goods at common law or under the Bankruptcy and Insolvency Act (Canada) and other applicable legislation;

 

(gg)                            Undetermined or inchoate Liens which have not at such time been filed and of which none of the Loan Parties have been given notice and which relate to obligations not then due and payable;

 

(hh)                          Liens securing obligations permitted under SECTION 6.03(f) (other than in respect of Bank Products) to the extent such obligations are owing to a “Term Hedging Affiliate” (as defined in the Intercreditor Agreement) pursuant to a “Term Hedging Agreement” (as defined in the Intercreditor Agreement), subject at all times to the terms of the Intercreditor Agreement; and

 

(ii)                                  Without duplication of, or aggregation with, any other Lien permitted under any other clause of this SECTION 6.01, other Liens (not covering Accounts, Inventory or the proceeds thereof unless the Liens thereon are subordinated to the Lien of the Collateral Agent in a manner consistent with the terms of the Intercreditor Agreement) securing Indebtedness outstanding in an aggregate principal amount not to exceed $30,000,000 at any time outstanding.

 

The designation of a Lien as a Permitted Encumbrance shall not limit or restrict the ability of the Administrative Agent to establish any Reserve relating thereto.

 

SECTION 6.02                                      Investments.

 

No Loan Party shall make or hold any Investments, except the following (each a “Permitted Investment”):

 

(a)                                 Investments by the Lead Borrower or a Restricted Subsidiary in assets that were Cash Equivalents when such Investment was made;

 

(b)                                 loans or advances to officers, directors and employees of the Parent and the Restricted Subsidiaries (i)  for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) to the extent permitted by Applicable Law, in connection with such Person’s purchase of Capital Stock of the Lead Borrower (or any direct or indirect parent of the Lead Borrower), provided that the amount of such loans and advances shall be contributed to the Lead Borrower in cash as common equity, or paid to the Lead Borrower in connection with such purchase of Capital Stock, and (iii) to the extent permitted by Applicable Law, for purposes not described in the foregoing clauses (i) and (ii), in an aggregate principal amount outstanding not to exceed $15,000,000 at any one time outstanding;

 

(c)                                  Investments (i) by the Lead Borrower or any Restricted Subsidiary in any Loan Party (other than Holdco), (ii) by any Restricted Subsidiary that is not a Loan Party in any other such Restricted Subsidiary that is also not a Loan Party, and (iii) by the Lead Borrower or

 

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any Restricted Subsidiary (A) in any Foreign Subsidiary; provided that the outstanding aggregate amount of such Investments in Foreign Subsidiaries shall not exceed $25,000,000 at any time (net of any return representing a return of capital in respect of any such Investment) or (B) in any Foreign Subsidiary, consisting of the contribution of Capital Stock of any other Foreign Subsidiary held directly or indirectly by the Lead Borrower or such Restricted Subsidiary in exchange for Indebtedness, Capital Stock or a combination thereof of the Foreign Subsidiary to which such contribution is made (including, without limitation, in connection with the Permitted Foreign Restructuring), (C) in any Foreign Subsidiary, constituting an exchange of Capital Stock of such Foreign Subsidiary for Indebtedness of such Foreign Subsidiary or (D) constituting Guarantees of Indebtedness or other monetary obligations of Foreign Subsidiaries owing to any Loan Party;

 

(d)                                 Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;

 

(e)                                  Investments consisting of Permitted Encumbrances, Permitted Indebtedness, fundamental changes, Permitted Dispositions, Restricted Payments and Permitted Payments permitted under SECTION 6.01, SECTION 6.03, SECTION 6.04, SECTION 6.05, SECTION 6.06, and SECTION 6.11, respectively;

 

(f)                                   Investments (i) by the Lead Borrower and its Restricted Subsidiaries consisting of Permitted Acquisitions and (ii) by Holdco consisting of Permitted Acquisitions if the assets that are the subject of such Permitted Acquisition are immediately contributed to the Lead Borrower;

 

(g)                                  Investments (i) existing or contemplated on the Restatement Date and set forth on Schedule 6.02 and any modification, replacement, renewal, reinvestment or extension thereof and (ii) Investments existing on the Restatement Date by the Lead Borrower or any Restricted Subsidiary in the Lead Borrower or any other Restricted Subsidiary and any modification, renewal or extension thereof; provided that the amount of the original Investment is not increased except by the terms of such Investment or as otherwise permitted by this SECTION 6.02;

 

(h)                                 Investments in Swap Contracts permitted under SECTION 6.03;

 

(i)                                     promissory notes and other non-cash consideration received in connection with Permitted Dispositions;

 

(j)                                    Investments in the ordinary course of business consisting of endorsements for collection or deposit and customary trade arrangements with customers consistent with past practices;

 

(k)                                 Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary

 

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course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;

 

(l)                                     so long as immediately after giving effect to any such Investment, no Default has occurred and is continuing and without duplication of any other clauses of this SECTION 6.02, other Investments that do not exceed $50,000,000 in the aggregate at any time outstanding (net of any return of capital, interest, distributions, income and similar amounts actually received in cash in respect of any such Investment) and valued at the time of the making thereof (provided that, such amount shall be increased by the Net Proceeds of Permitted Equity Issuances), and determined without regard to any write-downs or write-offs thereof;

 

(m)                             advances of payroll payments to employees in the ordinary course of business;

 

(n)                                 Investments to the extent that payment for such Investments is made solely with Capital Stock of the Lead Borrower or any direct or indirect parent of the Lead Borrower not resulting in a Change in Control;

 

(o)                                 Investments of a Restricted Subsidiary acquired after the Restatement Date or of a Person merged into or amalgamated with the Lead Borrower or merged, amalgamated or consolidated with a Restricted Subsidiary in accordance with SECTION 6.04 after the Restatement Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, amalgamation, or consolidation and were in existence on the date of such acquisition, merger, amalgamation, or consolidation;

 

(p)                                 Guarantees by the Parent or any Restricted Subsidiary of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;

 

(q)                                 Guarantees constituting Permitted Indebtedness;

 

(r)                                    Subject to SECTION 2.18, Investments in deposit accounts opened in the ordinary course of business;

 

(s)                                   Investments in new Subsidiaries (other than Foreign Subsidiaries), subject to the provisions of SECTION 5.11;

 

(t)                                    Capital Expenditures;

 

(u)                                 Loans and advances to Holdco in lieu of, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), Restricted Payments to the extent permitted to be made to Holdco in accordance with SECTION 6.06; and

 

(v)                                 Without duplication of, or aggregation with, any Investment made under any other clause of this SECTION 6.02, the Lead Borrower and its Restricted Subsidiaries may make other Investments as long as the Payment Conditions are satisfied;

 

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provided that no Investment in an Unrestricted Subsidiary that would otherwise be permitted under this SECTION 6.02 shall be permitted hereunder (w) to the extent that any portion of such Investment is used to make any prepayments, redemptions, purchases, defeasances and other payments in respect of any Indebtedness, (x) if immediately before or after such Investment, a Default shall have occurred and be continuing, (y) if after giving effect to such Investment, the Payment Conditions shall not have been satisfied, or (z) if such Investment consists of a transfer of any property of the type (e.g., Inventory and Accounts) included in the Borrowing Base.

 

SECTION 6.03                                      Indebtedness.

 

The Loan Parties will not create, incur, assume or suffer to exist any Indebtedness, except the following (each “Permitted Indebtedness”):

 

(a)                                 Indebtedness of the Parent and any of its Subsidiaries under the Loan Documents;

 

(b)                                 Indebtedness (i) outstanding on the Restatement Date and listed on Schedule 6.03, and (ii) intercompany Indebtedness outstanding on the Restatement Date;

 

(c)                                  Guarantees by the Parent and its Restricted Subsidiaries in respect of Indebtedness of the Lead Borrower or any Restricted Subsidiary otherwise permitted hereunder; provided that (A) no Guarantee by any Restricted Subsidiary of the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes or the Term Loan Facility shall be permitted unless such Restricted Subsidiary shall have also provided a Guarantee of the Obligations substantially on the terms set forth in the Facility Guarantee executed on the Restatement Date and (B) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Facility Guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness;

 

(d)                                 Indebtedness of the Lead Borrower or any Restricted Subsidiary owing to the Lead Borrower or any other Restricted Subsidiary to the extent constituting an Investment permitted by SECTION 6.02; provided that, all such Indebtedness of any Loan Party owed to any Person that is not, or ceases to be, a Loan Party shall be subject to the subordination terms set forth in Article VII of the Security Agreement;

 

(e)                                  As long as the Payment Conditions are satisfied after giving effect thereto, Attributable Indebtedness and other Indebtedness (including Capitalized Leases) of the Lead Borrower and its Restricted Subsidiaries financing the acquisition, construction, repair, replacement or improvement of fixed or capital assets; provided that (i) such Indebtedness is incurred concurrently with or within two hundred and seventy (270) days after the applicable acquisition, construction, repair, replacement or improvement, and (ii) if reasonably requested by the Administrative Agent, the Loan Parties will use commercially reasonable efforts to cause the holder of such Indebtedness to enter into a Collateral Access Agreement with the Collateral Agent on terms reasonably satisfactory to the Collateral Agent;

 

(f)                                   Indebtedness in respect of Swap Contracts designed to hedge against interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes;

 

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(g)                                  (i) Indebtedness of the Parent or any of its Restricted Subsidiaries (A) assumed in connection with any Permitted Acquisition; provided that such Indebtedness is not incurred in contemplation of such Permitted Acquisition, or (B) incurred to finance a Permitted Acquisition and (ii) any Permitted Refinancing of the foregoing; provided, in each case that such Indebtedness and all Indebtedness resulting from any Permitted Refinancing thereof (v) is unsecured or is subordinated to the Obligations on terms reasonably acceptable to the Administrative Agent (it being understood that subordination terms set forth in the Senior Subordinated Notes and the Subordinated Discount Notes shall also be deemed to be acceptable for such Indebtedness), (w) both immediately prior and after giving effect thereto, no Default shall exist or result therefrom, (x) matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the Maturity Date (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (y) hereof), (y) has terms and conditions (other than interest rate, redemption premiums and subordination terms), taken as a whole, that are reasonably acceptable to the Administrative Agent provided that a certificate of a Responsible Officer shall be delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Lead Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement and such certificate shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Lead Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees); and (z) with respect to such Indebtedness described in the immediately preceding clause (B), is incurred by the Lead Borrower or a Facility Guarantor.

 

(h)                                 Indebtedness representing deferred compensation, severance, and health and welfare retirement benefits to current and former employees of Holdco, the Lead Borrower and its Restricted Subsidiaries incurred in the ordinary course of business or existing on the Restatement Date;

 

(i)                                     Indebtedness consisting of promissory notes issued by any Loan Party to current or former officers, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Capital Stock of the Parent or any direct or indirect parent of the Parent permitted by SECTION 6.06;

 

(j)                                    Indebtedness incurred by the Lead Borrower or its Restricted Subsidiaries in connection with any disposition expressly permitted hereunder constituting indemnification obligations or obligations in respect of purchase price or other similar adjustments, provided that (A) such Indebtedness is not reflected on the balance sheet of the Lead Borrower or any of its Restricted Subsidiaries prepared in accordance with GAAP (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (A)); and (B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Lead Borrower and its Restricted Subsidiaries in connection with such Acquisition or Investment;

 

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(k)                                 Indebtedness consisting of obligations of the Parent or its Restricted Subsidiaries under deferred compensation or other similar arrangements incurred by such Person in connection with Permitted Acquisitions or any other Investment expressly permitted hereunder;

 

(l)                                     Obligations with respect to Cash Management Services and other Indebtedness in respect of netting services, overdraft protections and similar arrangements in each case in connection with deposit accounts;

 

(m)                             Without duplication of, or accumulation with, any other clauses of this SECTION 6.03, Indebtedness in an aggregate principal amount not to exceed $300,000,000 at any time outstanding;

 

(n)                                 As long as the Payment Conditions are satisfied after giving effect thereto, Subordinated Indebtedness and other unsecured non-amortizing long term Indebtedness (which shall include unsecured bridge financings that convert into unsecured non-amortizing long term Indebtedness, subject to reasonable or customary conditions);

 

(o)                                 Indebtedness consisting of (a) the financing of insurance premiums or (b) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

 

(p)                                 Indebtedness incurred by the Lead Borrower or any of its Restricted Subsidiaries in respect of letters of credit (including, without limitation, under any Commercial Letter of Credit Facility, provided that any provider of such Commercial Letter of Credit Facility shall agree that such Commercial Letter of Credit Facility shall be treated as Other Liabilities payable in accordance with SECTION 7.04(l) hereof), bank guarantees, bankers’ acceptances or similar instruments issued or created in the ordinary course of business, including in respect of commercial letters of credit, workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 30 days following the incurrence thereof;

 

(q)                                 obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Lead Borrower or any of its Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;

 

(r)                                    Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;

 

(s)                                   Indebtedness in respect of the Term Loan Facility;

 

(t)                                    Indebtedness in respect of the Senior Notes, the Senior Subordinated Notes and the Subordinated Discount Notes;

 

(u)                                 Indebtedness incurred in connection with sale-leaseback transactions permitted hereunder;

 

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(v)                                 Unsecured Indebtedness owed to the Sponsor and/or other stockholders of the Parent and their respective Affiliates, provided that such Indebtedness does not require the payment in cash of interest at a rate in excess of ten percent (10%) per annum or principal prior to the Maturity Date, has a maturity which extends beyond the Maturity Date, and is subordinated to the Obligations on terms reasonably acceptable to the Administrative Agent;

 

(w)                               Guarantees and letters of credit and surety bonds (other than Guarantees of, or letters of credit and surety bonds related to, Indebtedness) issued by the Lead Borrower and its Restricted Subsidiaries in connection with Permitted Acquisitions and Permitted Dispositions;

 

(x)                                 Without duplications of any other Indebtedness, non-cash accruals of interest, accretion or amortization of original issue discount and payment-in-kind interest with respect to Indebtedness permitted hereunder;

 

(y)                                 Indebtedness due to any landlord in connection with the financing by such landlord of leasehold improvements;

 

(z)                                  All premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (y) above;

 

(aa)                          Permitted Holdco Debt; and

 

(bb)                          Extensions, renewals and replacements of any such Indebtedness described in clauses (b), (c), (d), (e), (f), (g), (m), (n), (t), (u), (v), (w), (x) and (aa) above provided that such Indebtedness constitutes a Permitted Refinancing.

 

For purposes of calculating compliance with this SECTION 6.03 only, the amount of Indebtedness of a Person which is non-recourse to such Person shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness, or (ii) the fair market value of the property upon which a Lien has been granted to secure such Indebtedness.

 

SECTION 6.04                                      Fundamental Changes.

 

No Loan Party shall merge, amalgamate, dissolve, liquidate, wind up, consolidate with or into another Person, or dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that:

 

(a)                                 any Restricted Subsidiary may merge or amalgamate with (i) any Borrower (including a merger or amalgamation, the purpose of which is to reorganize such Borrower into a new jurisdiction); provided that such Borrower shall be the continuing or surviving Person, or (ii) any one or more other Restricted Subsidiaries; provided that when any Restricted Subsidiary that is a Loan Party is merging or amalgamating with another Restricted Subsidiary, a Loan Party shall be the continuing or surviving Person and provided further that if such merger or amalgamation includes any Canadian Subsidiary and a Canadian Subsidiary is not the surviving entity, such shall be on terms and conditions reasonably satisfactory to the Administrative Agent (whose consent shall not be unreasonably withheld);

 

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(b)                                 (i) any Subsidiary that is not a Loan Party may merge, amalgamate or consolidate with or into any other Subsidiary that is not a Loan Party, (ii) any Loan Party may merge, amalgamate or consolidate with any other Loan Party, provided that if a Borrower is a party thereto, a Borrower shall be the continuing or surviving Person, and provided further that if such merger, amalgamation or consolidation includes any Canadian Subsidiary and a Canadian Subsidiary is not the surviving entity, such shall be on terms and conditions reasonably satisfactory to the Administrative Agent (whose consent shall not be unreasonably withheld), and (iii) any Subsidiary may liquidate or dissolve or change its legal form if the Lead Borrower determines in good faith that such action is in the best interests of the Lead Borrower and its Subsidiaries and if not materially disadvantageous to the Lenders; provided that, with respect to this clause (b)(iii), a certificate of a Responsible Officer shall be delivered to the Administrative Agent at least five (5) Business Days prior to the liquidation, dissolution or change of legal form, together with a reasonably detailed description of the material terms and conditions thereof, stating that the Lead Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement;

 

(c)                                  any Restricted Subsidiary may dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Lead Borrower or to another Restricted Subsidiary; provided that if the transferor in such a transaction is a Loan Party, then (i) the transferee must be another Loan Party, or (ii) to the extent constituting an Investment, such Investment must be a Permitted Investment in or Indebtedness of a Restricted Subsidiary which is not a Loan Party in accordance with SECTION 6.02 and SECTION 6.03, respectively;

 

(d)                                 any Restricted Subsidiary may merge or amalgamate with any other Person in order to effect a Permitted Investment; provided that the continuing or surviving Person shall be a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the requirements of SECTION 5.11; and

 

(e)                                  the Lead Borrower and its Restricted Subsidiaries may consummate a merger, amalgamation, dissolution, winding up, liquidation, consolidation or Disposition, the purpose of which is to effect a Permitted Disposition.

 

SECTION 6.05                                      Dispositions.

 

The Loan Parties shall not make any Disposition or enter into any agreement to make any Disposition, except the following (each, a “Permitted Disposition”):

 

(a)                                 Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and dispositions of property no longer used or useful in the conduct of the business of the Parent and its Restricted Subsidiaries including, without limitation, the abandonment of or failure to maintain Intellectual Property and with respect to closed Stores;

 

(b)                                 Dispositions of Inventory in the ordinary course of business;

 

(c)                                  Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement property;

 

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(d)                                 Dispositions of property to the Lead Borrower or to a Restricted Subsidiary; provided that if the transferor of such property is a Loan Party (i) the transferee thereof must either be a Borrower or a Facility Guarantor, in which event the Collateral Agent shall retain its perfected Lien on the property so disposed of, subject to the same priority as existed prior to such disposition, or (ii) to the extent such transaction constitutes an Investment, such transaction is a Permitted Investment, provided further that (A) if the property being disposed of is transferred to a Subsidiary that is not a Loan Party, the Administrative Agent may require, in the exercise of its reasonable business judgment, that the transferee execute an agreement granting the Agents access to such property for purposes of conducting a Liquidation, and (B) if the property being disposed of constitutes Eligible Credit Card Receivables, Eligible Inventory, or Eligible Letters of Credit and is being transferred to a Subsidiary which is not a Loan Party, such disposition shall be made only if the Payment Conditions are satisfied after giving effect thereto;

 

(e)                                  Dispositions permitted by SECTION 6.04 and SECTION 6.06 and Permitted Encumbrances;

 

(f)                                   Dispositions of Cash Equivalents;

 

(g)                                  sales, discounting or forgiveness of Accounts in the ordinary course of business or in connection with the collection or compromise thereof;

 

(h)                                 leases, subleases, licenses or sublicenses (including the provision of Software under an open source license), in each case in the ordinary course of business and which (i) do not materially interfere with the business of the Parent and its Restricted Subsidiaries, or (ii) relate to closed Stores;

 

(i)                                     termination of Leases in the ordinary course of business;

 

(j)                                    transfers of property subject to Casualty Events upon receipt of the Net Proceeds of such Casualty Event;

 

(k)                                 licenses for the conduct of licensed departments within the Loan Parties’ Stores in the ordinary course of business;

 

(l)                                     as long as no Specified Default hereof then exists or would arise therefrom, and no Overadvance would result therefrom, bulk sales or other dispositions of the Loan Parties’ Inventory not in the ordinary course of business in connection with Store closings, at arm’s length, provided  that (i) such Store closures and related Inventory dispositions shall not exceed, in any Fiscal Year of the Lead Borrower and its Subsidiaries, ten percent (10%) of the number of the Loan Parties’ Stores as of the beginning of such Fiscal Year (net of Store relocations (i) occurring substantially contemporaneously, but in no event later than ten (10) Business Days after the related Store closure date, or (ii) wherein a binding lease has been entered into prior to the related Store closure date) as set forth in the Compliance Certificate delivered pursuant to SECTION 5.02(b), and (ii) as of any date after the Restatement Date, the aggregate number of such Store closures since the Restatement Date shall not exceed twenty-five percent (25%) of the greater of (x) the number of the Loan Parties’ Stores in existence as of the Restatement Date or (y) the number of the Loan Parties’ Stores as of the first day of any Fiscal

 

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Year beginning after the Restatement Date (net of Store relocations (i) occurring substantially contemporaneously, but in no event later than ten (10) Business Days after the related Store closure date or (ii) wherein a binding lease has been entered into prior to the related Store closure date) as set forth in the Compliance Certificate delivered pursuant to SECTION 5.02(b), provided  that all sales of Inventory in connection with Store closings in a transaction or series of related transactions shall be in accordance with liquidation agreements and with professional liquidators reasonably acceptable to the Administrative Agent; provided  further  that all Net Proceeds received in connection therewith (other than from any Canadian Loan Party) are applied to the Obligations, if then required in accordance with SECTION 2.17, SECTION 2.18 or SECTION 7.04 hereof;

 

(m)                             sales of non-core assets acquired in connection with a Permitted Acquisition and sales of Real Estate acquired in a Permitted Acquisition which, within thirty days of the date of the Acquisition, are designated in writing to the Administrative Agent as being held for sale and not for the continued operation of a Store;

 

(n)                                 exchanges or swaps, including, without limitation, transactions covered by Section 1031 of the Code, of Leases and other Real Estate of the Loan Parties so long as the exchange or swap is made for fair value and on an arm’s length basis, provided that upon the consummation of such exchange or swap, (x) the Collateral Agent has a perfected Lien having the same priority as any Lien held on the Leases or Real Estate so exchanged or swapped and (y) the Net Proceeds, if any, received in connection with any such exchange or swap are applied to the Obligations if then required in accordance with SECTION 2.17, SECTION 2.18 or SECTION 7.04 hereof;

 

(o)                                 sale-leaseback transactions of Real Estate of any Loan Party as long as (A) no Specified Default then exists or would arise therefrom, and (B) with respect to any distribution center, warehouse, manufacturing facility or corporate offices, (1) such sale-leaseback is made pursuant to leases on market terms, and (2) the Loan Parties cause each purchaser of such Real Estate to enter into a Collateral Access Agreement with the Collateral Agent on terms reasonably satisfactory to the Collateral Agent;

 

(p)                                 Dispositions listed on Schedule 6.05;

 

(q)                                 Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

 

(r)                                    (i) Dispositions of property owned by Aaron Brothers, Inc. in connection with the sale of all or substantially all the assets of Aaron Brothers, Inc. or the Capital Stock of Aaron Brothers, Inc. by the Lead Borrower as long as the Payment Conditions are satisfied after giving effect thereto, and (ii) dispositions of Capital Stock of Foreign Subsidiaries in connection with the Permitted Foreign Restructuring; and

 

(s)                                   Dispositions of property (other than Inventory, Accounts and Intellectual Property, unless such Dispositions occur in connection with a sale of a Subsidiary or any division, business unit, line of business or facility used for operations) not otherwise permitted under this

 

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SECTION 6.05, provided  that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at any time when no Default or Event of Default exists), no Default or Event of Default shall exist or would result from such Disposition and (ii) the aggregate book value of all property disposed of pursuant to this clause (s) shall not exceed $250,000,000 in any Fiscal Year or $500,000,000 in the aggregate after the Restatement Date;

 

provided that any disposition of any property pursuant to this SECTION 6.05 (except for Dispositions pursuant to SECTION 6.05(d) (solely with respect to such Dispositions described in SECTION 6.05(d) (i) from a Loan Party to another Loan Party, or (ii) constituting Permitted Investments hereunder), SECTION 6.05(e), SECTION 6.05(j), SECTION 6.05(n) (solely with respect to the cash consideration requirements below) and SECTION 6.05(r)(ii)), shall be for no less than the fair market value of such property at the time of such disposition and, (1) in the case of Accounts and Inventory solely for cash consideration, and (2) in the case of any other assets, at least seventy-five percent (75%) of the consideration is payable in cash or Cash Equivalents at the time of consummation of the transaction; provided, however, that for the purposes of this clause (2) only, the following shall be deemed to be cash: (A) any liabilities (as shown on the Lead Borrower’s most recent balance sheet provided hereunder or in the footnotes thereto) of the Lead Borrower or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Lead Borrower and all of its Restricted Subsidiaries shall have been validly released by all applicable creditors in writing, and (B) any securities received by the Lead Borrower or the applicable Restricted Subsidiary from such transferee that are converted by the Lead Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of the applicable Disposition.  To the extent any Collateral is disposed of as expressly permitted by this SECTION 6.05 to any Person other than the Lead Borrower or any Restricted Subsidiary, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and the Agents shall be authorized to take any actions deemed appropriate in order to effect the foregoing.

 

SECTION 6.06                                      Restricted Payments.

 

The Loan Parties shall not declare or make, directly or indirectly, any Restricted Payment, except:

 

(a)                                 each Restricted Subsidiary may make Restricted Payments to the Parent and to other Restricted Subsidiaries (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Parent and any other Restricted Subsidiary and to each other owner of Capital Stock of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Capital Stock);

 

(b)                                 the Parent and each Restricted Subsidiary may declare and make dividend payments or other distributions payable solely in the Capital Stock (other than Disqualified Capital Stock not otherwise permitted by SECTION 6.03) of such Person;

 

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(c)                                  to the extent constituting Restricted Payments, the Parent and its Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of SECTION 6.04 or SECTION 6.08 (other than SECTION 6.08(g));

 

(d)                                 the Parent may repurchase Capital Stock in the Parent or any Restricted Subsidiary deemed to occur upon the exercise of stock options or warrants if such Capital Stock represents a portion of the exercise price of such options or warrants;

 

(e)                                  Holdco and the Lead Borrower may pay for the repurchase, retirement, or other acquisition of Capital Stock of the Parent or any of its direct or indirect parent companies by any former, present, or future employee of the Parent or any of its Restricted Subsidiaries or any of its direct or indirect parent companies, or any of their respective estates, spouses or former spouses pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by Holdco or the Lead Borrower or any direct or indirect parent company in connection with such repurchase, retirement or other acquisition); provided that amounts payable under this clause (e) do not exceed in any calendar year $15,000,000 (which shall increase to $30,000,000 subsequent to the consummation of an underwritten Qualifying IPO by the Parent or any direct or indirect parent company of the Parent), with unused amounts in any calendar year being carried over to succeeding calendar years, subject to a maximum (without giving effect to the following proviso) of $30,000,000 in any calendar year unless the Pro Forma Availability Condition shall have been satisfied after giving effect to such Restricted Payment, in which case the maximum amount shall be $60,000,000 in any calendar year after the consummation of an underwritten Qualifying IPO by the Parent or any direct or indirect parent company of the Parent; provided further that such amount in any calendar year may be increased by an amount not to exceed (A) the Net Proceeds of Permitted Equity Issuances (other than Disqualified Capital Stock) after the Restatement Date to the extent that such Net Proceeds shall have been actually received by the Lead Borrower, in each case to members of management, directors or consultants of the Parent or of its Restricted Subsidiaries or any direct or indirect parent company of the Parent that occurs after the Restatement Date, plus, in respect of any sale of Capital Stock in connection with an exercise of stock options, an amount equal to the amount required to be withheld by Holdco, the Lead Borrower or any of its direct or indirect parent companies in connection with such exercise under applicable law to the extent such amount is repaid to the Parent or any of its direct or indirect parent companies, plus (B) the cash proceeds of key man life insurance policies received by the Parent or any Restricted Subsidiary after the Restatement Date less (C) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (A) and (B) of this clause (e); and provided further that cancellation of Indebtedness owing to the Parent from any employees, directors, or consultants of the Parent, any of its Restricted Subsidiaries or any direct or indirect parent companies in connection with a repurchase of Capital Stock of the Parent or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment;

 

(f)                                   Holdco and the Lead Borrower may make cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Parent or any Restricted Subsidiary; provided, however, that any such cash payment shall not be for the purpose of evading the limitations of this Agreement;

 

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(g)                                  the Parent and its Restricted Subsidiaries may make Restricted Payments in an amount equal to the aggregate amount of the Net Proceeds of Permitted Equity Issuances;

 

(h)                                 the Parent and its Restricted Subsidiaries may distribute, by dividend or otherwise, shares of Capital Stock of, or Indebtedness owed to the Parent or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than any Unrestricted Subsidiary whose primary assets are Cash Equivalents);

 

(i)                                     As long as no Event of Default then exists or would arise therefrom (or if such Event of Default exists or would so arise, with the written consent of the Administrative Agent or without such consent, by using the amounts in the Designated Account), the Lead Borrower may declare and pay dividends or distributions to, or make loans to, Holdco in amounts required for Holdco or any direct or indirect parent of Holdco to pay, in each case without duplication,

 

(i)                                     franchise taxes and other fees, Taxes and expenses required to maintain Holdco’s (or such parent’s)  corporate existence;

 

(ii)                                  federal, state, provincial and local income Taxes, to the extent such income Taxes are attributable to the income of the Lead Borrower and its Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such Taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that in each case the amount of such payments for any Fiscal Year does not exceed the excess (if any) of (A) the amount that the Lead Borrower and its Restricted Subsidiaries would be required to pay in respect of federal, state, provincial and local income Taxes for such Fiscal Year were the Lead Borrower, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) to pay such Taxes separately from Holdco (or any such parent) over (B) the aggregate federal, state, provincial and local income Taxes paid by the Lead Borrower and its Restricted Subsidiaries; and

 

(iii)                               for any Permitted Acquisition made in compliance with SECTION 6.02(f)(ii) hereof.

 

(j)                                    Holdco may make Restricted Payments with the Net Proceeds of Permitted Holdco Debt (unless such Net Proceeds are contributed to the Lead Borrower or its Restricted Subsidiaries in which event such Net Proceeds may not be used to make Restricted Payments unless the conditions of clause (k) below are satisfied); and

 

(k)                                 Without duplication of, or aggregation with, any Restricted Payments permitted under any other clause of this SECTION 6.06, the Parent and its Restricted Subsidiaries may make other Restricted Payments to the holders of their respective Capital Stock as long as the RP Conditions are satisfied.

 

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SECTION 6.07                                      Change in Nature of Business.

 

(a)                                 The Loan Parties shall not engage in any material line of business substantially different from those lines of business conducted by the Lead Borrower and its Restricted Subsidiaries on the date hereof or any business reasonably related or ancillary thereto or a reasonable extension thereof.

 

(b)                                 Holdco shall not conduct, transact or otherwise engage in any business or operations other than those incidental to (i) its ownership of the Capital Stock of the Lead Borrower, (ii) the maintenance of its legal existence, (iii) the performance of the Loan Documents, (iv) any public offering of its common stock or any other issuance of its Capital Stock not prohibited by this Article VI, and (v) any transaction that Holdco is permitted to enter into or consummate under this Article VI.  Furthermore, notwithstanding anything to the contrary herein contained, Holdco shall not (i) own any material assets other than the Capital Stock of the Lead Borrower or (ii) grant any Liens in any of its assets (other than Liens granted to Collateral Agent, for the benefit of the Secured Parties, under the Loan Documents or to secure obligations under the Term Loan Facility or Liens securing any Other Pari Passu Lien Obligations (as defined in and to the extent permitted under the Term Loan Agreement as amended and in effect from time to time in accordance with the Intercreditor Agreement)).

 

SECTION 6.08                                      Transactions with Affiliates.

 

The Loan Parties shall not enter into any transaction of any kind with any Affiliate of the Lead Borrower, whether or not in the ordinary course of business, other than (a) transactions among Loan Parties or any Restricted Subsidiary or any entity that becomes a Restricted Subsidiary as a result of such transaction, (b) transactions on terms substantially as favorable to the Parent or such Restricted Subsidiary as would be obtainable by the Parent or such Restricted Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, (c) payments due pursuant to the Advisory Agreements on account of Advisory Fees consisting of (i) payments (but not prepayments) on account of Periodic Fees as defined in each of the Advisory Agreements (as in effect on the Closing Date) and termination fees provided therein as of the Closing Date, provided that such payments may not be made if a Specified Default has occurred and is continuing or would arise therefrom, provided  further that such fees not paid shall accrue and be paid when the applicable Specified Default has been cured or waived and no additional Specified Default has occurred and is continuing or would arise as a result of such payment, and (ii) Subsequent Fees (as defined in the Advisory Agreement described in clause (i) of the definition thereof as in effect on the Closing Date), which payments are approved by a majority of the disinterested members of the board of directors of the Parent in good faith, provided that such payments may not be made if an Event of Default exists under SECTION 7.01(f) or SECTION 7.01(g), (d) payments of indemnities and reasonable expense reimbursements under the Advisory Agreements, (e) equity issuances, repurchases, retirements or other acquisitions or retirements of Capital Stock of Holdco or the Lead Borrower permitted under SECTION 6.06, (f) loans and other transactions by the Parent and its Restricted Subsidiaries to the extent permitted under this Article VI, (g) employment and severance arrangements between the Parent and its Restricted Subsidiaries and their respective officers and employees in the ordinary course of business, (h) payments by the Restricted Subsidiaries pursuant to the tax sharing agreements among the Parent and its Restricted Subsidiaries on customary terms to the extent attributable to the ownership or operation of the Parent and its Restricted Subsidiaries, (i) the payment of customary fees, compensation, and reasonable out of

 

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pocket costs to, and indemnities provided on behalf of, directors, officers and employees of the Parent and its Restricted Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of the Lead Borrower and its Restricted Subsidiaries, (j) transactions pursuant to permitted agreements in existence on the Restatement Date and set forth on Schedule 6.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (k) dividends, redemptions and repurchases permitted under SECTION 6.06, and (l) the Permitted Foreign Restructuring.

 

SECTION 6.09                                      Burdensome Agreements.

 

The Loan Parties shall not enter into or permit to exist any contractual obligation (including Material Indebtedness) (other than this Agreement or any other Loan Document) that limits the ability of (a) any Restricted Subsidiary of the Lead Borrower that is not a Borrower or a Facility Guarantor to make Restricted Payments to any Loan Party or (b) the Lead Borrower or any other Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Secured Parties with respect to the Obligations or under the Loan Documents; provided that the foregoing clauses (a) and (b) shall not apply to contractual obligations (including Material Indebtedness) which (i) (x) exist on the Restatement Date and (to the extent not otherwise permitted by this SECTION 6.09) are listed on Schedule 6.09 hereto and (y) to the extent contractual obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted renewal, extension or refinancing of such Indebtedness so long as such renewal, extension or refinancing does not expand the scope of such contractual obligation in any material respect, (ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of the Parent, so long as such contractual obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of the Parent; provided further that this clause (ii) shall not apply to contractual obligations that are binding on a Person that becomes a Restricted Subsidiary pursuant to SECTION 5.14, (iii) represent Indebtedness of a Restricted Subsidiary of the Lead Borrower which is not a Loan Party which is permitted pursuant to SECTION 6.03, (iv) arise in connection with any Permitted Disposition, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under SECTION 6.02 and applicable solely to such joint venture entered into in the ordinary course of business, (vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under SECTION 6.03 but solely to the extent any negative pledge relates to the property financed by or the subject of such Indebtedness, (vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto, (viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to SECTION 6.03(e) or SECTION 6.03(g) to the extent that such restrictions apply only to the property or assets securing such Indebtedness or, in the case of Indebtedness incurred pursuant to SECTION 6.03(g) only, to the Restricted Subsidiaries incurring or guaranteeing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Lead Borrower or any Restricted Subsidiary, (x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, and (xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business.

 

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SECTION 6.10                                      Accounting Changes.

 

The Loan Parties shall not make any change in their Fiscal Year; provided, however, that the Lead Borrower may, upon written notice to the Administrative Agent, change its Fiscal Year to any other Fiscal Year reasonably acceptable to the Administrative Agent, in which case, the Lead Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in Fiscal Year.

 

SECTION 6.11                                      Prepayments, Etc., of Indebtedness.

 

No Loan Party will make or agree to pay or make any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness, except the following (each, a “Permitted Payment”):

 

(a)                                 payments in Capital Stock (as long as no Change in Control would result therefrom), the conversion of Indebtedness to Capital Stock (other than Disqualified Capital Stock) of the Parent (as long as no Change in Control would result therefrom) and payments of interest in-kind of the Loan Parties or the accretion of interest on Permitted Indebtedness;

 

(b)                                 payments of principal and interest as and when due in respect of any Subordinated Indebtedness (subject to applicable subordination provisions relating thereto);

 

(c)                                  payments of principal (including mandatory prepayments) and interest as and when due in respect of any Permitted Indebtedness (other than Subordinated Indebtedness);

 

(d)                                 voluntary prepayments, redemptions, purchases, and defeasances in whole or in part of the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, the Term Loan Facility and other Indebtedness with the Net Proceeds of any Permitted Equity Issuances for the purpose of making such payment or prepayment;

 

(e)                                  voluntary prepayments, redemptions, purchases, and defeasances of, and exchanges for, in whole or in part, the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, or the Term Loan Facility from any Permitted Refinancing thereof;

 

(f)                                   if the Payment Conditions are satisfied, voluntary prepayments, purchases, exchanges for, redemptions, defeasances and mandatory prepayments, redemptions and repurchases in whole or in part of the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, the Term Loan Facility or any other Permitted Indebtedness;

 

(g)                                  the prepayment of Indebtedness of the Lead Borrower or any Restricted Subsidiary to the Lead Borrower or any Restricted Subsidiary to the extent permitted by the Security Documents;

 

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(h)                                 mandatory redemptions of the Subordinated Discount Notes (and exchange notes issued in respect thereof) pursuant to the Subordinated Discount Note Indenture due to the existence of an AHYDO Amount (as defined in the Subordinated Discount Note Indenture); and

 

(i)                                     other Permitted Refinancings of Indebtedness.

 

SECTION 6.12                                      Equity Interests of the Lead Borrower and Restricted Subsidiaries.

 

The Loan Parties shall not permit any Subsidiary that is a Restricted Subsidiary to be a non-wholly owned Subsidiary, except (i) as a result of or in connection with a dissolution, merger, amalgamation, consolidation or disposition of a Restricted Subsidiary permitted by SECTION 6.04 or SECTION 6.05 or a Permitted Investment in any Person or (ii) so long as such Restricted Subsidiary continues to be a Facility Guarantor or a Borrower.

 

SECTION 6.13                                      Amendment of Material Documents.

 

(a)                                 No Loan Party will amend, modify or waive any of its rights under (i) its Organization Documents, (ii) the Advisory Agreements, or (iii) any Material Indebtedness (other than as a result of a Permitted Refinancing thereof), in each case to the extent that such amendment, modification or waiver would either (A) be reasonably likely have a Material Adverse Effect or (B) with respect to clauses (ii) and (iii) only, (1) shorten the maturity date of any Material Indebtedness to a date which is prior to ninety-one (91) days after the Maturity Date, (2) except as provided in clause (1), shorten the date scheduled for any principal payment or increase the amount of any required principal payment, the result of which would be to require principal payments on account thereof in excess of the amounts previously required over the twenty-four (24) months following such amendment, modification or waiver, (3) grant any collateral security therefor on the ABL Priority Collateral, except to the extent that such collateral security constitutes a Permitted Encumbrance and is granted subject to an intercreditor agreement on terms substantially similar to those contained in the Intercreditor Agreement, (4) without duplication of any collateral security granted under clause (3) above, grant any other collateral therefor except to the extent such grant of security constitutes a Permitted Encumbrance, the Collateral Agent also has or obtains a Lien on such assets, and provided that to the extent that such collateral security consists of assets that would constitute Term Priority Collateral, such collateral security is granted subject to an intercreditor agreement on terms substantially similar to those contained in the Intercreditor Agreement, (5) modify the subordination provisions thereof or (6) be otherwise materially adverse to the interests of the Credit Parties.

 

(b)                                 The Lead Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, designate any Indebtedness (or related interest obligations) as “Designated Senior Debt” (as defined in each of the Senior Subordinated Notes Indenture and the Subordinated Discount Notes Indenture) or any similar term (as defined in any documents or agreements evidencing the Junior Financing), in each case, except for the Obligations and the Term Loan Facility (and related obligations).

 

SECTION 6.14                                      Designated Account.

 

After the occurrence and during the continuance of a Cash Dominion Event, the Loan Parties shall not use utilize the funds on deposit in the Designated Account for any

 

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purposes other than (a) the payment of operating expenses incurred by the Loan Parties in the ordinary course of business (including payments of interest when due on account of the Senior Notes, the Senior Subordinated Notes, the Subordinated Discount Notes, and the Term Loan Facility), and (b) for such other purposes as the Loan Parties deem appropriate.

 

ARTICLE VII

 

Events of Default

 

SECTION 7.01                                      Events of Default.

 

The occurrence of any of the following events shall constitute an “Event of Default” hereunder:

 

(a)                                 Non-Payment.  Any Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Revolving Credit Loan (including Swingline Loans), or any obligation in respect of any Letter of Credit (other than Letter of Credit Fees, as to which clause (ii) below shall apply), or (ii) within five (5) Business Days after the same becomes due, any interest on any Revolving Credit Loan (including Swingline Loans) or any other amount payable hereunder or with respect to any other Loan Document; or

 

(b)                                 Specific Covenants.  Any Loan Party shall fail to observe or perform when due any covenant, condition or agreement contained in (i) any Section of Article VI, or (ii) SECTION 5.01(e) (after a two (2) Business Day grace period), (iii) SECTION 2.18 (provided that for SECTION 2.18(f), after a five (5) Business Day grace period) or SECTION 5.24, or (iv) any of SECTION 5.02(b), SECTION 5.03(a), SECTION 5.07 (but only with respect to fire and extended coverage policies maintained with respect to any Collateral), SECTION 5.10(b), SECTION 5.17, SECTION 5.18, SECTION 5.19, or SECTION 5.22 (provided that, if (A) any such Default described in this clause (iv) is of a type that can be cured within five (5) Business Days and (B) such Default could not materially adversely impact the Lenders’ Liens on the Collateral, such default shall not constitute an Event of Default for five (5) Business Days after the occurrence of such Default so long as the Loan Parties are diligently pursuing the cure of such Default); or

 

(c)                                  Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in SECTION 7.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after notice thereof by the Administrative Agent to the Lead Borrower; or

 

(d)                                 Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Lead Borrower or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

 

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(e)                                  Cross-Default.  Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period with respect thereto, if any (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness (including Other Liabilities to the extent constituting Indebtedness but excluding other Obligations), or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness beyond the applicable grace period with respect thereto, or any other event occurs (other than with respect to Indebtedness consisting of Swap Contracts, termination events or equivalent events pursuant to the terms of such Swap Contracts unless any payment required thereby is not made beyond the applicable grace period with respect thereto, if any), the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) after the expiration of the applicable grace period with respect thereto, to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Material Indebtedness to be made, prior to its stated maturity; provided that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder, and further provided that the occurrence of any event of default under the Term Loan Agreement by virtue of the breach of the leverage covenant contained in Section 7.05 of the Term Loan Agreement (or any other financial maintenance covenant from time to time in effect under the Term Loan Agreement and not contained in this Agreement) shall not constitute an Event of Default until the earliest of (x) sixty (60) days after the date of such breach (during which period such breach is not waived by the lenders under the Term Loan Agreement or such breach is not cured pursuant to Section 8.05 of the Term Loan Agreement), or (y) the acceleration of the obligations under the Term Loan Agreement, or (z) the commencement of the Exercise of Any Secured Creditor Remedies (as defined in the Intercreditor Agreement as in effect on the Closing Date) by the agent and/or the lenders under the Term Loan Agreement as a result of such breach; or

 

(f)                                   Insolvency Proceedings, Etc.  Any Loan Party or any of the Restricted Subsidiaries institutes or consents to the institution of any proceeding under the Bankruptcy Code or any other federal, state, provincial, or foreign bankruptcy, insolvency, receivership or similar law (or any Canadian Loan Party institutes or consents to the institution of any proposal or notice of intent to file a proposal), or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, monitor, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, monitor, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under the Bankruptcy Code or any other federal, state, provincial, or foreign bankruptcy, insolvency, receivership or similar law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

 

(g)                                  Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Restricted Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as

 

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they become due in an aggregate amount in excess of (x) $50,000,000 if Availability is greater than or equal to $95,000,000 on a Pro Forma Basis for the twelve (12) month period following the date of determination or (y) $25,000,000 if Availability is less than $95,000,000 on a Pro Forma Basis for the twelve (12) month period following the date of determination, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of the Loan Parties, taken as a whole, and is not released, vacated or fully bonded within forty-five (45) days after its issue or levy; or

 

(h)                                 Judgments.  There is entered against any Loan Party or any Restricted Subsidiary one or more final judgments or orders for the payment of money in an aggregate amount in excess of (x) $75,000,000 if Availability is greater than or equal to $95,000,000 on a Pro Forma Basis for the twelve (12) month period following any such judgment or (y) $40,000,000 if Availability is less than $95,000,000 on a Pro Forma Basis for the twelve (12) month period following any such judgment (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied coverage), and any such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of forty-five (45) consecutive days; or

 

(i)                                     ERISA.  (a)(i) An ERISA Event occurs with respect to a Plan subject to ERISA or Multiemployer Plan subject to ERISA which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, or (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect; or (b) except as could not reasonably be expected to result in a Material Adverse Effect, (i) a Pension Event shall occur which, in Collateral Agent’s determination, constitutes grounds for the termination under any Applicable Law, of any Plan or (ii) the appointment by the appropriate Governmental Authority of a trustee for any Plan, or (iii) if any Plan shall be terminated or any such trustee shall be requested or appointed, or (iv) if a Loan Party is in default with respect to payments to a Plan resulting from their complete or partial withdrawal from such Plan or (v) any event that may reasonably be expected to have a Material Adverse Effect or any Lien arises (save for contribution amounts not yet due) in connection with any Plan; or

 

(j)                                    Invalidity of Loan Documents.  (i) Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under SECTION 6.04 or SECTION 6.05) or as a result of acts or omissions by any Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Commitments), or purports in writing to revoke or rescind any Loan Document; or (ii) any challenge by or on behalf of any Loan Party, receiver, trustee, custodian, conservator, monitor, liquidator, rehabilitator, administrator, administrative receiver or similar officer for any Loan Party or for all or any material part of its property to the validity of any Loan Document or the

 

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applicability or enforceability of any Loan Document strictly in accordance with the subject Loan Document’s terms or which seeks to void, avoid, limit, or otherwise adversely affect any security interest created by or in any Loan Document or any payment made pursuant thereto; or

 

(k)                                 Change in Control.  There occurs any Change in Control; or

 

(l)                                     Security Documents.  (i) Any Security Document shall for any reason (other than pursuant to the terms thereof including as a result of a transaction permitted under SECTION 6.04 or SECTION 6.05) cease to create a valid and perfected or recorded Lien, with the priority required by the Security Documents, (or other security purported to be created on the applicable Collateral) on, security interest in, and hypothecs of any material portion of the Collateral purported to be covered thereby, subject to Permitted Encumbrances, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent or the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents or to file Uniform Commercial Code continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lender’s title insurance policy and such insurer has not denied coverage, or (ii) any of the Capital Stock of the Lead Borrower ceasing to be pledged pursuant to the Security Agreement free of Liens other than Liens created by the Security Agreement (other than Liens to secure the Term Loan Facility or Liens securing any Other Pari Passu Lien Obligations (as defined in and to the extent permitted under the Term Loan Agreement as amended and in effect from time to time)) or any nonconsensual Liens arising solely by operation of Law;

 

(m)                             Senior Subordinated Note Documents and Subordinated Discount Note Documents.  (i) Any of the Obligations of the Loan Parties under the Loan Documents for any reason shall cease to be “Senior Indebtedness” (or any comparable term) or “Senior Secured Financing” (or any comparable term) under, and as defined in any Senior Subordinated Note Documents or Subordinated Discount Note Documents, or (ii) the subordination provisions set forth in any Senior Subordinated Note Documents or the Subordinated Discount Note Documents shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against the holders of any Senior Subordinated Notes and the Subordinated Discount Notes, as applicable;

 

(n)                                 Termination of Business.  Except as permitted under SECTION 6.05, the determination of the Loan Parties, whether by vote of the Loan Parties’ board of directors or otherwise to: suspend the operation of the Loan Parties’ business in the ordinary course, liquidate all or substantially all of the Loan Parties’ assets or Store locations, or employ an agent or other third party to conduct any so-called store closing, store liquidation or “Going-Out-Of-Business” sales for all or substantially all of the Loan Parties’ Stores;

 

(o)                                 Termination of Guaranty.  The termination of the Facility Guaranty or any other guaranty of the Obligations (except for any release or termination permitted hereunder); or

 

(p)                                 Indictment.  The indictment of any Loan Party, under any Applicable Law where the crime alleged would constitute a felony under Applicable Law and such indictment remains unquashed or such legal process remains undismissed for a period of ninety (90) days or

 

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more, unless either (i) the Administrative Agent, in its commercially reasonable discretion, determines that the indictment is not material or (ii) such indictment relates to the Lead Borrower’s stock option practices.

 

SECTION 7.02                                      Remedies Upon Event of Default.

 

If any Event of Default occurs and is continuing, the Administrative Agent may and, at the request of the Required Lenders, shall take any or all of the following actions:

 

(a)                                 declare the Commitment of each Lender to make Revolving Credit Loans (including Swingline Loans) and any obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon such Commitments and obligation shall be terminated;

 

(b)                                 declare the unpaid principal amount of all outstanding Revolving Credit Loans (including Swingline Loans), all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers;

 

(c)                                  require that the Borrowers provide Cash Collateral equal to the amount of 103% of the amount of all Letter of Credit Outstandings (other than Letter of Credit Outstandings with respect to Letters of Credit denominated in a currency other than Dollars, which Letter of Credit Outstandings shall be Cash Collateralized in an amount equal to 115% of the amount of such Letter of Credit Outstandings); and

 

(d)                                 exercise on behalf of itself and the Secured Parties all rights and remedies available to it and the Secured Parties under the Loan Documents or Applicable Law;

 

provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Loan Party under the Bankruptcy Code, the obligation of each Lender to make Revolving Credit Loans (including Swingline Loans) and any obligation of the Issuing Banks to issue Letters of Credit shall automatically terminate, the unpaid principal amount of all outstanding Revolving Credit Loans (including Swingline Loans) and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrowers to Cash Collateralize the amount of Letter of Credit Outstandings as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

 

SECTION 7.03                                      Exclusion of Immaterial Subsidiaries.

 

(a)                                 Solely for the purpose of determining whether a Default has occurred under clause (f) or (g) of SECTION 7.01, any reference in any such clause to any Restricted Subsidiary or Loan Party shall be deemed not to include any Immaterial Subsidiary affected by any event or circumstances referred to in any such clause (it being agreed that all Immaterial Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether they constitute Immaterial Subsidiaries).

 

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SECTION 7.04                                      Application of Proceeds.

 

After the occurrence and during the continuance of (i) any Cash Dominion Event (other than, with respect to any Canadian Loan Party), or (ii) any Event of Default and acceleration of the Obligations, all proceeds realized from any Loan Party or on account of any Collateral owned by a Loan Party or any payments in respect of any Obligations and all proceeds of the Collateral, shall be applied in the following order:

 

(a)                                 FIRST, ratably to pay the Obligations in respect of any Credit Party Expenses, indemnities and other amounts then due to the Administrative Agent and the Collateral Agent until paid in full;

 

(b)                                 SECOND, ratably to pay any Credit Party Expenses and indemnities, and to pay any fees then due to the Lenders, until paid in full;

 

(c)                                  THIRD, to the extent not previously reimbursed by the Lenders, to payment to the Agents of that portion of the Obligations constituting accrued and unpaid interest on any Permitted Overadvances;

 

(d)                                 FOURTH, to the extent not previously reimbursed by the Lenders, to payment to the Agents of that portion of the Obligations constituting principal on any Permitted Overadvances;

 

(e)                                  FIFTH, to the extent that Swingline Loans have not been repaid by the Lenders, payment to the Swingline Lender of that portion of the Obligations constituting accrued and unpaid interest on the Swingline Loans;

 

(f)                                   SIXTH, to the extent that Swingline Loans have not been repaid by the Lenders, payment to the Swingline Lender of that portion of the Obligations constituting principal on the Swingline Loans;

 

(g)                                  SEVENTH, ratably to pay interest accrued in respect of the Obligations (other than Other Liabilities) until paid in full;

 

(h)                                 EIGHTH, ratably to pay principal due in respect of the Revolving Credit Loans until paid in full;

 

(i)                                     NINTH, to the Administrative Agent, to be held by the Administrative Agent, for the ratable benefit of the Issuing Banks and the Lenders as Cash Collateral in an amount equal to 103% of the amount of all Letter of Credit Outstandings (other than Letter of Credit Outstandings with respect to Letters of Credit denominated in a currency other than Dollars, which Letter of Credit Outstandings shall be Cash Collateralized in an amount equal to 115% of the amount of such Letter of Credit Outstandings) until paid in full,

 

(j)                                    TENTH, to pay outstanding Obligations with respect to Cash Management Services furnished to any Loan Party;

 

(k)                                 ELEVENTH, ratably to pay any other outstanding Obligations (including any other outstanding Other Liabilities); and

 

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(l)                                     TWELFTH, to the Lead Borrower or such other Person entitled thereto under Applicable Law.

 

Notwithstanding the foregoing, in the case of payments from or proceeds of Collateral of Michaels of Canada, ULC, the same shall first be applied as provided with respect to principal or Cash Collateral in subparagraphs (d), (f) and (h) before application to any fees which may be in the nature of interest for tax purposes as provided in subparagraph (b) or to interest as provided in subparagraphs (c), (e) and (g).

 

ARTICLE VIII

 

The Administrative Agent

 

SECTION 8.01                                      Appointment of Administrative Agent.

 

Each Credit Party hereby irrevocably designates Wells Fargo as Administrative Agent under this Agreement and the other Loan Documents. The general administration of the Loan Documents shall be by the Administrative Agent. The Credit Parties each hereby (a) irrevocably authorizes the Administrative Agent (i) to enter into the Loan Documents to which it is a party, and (ii) at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto, and (b) agrees and consents to all of the provisions of the Security Documents. The Administrative Agent shall have no duties or responsibilities except as set forth in this Agreement and the other Loan Documents, nor shall it have any fiduciary relationship with any other Credit Party, and no implied covenants, responsibilities, duties, obligations, or liabilities shall be read into the Loan Documents or otherwise exist against the Administrative Agent.

 

SECTION 8.02                                      Appointment of Collateral Agent.

 

Each Secured Party hereby irrevocably designates Wells Fargo as Collateral Agent under this Agreement and the other Loan Documents. The Secured Parties each hereby (i) irrevocably authorizes the Collateral Agent (x) to enter into the Loan Documents to which it is a party, and (y) at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto, and (ii) agrees and consents to all of the provisions of the Security Documents.  All Collateral shall be held or administered by the Collateral Agent (or its duly-appointed agent) for its own benefit and for the ratable benefit of the other Credit Parties. Any proceeds received by the Collateral Agent from the foreclosure, sale, lease or other disposition of any of the Collateral and any other proceeds received pursuant to the terms of the Security Documents or the other Loan Documents shall be paid over to the Administrative Agent for application as provided in this Agreement and the other Loan Documents.  The Collateral Agent shall have no duties or responsibilities except as set forth in this Agreement and the other Loan Documents, nor shall it have any fiduciary relationship with any other Secured Party, and no implied covenants, responsibilities, duties, obligations, or liabilities shall be read into the Loan Documents or otherwise exist against the Collateral Agent.

 

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SECTION 8.03                                      Solidary Interests/Quebec Liens (Hypothecs).

 

Without limiting the generality of the foregoing, for the purposes of creating a solidarité active in accordance with Article 1541 of the Civil Code of Quebec, between each Credit Party, taken individually, on the one hand, and the Agents, on the other hand, the Borrowers, the Facility Guarantors and each such Credit Party acknowledge and agree with the Agents that such Credit Party and the Agents are hereby conferred the legal status of solidary creditors of the Borrowers and the Facility Guarantors in respect of all Obligations, present and future, owed by the Borrowers or the Facility Guarantors to each such Credit Party and the Agents (collectively, the “Solidary Claim”).  Accordingly, but subject (for the avoidance of doubt) to Article 1542 of the Civil Code of Quebec, the Borrowers and the Facility Guarantors are irrevocably bound towards the Agents and each Credit Party in respect of the entire Solidary Claim of the Agents and such Credit Party.  As a result of the foregoing, the parties hereto acknowledge that the Agents and each Credit Party shall at all times have a valid and effective right of action for the entire Solidary Claim of the Agents and such Credit Party and the right to give full acquittance for it.  Accordingly, without limiting the generality of the foregoing, the Agents, as solidary creditor with each Credit Party, shall at all times have a valid and effective right of action in respect of all Obligations, present and future, owed by the Borrowers or the Facility Guarantors to the Agents and to the Credit Parties or any of them and the right to give a full acquittance for same.  For greater certainty, the foregoing provisions of this paragraph, and the rights of the Credit Parties, shall at all times be subject to the provisions of this Agreement.

 

In addition, and without limiting any of the foregoing, for the purposes of holding any security granted by any Loan Party pursuant to the laws of the Province of Quebec to secure payment of any bond issued by any Loan Party, each of the Credit Parties hereby irrevocably appoints and authorizes the Collateral Agent and, to the extent necessary, ratifies the appointment and authorization of the Collateral Agent, to act as the person holding the power of attorney (i.e. “fondé de pouvoir”) (in such capacity, the “Attorney”) of the Credit Parties as contemplated under Article 2692 of the Civil Code, and to enter into, to take and to hold on its behalf, and for its benefit, any hypothec, and to exercise such powers and duties that are conferred upon the Attorney under any hypothec.  Moreover, without prejudice to such appointment and authorization to act as the person holding the power of attorney as aforesaid, each of the Credit Parties hereby irrevocably appoints and authorizes the Collateral Agent (in such capacity, the “Custodian”) to act as agent and custodian for and on behalf of the Credit Parties to hold and be the sole registered holder of any bond which may be issued under any hypothec, the whole notwithstanding Section 32 of An Act respecting the special powers of legal persons (Quebec) or any other applicable law, and to execute all related documents.  Each of the Attorney and the Custodian shall: (a) have the sole and exclusive right and authority to exercise, except as may be otherwise specifically restricted by the terms hereof, all rights and remedies given to the Attorney and the Custodian (as applicable) pursuant to any hypothec, bond, pledge, applicable laws or otherwise, (b) benefit from and be subject to all provisions hereof with respect to the Collateral Agent mutatis mutandis, including, without limitation, all such provisions with respect to the liability or responsibility to and indemnification by the Credit Parties, and (c) be entitled to delegate from time to time any of its powers or duties under any hypothec, bond, or pledge on such terms and conditions as it may determine from time to time.  Any person who becomes a Credit Party shall, by its execution of an Assignment and Acceptance, be deemed to have consented to and confirmed: (i) the Attorney as the person holding the power of attorney as 

 

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aforesaid and to have ratified, as of the date it becomes a Credit Party, all actions taken by the Attorney in such capacity, and (ii) the Custodian as the agent and custodian as aforesaid and to have ratified, as of the date it becomes a Credit Party, all actions taken by the Custodian in such capacity.  The substitution of the Collateral Agent pursuant to the provisions of this Article VIII shall also constitute the substitution of the Attorney and the Custodian.

 

SECTION 8.04                                      Sharing of Excess Payments.

 

If at any time or times any Secured Party shall receive (i) by payment, foreclosure, setoff, banker’s lien, counterclaim, or otherwise, or any payments with respect to the Obligations owing to such Secured Party arising under, or relating to, this Agreement or the other Loan Documents, or (ii) payments from the Administrative Agent in excess of such Secured Party’s ratable portion of all such distributions by the Administrative Agent, such Secured Party shall promptly (1) turn the same over to the Administrative Agent, in kind, and with such endorsements as may be required to negotiate the same to the Administrative Agent, or in same day funds, as applicable, for the account of all of the Secured Parties and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Secured Parties so that such excess payment received shall be applied ratably as among the Secured Parties in accordance with the provisions of SECTION 2.17 or SECTION 7.04, as applicable; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.  In no event shall the provisions of this paragraph be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Credit Loans or participations in Swingline Loans or in Letters of Credit to any Eligible Assignee or participant, other than to the Borrowers (as to which the provisions of this paragraph shall apply).

 

SECTION 8.05                                      Agreement of Applicable Lenders.

 

Upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Applicable Lenders, action shall be taken by each Agent for and on behalf or for the benefit of all Credit Parties upon the direction of the Applicable Lenders, and any such action shall be binding on all Credit Parties. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of SECTION 9.01.

 

SECTION 8.06                                      Liability of Agents.

 

(a)                                 The Agents, when acting on behalf of the Credit Parties, may execute any of their respective duties under this Agreement or any of the other Loan Documents by or through any of their respective officers, agents and employees, and none of the Agents nor any of their respective directors, officers, agents or employees shall be liable to any other Secured Party for any action taken or omitted to be taken in good faith, or be responsible to any other Secured Party for the consequences of any 

 

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oversight or error of judgment, or for any loss, except to the extent of any liability imposed by law by reason of such Agent’s own gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision). None of the Agents nor any of their respective directors, officers, agents and employees shall in any event be liable to any other Secured Party for any action taken or omitted to be taken by it pursuant to instructions received by it from the Applicable Lenders, or in reliance upon the advice of counsel selected by it. Without limiting the foregoing none of the Agents, nor any of their respective directors, officers, employees, or agents shall be: (i) responsible to any other Secured Party for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any recital, statement, warranty or representation in, this Agreement, any other Loan Document or any related agreement, document or order; (ii) required to ascertain or to make any inquiry concerning the performance or observance by any Loan Party of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents; (iii) responsible to any other Secured Party for the state or condition of any properties of the Loan Parties or any other obligor hereunder constituting Collateral for the Obligations or any information contained in the books or records of the Loan Parties; (iv) responsible to any other Secured Party for the validity, enforceability, collectibility, effectiveness or genuineness of this Agreement or any other Loan Document or any other certificate, document or instrument furnished in connection therewith; or (v) responsible to any other Secured Party for the validity, priority or perfection of any Lien securing or purporting to secure the Obligations or for the value or sufficiency of any of the Collateral.

 

(b)                                 The Agents may execute any of their duties under this Agreement or any other Loan Document by or through their agents or attorneys-in-fact, and shall be entitled to the advice of counsel concerning all matters pertaining to its rights and duties hereunder or under the other Loan Documents.  The Agents shall not be responsible for the negligence or misconduct of any agent or attorneys-in-fact selected by them with reasonable care.

 

(c)                                  None of the Agents nor any of their respective directors, officers, employees, or agents shall have any responsibility to any Loan Party on account of the failure or delay in performance or breach by any other Secured Party (other than by each such Agent in its capacity as a Lender) of any of its respective obligations under this Agreement or any of the other Loan Documents or in connection herewith or therewith.

 

(d)                                 The Agents shall be entitled to rely, and shall be fully protected in relying, upon any notice, consent, certificate, affidavit, or other document or writing believed by them to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon the advice and statements of legal counsel (including, without, limitation, counsel to the Loan Parties), independent accountants and other experts selected by any Loan Party or any Secured Party.  The Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless they shall first receive such advice or concurrence of the Applicable Lenders as they deem appropriate or they shall first be indemnified to their satisfaction by the other Secured Parties against any and all liability and expense which may be incurred by them by reason of the taking or failing to take any such action.

 

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SECTION 8.07                                      Notice of Default.

 

No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has actual knowledge of the same or has received notice from a Secured Party or Loan Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  In the event that an Agent obtains such actual knowledge or receives such a notice, such Agent shall give prompt notice thereof to each of the other Secured Parties.  Upon the occurrence of an Event of Default, the Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.  Unless and until the Agents shall have received such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as they shall deem advisable in the best interest of the Secured Parties.  In no event shall the Agents be required to comply with any such directions to the extent that the Agents believe that their compliance with such directions would be unlawful.

 

SECTION 8.08                                      Credit Decisions.

 

Each Secured Party (other than the Agents) acknowledges that it has, independently and without reliance upon the Agents or any other Secured Party, and based on the financial statements prepared by the Loan Parties and such other documents and information as it has deemed appropriate, made its own credit analysis and investigation into the business, assets, operations, property, and financial and other condition of the Loan Parties and has made its own decision to enter into this Agreement and the other Loan Documents.  Each Credit Party (other than the Agents) also acknowledges that it will, independently and without reliance upon the Agents or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in determining whether or not conditions precedent to closing any Revolving Credit Loan hereunder have been satisfied and in taking or not taking any action under this Agreement and the other Loan Documents.

 

SECTION 8.09                                      Reimbursement and Indemnification.

 

Each Secured Party (other than the Administrative Agent and the Collateral Agent) severally agrees to (i) reimburse the Administrative Agent and the Collateral Agent for such Secured Party’s pro rata share of outstanding Credit Extensions held by such Secured Party (or, in the case of any Lender that has assigned its Commitments pursuant to SECTION 9.07 hereof, where the applicable assignee has not ratably assumed such Lender’s obligations under this SECTION 8.09 with respect to acts or omissions that occurred prior to such assignment, such assigning Lender’s Commitment Percentage prior to such assignment) of (x) any expenses and fees incurred by such Agent for the benefit of Secured Parties under this Agreement and any of the other Loan Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Secured Parties, and any other expense incurred in connection with the operation or enforcement thereof, in each case to the extent not previously reimbursed by the Loan Parties, and (y) any expenses of such Agent incurred for the benefit of the Secured Parties that the Loan Parties have agreed to reimburse pursuant to this Agreement or any other Loan Document and have failed to so reimburse, and (ii) indemnify and hold harmless such Agent and any of its directors, officers, employees, or agents, 

 

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on demand, in the amount of such Secured Party’s Commitment Percentage (or, in the case of any Lender that has assigned its Commitments pursuant to SECTION 9.07 hereof, where the applicable assignee has not ratably assumed such Lender’s obligations under this SECTION 8.09 with respect to acts or omissions that occurred prior to such assignment, such assigning Lender’s Commitment Percentage prior to such assignment), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any Secured Party in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the other Loan Documents to the extent not reimbursed by the Loan Parties, including, without limitation, costs of any suit initiated either by such Agent against any Secured Party or against such Agent or Secured Party (except such as shall have been determined by a court of competent jurisdiction or another independent tribunal having jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Agent); provided, however, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Secured Party in its capacity as such.  The provisions of this SECTION 8.09 shall survive the repayment or assignment of the Obligations and the termination of the Commitments and, in the case of any Lender that has assigned its Commitments pursuant to SECTION 9.07 hereof where the applicable assignee has not ratably assumed such Lender’s obligations under this SECTION 8.09 with respect to acts or omissions that occurred prior to such assignment, with respect to events which have occurred prior to any such assignment.

 

SECTION 8.10                                      Rights of Agents.

 

It is understood and agreed that the Agents shall have the same rights and powers hereunder (including the right to give such instructions) as the other Lenders and may exercise such rights and powers, as well as their rights and powers under other agreements and instruments to which they are or may be party, and engage in other transactions with the Loan Parties, as though they were not the Agents.  Each Agent and their respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of commercial or investment banking, trust, advisory or other business with the Loan Parties and their Affiliates as if it were not an Agent thereunder.

 

SECTION 8.11                                      Notice of Transfer.

 

The Administrative Agent may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Acceptance shall have become effective as set forth in SECTION 9.07.

 

SECTION 8.12                                      Successor Agents.

 

Any Agent may resign at any time by giving thirty (30) Business Days’ written notice thereof to the other Secured Parties and the Lead Borrower. Upon any such resignation of an Agent, the Required Lenders shall have the right to appoint a successor Agent, which, so long as there is no Specified Default, shall be reasonably satisfactory to the Lead Borrower (whose 

 

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consent in any event shall not be unreasonably withheld or delayed).  If no successor Agent shall have been so appointed by the Required Lenders and/or none shall have accepted such appointment within thirty (30) days after the retiring Agent’s giving of notice of resignation, the retiring Agent may, on behalf of the other Secured Parties, appoint a successor Agent which shall be a commercial bank (or affiliate thereof) organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of a least $1,000,000,000, or capable of complying with all of the duties of such Agent hereunder (in the opinion of the retiring Agent and as certified to the other Secured Parties in writing by such successor Agent) which, so long as there is no Specified Default, shall be reasonably satisfactory to the Lead Borrower (whose consent shall not in any event be unreasonably withheld or delayed).  Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent’s resignation hereunder as such Agent, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was such Agent under this Agreement.

 

SECTION 8.13                                      Relation Among the Lenders.

 

The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of any Agent) authorized to act for, any other Lender.

 

SECTION 8.14                                      Reports and Financial Statements.

 

By signing this Agreement, each Lender (and with respect to clause (a), each Secured Party):

 

(a)                                 agrees to furnish the Administrative Agent, after the occurrence and during the continuance of a Cash Dominion Event (and thereafter at such frequency as the Administrative Agent may reasonably request), with a summary of all Other Liabilities due or to become due to such Lender or its Affiliates;

 

(b)                                 is deemed to have requested that the Agents furnish such Lender, promptly after they become available, copies of all financial statements required to be delivered by the Lead Borrower under SECTION 5.01(a) through and including SECTION 5.01(g), and all commercial finance examinations and appraisals of the Collateral received by the Agents (collectively, the “Reports”) (and the Agents agree to furnish such Reports promptly to the Lenders, which Reports may be furnished in accordance with the final paragraph of SECTION 5.01);

 

(c)                                  expressly agrees and acknowledges that no Agent makes any representation or warranty as to the accuracy of the Reports, and shall not be liable for any information contained in any Report;

 

(d)                                 expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agents or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records, as well as on representations of the Loan Parties’ personnel;

 

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(e)                                  agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except to its participants, or use any Report in any other manner; and

 

(f)                                   without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold each Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrowers, or the indemnifying Lender’s participation in Swingline Loans and Letters of Credit, or the indemnifying Lender’s purchase of, Revolving Credit Loans of the Borrowers; and (ii) to pay and protect, and indemnify, defend, and hold each Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agents and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender in violation of the terms hereof.

 

SECTION 8.15                                      Agency for Perfection.

 

Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens for the benefit of the Agents and the Secured Parties, in assets which, in accordance with Article 9 of the UCC or any other Applicable Law of the United States of America or Canada under the PPSA or otherwise can be perfected only by possession.  Should any Secured Party (other than an Agent) obtain possession of any such Collateral, such Secured Party shall notify the Collateral Agent thereof, and, promptly upon the Collateral Agent’s request therefor shall deliver such Collateral to the Collateral Agent, or otherwise deal with such Collateral in accordance with the Collateral Agent’s instructions.

 

SECTION 8.16                                      Delinquent Lender; Deteriorating Lender.

 

(a)                                 If for any reason any Lender (i) (A) shall fail or refuse to abide by its obligations under this Agreement, including without limitation its obligation to make available to Administrative Agent its Commitment Percentage of any Revolving Credit Loans, expenses or setoff or purchase its Commitment Percentage of a participation interest in the Swingline Loans or Letter of Credit Outstandings and such failure is not cured within one (1) Business Day of receipt from the Administrative Agent of written notice thereof, or (B) shall fail, within three (3) Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its Commitments (each, a “Delinquent Lender”), or (ii) is a Deteriorating Lender, then, in addition to the rights and remedies that may be available to the other Secured Parties, the Loan Parties or any other party at law or in equity, and not in limitation thereof,

 

(i)                                     such Delinquent Lender’s or Non-Performing Deteriorating Lender’s, as applicable, right to participate in the administration of, or decision-making rights related to, the Revolving Credit Loans, this Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal,

 

(ii)                                  any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable (whether voluntary or mandatory, at 

 

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maturity, pursuant to Article VII or otherwise), or received by the Administrative Agent from a Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, pursuant to SECTION 9.09 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, to the Issuing Banks or Swingline Lender hereunder; third, to Cash Collateralize the Issuing Banks’ Fronting Exposure with respect to such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, in accordance with SECTION 2.13(g); fourth, as the Lead Borrower may request (so long as no Default or Event of Default exists), to the funding of any Revolving Credit Loan in respect of which such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Lead Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Delinquent Lender’s or Non-Performing Deteriorating Lender’s, as applicable, potential future funding obligations with respect to Revolving Credit Loans under this Agreement and (y) Cash Collateralize the Issuing Banks’ future Fronting Exposure with respect to such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, with respect to future Letters of Credit issued under this Agreement in accordance with SECTION 2.13(g); sixth, to the payment of any amounts owing to the Lenders, the Issuing Banks or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Banks or the Swingline Lender against such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, as a result of such Delinquent Lender’s or Non-Performing Deteriorating Lender’s, as applicable, breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrowers as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, as a result of such Delinquent Lender’s or Deteriorating Lender’s, as applicable, breach of its obligations under this Agreement; and eighth, to such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Revolving Credit Loans or obligations in respect of Letters of Credit in respect of which such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, has not fully funded its appropriate share, and (y) such Revolving Credit Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in SECTION 4.02 were satisfied or waived, such payment shall be applied solely to pay the Revolving Credit Loans of, and obligations in respect of Letters of Credit owed to, all Performing Lenders on a pro rata basis prior to being applied to the payment of any Revolving Credit Loans of, or obligations in respect of Letters of Credit owed to, such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, until such time as all Revolving Credit Loans and obligations in respect of Letters of Credit and Swingline Loans are held by the Lenders pro rata in accordance with the Commitments hereunder without giving effect to SECTION 8.16(e). Any payments, 

 

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prepayments or other amounts paid or payable to a Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, that are applied (or held) to pay amounts owed by a Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, or to post Cash Collateral pursuant to this SECTION 8.16(a)(iii) shall be deemed paid to and redirected by such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, and each Lender irrevocably consents hereto.

 

Notwithstanding the foregoing, a Lender shall not be a Delinquent Lender or a Deteriorating Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.  Any determination by the Administrative Agent that a Lender is a Delinquent Lender or a Deteriorating Lender (including as a Non-Performing Deteriorating Lender) under this clause (a), and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Delinquent Lender or Deteriorating Lender (including as a Non-Performing Deteriorating Lender), as applicable (subject to SECTION 8.16(g)) as of the date established Administrative therefor by the Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Lead Borrower, the Issuing Banks, the Swingline Lender and each other Lender promptly following such determination.

 

(b)                                 No Delinquent Lender or Non-Performing Deteriorating Lender shall be entitled to receive any commitment fee payable under SECTION 2.19(b) for any period during which that Lender is a Delinquent Lender or Non-Performing Deteriorating Lender, as applicable (and the Borrowers shall not be required to pay any such fee that otherwise would have been required to have been paid to that Delinquent Lender or Non-Performing Deteriorating Lender, as applicable).

 

(c)                                  Each Delinquent Lender or Non-Performing Deteriorating Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, only to the extent allocable to its Commitment Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to the terms hereof in accordance with SECTION 2.13(g).

 

(d)                                 With respect to any commitment fee payable under SECTION 2.19(b) or any Letter of Credit Fee not required to be paid to any Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, pursuant to clauses (b) or (c) above, the Borrowers shall (x) pay to each Performing Lender that portion of any such fee otherwise payable to such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, with respect to such Delinquent Lender’s or Non-Performing Deteriorating Lender’s, as applicable, participation in obligations in respect of Letters of Credit or Swingline Loans that has been reallocated to such Performing Lender pursuant to clause (e) below, (y) pay to the Issuing Banks and Swingline Lender, as applicable, the amount of any such fee otherwise payable to such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, to the extent allocable to such Issuing Banks’ or Swingline Lender’s Fronting Exposure to such Delinquent Lender or Non-Performing Deteriorating Lender, as applicable, and (z) not be required to pay the remaining amount of any such fee.

 

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(e)                                  All or any part of such Delinquent Lender’s or Deteriorating Lender’s, as applicable, participation in obligations in respect of Letters of Credit and Swingline Loans shall be reallocated among the Lenders that are not Delinquent Lenders or Deteriorating Lenders in accordance with their respective Commitment Percentages (calculated without regard to such Delinquent Lender’s or Deteriorating Lender’s, as applicable, Commitment) but only to the extent that (x) the conditions set forth in SECTION 4.02 are satisfied at the time of such reallocation (and, unless the Lead Borrower shall have otherwise notified the Administrative Agent at such time, the Borrowers shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Credit Extensions of any non-Delinquent Lender or non-Deteriorating Lender, as applicable, to exceed such non-Delinquent Lender’s or non-Deteriorating Lender’s, as applicable, Commitment.  No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Delinquent Lender or Deteriorating Lender arising from that Lender having become a Delinquent Lender or Deteriorating Lender, as applicable, including any claim of a non-Delinquent Lender or non-Deteriorating Lender, as applicable, as a result of such non-Delinquent Lender’s or non-Deteriorating Lender’s, as applicable, increased exposure following such reallocation.  If the reallocation described in this clause (e) cannot, or can only partially, be effected, the Borrowers shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swingline Loans in an amount equal to the Swingline Lender’s Fronting Exposure and (y) second, Cash Collateralize the Issuing Banks’ Fronting Exposure in accordance with the procedures set forth in SECTION 2.13(g).

 

(f)                                   The non-Delinquent Lenders and non-Deteriorating Lenders shall also have the right, but not the obligation, in their respective, sole and absolute discretion, to cause the termination and assignment without any further action by the Delinquent Lender or Deteriorating Lender, as applicable, for no cash consideration (pro  rata, based on the respective Commitment Percentages of those Lenders electing to exercise such right), the Delinquent Lender’s or Deteriorating Lender’s, as applicable, Commitment to fund future Credit Extensions.  Upon any such purchase of the Commitment Percentage of any Delinquent Lender or Deteriorating Lender, the Delinquent Lender’s or Deteriorating Lender’s, as applicable, share in future Credit Extensions and its rights under the Loan Documents with respect thereto shall terminate on the date of purchase, and the Delinquent Lender or Deteriorating Lender, as applicable, shall promptly execute all documents reasonably requested to surrender and transfer such interest, including, if so requested, an Assignment and Acceptance.  The Borrowers may, on ten (10) days’ prior written notice to the Administrative Agent and such Delinquent Lender or Deteriorating Lender, as applicable, replace such Delinquent Lender or Deteriorating Lender, as applicable (in its capacity as a Lender), by causing such Delinquent Lender or Deteriorating Lender, as applicable, to (and such Delinquent Lender or Deteriorating Lender, as applicable, shall be obligated to) assign (with the assignment fee to be paid by the Borrowers in such instance) all of its rights and obligations under this Agreement to one or more Eligible Assignees.

 

(g)                                  If the Lead Borrower, the Administrative Agent, Swingline Lender and the Issuing Banks agree in writing that a Lender is no longer a Delinquent Lender or Deteriorating Lender (including any Non-Performing Deteriorating Lender), the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Credit Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Loans and obligations in respect of Letters of Credit and Swingline Loans

 

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to be held on a pro rata basis by the Lenders in accordance with their Commitment Percentages (without giving effect to SECTION 8.16(e)), whereupon such Lender will cease to be a Delinquent Lender or Deteriorating Lender, as applicable; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrowers while that Lender was a Delinquent Lender or Deteriorating Lender, as applicable; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Delinquent Lender or Deteriorating Lender, as applicable, to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Delinquent Lender or Deteriorating Lender, as applicable.

 

(h)                                 Each Delinquent Lender and Deteriorating Lender shall indemnify the Administrative Agent and each non-Delinquent Lender and non-Deteriorating Lender from and against any and all loss, damage or expenses, including but not limited to reasonable attorneys’ fees and funds advanced by the Administrative Agent or by any non-Delinquent Lender or non-Deteriorating Lender, as applicable, on account of a Delinquent Lender’s or Deteriorating Lender’s, as applicable, failure to timely fund its Commitment Percentage of a Revolving Credit Loan, or its obligations in respect of Swingline Loans and Letters of Credit or to otherwise perform its obligations under the Loan Documents.

 

SECTION 8.17                                      Collateral and Guaranty Matters.

 

(a)                                 The Lenders hereby irrevocably authorize the Collateral Agent to release any Lien upon any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full of all Obligations (other than (x) Other Liabilities as to which arrangements satisfactory to the Administrative Agent and the applicable Lenders, Affiliates of Lenders or other providers, shall have been made, and (y) contingent indemnity obligations with respect to then unasserted claims), the expiration or termination of all Letters of Credit (except for those Letters of Credit that have been Cash Collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and the reduction of all Letter of Credit Outstandings to zero (except for those Letters of Credit that have been Cash Collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank), or (ii) constituting property being sold, transferred or disposed of in a Permitted Disposition upon receipt by the Administrative Agent of the Net Proceeds thereof to the extent required by this Agreement.

 

(b)                                 The Lenders hereby irrevocably authorize the Administrative Agent to release any Restricted Subsidiary that is a Facility Guarantor from its obligations under its Guaranty at the times and in accordance with the provisions of Section 4.13 of such Guaranty.

 

(c)                                  Except as provided in clauses (a) and (b) of this Section, the Collateral Agent will not release any of the Collateral Agent’s Liens and the Administrative Agent will not release any Facility Guarantor from its obligations under its Guaranty, in each case, without the prior written authorization of the Applicable Lenders. Upon request by any Agent or any Loan Party at any time, the Lenders will confirm in writing the Collateral Agent’s authority to release any Liens upon particular types or items of Collateral or the Administrative Agent’s authority to release any Facility Guarantor, in each case, pursuant to this SECTION 8.17.

 

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(d)                                 Upon at least two (2) Business Days’ prior written request by the Lead Borrower, the Collateral Agent or the Administrative Agent, as applicable, shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens upon any Collateral described in SECTION 8.17(a) or the release of any Facility Guarantor described in SECTION 8.17(b); provided, however, that (i) such Agent shall not be required to execute any such document on terms which, in its reasonable opinion, would, under Applicable Law, expose such Agent to liability or create any obligation or entail any adverse consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of any Loan Party (other than any Loan Party being expressly released) in respect of) all interests retained by any Loan Party, including (without limitation) the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

 

SECTION 8.18                                      Co-Syndication Agents, Co-Documentation Agents, and Arrangers.

 

Notwithstanding the provisions of this Agreement or any of the other Loan Documents, the Co-Syndication Agents, the Co-Documentation Agents, and the Arrangers shall have no powers, rights, duties, responsibilities or liabilities with respect to this Agreement and the other Loan Documents.

 

ARTICLE IX

 

Miscellaneous

 

SECTION 9.01                                      Amendments, Etc.

 

Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Lead Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Lead Borrower or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:

 

(a)                                 extend or increase the Commitment of any Lender without the written consent of such Lender (it being understood that a waiver of any condition precedent set forth in SECTION 4.02 or the waiver of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender);

 

(b)                                 postpone any date scheduled for, or reduce the amount of, any payment of principal, interest, fees or other amounts payable under the Loan Documents or reduce the amount of, waive or excuse any such payment or postpone the expiration of the Commitments or the Maturity Date, without the prior written consent of all Lenders directly affected thereby provided that, only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest at the Default Rate;

 

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(c)                                  reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any other Loan Document without the prior written consent of all Lenders directly affected thereby; provided that, only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest at the Default Rate;

 

(d)                                 change any provision of this SECTION 9.01, the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the prior written consent of all Lenders directly affected thereby;

 

(e)                                  other than in a transaction permitted under SECTION 6.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the prior written Unanimous Consent of all Lenders; or

 

(f)                                   other than in connection with a transaction permitted under SECTION 6.04 or SECTION 6.05 or in accordance with the provisions of Section 4.13 of the Guaranty, release any Loan Party from its obligations under any Loan Document or limit its liability in respect of such Loan Document, without the prior written Unanimous Consent of all Lenders; or

 

(g)                                  without the prior written Unanimous Consent of all Lenders, change the definition of the terms “Availability” or “Borrowing Base” or any component definition of any such terms if as a result thereof the amounts available to be borrowed by the Borrowers would be increased, provided  that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves or to add Inventory and Accounts acquired in a Permitted Acquisition to the Borrowing Base as provided herein; or

 

(h)                                 without the prior written Unanimous Consent of all Lenders, modify the definition of Permitted Overadvance so as to increase the amount thereof, or to cause the Total Commitments (or the Commitment of any Lender) to be exceeded as a result thereof, or, except as provided in such definition, the time period for a Permitted Overadvance;

 

(i)                                     without the prior written Unanimous Consent of all Lenders, change SECTION 2.17 (other than clause (e) thereof), SECTION 2.21(b) (with respect to the first sentence thereof only), SECTION 2.18, SECTION 7.04, or SECTION 8.04;

 

(j)                                    without the prior written Unanimous Consent of all Lenders, (i) subordinate the Obligations hereunder to any other Indebtedness, or (ii) except as provided by operation of Applicable Law or in the Intercreditor Agreement, subordinate the Liens granted hereunder or under the other Loan Documents to any other Lien; or

 

(k)                                 without the prior written Unanimous Consent of all Lenders, amend the Intercreditor Agreement in a manner that (x) modifies the definition of “ABL Priority Collateral” or “Term Priority Collateral” as set forth therein in a manner adverse to the Lenders, or (y) modifies the provisions with respect to application of proceeds as set forth in Sections 4.1(b), (c) or (d) of the Intercreditor Agreement;

 

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and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by each Issuing Bank in addition to the Lenders required above, affect the rights or duties of an Issuing Bank under this Agreement or any Letter of Credit application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Lender in addition to the Lenders required above, affect the rights or duties of the Swingline Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent and the Collateral Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent or the Collateral Agent under this Agreement or any other Loan Document; (iv) no Lender consent is required to effect an Extension Amendment (except as expressly provided in SECTION 2.27); and (v) no Lender consent is required to effect any amendment or supplement to the Intercreditor Agreement that is for the sole purpose of adding the holders of any Indebtedness constituting a Permitted Refinancing of the Term Loan Facility (or any agent or trustee of such holders) as parties thereto, as expressly contemplated by the terms of the Intercreditor Agreement.  Notwithstanding anything to the contrary herein, no Delinquent Lender or Deteriorating Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender (it being understood that any Commitments or Loans held or deemed held by any Delinquent Lender or Deteriorating Lender, as applicable, shall be excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).

 

Notwithstanding anything to the contrary in this Agreement or any other Loan Document, (i) no provider or holder of any Bank Products or Cash Management Services shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as Lenders, to the extent applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or any Loan Party, and (ii) any Loan Document may be amended and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with Applicable Law impacting all Lenders, (ii) to cure obvious errors or defects or (iii) to cause any Loan Document to be consistent with this Agreement and the other Loan Documents.

 

Notwithstanding anything to the contrary contained in this SECTION 9.01, in the event that the Lead Borrower shall request that this Agreement or any other Loan Document be modified, amended or waived in a manner which would require the Unanimous Consent of the Lenders or of all Lenders affected thereby and such amendment is approved by the Required Lenders, but not by all the Lenders, the Lead Borrower and the Administrative Agent shall be permitted to amend this Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Lead Borrower (such Lender or Lenders, collectively the “Minority Lenders”) subject to their providing for (i) the termination of the Commitment of each of the Minority Lenders, (ii) the addition to this Agreement of one or more other financial institutions which would qualify as an Eligible Assignee, subject to the reasonable approval of the Administrative Agent, or an increase in the Commitment of one or more of the Required Lenders, so that the Total Commitments after giving effect to such

 

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amendment shall be in the same amount as the Total Commitments immediately before giving effect to such amendment, (iii) if any Revolving Credit Loans are outstanding at the time of such amendment, the making of such additional Revolving Credit Loans by such new or increasing Lender or Lenders, as the case may be, as may be necessary to repay in full the outstanding Revolving Credit Loans (including principal, interest, fees and other amounts due and owing under the Loan Documents) of the Minority Lenders immediately before giving effect to such amendment and (iv) such other modifications to this Agreement or the Loan Documents as may be appropriate and incidental to the foregoing.

 

SECTION 9.02                                      Notices and Other Communications; Facsimile Copies.

 

(a)                                 General.  Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission).  All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)                                     if to any Loan Party, to it at 8000 Bent Branch Drive, Irving, Texas 75063, Attention: Charles M. Sonsteby, Member of the Interim Office of the Chief Executive Officer, Chief Administrative Officer & Chief Financial Officer, and Thomas Melito, Vice President — Treasurer (Telecopy No. (972) 409-1556) (E-Mail: sonstebc@michaels.com and melitot@michaels.com), with a copy to the attention of General Counsel (Telecopy No. (972) 409-1965, and with copies to Bain Capital Partners, LLC, John Hancock Tower, 200 Clarendon Street, Boston, Massachusetts 02116, Attention: Josh Bekenstein, Matthew Levin and Todd Cook (Telecopy No. (617) 516-2010), (E-Mail: jbekenstein@baincapital.com, mlevin@baincapital.com, and tcook@baincapital.com), and Blackstone Management Associates V LLC, 345 Park Avenue, New York, New York 10154, Attention: Peter Wallace and Vikrant Sawhney (Telecopy No. (212) 583-5717), (E-Mail: wallace@blackstone.com and sawhney@blackstone.com), with a copy to Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199, Attention: Byung W. Choi, Esquire (Telecopy No. (617) 951-7050), (E-Mail: byung.choi@ropesgray.com); and

 

(ii)                                  if to the Administrative Agent, the Collateral Agent or the Swingline Lender to Wells Fargo, One Boston Place, 18th Floor, Boston, Massachusetts 02108, Attention: Connie Liu (Telecopy No. (866) 303-3944), (E-Mail: connie.liu@wellsfargo.com), with a copy to Riemer & Braunstein LLP, Three Center Plaza, Boston, Massachusetts 02108, Attention: David S. Berman, Esquire (Telecopy No. (617) 880-3456), (E-Mail: dberman@riemerlaw.com);

 

(iii)                               if to any other Credit Party, to it at its address (or telecopy number or electronic mail address) set forth on the signature pages hereto or on any Assignment and Acceptance.

 

All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by

 

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courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of SECTION 5.02), when delivered; provided that notices and other communications to the Administrative Agent, the Issuing Banks and the Swingline Lender pursuant to Article II shall not be effective until actually received by such Person.  In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.

 

Notwithstanding the foregoing, any notice hereunder sent by e-mail shall be solely for the distribution of (i) routine communications such as financial statements and (ii) documents and signature pages for execution by the parties hereto, and for no other purpose.  Unless the Administrative Agent otherwise prescribes, notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.  Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.

 

(b)                                 Effectiveness of Facsimile Documents and Signatures.  Loan Documents may be transmitted and/or signed by facsimile or by electronic pdf copy.  The effectiveness of any such documents and signatures shall, subject to Applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Administrative Agent, the Collateral Agent, the Issuing Banks, and the Lenders.

 

(c)                                  Reliance by Agents and Lenders.  The Administrative Agent, the Collateral Agent, the Issuing Banks and the Lenders shall be entitled to rely and act upon any notices (including telephonic Borrowing Requests) purportedly given by or on behalf of any Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrowers shall indemnify the Credit Parties and each Related Party from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrowers in the absence of gross negligence or willful misconduct.  All telephonic notices to the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

 

SECTION 9.03                                      No Waiver; Cumulative Remedies.

 

No failure or delay by any Credit Party in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Credit Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any other rights or remedies that they would

 

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otherwise have.  No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by SECTION 9.01, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  Without limiting the generality of the foregoing, the making of a Revolving Credit Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

 

SECTION 9.04                                      Attorney Costs and Expenses.

 

The Lead Borrower agrees (a) to pay or reimburse the Administrative Agent, the Collateral Agent and WFCF for all Credit Party Expenses incurred in connection with (i) the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and (ii) any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and (iii) the consummation and administration of the transactions contemplated hereby and thereby, including, in each case, all reasonable fees and expenses of Riemer & Braunstein LLP and Norton Rose Canada LLP, and (b) to pay or reimburse the Administrative Agent, the Collateral Agent and each Lender for all Credit Party Expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including, without limitation, all such costs and expenses incurred during any legal proceeding, including any proceeding under the Bankruptcy Code, and including all fees and expenses of counsel to the Administrative Agent, the Collateral Agent and, to the extent constituting Credit Party Expenses, the other Credit Parties).  The agreements in this SECTION 9.04 shall survive the termination of the Commitments, repayment of all other Obligations and assignment of any portion of the Obligations.  All amounts due under this SECTION 9.04 for Credit Party Expenses incurred after the Closing Date shall be paid within ten (10) Business Days of receipt by the Lead Borrower of an invoice relating thereto setting forth such Credit Party Expenses in reasonable detail.  If any Loan Party fails to pay when due any Credit Party Expenses payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion, without notice to or consent from the Loan Parties, and any amounts so paid shall constitute Revolving Credit Loans hereunder.

 

SECTION 9.05                                      Indemnification by the Lead Borrower.

 

Whether or not the transactions contemplated hereby are consummated, the Lead Borrower shall indemnify and hold harmless each Credit Party, their respective Related Parties and their respective Affiliates, directors, officers, employees, counsel, agents, trustees, investment advisors and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including fees and expenses of counsel, which shall be limited to one counsel for all Indemnitees taken as a whole and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction and, solely in the case of a conflict of interest, one additional counsel in each relevant jurisdiction to the affected Indemnitees similarly situated taken as a whole) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance

 

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or administration of any Loan Document, the Existing Credit Agreement or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Revolving Credit Loan (including Swingline Loans) or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), or (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Lead Borrower, any Subsidiary or any other Loan Party, or any Environmental Liability related in any way to the Lead Borrower, any Subsidiary or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto and, in each case, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements (i) resulted from the gross negligence, bad faith, or willful misconduct of such Indemnitee or of any affiliate, director, officer, employee, counsel, agent or attorney-in-fact of such Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision), or (ii) are relating to disputes amongst Indemnitees, other than (x) any claims against any Agent or any Arranger in its capacity or in fulfilling its role as an Agent or Arranger or any similar role under the Loan Documents and (y) any claims arising out of any act or omission on the part of any Loan Party or any Subsidiary thereof.  No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks/IntraAgency, SyndTrak or other similar information transmission systems in connection with this Agreement (except to the extent such damages resulted from the willful misconduct or gross negligence of such Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision)), nor shall any Indemnitee or any Loan Party have any liability and each party hereby waives, any claim against any other party to this Agreement or any Indemnitee, for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date); provided that the Loan Parties shall be liable to the Indemnitees for any special, punitive, indirect or consequential damages to the extent paid by such Indemnitees to any third party.  In the case of an investigation, litigation or other proceeding to which the indemnity in this SECTION 9.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated.  All amounts due under this SECTION 9.05 shall be paid within ten (10) Business Days after written demand therefor; provided, however, that such Indemnitee shall promptly refund such amount to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification or contribution rights with respect to such payment pursuant to the express terms of this SECTION 9.05.  The agreements in this SECTION 9.05 shall survive the resignation of the Administrative Agent or the Collateral Agent, the

 

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replacement of any Lender, the termination of the Commitments, the repayment, satisfaction or discharge of all the other Obligations and the assignment of any of the Obligations to a third party.

 

SECTION 9.06                                      Payments Set Aside.

 

To the extent that any payment by or on behalf of the Lead Borrower is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under the Bankruptcy Code or any other debtor relief law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent or the Collateral Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect.

 

SECTION 9.07                                      Successors and Assigns.

 

The provisions of this Agreement shall be binding upon and inure to the benefit of the Secured Parties, the Loan Parties and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee, (ii) by way of participation in accordance with the provisions of SECTION 9.07(d) or SECTION 9.07(f), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of SECTION 9.07(g) or SECTION 9.07(h) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the Secured Parties, the Loan Parties and their respective successors and assigns permitted hereby, Participants to the extent provided in SECTION 9.07(f) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(a)                                 (i)                                     Subject to the conditions set forth in paragraph (a)(ii) below, any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Revolving Credit Loans (including for purposes of this SECTION 9.07(a), participations in Letters of Credit and in Swingline Loans) at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

 

(A)                               the Lead Borrower, provided that no consent of the Lead Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Specified Default has occurred and is continuing, any Eligible Assignee;

 

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(B)                               the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to a Lender, an Affiliate of a Lender, or an Approved Fund;

 

(C)                               the Swingline Lender, provided that no consent of the Swingline Lender shall be required for an assignment to a Lender, an Affiliate of a Lender, or an Approved Fund; and

 

(D)                               each Issuing Bank, provided that no consent of any Issuing Bank shall be required for an assignment to a Lender, an Affiliate of a Lender, or an Approved Fund.

 

(ii)          Assignments shall be subject to the following additional conditions:

 

(A)                               except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Lead Borrower and the Administrative Agent otherwise consents, provided that (1) no such consent of the Lead Borrower shall be required if a Specified Default has occurred and is continuing, and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;

 

(B)                               the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (unless such fee is waived by the Administrative Agent in its sole discretion); and

 

(C)                               the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire satisfactory in form and content to the Administrative Agent.

 

(b)                                 Subject to acceptance and recording thereof by the Administrative Agent pursuant to SECTION 9.07(c), from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (except to the extent provided in SECTION 8.09, and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of SECTION 9.05 with respect to facts and circumstances occurring prior to the effective date of such assignment).  Upon request, and the surrender by the assigning Lender of its Note, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender.  Any

 

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assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause (b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with SECTION 9.07(d).

 

(c)                                  The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Revolving Credit Loans (including Swingline Loans) and Obligations with respect to Letters of Credit owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, absent manifest error, and the Borrowers, the Credit Parties shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by any Borrower and any Credit Party, at any reasonable time and from time to time upon reasonable prior notice.

 

(d)                                 Any Lender may at any time, without the consent of, or notice to, the Borrowers, the Administrative Agent, the Swingline Lender or any Issuing Bank, sell participations to any Person (other than a natural person) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Revolving Credit Loans (including such Lender’s participations in Letters of Credit and/or Swingline Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers and the other Credit Parties shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in SECTION 9.01(b), (c), (e) or (f) that directly affects such Participant.  Subject to SECTION 9.07(f), the Borrowers agree that each Participant shall be entitled to the benefits of SECTION 2.14 and SECTION 2.23 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to SECTION 9.07(b).  To the extent permitted by Applicable Law, each Participant also shall be entitled to the benefits of SECTION 9.09 as though it were a Lender; provided that such Participant agrees to be subject to SECTION 8.04 as though it were a Lender.

 

(e)                                  Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each participant and the principal amounts (and interest thereon) of each participant’s interest in the Revolving Credit Loans or other Obligations under this Agreement (the “Participant Register”). Notwithstanding any other provision of this Agreement, no sale, grant or other transfer of a participation shall be effective until recorded in the Participant Register. The entries in Participant Register shall be conclusive and the Borrowers, Lenders and each Agent

 

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shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement, notwithstanding notice to the contrary.  No Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that any loans are in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.

 

(f)                                   A Participant shall not be entitled to receive any greater payment under SECTION 2.14 or SECTION 2.23 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Lead Borrower’s prior written consent and such Participant agrees to comply with SECTION 2.23(e) as though it were a Lender and so complies.

 

(g)                                  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(h)                                 Notwithstanding anything to the contrary contained herein, (1) any Lender may in accordance with Applicable Law create a security interest in all or any portion of the Revolving Credit Loans owing to it and the Note, if any, held by it and (2) any Lender that is a fund that invests in loans may create a security interest in all or any portion of the Revolving Credit Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this SECTION 9.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

 

(i)                                     Notwithstanding anything to the contrary contained herein, any Issuing Bank or the Swingline Lender may, upon thirty (30) days’ notice to the Lead Borrower and the Lenders, resign as an Issuing Bank or the Swingline Lender, respectively; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the relevant Issuing Bank or the Swingline Lender shall have identified a successor Issuing Bank or Swingline Lender reasonably acceptable to the Lead Borrower willing to accept its appointment as successor Issuing Bank or Swingline Lender, as applicable.  In the event of any such resignation of an Issuing Bank or the Swingline Lender, the Lead Borrower shall be entitled to appoint from among the Lenders willing to accept such appointment a successor Issuing Bank or Swingline Lender hereunder; provided that no failure by the Lead Borrower to appoint any such successor shall affect the resignation of the relevant Issuing Bank or the Swingline Lender, as the case may be, except as expressly provided above.  If an Issuing Bank resigns as an Issuing Bank, it shall retain all the rights and obligations of an Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an Issuing Bank and all Obligations with

 

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respect thereto (including the right to require the Lenders to make Prime Rate Loans or fund risk participations in Letters of Credit).  If the Swingline Lender resigns as Swingline Lender, it shall retain all the rights of the Swingline Lender provided for hereunder with respect to Swingline Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Prime Rate Loans or fund risk participations in outstanding Swingline Loans.

 

SECTION 9.08                                      Confidentiality.

 

Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and its Affiliates’ directors, officers, employees, trustees, investment advisors and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and shall agree to keep such Information confidential); (b) to the extent requested by any Governmental Authority; (c) to the extent required by Applicable Law or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) subject to an agreement containing provisions substantially the same as those of this SECTION 9.08 (or as may otherwise be reasonably acceptable to the Lead Borrower), to any pledgee referred to in SECTION 9.07(g), counterparty or prospective counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement; (f) with the written consent of the Lead Borrower; (g) to the extent such Information becomes publicly available other than as a result of a breach of this SECTION 9.08; (h) to any Governmental Authority or examiner (including self-regulatory authorities, credit insurers, the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; (i) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender); (j) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (k) to the extent such Information becomes available to any Credit Party on a non-confidential basis from a source other than the Loan Parties; and (l) to the extent that such Information is independently developed by such Credit Party.  In addition, the Credit Parties may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Credit Parties in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions.  For the purposes of this SECTION 9.08, “Information” means all information received from any Loan Party relating to any Loan Party or its business, other than any such information that is publicly available to any Credit Party prior to disclosure by any Loan Party other than as a result of a breach of this SECTION 9.08; provided that, in the case of information received from a Loan Party after the Restatement Date, such information is clearly identified at the time of delivery as confidential or (ii) is delivered pursuant to SECTION 5.01, SECTION 5.02 or SECTION 5.03 hereof.

 

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SECTION 9.09                                      Setoff.

 

In addition to any rights and remedies of the Lenders provided by Applicable Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates is authorized at any time and from time to time, without prior notice to the Lead Borrower or any other Loan Party, any such notice being waived by the Lead Borrower (on its own behalf and on behalf of each Loan Party and its Subsidiaries) to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender and its Affiliates hereunder or under any other Loan Document, now or hereafter existing, regardless of the adequacy of the Collateral and irrespective of whether or not such Credit Party or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness.  Each Lender agrees promptly to notify the Lead Borrower and the Administrative Agent after any such set off and application made by such Lender; provided, that the failure to give such notice shall not affect the validity of such setoff and application.  The rights of the Administrative Agent and each Lender under this SECTION 9.09 are in addition to other rights and remedies (including other rights of setoff) that the Agents and such Lender may have.

 

SECTION 9.10                                      Interest Rate Limitation.

 

Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Applicable Law (the “Maximum Rate”).  If any Credit Party shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Revolving Credit Loans (including Swingline Loans) or, if it exceeds such unpaid principal, refunded to the Borrowers.  In determining whether the interest contracted for, charged, or received by a Credit Party exceeds the Maximum Rate, such Person may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

SECTION 9.11                                      Counterparts.

 

This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery by telecopier or by electronic pdf copy of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document.  The Administrative Agent and the Collateral Agent may also require that any such documents and signatures delivered by telecopier be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier.

 

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SECTION 9.12                                      Integration.

 

The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.  In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Credit Parties in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

 

SECTION 9.13                                      Severability.

 

If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

SECTION 9.14                                      GOVERNING LAW.

 

(a)                                 THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW THEREOF (BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW); PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF ANY LIEN OR IN REGARD TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS IN COLLATERAL, SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL CONTINUE TO APPLY TO THAT EXTENT.

 

(b)                                 ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY AND EACH CREDIT PARTY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  EACH BORROWER, EACH FACILITY GUARANTOR AND EACH CREDIT PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION OR OTHER JURISDICTION CHOSEN BY THE

 

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ADMINISTRATIVE AGENT IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.

 

SECTION 9.15                                      WAIVER OF RIGHT TO TRIAL BY JURY.

 

EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9.15 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

SECTION 9.16                                      Binding Effect.

 

This Agreement shall become effective when it shall have been executed by the Borrowers and the Administrative Agent shall have been notified by each Lender, Swingline Lender and Issuing Bank that each such Lender, Swingline Lender and Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of each Borrower and each Credit Party and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders except as otherwise permitted hereby.

 

SECTION 9.17                                      Judgment Currency.

 

If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given.  The obligation of each Borrower in respect of any such sum due from it to the Administrative Agent or the Lenders hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency.  If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent from any Borrower in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or the Person to whom such obligation was owing against such loss.  If the amount of the

 

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Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent in such currency, the Administrative Agent agrees to return the amount of any excess to such Borrower (or to any other Person who may be entitled thereto under Applicable Law).

 

SECTION 9.18                                      Lender Action.

 

Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any banker’s lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, without the prior written consent of the Administrative Agent.  The provision of this SECTION 9.18 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.

 

SECTION 9.19                                      PATRIOT ACT, ETC.; PROCEEDS OF CRIME ACT.

 

Each Lender hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act and other “know your customer” rules, regulations, laws and policies (together with the Patriot Act, collectively, the “KYC Provisions”), it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with KYC Provisions.  Each Loan Party is in compliance, in all material respects, with the KYC Provisions and the Proceeds of Crime Act.  No part of the proceeds of the Revolving Credit Loans will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

SECTION 9.20                                      No Advisory or Fiduciary Responsibility.

 

In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of

 

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whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.  Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

 

SECTION 9.21                                      Foreign Asset Control Regulations.

 

Neither of the advance of the Revolving Credit Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Patriot Act.  Furthermore, none of the Borrowers or their Subsidiaries (a) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) knowingly engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person” or in any manner violative of any such order.

 

SECTION 9.22                                      Survival.

 

All covenants, agreements, indemnities, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Revolving Credit Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and, notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect until (i) the Commitments have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan (including Swingline Loans) and all fees and other Obligations (other than contingent indemnity obligations with respect to then unasserted claims) shall have been paid in full, (iii) all Letters of Credit shall have expired or terminated (or been Cash Collateralized or backstopped in a manner reasonably

 

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satisfactory to the applicable Issuing Bank) and (iv) all Letter of Credit Outstandings have been reduced to zero (or Cash Collateralized in a manner reasonably satisfactory to the applicable Issuing Bank).  In connection with the termination of this Agreement and the release and termination of the security interests in the Collateral, the Administrative Agent, on behalf of itself and the other Credit Parties, may require such indemnities as they shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to the Other Liabilities, and (z) any Obligations that may thereafter arise under SECTION 9.04 or SECTION 9.05 hereof.

 

SECTION 9.23                                      Press Releases and Related Matters.

 

Each Borrower consents to the publication by the Administrative Agent of customary trade advertising material in tombstone format relating to the financing transactions contemplated by this Agreement using any Borrower’s name, and with the consent of the Lead Borrower, logo or trademark.  The Administrative Agent shall provide a draft reasonably in advance of any advertising material to the Lead Borrower for review and comment prior to the publication thereof.  The Administrative Agent and the Lenders reserve the right to provide to industry trade organizations and loan syndication and pricing reporting services information necessary and customary for inclusion in league table measurements.

 

SECTION 9.24                                      Additional Waivers.

 

(a)                                 The Obligations are the joint and several obligation of each Loan Party. To the fullest extent permitted by Applicable Law, the obligations of each Loan Party hereunder shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or under Applicable Law, (ii) any rescission, waiver, amendment or modification of, or any release of any Loan Party from, any of the terms or provisions of, this Agreement, any other Loan Document, or (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Collateral Agent or any other Credit Party.

 

(b)                                 To the fullest extent permitted by Applicable Law, the obligations of each Loan Party to pay the Obligations in full hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the payment in full in cash of the Obligations after the termination of all Commitments to any Loan Party under any Loan Document), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise. Without limiting the generality of the foregoing, to the fullest extent permitted by Applicable Law, the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any other Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge

 

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of any Loan Party as a matter of law or equity (other than the payment in full in cash of all the Obligations after termination of all Commitments to any Loan Party under any Loan Document).

 

(c)                                  To the fullest extent permitted by Applicable Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the payment in full in cash of all the Obligations after the termination of all Commitments to any Loan Party under any Loan Document. To the fullest extent permitted by Applicable Law, the Collateral Agent and the other Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and performed in full after the termination of Commitments to any Loan Party under any Loan Document.  Pursuant to, and to the fullest extent permitted by, Applicable Law, each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.

 

(d)                                 Except as otherwise specifically provided herein, each Borrower is obligated to repay the Obligations as joint and several obligors under this Agreement.  Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior payment in full in cash of all the Obligations (other than contingent indemnity obligations for then unasserted claims) and the termination of all Commitments to any Loan Party under any Loan Document.  If any amount shall erroneously be paid to any Loan Party on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents.  Subject to the foregoing, to the extent that any Loan Party shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Revolving Credit Loans made to another Loan Party hereunder (an “Accommodation Payment”), then the Loan Party making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Loan Party’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Loan Parties.  As of any date of determination, the “Allocable Amount” of each Loan Party shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Loan Party hereunder without (a) rendering such Loan Party “insolvent” within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Loan Party with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Loan Party unable to pay its debts as they become due

 

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within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

(e)                                  Without limiting the generality of the foregoing, or of any other waiver or other provision set forth in this Agreement, to the fullest extent permitted by Applicable Law, each Loan Party waives all rights and defenses arising out of an election of remedies by any Credit Party, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed such Credit Party’s rights of subrogation and reimbursement against such Loan Party.  Each Loan Party waives all rights and defenses that such Loan Party may have because the Obligations are secured by Real Estate which means, among other things: (i) a Credit Party may collect from any Loan Party without first foreclosing on any Real Estate or personal property Collateral pledged by a Loan Party; (ii) if any Credit Party forecloses on any Real Estate pledged by any Loan Party, the amount of the Obligations may be reduced only by the price for which that Real Estate is sold at the foreclosure sale, even if the Real Estate is worth more than the sale price; and (iii) the Credit Parties may collect Obligations from a Loan Party even if a Credit Party, by foreclosing on any such Real Estate, has destroyed any right any Loan Party may have to collect from the other Loan Parties. This is an unconditional and irrevocable waiver of any rights and defenses any Loan Party may have because the Obligations are secured by Real Estate.

 

(f)                                   Each Loan Party hereby agrees to keep each other Loan Party fully apprised at all times as to the status of its business, affairs, finances, and financial condition, and its ability to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect thereto.  Each Loan Party hereby agrees to undertake to keep itself apprised at all times as to the status of the business, affairs, finances, and financial condition of each other Loan Party, and of the ability of each other Loan Party to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect to any thereof.  Each Loan Party hereby agrees, in light of the foregoing mutual covenants to inform each other, and to keep themselves and each other informed as to such matters, that the Credit Parties shall have no duty to inform any Loan Party of any information pertaining to the business, affairs, finances, or financial condition of any other Loan Party, or pertaining to the ability of any other Loan Party to perform its Obligations under the Loan Documents, even if such information is adverse, and even if such information might influence the decision of one or more of the Loan Parties to continue to be jointly and severally liable for, or to provide Collateral for, the Obligations of one or more of the other Loan Parties. To the fullest extent permitted by applicable law, each Loan Party hereby expressly waives any duty of the Credit Parties to inform any Loan Party of any such information.

 

SECTION 9.25              Intercreditor Agreement.

 

(a)                                 The Loan Parties, the Agents, the Lenders and the other Credit Parties acknowledge that the exercise of certain of the Agents’ rights and remedies hereunder may be subject to, and restricted by, the provisions of the Intercreditor Agreement.  Except as specified herein, nothing contained in the Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement and the other Loan Documents, which, as among the Loan Parties, the Agents, the Lenders and the other Credit Parties shall remain in full force and effect. Each Lender hereto understands, acknowledges and agrees that Liens were created on the Collateral pursuant to the Term Loan Agreement and the Term Loan Documents, which Liens (x) to the extent created with respect to Term Priority Collateral, are senior to the Liens created under this Agreement and the related Loan

 

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Documents (with the Liens so created hereunder and under the other Loan Documents on Term Priority Collateral being subordinated to such Liens pursuant to the terms of the Intercreditor Agreement) and (y) to the extent created with respect to ABL Priority Collateral, are subordinated to the Liens created under this Agreement and the related Loan Documents.  The Intercreditor Agreement also has other provisions which are binding upon the Secured Parties pursuant to this Agreement.  Pursuant to the express terms of Section 7.17 of the Intercreditor Agreement, in the event of any conflict between the terms of the Intercreditor Agreement and any of the Loan Documents, the provisions of the Intercreditor Agreement shall govern and control.

 

(b)                                 Each Lender authorizes and instructs the Collateral Agent and the Administrative Agent to enter into the Intercreditor Agreement on behalf of such Lender, and to take all actions (and execute all documents) required (or deemed advisable) by it in accordance with the terms of the Intercreditor Agreement.

 

(c)                                  The provisions of this SECTION 9.25 are not intended to summarize all relevant provisions of the Intercreditor Agreement.  Reference must be made to the Intercreditor Agreement itself to understand all terms and conditions thereof.  Each Lender is responsible for making its own analysis and review of the Intercreditor Agreement and the terms and provisions thereof, and no Agent (and none of its Affiliates) makes any representation to any Lender as to the sufficiency or advisability of the provisions contained in the Intercreditor Agreement.

 

SECTION 9.26              Existing Credit Agreement Amended and Restated.

 

Upon satisfaction of the conditions precedent to the effectiveness of this Agreement, (a) this Agreement shall amend and restate the Existing Credit Agreement in its entirety (except to the extent that definitions from the Existing Credit Agreement are incorporated herein by reference), (b) all LIBO Loans (as defined in the Existing Credit Agreement) shall be paid in full, together with all Breakage Costs (as defined in the Existing Credit Agreement) incurred in connection therewith, with the proceeds of the initial Revolving Credit Loans made hereunder, and (c) the rights and obligations of the parties under the Existing Credit Agreement shall be subsumed within, and be governed by, this Agreement; provided, however, that the Loan Parties hereby agree that (i) the Letter of Credit Outstandings under, and as defined in, the Existing Credit Agreement on the Restatement Date shall be Letter of Credit Outstandings hereunder, and (ii) except as provided in clause (b) hereof, all Obligations of the Loan Parties under, and as defined in, the Existing Credit Agreement shall remain outstanding, shall constitute continuing Obligations secured by the Collateral, and this Agreement shall not be deemed to evidence or result in a novation or repayment and reborrowing of such obligations and other liabilities.

 

[SIGNATURE PAGES FOLLOW]

 

185

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

	
 
    	
MICHAELS   STORES, INC., as Lead Borrower and as a Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
Member of the Interim Office of the Chief Executive   Officer, Chief Administrative Officer & Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
AARON   BROTHERS, INC., as a Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
President   — CAO and CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAELS   STORES PROCUREMENT COMPANY, INC., as a Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
Chief   Administrative Officer and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARTISTREE, INC., as a   Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
Chief   Administrative Officer and Chief Financial Officer
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
MICHAELS   FINANCE COMPANY, INC., as a Facility Guarantor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
President   — CAO and CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAELS   STORES CARD SERVICES, LLC, as a Facility Guarantor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
President   — CAO and CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAELS   OF CANADA, ULC, as a Facility Guarantor
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles   M. Sonsteby
    
	
 
    	
Title:
    	
Chief   Administrative Officer and Chief Financial Officer
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent,   as Collateral Agent, and as Issuing Bank
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
One   Boston Place, 18th Floor
    
	
 
    	
Boston,   Massachusetts 02108
    
	
 
    	
Attention:   Connie Liu
    
	
 
    	
Telephone:  (617) 854-7232
    
	
 
    	
Telecopy:  (866) 303-3944
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION, as Swingline Lender, and   as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
One   Boston Place, 18th Floor
    
	
 
    	
Boston,   Massachusetts 02108
    
	
 
    	
Attention:   Connie Liu
    
	
 
    	
Telephone:  (617) 854-7232
    
	
 
    	
Telecopy:  (866) 303-3944
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
JPMORGAN   CHASE BANK, N.A., as a Co-Syndication Agent and as a Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    	
 
    
	
 
    	
Attention:
    	
 
    
	
 
    	
Telephone:
    	
 
    
	
 
    	
Telecopy:
    	
 
    
				

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
GOLDMAN   SACHS BANK USA, as a Co -Syndication Agent and as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
c/o   Goldman, Sachs & Co.
    
	
 
    	
30   Hudson Street, 5th Floor
    
	
 
    	
Jersey   City, New Jersey 07302
    
	
 
    	
Attention:   Michelle Latzoni
    
	
 
    	
Telephone:  (212) 934-3921
    
	
 
    	
Telecopy:  (917) 977-3966
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
BARCLAYS   BANK PLC, as Co-Documentation Agent and as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
745   7th Avenue, 26th Floor
    
	
 
    	
New   York, New York 10019
    
	
 
    	
Attention:   Ronnie Glenn
    
	
 
    	
Telephone:  (212) 526-3987
    
	
 
    	
Telecopy:  (212) 526-5115
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
DEUTSCHE   BANK AG NEW YORK BRANCH, as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
60   Wall Street, 43rd Floor
    
	
 
    	
New   York, New York 10005
    
	
 
    	
Attention:   Duzan Lazarov
    
	
 
    	
Telephone:  (212) 250-0211
    
	
 
    	
Telecopy:  (212) 797-5695
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
DEUTSCHE   BANK SECURITIES INC., as a Co-Documentation Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
60   Wall Street, 43rd Floor
    
	
 
    	
New   York, New York 10005
    
	
 
    	
Attention:   Duzan Lazarov
    
	
 
    	
Telephone:  (212) 250-0211
    
	
 
    	
Telecopy:  (212) 797-5695
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
BANK   OF AMERICA, N.A., as a Co-Documentation Agent and a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
100   Federal Street, 9th Floor
    
	
 
    	
Boston,   Massachusetts 02110
    
	
 
    	
Attention:   David Vega
    
	
 
    	
Telephone:  (617) 434-8735
    
	
 
    	
Telecopy:  (617) 434-4131
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
CREDIT   SUISSE AG, CAYMAN ISLANDS BRANCH, as a Co-Documentation   Agent and as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
Eleven   Madison Avenue
    
	
 
    	
New   York, New York 10010
    
	
 
    	
Attention:   Christopher Day
    
	
 
    	
Telephone:  (212) 325-2841
    
	
 
    	
Telecopy:  (212) 322-1800
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
MORGAN   STANLEY BANK, N.A., as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
1300   Thames Street, Thames Street Wahrf, 4th Floor
    
	
 
    	
Baltimore,   MD  21231
    
	
 
    	
Attention:   Edward Henley
    
	
 
    	
Telephone:  (443) 627-4326
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
MORGAN   STANLEY SENIOR FUNDING, INC., as a Co-Documentation   Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
1300   Thames Street, Thames Street Wahrf, 4th Floor
    
	
 
    	
Baltimore,   MD  21231
    
	
 
    	
Attention:   Edward Henley
    
	
 
    	
Telephone:  (443) 627-4326
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
UBS   LOAN FINANCE LLC, as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
677 Washington Boulevard
    
	
 
    	
Stamford, CT 06901
    
	
 
    	
Attention:   Jitesh Hotwani
    
	
 
    	
Telephone:  (203)   719-6391
    
	
 
    	
Telecopy:  (203)   719-3888
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
RBS BUSINESS CAPITAL, A DIVISION OF RBS ASSET   FINANCE, INC., A SUBSIDIARY OF RBS CITIZENS, N.A., as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
28   State Street
    
	
 
    	
Boston,   Massachusetts 02109
    
	
 
    	
Attention:   Michael J. Ganann
    
	
 
    	
Telephone:  (617) 994-7573
    
	
 
    	
Telecopy:  (617) 227-7995
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
SUNTRUST   BANK, as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
303   Peachtree Street
    
	
 
    	
Atlanta,   Georgia 30308
    
	
 
    	
Attention:   Virginia Sullivan
    
	
 
    	
Telephone:  (404) 658-4833
    
	
 
    	
Telecopy:  (404) 813-5890
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
REGIONS   BANK, as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
250   Park Avenue, Suite 600
    
	
 
    	
New   York, New York 10177
    
	
 
    	
Attention:   Daniel Wells
    
	
 
    	
Telephone:  (212) 935-6415
    
	
 
    	
Telecopy:  (212) 935-7458
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
U.S.   BANK NATIONAL ASSOCIATION, as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
209   South LaSalle Street, Suite 300
    
	
 
    	
MK-IL-RY3B
    
	
 
    	
Chicago, Illinois   60604
    
	
 
    	
Attention:   Kelli Stabenow
    
	
 
    	
Telephone:  (312) 325-8776
    
	
 
    	
Telecopy:    (312) 325-8905
    

 

Signature Page to Second Amended and Restated Credit Agreement

 

 

	
 
    	
SIEMENS   FINANCIAL SERVICES, INC., as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
170   Wood Avenue South
    
	
 
    	
Iselin,   New Jersey 08830
    
	
 
    	
Attention:   Andrew Beneduce
    
	
 
    	
Telephone:  (732) 590-6593
    
	
 
    	
Telecopy:  (407) 243-1049
    

 

Signature Page to Second Amended and Restated Credit Agreement

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