Credit Agreement

SECOND AMENDMENT TO CREDIT AGREEMENT


Exhibit 4.3

 

SECOND AMENDMENT TO

CREDIT AGREEMENT

 

This Second Amendment to Credit Agreement (this “Second Amendment”) is made as of July 26, 2013 by and among:

 

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

 

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

 

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

 

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

 

each Lender from time to time party hereto;

 

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

 

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

 

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

 

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

 

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

W I T N E S S E T H:

 

WHEREAS, on November 12, 2010, the Borrowers, the Guarantors, the Agents and the Lenders, entered in a certain Credit Agreement (as amended pursuant to a First Amendment to Credit Agreement dated June 8, 2012 and as further amended, restated, supplemented or otherwise modified, the “Credit Agreement”); and

 

WHEREAS, the Borrowers have requested that the Agents and the Lenders further amend certain provisions of the Credit Agreement, in each case subject to the terms and conditions hereof.

 

WHEREAS, the Agents and the Lenders have agreed to so amend subject to the terms and conditions hereof.

 

NOW, THEREFORE, it is hereby agreed among the Borrowers, the Agent, and the Lenders as follows:

 



 

1.                                      Capitalized Terms.  All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.

 

2.                                      Amendments to Credit Agreement.

 

a.                                      Credit Agreement.  The Credit Agreement is hereby amended to delete the bold, stricken text (indicated textually in the same manner as the following example: stricken text) and to add the bold, double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Exhibit A hereto.

 

b.                                      Schedules and Exhibits to Credit Agreement.   The Schedules and Exhibits to the Credit Agreement are hereby deleted in their entirety and the Schedules and Exhibits attached to Exhibit A hereto are substituted in their stead.

 

3.                                      Ratification of Loan Documents.  Except as provided herein, all terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. The Borrowers hereby ratify, confirm, and reaffirm all representations, warranties, and covenants contained therein and acknowledge and agree that the Obligations are and continue to be secured by the Collateral, as modified hereby.

 

4.                                      Conditions to Effectiveness.  This Second Amendment (including, without limitation, the amendments identified in the Credit Agreement attached as Exhibit A hereto) shall be effective upon fulfillment, to the satisfaction of the Administrative Agent, of each of the following conditions precedent:

 

a.                                      This Second Amendment and all documents described on Exhibit B hereto shall have been duly executed and delivered by the Loan Parties and the Lenders party thereto and shall be in form and substance satisfactory to the Administrative Agent.

 

b.                                      All action on the part necessary for the valid execution, delivery and performance of this Second Amendment shall have been duly and effectively taken by the Loan Parties and evidence thereof satisfactory to the Administrative Agent shall have been provided to the Administrative Agent.

 

c.                                       All necessary governmental approvals to the Second Amendment shall have been obtained except to the extent the failure to obtain could not reasonably be expected to have a Material Adverse Effect.

 

d.                                      After giving effect to the consummation of the transactions contemplated on the Effective Date and the Credit Extensions made on the Effective Date, Excess Availability shall be not less than $375,000,000.

 

e.                                       Lien searches on the assets of the Loan Parties shall have been completed and there shall have been filed and recorded (and the payment of filing and recordation fees in connection therewith) of such financing statements and other documents as may be necessary to reflect the valid and perfected first priority liens and security interests of the Agents, in each case reasonably satisfactory to the Administrative Agent.

 

2



 

f.                                        The Administrative Agent shall have received satisfactory evidence of insurance required to be maintained by the Loan Parties with respect to the Collateral under the Loan Documents, reasonably satisfactory to the Administrative Agent.

 

g.                                       The Lenders shall have received satisfactory opinions of counsel to the Loan Parties (which shall cover, among other things, authority, legality, validity, binding effect and enforceability of the documents for the Second Amendment and the Loan Documents, as amended hereby) and of appropriate local and foreign counsel.

 

h.                                      There shall not have occurred since March 31, 2013 any event or condition that has had or could be reasonably expected, either individually or in the aggregate, to have a Material Adverse Effect.

 

i.                                          There shall not exist any action, suit, investigation or proceeding pending or, to the knowledge of the Borrowers, threatened in any court or before any arbitrator or governmental authority that could reasonably be expected to have a Material Adverse Effect.

 

j.                                         The Administrative Agent shall have received and be reasonably satisfied with detailed financial projections, including, in each case, an income statement, balance sheet, statement of cash flow, and business assumptions for the Parent and its Subsidiaries on (x) a monthly basis for the twelve month period following the Effective Date, and (y) on an annual basis, for each Fiscal Year thereafter through the Maturity Date. In addition, the Administrative Agent shall have received and be reasonably satisfied with a borrowing base availability analysis on a monthly basis for the twelve month period following the Effective Date.

 

k.                                      The Administrative Agent shall have received a Borrowing Base Certificate (separately for the Domestic Facility and the Canadian Sub-facility and on a combined basis) dated as of the Effective Date, executed by a financial officer of the Borrowers.

 

l.                                          All actual accrued fees and expenses of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS”) and the Agents (including the fees and expenses of counsel (including any local counsel) for the Agents and MLPFS) shall have been paid (it being understood that the reimbursement obligations hereunder shall not exceed the actual amounts invoiced to the Agents and MLPFS).

 

m.                                  The Administrative Agent, MLPFS and the Lenders shall have received payment of all fees in accordance with the terms of the Fee Letter.

 

n.                                      No Default or Event of Default shall exist.

 

5.                                      Representations and Warranties.

 

a.                                      The transactions contemplated hereby are within each Loan Party’s corporate powers and have been duly authorized by all necessary corporate, membership, partnership or other necessary action. This Second Amendment has been duly executed and delivered by each Loan Party that is a party hereto and this Second Amendment and the other Loan Documents constitutes a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency,

 

3



 

reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

b.                                      The transactions to be entered into and contemplated by this Second Amendment (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for such as have been obtained or made and are in full force and effect, (b) will not violate any applicable Laws to which any Loan Party is subject or any judgment, order, writ, injunction, license or permit applicable to any of the Loan Parties, (c) will not violate the Organization Documents of any Loan Party, (d) will not violate or result in a default under any agreement or instrument binding upon any Loan Party or its assets, or give rise to a right thereunder to require any payment to be made by any Loan Party, and (e) will not result in the creation or imposition of any Lien on any asset of any Loan Party, except Liens created under the Loan Documents.

 

6.                                      Waiver.  In connection with this Amendment, each of UBS AG, Stamford Branch and UBS AG, Canada Branch (collectively, the “Exiting Lenders”) is terminating its Commitment in full pursuant to those certain letter agreements of even date herewith between each of the Exiting Lenders and the Borrowers.  By their execution of this Amendment, the Lenders hereby acknowledge and agree that solely with respect to the termination of the Commitments of the Exiting Lenders in connection with this Amendment, the requirement set forth in Section 2.06(f) of the Credit Agreement that Commitments be reduced in accordance with each Lender’s Applicable Percentage is hereby waived.

 

7.                                      Release of Certain Liens.  On the Effective Date, the Administrative Agent will automatically release (and cause the Collateral Agent and the Canadian Agent to release) its Lien on the assets of the Loan Parties not constituting “Collateral” under and as defined in the Security Agreement (as the Security Agreement has been amended as of the date hereof) and will execute and record in all appropriate jurisdictions, at the Loan Parties’ expenses, such (a) Uniform Commercial Code financing statement releases and partial releases, as appropriate, (b) mortgage releases relating to existing real property collateral in which the Administrative Agent or the Collateral Agent holds a Lien to secure the Obligations and (c) any other documentation, agreements or instruments requested by the Loan Parties to effectuate the provisions of this Section 7.  Further, the Administrative Agent shall (and shall cause the Collateral Agent to) return all personal property not constituting “Collateral” under and as defined in the Security Agreement (as the Security Agreement has been amended as of the date hereof), including, without limitation, any stock certificates, to the Loan Parties.

 

8.                                      Miscellaneous

 

a.                                      This Second Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

 

b.                                      This Second Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby.  No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

c.                                       Any determination that any provision of this Second Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not

 

4



 

affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Second Amendment.

 

d.                                      The Loan Parties represent and warrant that they have consulted with independent legal counsel of their selection in connection with this Second Amendment and are not relying on any representations or warranties of the Agents or the Lenders or their counsel in entering into this Second Amendment.

 

e.                                       THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

[signature pages follow]

 

5



 

 

IN WITNESS WHEREOF, the parties have hereunto caused this Second Amendment to be executed and their seals to be hereto affixed as of the date first above written.

 

 

DOMESTIC BORROWERS:

 

SALLY HOLDINGS LLC

BEAUTY SYSTEMS GROUP LLC

SALLY BEAUTY SUPPLY LLC

 

 

 

By:

/s/ Mark J. Flaherty

 

Name:

Mark J. Flaherty

 

Title:

Senior Vice President and

 

 

Chief Financial Officer

 

 

 

 

CANADIAN BORROWER:

 

 

 

BEAUTY SYSTEMS GROUP (CANADA), INC.

 

 

 

 

By:

/s/ Mark J. Flaherty

 

Name:

Mark J. Flaherty

 

Title:

Senior Vice President and

 

 

Chief Financial Officer

 

 

[Signature page to Second Amendment to Credit Agreement]

 



 

FOREIGN BORROWER:

 

 

/s/ E. T. Kromhout

 

 

/s/ D. Zeelenberg

On behalf of SBH Finance B.V.

 

On behalf of SBH Finance B.V.

By:

ANT Management (Netherlands) B.V.

 

By:

ANT Management (Netherlands) B.V.

Title:

Managing Director A

 

Title:

Managing Director A

On behalf of ANT Management (Netherlands) B.V.

 

On behalf of ANT Management (Netherlands) B.V.

 

 

 

By:

E.T. Kromhout

 

By:

D. Zeelenberg

Title:

Proxy holder A

 

Title:

Managing Director

Date:

26/7/2013

 

Date:

26/7/2013

Place:

Rotterdam

 

Place:

Rotterdam

 

 

 

 

 

 

 

 

 

 

 

/s/ E. T. Kromhout

 

 

/s/ D. Zeelenberg

On behalf of SBH Finance B.V.

 

On behalf of SBH Finance B.V.

By:

Sally Beauty Worldwide Holdings B.V.

 

By:

Sally Beauty Worldwide Holdings B.V.

Title:

Managing Director A

 

Title:

Managing Director A

On behalf of Sally Beauty Worldwide Holdings B.V.

 

On behalf of Sally Beauty Worldwide Holdings B.V.

 

 

 

 

 

 

By:

ANT Management (Netherlands) B.V.

 

By:

ANT Management (Netherlands) B.V.

Title:

Managing Director A

 

Title:

Managing Director A

On behalf of ANT Management (Netherlands) B.V.

 

On behalf of ANT Management (Netherlands) B.V.

 

 

 

 

 

By:

E.T. Kromhout

 

By:

D. Zeelenberg

Title:

Proxy holder A

 

Title:

Managing Director

Date:

26/7/2013

 

Date:

26/7/2013

Place:

Rotterdam

 

Place:

Rotterdam

 

 

 

 

 

 

 

 

 

 

 

/s/ Mark Faulkner

 

 

/s/ Mark Faulkner

On behalf of SBH Finance B.V.

 

On behalf of SBH Finance B.V.

By:

Sally Beauty Worldwide Holdings B.V.

 

By:

Mark Faulkner

Title:

Managing Director A

 

Title:

Managing Director B

On behalf of Sally Beauty Worldwide Holdings B.V.

 

 

 

 

 

 

 

By:

Mark Faulkner

 

By:

Mark Faulkner

Title:

Managing Director

 

Title:

Managing Director

Date:

 

 

Date:

 

Place:

Denton, TX USA

 

Place:

Denton, TX USA

 

[Signature page to Second Amendment to Credit Agreement]

 



 

GUARANTORS:

 

INNOVATIONS — SUCCESSFUL SALON SERVICES

NEKA SALON SUPPLY, INC.

PROCARE LABORATORIES, INC.

ARMSTRONG MCCALL HOLDINGS, INC.

ARMSTRONG MCCALL MANAGEMENT, L.C.

ARMSTRONG MCCALL HOLDINGS, L.L.C.

ARNOLD’S, INC.

ARMSTRONG MCCALL, L.P.

DIORAMA SERVICES COMPANY, LLC

SALLY CAPITAL INC.

SALLY BEAUTY DISTRIBUITON LLC

SALLY BEAUTY DISTRIBUTION OF OHIO, INC.

SALLY BEAUTY INTERNATIONAL FINANCE LLC

BEAUTY HOLDING LLC

SOREN ENTERPRISES, INC.

BEYOND THE ZONE, INC.

SILK ELEMENTS, INC.

HIGH INTENSITY PRODUCTS, INC.

NAIL LIFE, INC.

SEXY U PRODUCTS, INC.

FOR PERMS ONLY, INC.

ENERGY OF BEAUTY, INC.

MIRACLE LANE, INC.

TANWISE, INC

SATIN STRANDS, INC.

POWER IQ, INC.

DESIGN LENGTHS, INC.

BRENTWOOD BEAUTY LABORATORIES INTERNATIONAL, INC.

ION PROFESSIONAL PRODUCTS, INC.

NEW IMAGE PROFESSIONAL PRODUCTS, INC.

ESTHETICIAN SERVICES, INC.

FEMME COUTURE INTERNATIONAL, INC.

GENERIC VALUE PRODUCTS, INC.

LAND OF DREAMS, INC.

COLOREESE, INC.

AERIAL COMPANY, INC.

SALLY BEAUTY HOLDINGS, INC.

SALLY INVESTMENT HOLDINGS LLC

VENIQUE, INC.

 

 

By:

/s/ Mark J. Flaherty

 

Name:

Mark J. Flaherty

 

Title:

Senior Vice President and Chief

 

 

Financial Officer

 

 

 

 

SALON SUCCESS INTERNATIONAL, LLC

 

 

 

 

By:

/s/ Gary Winterhalter

 

Name:

Gary Winterhalter

 

Title:

Manager

 

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

BANK OF AMERICA, N.A., as

 

Administrative Agent, as Collateral Agent, as Domestic L/C Issuer, as Domestic Swing Line Lender, and as a Domestic Lender

 

 

 

 

By:

/s/ Matthew Potter

 

 

 

 

Name:

Matthew Potter

 

 

 

 

Title:

Vice President

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

BANK OF AMERICA, N.A. (ACTING THROUGH ITS CANADA BRANCH), as Canadian Agent, as Canadian Swing Line Lender, and as a Canadian Lender

 

 

 

 

By:

/s/ Medina Sales de Andrade

 

 

 

 

Name:

Medina Sales de Andrade

 

 

 

 

Title:

Vice President

 

[Signature page to Second Amendment to Credit Agreement]

 


 

 

WELLS FARGO BANK, N.A., as a

 

Domestic Lender

 

 

 

 

 

By:

/s/ Peter Yelle

 

 

 

 

 

 

Name:

Peter Yelle

 

 

 

 

 

 

Title:

Vice President

 

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

WELLS FARGO CAPITAL FINANCE CORPORATION CANADA, as a Canadian Lender

 

 

 

 

 

By:

/s/ Domenic Cosentino

 

 

 

 

 

 

Name:

Domenic Cosentino

 

 

 

 

 

 

Title:

Vice President

 

 

 

Wells Fargo Capital Finance Corporation Canada

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

WELLS FARGO BANK, N.A. (LONDON BRANCH), as a European Funding  Agent for Wells Fargo Bank, N.A. and Wells Fargo Capital Corporation Canada

 

 

 

 

 

By:

/s/ Peter Yelle

 

 

 

 

 

 

Name:

Peter Yelle

 

 

 

 

 

 

Title:

Authorized Signatory

 

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

JPMORGAN CHASE BANK, N.A., as a Domestic Lender

 

 

 

 

 

By:

/s/ Kevin D. Padgett

 

 

 

 

 

 

Name:

Kevin D. Padgett

 

 

 

 

 

 

Title:

Authorized Officer

 

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

JPMORGAN CHASE BANK, N.A., (through its Toronto branch), as a Canadian Lender

 

 

 

 

 

By:

/s/ Agostino A. Marchetti

 

 

 

 

 

 

Name:

Agostino A. Marchetti

 

 

 

 

 

 

Title:

SVP

 

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

PNC BANK, NATIONAL ASSOCIATION, as a Domestic Lender

 

 

 

 

By:

/s/ Biana Sidanova

 

 

 

 

Name:

Biana Sidanova

 

 

 

 

Title:

Banking Officer

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

ROYAL BANK OF CANADA, as a Domestic Lender and as a Canadian Lender

 

 

 

 

 

By:

/s/ John Flores

 

 

 

 

Name:

John Flores

 

 

 

 

Title:

Authorized Signatory

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

FIFTH THIRD BANK, as a Domestic Lender

 

 

 

 

 

By:

/s/ Kirk Wolverton

 

 

 

 

Name:

Kirk Wolverton

 

 

 

 

Title:

Vice President

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

CREDIT SUISSE AG, TORONTO BRANCH, as a Canadian Lender

 

 

 

 

 

By:

/s/ Alain Daoust

 

 

 

 

 

 

Name:

Alain Daoust

 

 

 

 

Title:

Authorized signatory

 

 

 

 

 

 

 

By:

/s/ Ash Bisaria

 

 

 

 

Name:

Ash Bisaria

 

 

 

 

 

Title:

Authorized signatory

 

 

Ash Bisaria

 

 

Vice President, Financial Accounting

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

CREDIT SUISSE AG, CAYMEN ISLANDS BRANCH, as Domestic Lender

 

 

 

 

 

By:

/s/ Christopher Day

/s/ Tyler R. Smith

 

 

 

 

 

Name:

Christopher Day

Tyler R. Smith

 

 

 

 

 

Title:

Authorized Signatory

Authorized Signatory

 

[Signature page to Second Amendment to Credit Agreement]

 


 

 

DEUTSCHE BANK AG, NEW YORK BRANCH, as a Domestic Lender

 

 

 

 

By:

/s/ Dusan Lazarov

 

 

 

 

Name:

Dusan Lazarov

 

 

 

 

Title:

Director

 

 

 

 

 

 

 

 

/s/ Michael Getz

 

 

Michael Getz

 

 

Vice President

 

[Signature page to Second Amendment to Credit Agreement]

 



 

 

DEUTSCHE BANK AG, CANADA BRANCH, as a Domestic Lender

 

 

 

 

By:

/s/ Scott Lampard

 

 

 

 

Name:

Scott Lampard

 

 

 

 

Title:

Managing Director

 

 

 

 

 

 

 

By:

/s/ Marcellus Leung

 

 

 

 

Name:

Marcellus Leung

 

 

 

 

Title:

Assistant Vice President

 

[Signature page to Second Amendment to Credit Agreement]

 



 

Exhibit A

 

Composite Credit Agreement

 

[see attached]

 



 

 

 

CREDIT AGREEMENT

 

Dated as of November 12, 2010
Amended June 8, 2012
Amended as of July 26, 2013

 

among

 

SALLY HOLDINGS LLC
BEAUTY SYSTEMS GROUP LLC
SALLY BEAUTY SUPPLY LLC
AS Domestic Borrowers

 

BEAUTY SYSTEMS GROUP (CANADA), INC.
as Canadian Borrower

 

SBH FINANCE B.V.
as Foreign Borrower

 

The Guarantors From Time to Time Party Hereto

 

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

 

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

 

The Other Lenders Party Hereto

 

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

 

WELLS FARGO CAPITAL FINANCE, LLCBANK, NATIONAL ASSOCIATION,
as Syndication Agent

 

BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
WELLS FARGO CAPITAL FINANCE, LLCBANK, NATIONAL ASSOCIATION
as Joint Lead Arrangers
and Joint Book Managers

 

 

 



 

TABLE OF CONTENTS

 

Section

 

 

Page

 

 

 

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

1

 

 

 

1.01

Defined Terms

1

1.02

Other Interpretive Provisions

5963

1.03

Accounting Terms

6064

1.04

Rounding

64

1.05

Times of Day

6164

1.06

Letter of Credit Amounts

6165

1.07

Currency Equivalents Generally

6165

1.08

Québec Matters

6165

1.09

Dutch Matters

6165

 

 

 

ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

6266

 

 

 

2.01

Committed Loans; Reserves

6266

2.02

Borrowings, Conversions and Continuations of Committed Loans

6468

2.03

Letters of Credit

6771

2.04

Swing Line Loans

7680

2.05

Prepayments

84

2.06

Termination or Reduction of Commitments

86

2.07

Repayment of Loans

8387

2.08

Interest

8388

2.09

Fees

8489

2.10

Computation of Interest and Fees

8489

2.11

Evidence of Debt

8590

2.12

Payments Generally; Administrative Agent’s Clawback

8691

2.13

Sharing of Payments by Lenders

8893

2.14

Settlement Amongst Lenders

8994

2.15

Increase in Commitments

9094

2.16

Defaulting Lenders

96

 

 

 

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

9198

 

 

 

3.01

Taxes

9198

3.02

Illegality

93103

3.03

Inability to Determine Rates

94103

3.04

Increased Costs; Reserves on LIBOR Rate Loans

94104

3.05

Compensation for Losses

95105

3.06

Mitigation Obligations; Replacement of Lenders

96106

3.07

Survival

96106

3.08

Designation of Parent as Borrowers’ Agent

96106

 

 

 

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

97107

 

 

4.01

Conditions of Initial Credit Extension

97107

4.02

Conditions to all Credit Extensions

101110

 

 

 

ARTICLE V REPRESENTATIONS AND WARRANTIES

101111

 

 

 

5.01

Existence, Qualification and Power

101111

 

 

(i)



 

5.02

Authorization; No Contravention

102112

5.03

Governmental Authorization; Other Consents

102112

5.04

Binding Effect

102112

5.05

Financial Statements; No Material Adverse Effect

102112

5.06

Litigation

103113

5.07

No Default

104113

5.08

Ownership of Property; Liens

104113

5.09

Environmental Compliance

104114

5.10

Insurance

105115

5.11

Taxes

105115

5.12

Plans

105115

5.13

Subsidiaries; Equity Interests

107117

5.14

Margin Regulations; Investment Company Act

107117

5.15

Disclosure

107117

5.16

Compliance with Laws

108118

5.17

Intellectual Property; Licenses, Etc.

108118

5.18

Labor Matters

108118

5.19

Security Documents

109119

5.20

Solvency

109119

5.21

Deposit Accounts; Credit Card Arrangements

109119

5.22

Brokers

109119

5.23

Customer and Trade Relations

109119

5.24

Casualty

109119

5.25

Senior IndebtednessReserved

110120

5.26

Anti-Terrorism

110120

 

 

 

ARTICLE VI AFFIRMATIVE COVENANTS

110120

 

 

 

6.01

Financial Statements

110120

6.02

Certificates; Other Information

111121

6.03

Notices

114124

6.04

Payment of Obligations

115125

6.05

Preservation of Existence, Etc.

116125

6.06

Maintenance of Properties

116126

6.07

Maintenance of Insurance

116126

6.08

Compliance with Laws

116126

6.09

Books and Records; Accountants

116126

6.10

Inspection Rights

117127

6.11

Additional Loan Parties

118128

6.12

Cash Management

119129

6.13

Information Regarding the Collateral

120130

6.14

Physical Inventories

121131

6.15

Environmental Laws

121131

6.16

Further Assurances

122132

6.17

Compliance with Terms of Leaseholds

122132

6.18

Maintenance of New York Process Agent

122132

6.19

Canadian Pension Benefit Plans

122132

 

 

 

ARTICLE VII NEGATIVE COVENANTS

122133

 

 

 

7.01

Liens

123133

7.02

Investments

123133

7.03

Secured Indebtedness

123133

 

(ii)



 

7.04

Fundamental Changes

123133

7.05

Dispositions

124134

7.06

Restricted Payments

124134

7.07

Prepayments of Indebtedness

125135

7.08

Change in Nature of Business

125135

7.09

Use of Proceeds

125135

7.10

Amendment of Material Documents

125136

7.11

Fiscal Year

126136

7.12

Deposit Accounts; Credit Card Processors

126137

7.13

Consolidated Fixed Charge Coverage Ratio

126137

7.14

Limitations on Currency, Commodity and Other Hedging Transactions

127137

 

 

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

127137

 

 

8.01

Events of Default

127137

8.02

Remedies Upon Event of Default

130140

8.03

Application of Funds

130141

8.04

Waivers By Loan Parties

135145

 

 

 

ARTICLE IX ADMINISTRATIVE AGENT

135145

 

 

 

9.01

Appointment and Authority

135145

9.02

Rights as a Lender

136147

9.03

Exculpatory Provisions

136147

9.04

Reliance by Agents

137148

9.05

Delegation of Duties

138148

9.06

Resignation of Agents

138149

9.07

Non-Reliance on Agents and Other Lenders

139149

9.08

No Other Duties, Etc.

139150

9.09

Agents May File Proofs of Claim

139150

9.10

Collateral and Guaranty Matters

140150

9.11

Notice of Transfer

140151

9.12

Reports and Financial Statements

140151

9.13

Agency for Perfection

141152

9.14

Indemnification of Agents

141152

9.15

Relation among Lenders

142152

9.16

Defaulting LenderReserved

142153

9.17

Risk Participation

143154

9.18

Domestic Parallel Debt Provisions

143154

9.19

Foreign Parallel Debt

155

9.20

Parallel Debt Savings Clause

156

 

 

ARTICLE X MISCELLANEOUS

146156

 

 

10.01

Amendments, Etc.

146156

10.02

Notices; Effectiveness; Electronic Communications

148158

10.03

No Waiver; Cumulative Remedies

149160

10.04

Expenses; Indemnity; Damage Waiver

149161

10.05

Payments Set Aside

151162

10.06

Successors and Assigns

151162

10.07

Treatment of Certain Information; Confidentiality

155167

10.08

Right of Setoff

156167

10.09

Interest Rate Limitation

156168

10.10

Counterparts; Integration; Effectiveness

156168

 

(iii)



 

10.11

Survival

156168

10.12

Severability

157169

10.13

Replacement of Lenders

157169

10.14

Governing Law; Jurisdiction; Etc.

157170

10.15

Waiver of Jury Trial

158171

10.16

No Advisory or Fiduciary Responsibility

159171

10.17

USA PATRIOT Act Notice; Proceeds of Crime Act

159171

10.18

Foreign Asset Control Regulations

160172

10.19

Time of the Essence

160172

10.20

Designation as Senior Debt

160172

10.21

Press Releases

160172

10.22

Additional Waivers

160173

10.23

Judgment Currency

162174

10.24

No Strict Construction

162175

10.25

Attachments

162175

10.26

LanguageKeepwell

175

10.27

Language

163175

 

(iv)



 

SCHEDULES

 

 

 

1.01

Guarantors

1.02

Existing Letters of Credit

2.01

Commitments and Applicable Percentages

5.01

Loan Parties Organizational Information

5.06

Litigation

5.08(b)(1)

Owned Real Estate

5.08(b)(2)

Leased Real Estate

5.09

Environmental Matters

5.10

Insurance

5.13

Subsidiaries; Other Equity Investments

5.17

Intellectual Property Matters

5.18

Collective Bargaining Agreements

5.21(a)

DDAs

5.21(b)

Credit Card Arrangements

6.02

Financial and Collateral Reporting

7.01

Existing Liens

7.02

Existing Investments

7.03

Existing Indebtedness

10.02

Administrative Agent’s Office; Certain Addresses for Notices

 

EXHIBITS

 

 

Form of

 

 

A-1

Domestic Committed Loan Notice

A-2

Canadian Committed Loan Notice

B-1

Domestic Swing Line Loan Notice

B-2

Canadian Swing Line Loan Notice

C-1

Domestic Revolving Note

C-2

Canadian Revolving Note

C-3

Domestic Swing Line Note

C-4

Canadian Swing Line Note

C-5

Foreign Note - Domestic

C-6

Foreign Note - Canada

D

Assignment and Assumption

E

Borrowing Base Certificate

F

Compliance Certificate

 

(v)



 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of November 12, 2010, as amended on June 8, 2012 and on July 26, 2013, among

 

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

 

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

 

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

 

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

 

each Lender from time to time party hereto;

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“Accelerated Borrowing Base Delivery Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) the failure of the Borrowers to maintain Excess Availability of at least the greater of (i) $40,000,000, or (ii) fifteen percent (15%) of the Loan Cap.  For purposes of this Agreement, the occurrence of an Accelerated Borrowing Base Delivery Event shall be deemed continuing, (i) so long as such Event of Default has not been waived, and/or (ii) if the Accelerated Borrowing Base Delivery Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until the date Excess Availability shall have been not less than the greater of (i) $40,000,000 or (ii) fifteen percent (15%) of the Loan Cap for forty-five (45) consecutive days.  The termination of an Accelerated Borrowing Base Delivery Event as provided herein shall in no way limit, waive or delay the occurrence of

 

(1)


 

a subsequent Accelerated Borrowing Base Delivery Event in the event that the conditions set forth in this definition again arise.

 

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

 

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

 

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

 

“ACH” means automated clearing house transfers.

 

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

 

“Acquisition/Investment Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, that (a) no Default or Event of Default then exists or would arise as a result of entering into such transaction or the making of such payment, and (b) if after giving pro forma effect to such transaction or payment, Excess Availability for the 45 day period immediately preceding, and on the date of, such transaction or payment was equal to or greater than 15% of the Loan Cap.  If after giving pro forma effect to such transaction or payment, Excess Availability would be equal to or less than 5035% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such transaction or payment which is subject to the Acquisition/Investment Payment Conditions, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements, no less than five (5) Business Days prior to the consummation of any such transaction or payment.

 

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

 

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

 

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

 

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

 

(2)



 

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

 

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

 

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

 

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

 

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

 

“Aggregate Total Commitments” means, at any time of calculation, without duplication, the sum of the Domestic Total Commitments and the Canadian Total Commitments.  As of the ClosingEffective Date, the Aggregate Total Commitments are $400,000,000500,000,000.

 

“Agreement” means this Credit Agreement.

 

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

 

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

 

“Applicable Margin” means:

 

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

 

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

 

(3)



 

recalculated at such higher rate for any applicable periods and shall be due and payable on demand.

 

Level

 

Average Daily
Availability

 

LIBOR Margin/BA
Rate Margin/Euribor
Rate Margin

 

Domestic Prime Rate
Margin/US Index Rate
Margin/Canadian Prime
Rate Margin

I

 

Greater than or equal to $275,000,000 50% of the Loan Cap

 

2.251.50%

 

1.250.50%

II

 

Greater than or equal to $150,000,000  but less than $275,000,000

 

2.50%

 

1.50%

IIIII

 

Less than $150,000,00050% of the Loan Cap

 

2.751.75%

 

1.750.75%

 

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

 

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

 

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

 

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

 

(4)



 

“Arrangers” mean Banc of America Securities LLCMerrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Capital Finance, LLCBank, National Association, in their capacities as joint lead arrangers and joint book managers.

 

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

 

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

 

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

 

“Audited Financial Statements” means the audited consolidated balance sheet of the Parent and its Subsidiaries for the fiscal year ended September 30, 20092012, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such fiscal year of the Parent and its Subsidiaries, including the notes thereto.

 

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

 

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

 

“Availability Reserves” means such reserves as the Administrative Agent from time to time determines in its Permitted Discretion as being appropriate (a) to reflect the impediments to the Agents’ ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the realization upon the Collateral, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Domestic Borrowing Base, Canadian Borrowing Base or Distribution Borrowing Base or the assets, business, financial performance or financial condition of any Loan Party, or (d) to reflect that a Default or an Event of Default then exists. Without limiting the generality of the foregoing, Availability Reserves may include, in the Administrative Agent’s Permitted Discretion, (but are not limited to) reserves based on: (i) (A) rent for any Store locations, and (B) for each distribution center leased by a Loan Party unless the applicable lessor has delivered to the Collateral Agent or the Canadian Agent, as applicable, a Collateral Access Agreement; (ii) customs duties, and other costs to release Inventory which is being imported into the United States or Canada; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, claims of the PBGC and other Taxes which may have priority over the interests of the Collateral Agent or the Canadian Agent in any Collateral; (iv) salaries, wages, vacation pay and benefits due and owing to employees of any Loan Party, (v) Customer Credit Liabilities, (vi) customer deposits, (viii) reserves for reasonably anticipated changes in the Appraised Value of Eligible Inventory between appraisals, (viii) warehousemen’s, carrier’s or bailee’s charges and other Permitted Encumbrances which may have priority over the interests of the Collateral Agent or the Canadian Agent in any Collateral, (ix) amounts due to vendors on account of consigned

 

(5)



 

goods (x) the Agents’ estimate of Canadian Priority Payable Reserves, (xi) reserves to reflect the liabilities and obligations of the Loan Parties with respect to Bank Products then provided or outstanding, and (xii) reserves to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.  The amount of any Reserve established by the Administrative Agent hereunder shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve.  All such Reserves shall be established in good faith and without duplication for items already excluded from “Eligible Credit Card Receivables”, “Eligible Inventory” and “Eligible Trade Receivables” as set forth in the lettered clauses in the definitions thereof or reserves or criteria deducted in computing the Appraised Value of Eligible Inventory or the imposition of Inventory Reserves.  To the extent required pursuant to Section 2.01(e), the Administrative Agent shall give the Borrowers three (3) Business Days prior written notice of the imposition of any Reserve and, upon delivery of such notice, the Administrative Agent shall be available to discuss the proposed Availability Reserves and the Borrowers may take such action as may be required so that the event, condition or other matter that is the basis for the Availability Reserve no longer exists or has been otherwise adequately addressed by the Borrowers to the reasonable satisfaction of the Administrative Agent.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(6)



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(7)



 

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

 

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

 

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

 

(a)                                 the Canadian Loan Cap

 

minus

 

(b)                                 the Canadian Total Outstandings on such date.

 

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

 

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

 

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

 

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

 

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

 

plus

 

(b)                                 the Cost of Eligible Inventory of the Canadian Borrower, net of Inventory Reserves, multiplied by 8590% multiplied by the Appraised Value of Eligible Inventory of the Canadian Borrower;

 

plus

 

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

 

minus

 

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

 

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

 

(8)



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Canadian Letter of Credit Sublimit” means an amount equal to $10,000,000.  The Canadian Letter of Credit Sublimit is part of, and not in addition to, the Canadian Total Commitments.  A permanent reduction of the Canadian Total Commitments shall not require a corresponding pro rata

 

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reduction in the Canadian Letter of Credit Sublimit; provided, however, that if the Canadian Total Commitments are reduced to an amount less than the Canadian Letter of Credit Sublimit, then the Canadian Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Canadian Borrower’s option, less than) the Canadian Total Commitments.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Canadian Priority Payable Reserves” means, at any time, without duplication, the obligations, liabilities and indebtedness at such time which have, or would in any proceeding have, a trust, deemed trust, right of garnishment, right of distress, charge or statutory Lien imposed to provide for payment or Liens ranking or capable of ranking senior to or pari passu with Liens securing the Canadian Liabilities on any of the Collateral under federal, provincial, state, county, territorial, municipal, or local law including, to the extent that there is such a trust, statutory Liens or Liens in respect of the specified item that has or is capable of having such rank, claims for unremitted and accelerated rents, utilities, taxes (including sales taxes and goods and services taxes (“GST”) and harmonized sales taxes (“HST”), value added taxes, amounts deducted or withheld or not paid and remitted when due under the Income Tax Act (Canada), excise taxes, taxes payable pursuant to Part IX of the Excise Tax Act (Canada) or similar provincial or territorial Law), the claims of a clerk, servant, travelling salesperson, labourer or worker (whether full-time or part-time) who is owed wages (including any amounts protected by the Wage Earner Protection Program Act (Canada)), salaries, commissions, disbursements, compensation or other amounts (such as union dues payable on behalf of employees) by the Loan Parties (but only to the extent that the claims of such parties may rank or be capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral), vacation pay, severance pay, employee source deductions, workers’ compensation obligations, government royalties or pension fund obligations  (including claims of FSCO and all amounts currently or past due and not contributed, remitted or paid to any Canadian Pension Plan)  (but only to the extent ranking or capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral), together with the aggregate value, determined in accordance with GAAP, of all Eligible Inventory which may be or may become subject to a right of a supplier to recover possession thereof or to exercise rights of revendication with respect thereto under any federal, provincial, state, county, municipal, territorial or local law, where such supplier’s right may have priority over Liens securing the Obligations including Eligible Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the BIA or the Civil Code of Québec.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Change in Law” means the occurrence, after the Effective Date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided however, for purposes of this Agreementnotwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith are deemed to have gone into effect and been adopted after the Closingand (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.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01November 12, 2010.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

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

 

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

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

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

 

“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of  Holdings and its Subsidiaries on a Consolidated basis for the most recently completed Measurement Period, plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges, (ii) the provision for Federal, state, local and foreign income Taxes, (iii) depreciation and amortization expense and, (iv) all other non-cash charges and non-cash losses, including all non-cash  compensation to officers, directors and employees paid in the form of Equity Interests and all write-downs of assets and goodwill, (v) all cash expenses incurred in connection with (A) any capital markets transaction (including any merger or acquisition transaction) for the issuance of debt, equity or convertible security, and (B) the issuance of any Indebtedness (including the Obligations), (vi) losses incurred in any Disposition, (vii) fees, cash and expenses incurred in the early extinguishment of Indebtedness, (viii) non-cash losses or non-cash reserves incurred from or by discontinued operations, (ix) any loss accounted for by the equity method of accounting, net of any Investments made by Holdings or any of its Subsidiaries in the Person which has incurred such loss during such Measurement Period, (x) non-cash fees and expense reimbursements paid to members of the Board of Directors in connection with their service on such Board of Directors, and (xi) only with respect to determining compliance with Section 7.13 hereof, any Specified Equity Contribution, minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, provincial, territorial, municipal, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Holdings and its Subsidiaries for such Measurement Period), all as determined on a Consolidated basis in accordance with GAAP.

 

“‘Consolidated Fixed Charge Coverage Ratio’ means, at any date of determination, the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) the unfinanced portion of all Capital Expenditures (excluding any Capital Expenditure made with all or any portion of the proceeds, applied within twelve months of receipt thereof, from (x) any casualty insurance, condemnation or eminent domain, or (y) any sale of assets (other than Inventory) and excluding (z) any Capital Expenditure made with all or any portion of the proceeds from the sale of Equity Interests, provided that any such Capital Expenditure is made or committed to be made within six (6) months after the date of receipt of the initial proceeds from the sale of such Equity Interests) minus (iii) the aggregate amount of Federal, state, provincial, territorial, municipal, local and foreign income taxes paid in cash during such period to (b) the Debt Service

 

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Charges, in each case, of or by Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.

 

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

 

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

 

“Consolidated Net Income” means, as of any date of determination, the net income of Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP, provided, however, that there shall be excluded (a) all extraordinary and/or non-recurring and/or unusual gains, losses, items, credits and expenses for such Measurement Period, (b) the income (or loss) of any Person during such Measurement Period in which any Person (other than any Subsidiary of Holdings) has a joint interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to Holdings and its Subsidiaries during such period, (c) the income (or loss) of any Person during such Measurement Period and accrued prior to the date it becomes a Subsidiary of Holdings or any of its Subsidiaries or is merged into or consolidated with Holdings or any of its Subsidiaries or that Person’s assets are acquired by Holdings or any of its Subsidiaries, and (d) the income of any direct or indirect Subsidiary of Holdings and its Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its Organization Documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, except that Holdings’ and its Subsidiaries’ equity in any net loss of any such Subsidiary for such Measurement Period shall be included in determining Consolidated Net Income.

 

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

 

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

 

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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.  “Controlling” and “Controlled” have meanings correlative thereto.

 

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

 

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

 

“Covenant Compliance Event” means either (a) that an Event of Default has occurred and is continuing, or (b) Excess Availability is less than the greater of (a) 1510% of the Loan Cap, or (b) $40,000,000.  For purposes hereof, the occurrence of a Covenant Compliance Event shall be deemed continuing (i) so long as such Event of Default has not been waived, and/or (ii) if the Covenant Compliance Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until Excess Availability has exceeded the greater of (a) 1510% of the Loan Cap, or (b) $40,000,000 for forty-five (45) consecutive Business Days, in which case a Covenant Compliance Event shall no longer be deemed to be continuing for purposes of this Agreement.  The termination of a Covenant Compliance as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Covenant Compliance Event in the event that the conditions set forth in this definition again arise.

 

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

 

“Credit Card Receivables” means each “payment intangible” (as defined in the UCC) and each Account, together with all income, payments and proceeds thereof, owed by a major credit or debit card issuer (including, but not limited to, Visa, MasterCard and American Express and such other issuers approved by the Administrative Agent) to a Domestic Loan Party or to the Canadian Borrower resulting from charges by a customer of such Loan Party on credit or debit cards issued by such issuer in connection with the sale of goods by such Loan Party, or services performed by such Loan Party, in each case in the ordinary course of its business.

 

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

 

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

 

“Credit Party Expenses” means: (a) all reasonable and documented out-of-pocket expenses incurred by any of the Agents and their respective Affiliates, in connection with this Agreement and the other Loan Documents, including, without limitation (but in any event subject to the limitations described below), (i) the reasonable and documented actual fees, charges and disbursements of (A) counsel for any of the Agents and their Affiliates (limited to not more than one primary counsel, one Canadian counsel and one European counsel and necessary local counsel (limited to one local counsel for each other jurisdiction), (B) outside consultants for any of the Agents (solely after the occurrence of an Event of Default), (C) appraisers (but only to the extent expressly provided to be paid by the Borrowers as set forth in this Agreement or the other Loan Documents), (D) commercial finance examinations (but only to the

 

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extent expressly provided to be paid by the Borrowers as set forth in this Agreement or the other Loan Documents), and (E) all such out-of-pocket expenses incurred during any workout or restructuring negotiations in respect of the Obligations, and (ii) all reasonable and documented out-of-pocket expenses incurred in connection with (A) the syndication of the credit facility provided for herein, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (C) the enforcement or protection of their rights in connection with this Agreement or the other Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with any proceeding under any Debtor Relief Laws, or (D) any workout or restructuring negotiations in respect of any Obligations; and (b) with respect to each L/C Issuer, all reasonable and documented out-of-pocket expenses incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder; and (c) all reasonable and documented out-of-pocket expenses incurred by the Credit Parties who are not the Agents, the L/C Issuer or any Affiliate of any of them in connection with the enforcement of the Credit Parties’ rights and remedies under any of the Loan Documents or applicable Law including in the course of any work-out or restructuring of the Loans or other Obligations during the pendency of any Event of Default, provided that such Credit Parties shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent a conflict of interest in which case the Credit Parties may engage and be reimbursed for additional counsel).

 

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

 

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

 

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

 

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

 

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

 

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

 

“Defaulting Lender” means, subject to Section 2.16(b), any Lender that (a) has failed to (i) fund all or any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunderits Loans within three (3)two Business DayDays of the date such Loans were required to be funded by it hereunder (other than as a result of a good faith dispute), or (b) has otherwise failed toii) pay over to the Administrative Agentto the Agents, the L/C Issuer, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder within one Business Day(including in respect of its participation in Letters of Credit or Swing Line Loans) within two Business Days of the date when due (other than as a result of a good faith dispute), or (c) has been deemed insolvent or become the subject of any proceeding under any Debtor Relief Law unless, in the case of any Lender subject to this clause (c), the Administrative Agent shall have determined that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder..“Deteriorating Lender” means any Defaulting Lender or any Lender as to which (a)(b) has notified any Borrower, any Agent, the L/C Issuer or the Swing Line Lender has a good faith belief (based upon information reasonably believed by it to be true and correct) that such Lender has defaulted in fulfilling its obligations under one or more other syndicated credit facilities, or (b) a Person that Controls such Lender has been deemed insolvent or become the subject of anyin writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect, (c) has failed, within two Business Days after written request by the Administrative Agent or any Borrower, to confirm in writing to the Administrative Agent and the Borrowers that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrowers), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law unless, in the case of such Person, or (ii), had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity unless, in the case of any Lender subject to this clause (bd), the Administrative Agent shall have determined that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder.; provided that a Lender shall not be a Defaulting 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 Defaulting Lender under any one or more of clauses (a) through (d) above, 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 Defaulting Lender (subject to Section 2.16(b)) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrowers, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                 the Distribution Borrowing Base

 

Minus

 

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

 

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

 

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

 

(a)                                 the Cost of Eligible Inventory of Distribution, net of Inventory Reserves, multiplied by  8590% multiplied by the Appraised Value of Eligible Inventory;

 

minus

 

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

 

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

 

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

 

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

 

(a)                                 The Domestic Loan Cap

 

Minus

 

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

 

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

 

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

 

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

 

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

 

plus

 

(b)                                 the Cost of Eligible Inventory of the Domestic Loan Parties, net of Inventory Reserves, multiplied by 8590% multiplied by the Appraised Value of Eligible Inventory of the Domestic Loan Parties;

 

plus

 

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

 

minus

 

(d)                                 the then amount of all Availability Reserves.

 

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

 

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

 

“Domestic Commitments” means, as to each Domestic Lender, its obligation to (a) make Domestic Committed Loans to the Domestic Borrowers pursuant to Section 2.01, (b) make Domestic Committed Loans to the Foreign Borrower pursuant to Section 2.01(c), (c) purchase participations in Domestic L/C Obligations, and (c) purchase participations in Swing Line Loans made to the Domestic

 

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Borrowers or the Foreign Borrower (to the extent based on Domestic Availability), in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Domestic Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Domestic Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Domestic Letter of Credit Sublimit” means an amount equal to $50,000,00070,000,000.  The Domestic Letter of Credit Sublimit is part of, and not in addition to, the Domestic Total Commitments.  A permanent reduction of the Domestic Total Commitments shall not require a corresponding pro rata reduction in the Domestic Letter of Credit Sublimit; provided, however, that if the Domestic Total Commitments are reduced to an amount less than the Domestic Letter of Credit Sublimit, then the Domestic Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Parent’s option, less than) the Domestic Total Commitments.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Domestic Total Commitments” means the aggregate of the Domestic Commitments of all Domestic Lenders.  On the ClosingEffective Date, the Domestic Total Commitments are $400,000,000500,000,000.

 

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

 

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

 

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

 

“Dutch Pledge of Intragroup Loan Receivables” means the deed of pledge of intragroup loan receivables governed by Dutch law, between the Foreign Borrower as pledgor and the Collateral Agent

 

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and the Canadian Agent as pledgees, pursuant to which all intragroup loan receivables owed to the Foreign Borrower by any Foreign Subsidiary will be pledged in favor of the Collateral Agent and the Canadian Agent.

 

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

 

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

 

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

 

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

 

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

 

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

 

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Card Receivable included within any of the following categories shall not constitute an Eligible Credit Card Receivable:

 

(a)                                 Credit Card Receivables which do not constitute a “payment intangible” (as defined in the UCC) or an Account;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 Inventory that is comprised of goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are obsolete or slow moving, or custom items, work-in-process, raw materials, or that constitute spare parts, promotional, marketing, packaging and shipping materials or supplies used or consumed in a Domestic Loan Parties’ or the Canadian Borrower’s business, (iv) are seasonal in nature and which have been packed away for sale in the subsequent season, (v) not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, or (vi) are bill and hold goods;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Notwithstanding the foregoing, the Administrative Agent may, from time to time, in the exercise of its Permitted Discretion, on not less than three (3) Business Days’ prior notice to the

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(o)                                 Accounts arising out of sales to account debtors outside the United States (with respect to Accounts of a Domestic Borrower) or Canada (with respect to Accounts of the Canadian Borrower), unless such Accounts are fully backed by an irrevocable letter of credit on terms, and issued by a financial institution, acceptable to the Administrative Agent and such irrevocable letter of credit is in the possession of, and drawable by, the Administrative Agent, or

 

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Canadian Agent, as applicable or other assurances of payment have been provided as determined in the Administrative Agent’s sole discretion;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Environmental Liability” means any liability, obligation, damage, loss, claim, action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal or presence of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

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

 

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

 

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

 

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

 

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

 

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

 

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“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by a Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan Party or any ERISA Affiliate.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Loan Party under the Facility Guaranty of, or the grant under a Loan Document by such Loan Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act (or the application or official interpretation thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 10.26 hereof and any and all guarantees of such Loan Party’s Swap Obligations by other Loan Parties) at the time the guaranty of such Loan Party, or grant by such Loan Party of a security interest, becomes effective with respect to such Swap Obligation.  If a Swap Obligation arises under a Master Agreement governing more than one Swap Contract, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to Swap Contracts for which such guaranty or security interest becomes illegal.

 

“Excluded Taxes” means, with respect to any Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) taxesRecipient, any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient (a) Taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on itTaxes (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such receipient is organized or in whichand branch profits Taxes, in each case, (i) imposed as a result of such Recipient being

 

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organized under the laws of, or having its principal office is located or in which it is otherwise treated as doing businessor, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any Loan Party is located, (cLending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 10.13) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.01(a)(ii) or (c), amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(e), (d) in the case of a Foreign Lender (other than a Canadian Lender or an assignee pursuant to a request by the Parent under Section 10.13) or L/C Issuer, any withholding tax that is imposed on amounts payable to such Foreign Lender or L/C Issuer at the time such Foreign Lender or L/C Issuer becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s or L/C Issuer’s failure or inability (other than as a result of a Change in Law after such Foreign Lender or L/C Issuer becomes a party hereto) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Loan Parties with respect to such withholding tax pursuant to Section 3.01(a), and (de) in the case of a Canadian Lender (other than an assignee pursuant to a request by the Canadian Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Canadian Lender at the time such Canadian Lender becomes a party to this Agreement (or designates a new Lending Office) or is attributable to such Canadian Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Canadian Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Canadian Borrower with respect to such withholding tax pursuant to Section 3.01(a), and (f) any U.S. federal withholding Taxes imposed pursuant to FATCA. For the avoidance of doubt, any Participant that is entitled to the benefits of Section 3.01(a) shall be treated as a Lender for purposes of this defined term.

 

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

 

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

 

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

 

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

 

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made by the Canadian Borrower in favor of the Canadian Agent and the other Canadian Credit Parties, to the extent of any Credit Extensions received by the Foreign Borrower on account of Canadian Availability, each in form reasonably satisfactory to the Administrative Agent.

 

“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), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

 

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

 

“Fee Letter” means the letter agreement, dated September 23July 5, 20102013, among the Parent, the Administrative Agent and Banc of America Securities LLCMerrill Lynch Pierce, Fenner & Smith Incorporated.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

 

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

 

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

 

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

 

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently

 

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applied; provided that, with respect to Foreign Subsidiaries of Parent organized under the laws of Canada, or any province or territory thereof, unless GAAP is being applied, “GAAP” shall mean principles which are consistent with those promulgated or adopted by the Canadian Institute of Chartered Accountants and its predecessors (or successors) in effect and applicable to the accounting period in respect of which reference to GAAP is being made.

 

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

 

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

 

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

 

“Guarantor” means (a) with respect to the Obligations (including, without limitation, the Canadian Liabilities and the Foreign Liabilities), the Persons named on Schedule 1.01 hereof as Guarantors and each other Person that shall be required to execute and deliver a Facility Guaranty of the Obligations pursuant to Section 6.11(a), (b) with respect to the Canadian Liabilities, the Persons named on Schedule 1.01 hereof as Canadian Guarantors (including the Foreign Borrower) and each other Person that shall be required to execute and deliver a Facility Guaranty of the Canadian Liabilities pursuant to Section 6.11(b), and (c) with respect to the Foreign Liabilities, the Persons named on Schedule 1.01 hereof as Foreign Guarantors (including the other Canadian Loan Parties) and each other Person that shall be required to execute and deliver a Facility Guaranty of the Foreign Liabilities pursuant to Section 6.11(b), and (d) with respect to any Swap Obligation of a Specified Loan Party (determined before giving effect to Section 10.26) under the Facility Guaranty, each Borrower.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

 

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

 

“Information” has the meaning specified in Section 10.07.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                 obsolescence;

 

(b)                                 seasonality;

 

(c)                                  shrink;

 

(d)                                 imbalance;

 

(e)                                  change in Inventory character;

 

(f)                                   change in Inventory composition;

 

(g)                                  change in Inventory mix;

 

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

 

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

 

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

 

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

 

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

 

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

 

“IRS” means the United States Internal Revenue Service.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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“LIBOR Rate” means

 

(a) for any Interest Period with respect to a LIBOR Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate or the successor thereto if the British Bankers Association is no longer making a LIBOR rate available (“BBALIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Loan being made, continued or Convertedconverted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period.; and

 

(b) for any interest calculation with respect to a Prime Rate Loan on any date, the rate per annum equal to (i) LIBOR, at approximately 11:00 a.m., London time determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one 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 month would be offered by Bank of America’s London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the Credit Card Notifications, the Security Documents, each Facility Guaranty, the Intercreditor Agreement and any other instrument or agreement now or hereafter executed and delivered in connection herewith, or in connection with any transaction arising out of any Cash Management Services and Bank Products provided by any Lender or any of its Affiliates, each as amended and in effect from time to time.; provided that for purposes of Section 8.01, Section 9.01(a) and (b), Section 10.01 (other than clause (j)), the second paragraph of Section 10.03, and Section 10.06, the term “Loan Documents” shall not include any instrument or agreement now or hereafter executed and delivered in connection with any transaction arising out of any Cash Management Services and Bank Products provided by any Lender or any of its Affiliates.

 

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

 

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

 

“Master Agreement” means 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, together with any related schedules thereto.

 

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

 

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

 

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

 

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“Maturity Date” means November 12, 2015July 26, 2018.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

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

 

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

 

“Notes Indentures” means, collectively, the Senior Notes Indenture and the Senior Subordinated Notes Indenture,(i) that certain Indenture dated as of November 8, 2011 by Sally Holdings, LLC and Sally Capital Inc., as Issuers (collectively, the “Issuers”) in favor of Wells Fargo Bank, National Association, as Trustee (the “Trustee”) pursuant to which the Issuers, issued their 6-7/8% Senior Notes due 2019 and (ii) that certain Indenture dated as of May 18, 2012 by the Issuers in favor of the Trustee, as supplemented by Supplemental Indenture dated as of May 18, 2012 by the Issuers, the Guarantors set forth therein, and the Trustee, pursuant to which the Issuers issued their 5.75% Senior Notes due 2022, and any Permitted Refinancing thereof.

 

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“NPL” means the National Priorities List under CERCLA.

 

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

 

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

 

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

 

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

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

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

 

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

 

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“Other Taxes” means all present or future stamp, court or documentary taxes or any other excise or property taxes, charges, intangible, recording, filing or similar levies arisingTaxes that arise from any payment made hereunder or under any other Loan Document or, from the execution, delivery or, performance, enforcement ofor registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, this Agreement or any other Loan Document, excluding, however,except any such amountsTaxes that are Other Connection Taxes imposed as a result ofwith respect to an assignment by a Lender of its Loan or Commitment(other than an assignment made pursuant to Section 3.06).

 

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

 

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

 

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

 

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

 

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

 

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

 

“Participation Register” has the meaning provided therefor in Section 10.06(d).

 

“Payment Conditions means, at the time of determination with respect to any Restricted Payment, that (a) no Default or Event of Default then exists or would arise as a result of the making of such Restricted Payment, and (b) if after giving pro forma effect to such Restricted Payment, (x) Excess Availability for the 45 day period immediately preceding, and on the date of, such Restricted Payment was equal to or greater than 20% of the Loan Cap, and (y) the Consolidated Fixed Charge Coverage Ratio, for the most recent Measurement Period, is equal to or greater than 1.2:1.0. 1.1:1.0; provided that the provisions of this clause (y) shall not be applicable if, after giving pro forma effect to such Restricted Payment, Excess Availability for the 45 day period immediately preceding, and on the date of, such Restricted Payment was equal to or greater than 30% of the Loan Cap.  If after giving pro forma effect to such Restricted Payment, Excess Availability would be equal to or less than 5040% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such Restricted Payment which is subject to the Payment Conditions, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements and the satisfaction of the required Consolidated Fixed Charge Coverage Ratio, no less than five (5) Business Days prior to the consummation of any such Restricted Payment.

 

“Payment in Full” means the payment in full in cash of all Obligations (or with respect to the Canadian Borrower, all Canadian Liabilities and with respect to the Foreign Borrower, all Foreign Liabilities), including, without limitation, with respect to amounts available to be drawn under outstanding Letters of Credit, the cancellation of such Letters of Credit or the delivery or provision of money or backstop irrevocable letters of credit, in form, on terms, and issued by a financial institution

 

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reasonably acceptable to the Administrative Agent, in respect thereof in an amount equal to 105% of the L/C Obligations.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Permitted Discretion” means the commercially reasonable judgment of the Administrative Agent exercised in good faith in accordance with customary business practices for comparable asset-based lending transactions.  In exercising such judgment, the Administrative Agent may consider any factors which it reasonably determines: (a) with respect to any Collateral issues, will or reasonably could be expected to adversely affect in any material respect the value of the Collateral, the enforceability or priority of the applicable Agent’s Liens thereon or the amount which any Agent, the Lenders or any Issuing Lender would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral, or (b) is evidence that any collateral report or financial information delivered to such Agent by any Person on behalf of the applicable Borrower is incomplete, inaccurate or misleading in any material respect, or (c) creates or reasonably could be expected to create a Default or Event of Default.  In exercising such judgment, the Administrative Agent may also consider, without duplication, such factors already included in or tested by the definition of Eligible Inventory or Eligible Accounts, as well as any of the following: (i) changes after the ClosingEffective Date in any material respect in demand for, pricing of, or product mix of Inventory; (ii) changes after the ClosingEffective Date in any material respect in any concentration of risk with respect to Accounts; (iii) any other factors or circumstances that will or would reasonably be expected to have a Material Adverse Effect and (iv) any other factors arising after the ClosingEffective Date that change in any material respect the credit risk of lending to the Borrowers on the security of the Collateral.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Permitted Encumbrances” means:

 

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

 

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

 

(c)                                  pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security or similar laws or regulations, other than any Lien imposed by ERISA or other applicable Law relating to Canadian Pension Plans (except Liens arising in respect of employee contributions withheld from pay but not yet due to be remitted to a Canadian Pension Plan);

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(l)                                    Liens on property (i) of any Subsidiary that is not a Loan Party and (ii) that does not constitute Collateral; provided that, if requested by the Administrative Agent, and if such property is deemed by the Collateral Agent or the Canadian Agent, as applicable, reasonably necessary to be utilized to realize upon, and maximize the amounts recovered on any liquidation of, any of the Collateral included in the Combined Borrowing Base, such Liens are subject to an intercreditor agreement between the applicable Agent and the holder of such Lien so as to permit the Collateral Agent or the Canadian Agent, as applicable, access to and use of such property for a reasonable period of time to collect upon, effect a liquidation of, or otherwise exercise rights with respect to, the Collateral, all on such terms and conditions reasonably acceptable to the Administrative Agent in its Permitted Discretion;

 

(m)                             Liens on Intellectual Property; provided that such Liens result from the granting of licenses in the ordinary course of business to any Person to use such Intellectual Property or such foreign patents, patent applications, trademarks, trademark applications, trade names, copyrights, technology, know-how or processes, as the case may be and, if requested by the Administrative Agent, and if such property is deemed by the Collateral Agent or the Canadian Agent, as applicable, reasonably necessary to be utilized to realize upon, and maximize the amounts recovered on any liquidation of, any of the Collateral included in the Combined Borrowing Base, such Liens are subject to the Agents’ rights with respect to such Intellectual Property an intercreditor agreement between the applicable Agent and the holder of such Lien so as to permit the Collateral Agent or the Canadian Agent, as applicable, access to and use of such property for a reasonable period of time to collect upon, effect a liquidation of, or otherwise exercise rights with respect to, the Collateral, all on such terms and conditions reasonably acceptable to the Administrative Agent in its Permitted Discretion;

 

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(n)                                 the rights reserved to or vested in Governmental Authorities by statutory provisions or the terms of leases, licenses and franchises, grants or permits, in each case, which affect any land and which allow such Governmental Authorities to terminate the leases, licenses, franchises, grants or permits or to require annual or other periodic payments as a condition to the continuance thereof;

 

(o)                                 Liens on property subject to Sale and Leaseback Transactions and general intangibles related thereto; provided that, if requested by the Administrative Agent, such Liens are subject to an intercreditor agreement between the Administrative Agent and the holder of such Lien so as to permit the Collateral Agent or the Canadian Agent, as applicable, access to and use of such property for a reasonable period of time to collect upon, effect a liquidation of, or otherwise exercise rights with respect to, the Collateral, all on such terms and conditions reasonably acceptable to the Administrative Agent in its Permitted Discretion;

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 Liens in favor of Loan Parties; and

 

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

 

“Permitted Holders” means (i) any of the CD&R Investors; (ii) any of the Management Investors, CD&R, and their respective Affiliates; (iii) any investment fund or vehicle managed, sponsored or advised by CD&R or any Affiliate thereof, and any Affiliate of or successor to any such investment fund or vehicle; (iv) any limited or general partners of, or other investors in, any CD&R Investor or any Affiliate thereof, or any such investment fund or vehicle; and (vii) any Person acting in the capacity of an underwriter in connection with a public or private offering of Equity Interests of Holdings.  In addition, any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) whose status as a “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) constitutes or results in a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of either Notes Indenture, together with its Affiliates, shall thereafter constitute Permitted Holders.

 

“Permitted Investments” means each of the following:

 

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

 

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

 

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

 

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

 

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

 

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which invest solely in one or more of the types of securities described in clauses (a) through (d) above;

 

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

 

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

 

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

 

(i)                                     Guarantees of Indebtedness permitted under Section 7.03;

 

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

 

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

 

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

 

(m)                             Investments constituting Permitted Acquisitions;

 

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

 

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

 

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

 

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

 

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

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting a Permitted Refinancing); provided, that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premiums thereon and underwriting discounts, defeasance costs, fees, commissions and expenses), (b) the weighted average life to maturity of such Permitted Refinancing is greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall either be (i) unsecured or (ii) subordinated in right of payment to such Obligations on terms at least as favorable to the Credit Parties as those contained in the documentation governing the Indebtedness being Refinanced, (d) the interest rate applicable to any such Permitted Refinancing shall not exceed the then applicable market interest rate (as determined in good faith by the Board of Directors of Holdings), (e) if requested by the Administrative Agent, if such Permitted Refinancing includes security consisting of (i) any of the Collateral included in the Combined Borrowing Base, or (ii) any real or personal properties (including, without limitation, licensees or transferees of Intellectual Property) which the Collateral Agent or the Canadian Agent as applicable, reasonably deems necessary to be utilized to realize upon, and maximize the amounts recovered on any liquidation of, any of the Collateral included in the Combined Borrowing Base, the Person providing such Permitted Refinancing shall have entered into an intercreditor agreement with the Agents onapplicable Agent so as to permit the Collateral Agent or the Canadian Agent, as applicable, access to and use of such property for a reasonable period of time to collect upon, effect a liquidation of, or otherwise exercise rights with respect to, the Collateral, all on such terms and conditions reasonably satisfactoryacceptable to the Administrative Agent; and provided further, that if such refinancing is a Permitted Refinancing of the Senior Term Facility, the Administrative Agent agrees to execute an intercreditor agreement with respect thereto substantially in the form of the Intercreditor Agreement in its Permitted Discretion, and (f) at the time thereof, no Default or Event of Default shall have occurred and be continuing.

 

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

 

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

 

“Platform” has the meaning specified in Section 6.02.

 

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

 

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

 

“Prepayment Event” means:

 

(a)                                 Any Disposition (including pursuant to a sale and leaseback transaction) of any Collateral of a Loan Party included in the Combined Borrowing Base (excluding sales of Inventory in the ordinary course of business), unless the proceeds therefrom are required to be paid to the holder of a Lien on such Collateral having priority over the Lien of the Collateral Agent or Canadian Agent, as applicable;

 

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

 

(c)                                  Any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of (and payments in lieu thereof), Collateral of a Loan Party included in the Combined Borrowing Base, unless (i) the proceeds therefrom are required to be paid to the holder of a Lien on such Collateral having priority over the Lien of the Collateral Agent or Canadian Agent, as applicable, or (ii) unlessas long as a Trigger Event has not occurred and is not continuing, the proceeds therefrom are utilized for purposes of replacing or repairing the Collateral in respect of which such proceeds, awards or payments were received, or are otherwise used to purchase assets useful in the business of the Loan Parties, within 180 days of the occurrence of the damage to or loss of the Collateral being repaired or replaced; or

 

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

 

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

 

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

 

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

 

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

 

“Qualified ECP Guarantor” means, at any time, each Loan Party with total assets exceeding $10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity

 

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Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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

 

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

 

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

 

“Recipient” means (a) the Administrative Agent, (b) any Lender or (c) any L/C Issuer, as applicable.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Reserves” means all (if any) Inventory Reserves, Availability Reserves and Receivables Reserves. Borrowing Base Certificates shall include detailed reporting of ineligible Accounts if the Accounts Receivable Reporting Requirement is then in effect.  Borrowing Base Certificates shall include

 

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

 

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

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.  Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.

 

“RP Availability Condition” means, at any time of determination with respect to any specified transaction or payment, that, (a) no Default or Event of Default then exists or would arise as a result of entering into the transaction or making such payment, and (b) after giving pro forma effect thereto, Excess Availability for the 45 day period immediately preceding, and on the date of, such transaction or payment was equal to or greater than 2015% of the Loan Cap.  If after giving pro forma effect to such transaction or payment, Excess Availability would be equal to or less than 5040% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such transaction or payment which is subject to the RP Availability Condition, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements, no less than five (5) Business Days prior to the consummation of any such transaction or payment.

 

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

 

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

 

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

 

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

 

“Secured Leverage Ratio” means, as of any date of determination, the ratio of (a) Secured Funded Indebtedness to (b) Consolidated EBITDA, in each case of Holdings and its Subsidiaries for the most

 

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recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Senior Term Loans” means the senior secured term loans of the Parent in the aggregate principal amount of $1,070,000,000 made under the Senior Term Loan Credit Agreement, as the same may be

 

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amended, supplemented, waived or otherwise modified from time to time in accordance with the provisions of this Agreement and any Permitted Refinancings thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Specified Loan Party” means any Loan Party that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 10.26).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar

 

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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 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”), Master Agreement including any such obligations or liabilities under anysuch Master Agreement.

 

“Swap Obligations” means with respect to any Loan Party any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Trigger Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) the failure of the Borrowers to maintain Excess Availability of at least the greater of (i) $40,000,00050,000,000, or (ii) fifteentwelve and one-half percent (1512.5%) of the Loan Cap.  For purposes of this Agreement, the occurrence of a Trigger Event shall be deemed continuing, (i) so long as such Event of Default has not been waived, and/or (ii) if the Trigger Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until the date Excess Availability shall have been not less than the greater of (i) $40,000,00050,000,000 or (ii) fifteentwelve and one-half percent (1512.5%) of the Loan Cap for forty-five (45) consecutive days; provided that for the purposes of Section 6.12 a Trigger Event may be discontinued only three (3) times during the term of this Agreement notwithstanding that the Event of Default has been waived or that Availability shall have been not less than the amounts required above for forty-five (45) consecutive days.  The termination of a Trigger Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Trigger Event in the event that the conditions set forth in this definition again arise.

 

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

 

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

 

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effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

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

 

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

 

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

 

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

 

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

 

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

 

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

 

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

 

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

 

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

 

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

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

 

“U.S. Tax Compliance Certificate” has the meaning specified in Section 3.01(e)(ii)(B)(III).

 

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

 

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

 

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

 

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

 

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

 

(d)                                 Any other undefined term contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meaning provided for such term in the Uniform

 

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Commercial Code or the PPSA, as the context may require, to the extent the same are used or defined therein

 

1.03                        Accounting Terms

 

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

 

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

 

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

 

(d)                                 For purposes of making all financial calculations to determine compliance with this Credit Agreement, all components of such calculations shall be adjusted to include or exclude, as the case may be, without duplication, such components of such calculations attributable to any business or assets that have been acquired or disposed of by the Borrowers or any of their Subsidiaries, including through Permitted Acquisitions, after the first day of the applicable period of determination and prior to the end of such period, as determined in good faith by the Borrowers utilizing Permitted Pro Forma Adjustments, and such financial calculation will be determined based on the most recent period for which Financial Statements were required to be delivered pursuant to Section 6.01, with such adjustments calculated as if the applicable acquisitions or dispositions had been consummated on the first day of such period.

 

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

 

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

 

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

 

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

 

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

 

1.09                        Dutch Matters

 

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

 

(a)                                  a necessary action to authorize, where applicable, includes without limitation: (A) any action required to comply with the Dutch Works Council Act (Wet op de ondernemingsraden); and (B) obtaining unconditional positive advice (advies) from each competent works council;

 

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

 

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

 

(d)                                  a trustee in bankruptcy includes a curator;

 

(e)                                   an administrator includes a bewindvoerder;

 

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

 

(g)                                   a nationalization includes a nationalisering; and

 

(h)                                  an attachment includes a beslag.

 

ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  after giving effect to any Canadian Committed Borrowing, the aggregate Outstanding Amount of the Canadian Committed Loans of any Canadian Lender, plus the Applicable Percentage of the Outstanding Amount of all Canadian L/C Obligations for such Canadian Lender, plus such Canadian Lender’s Applicable Percentage of the Outstanding

 

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Amount of all Swing Line Loans made to the Canadian Borrower, shall not exceed the Canadian Commitment of such Canadian Lender, and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 The following are The Inventory Reserves and Availability Reserves as of the ClosingEffective Date: are set forth in the Borrowing Base Certificate delivered on the Effective Date.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Subject to the restrictions otherwise set forth in this Agreement, the Administrative Agent shall have the right, at any time and from time to time after the ClosingEffective Date in its Permitted Discretion to establish, modify or eliminate Reserves upon three (3) Business Days prior notice to the Borrowers, (during which period the Administrative Agent shall be available to discuss any such proposed Reserve with the Borrowers; provided that no such prior notice shall be required for (1) changes to any Reserves resulting solely by virtue of mathematical calculations of the amount of the Reserve in accordance with the methodology of calculation previously utilized (such as, but not limited to, Rent and Customer Credit Liabilities), or (2) changes to Reserves or establishment of additional Reserves if a Material Adverse Effect has occurred or it would be reasonably likely that a Material Adverse Effect to the Lenders would occur were such Reserve not changed or established prior to the expiration of such twothree (23) Business Day period, or (3) any changes to Reserves during the continuance of any Event of Default.

 

2.02                        Borrowings, Conversions and Continuations of Committed Loans.

 

(a)                                 Interest Rate Elections.

 

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

 

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

 

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

 

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

 

(c)                                  Following receipt of a Committed Loan Notice, the Agents shall promptly notify each Domestic Lender or Canadian Lender, as the case may be, of the amount of its Applicable

 

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

 

(d)                                 In the event that any Borrower fails to pay any interest, fee, service charge, Credit Party Expenses, or other payment to which any Lender or any Agent is entitled from the such Borrower pursuant hereto when due, or at any time after the occurrence and during the continuance of a Trigger Event, the applicable Agent, without the request of any Loan Party, may advance such interest, fee, service charge, Credit Party Expenses, or other payment to which any Lender or any Agent is entitled from the applicable Borrower pursuant hereto or any other Loan Document and may charge the same to the Loan Account with respect to the Domestic Credit Extensions or Canadian Credit Extensions, as applicable, notwithstanding that a Domestic Overadvance or a Canadian Overadvance may result thereby.  The Agents shall advise the Parent of any such advance or charge by the Administrative Agent promptly after the making thereof, and the Canadian Agent shall advise the Canadian Borrower of any such advance or charge by the Canadian Agent promptly after the making thereof.  Such action on the part of the Administrative Agent or the Canadian Agent shall not constitute a waiver of the applicable Credit Party’s rights and the applicable Borrowers’ obligations under Section 2.05(c).  Any amount which is added to the principal balance of the applicable Loan Account as provided in this Section 2.02(c) shall be deemed to be a Domestic Prime Rate Loan or a Canadian Prime Rate Loan, as applicable.

 

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

 

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

 

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

 

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

 

2.03                        Letters of Credit.

 

(a)                                 The Letter of Credit Commitment.

 

Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of any Borrower (provided that any Canadian Letter of Credit may only be for the benefit of any Canadian Loan Party or the Foreign Borrower), and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit; (B) each Domestic Lender severally agrees to participate in Domestic Letters of Credit and any drawings thereunder; provided that, after giving effect to any L/C Credit Extension with respect to any Domestic Letter of Credit, the provisions of Section 2.01(a) shall not have been breached, and (C) each Canadian Lender severally agrees to participate in Canadian Letters of Credit and any drawings thereunder; provided that, after giving effect to any Canadian L/C Credit Extension, the provisions of Section 2.01(a) shall not have been breached.  Each request by a Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by all Borrowers that the L/C Credit Extension

 

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so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, each Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly such Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  Any L/C Issuer (other than Bank of America or any of its branches or Affiliates) shall notify the applicable Agent in writing on each Business Day of all Letters of Credit issued on the prior Business Day by such L/C Issuer, provided that (i) until the applicable Agent advises any such L/C Issuer that the provisions of Section 4.02 are not satisfied, or (ii) the aggregate amount of the Letters of Credit issued in any such week exceeds such amount as shall be agreed by the Agents and the L/C Issuer, such L/C Issuer shall be required to so notify the Agents in writing only once each week of the Letters of Credit issued by such L/C Issuer during the immediately preceding week as well as the daily amounts outstanding for the prior week, such notice to be furnished on such day of the week as the Agents and such L/C Issuer may agree. All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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(D)                               any Lender is at suchthat time a Defaulting Lender or Deteriorating Lender hereunder, unless suchthe L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory arrangements to the L/C Issuer (in its reasonable discretion) with the applicable Borrowers or such Lender to eliminate suchthe L/C Issuer’s risk with respect to such Lender.actual or potential Fronting Exposure (after giving effect to Section 2.16(a)(iv)) with respect to the Defaulting Lender arising from either (x) the Letter of Credit then proposed to be issued or (y) that Letter of Credit and all other L/C Obligations as to which the L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.

 

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

 

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

 

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

 

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

 

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issuance or amendment, including any Issuer Documents, as the L/C Issuer, the Administrative Agent or the Canadian Agent may require.

 

(ii)                                  Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent and, if applicable, the Canadian Agent (by telephone or in writing) that the Administrative Agent and, if applicable, the Canadian Agent has received a copy of such Letter of Credit Application from the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable, and, if not, the L/C Issuer will provide the Administrative Agent and, if applicable, the Canadian Agent, with a copy thereof.  Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent, the Canadian Agent or any Loan Party, at least one (1) Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied or unless the L/C Issuer would not be permitted, or would have no obligation, at such time to issue such Letter of Credit under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or otherwise), then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the applicable Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices.  Immediately upon the issuance or amendment of each Letter of Credit, each Domestic Lender or each Canadian Lender, as applicable, shall be deemed to (without any further action), and hereby irrevocably and unconditionally severally agrees to, purchase from the L/C Issuer, without recourse or warranty, a risk participation in such Letter of Credit in an amount equal to the product of such Domestic Lender’s or Canadian Lender’s Applicable Percentage, as applicable times the Stated Amount of such Letter of Credit.  Upon any change in the Domestic Commitments or the Canadian Commitments under this Agreement, it is hereby agreed that with respect to all L/C Obligations, there shall be an automatic adjustment to the participations hereby created to reflect any new Applicable Percentages of the assigning and assignee Domestic Lenders or Canadian Lenders, as the case may be.

 

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

 

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

 

(c)                                  Drawings and Reimbursements; Funding of Participations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 Repayment of Participations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)                                 Applicability of ISP and UCP.  Unless otherwise expressly agreed by the L/C Issuer and the Parent or the Canadian Borrower, as applicable, when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each Standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each Commercial Letter of Credit. Notwithstanding the foregoing, the L/C Issuer shall not be responsible to the Borrowers for, and the L/C Issuer’s rights and remedies against the Borrowers shall not be impaired by, any action or inaction of the L/C Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is located, the practice stated in the ISP or UCP, as applicable, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.

 

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(i)                                     Letter of Credit Fees.  The Domestic Borrowers shall pay to the Administrative Agent for the account of the Domestic Lenders, the Canadian Borrower and the Foreign Borrower shall pay to the Canadian Agent, for the account of the Canadian Lenders, as applicable, each in accordance with its Applicable Percentage, a Letter of Credit fee (the “Letter of Credit Fee”) for (i) in the case of the Letter of Credit Fee payable by the Domestic Borrowers, each Domestic Letter of Credit equal to the Applicable Rate multiplied by the daily Stated Amount under each such Domestic Letter of Credit (whether or not such maximum amount is then in effect under such Domestic Letter of Credit) and (ii) in the case of the Letter of Credit Fee payable by the Canadian Borrower, each Canadian Letter of Credit equal to the Applicable Rate multiplied by the daily Stated Amount under each such Canadian Letter of Credit (whether or not such maximum amount is then in effect under such Canadian Letter of Credit).  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.06.  Letter of Credit Fees shall be (i) due and payable on the first calendar day of each April, July, October and January, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand, and (ii) computed on a quarterly basis in arrears.  If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary contained herein, while any Event of Default exists, Administrative Agent may, and upon the request of the Required Lenders shall, notify the Parent that all Letter of Credit Fees shall accrue at the Default Rate and thereafter such Letter of Credit Fees shall accrue at the Default Rate to the fullest extent permitted by applicable Law so long as such Event of Default is continuing.

 

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

 

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

 

2.04                        Swing Line Loans.

 

(a)                                 The Swing Line.  Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, to from time to time on any Business Day during the Availability Period, make loans (each such loan, a “Swing Line Loan”) (i) to the Domestic Borrowers or the Foreign Borrower (subject to the provisions of Section 2.01(c)) in an aggregate principal amount not to exceed at any time outstanding the amount of the Domestic Swing Line Sublimit, notwithstanding the fact that the Outstanding Amount of such Swing Line Loans made to the Domestic Borrowers and the Foreign Borrower, when aggregated with the Applicable Percentage of the Outstanding Amount of Domestic Committed Loans and Domestic L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Applicable Percentage;

 

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provided, however, that after giving effect to any Swing Line Loan made to the Domestic Borrowers and the Foreign Borrower, the provisions of Section 2.01(a) shall not have been breached;  and (ii) to the Canadian Borrower or the Foreign Borrower (subject to the provisions of Section 2.01(c)) in an aggregate principal amount not to exceed at any time outstanding the amount of the Canadian Swing Line Sublimit, notwithstanding the fact that the Outstanding Amount of such Swing Line Loans made to the Canadian Borrower and the Foreign Borrower, when aggregated with the Applicable Percentage of the Outstanding Amount of Canadian Committed Loans and Canadian L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Applicable Percentage; provided, however, that after giving effect to any Swing Line Loan made to the Canadian Borrower and the Foreign Borrower, the provisions of Section 2.01(b) shall not have been breached, and further provided that the Swing Line Lender shall not be obligated to make any Swing Line Loan if it shall determine (which determination shall be conclusive and binding absent manifest error) that it has, or by such Credit Extension may have, Fronting Exposure).  No Borrower shall use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan, and the Swing Line Lender shall not be obligated to make any Swing Line Loan at any time when any Lender is at such time a Defaulting Lender or Deteriorating Lender hereunder, unless the Swing Line Lender has entered into satisfactory arrangements with the applicable Borrower or such Lender to eliminate the Swing Line Lender’s risk with respect to such Lender.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only at a rate based on the U.S. Prime Rate , the Canadian Prime Rate or the U.S. Index Rate, as applicable.  Immediately upon the making of a Swing Line Loan to the Domestic Borrowers and the Foreign Borrower, each Domestic Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan made to the Domestic Borrowers and the Foreign Borrower (based on Domestic Availability).  Immediately upon the making of a Swing Line Loan to the Canadian Borrower, each Canadian Lender and the Foreign Borrower shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan made to the Canadian Borrower and the Foreign Borrower (based on Canadian Availability).  The Swing Line Lender shall have all of the benefits and immunities (A) provided to the Administrative Agent and the Canadian Agent in Article IX with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with Swing Line Loans made by it or proposed to be made by it as if the term “Administrative Agent” and “Canadian Agent” as used in Article IX included the Swing Line Lender with respect to such acts or omissions, and (B) as additionally provided herein with respect to the Swing Line Lender.

 

(b)                                 Swing Line Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the irrevocable notice of the Parent on behalf of the Domestic Borrowers, the Foreign Borrower or the Canadian Borrower, as applicable, to the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 or the Equivalent Amount thereof, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent or the Canadian Agent, as applicable, of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Parent, the Canadian Borrower, or the Foreign Borrower, as applicable.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent or the Canadian Agent, as applicable (by telephone or in writing) that the Administrative Agent or the Canadian Agent, as applicable, has also received such Swing Line Loan

 

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Notice and, if not, the Swing Line Lender will notify the Administrative Agent or the Canadian Agent, as applicable (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent or the Canadian Agent at the request of the Required Lenders prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso in clause (i) or clause (ii) to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Domestic Borrowers, the Canadian Borrower or the Foreign Borrower, as applicable, at its office by crediting the account of such Borrower or such other account as directed by the applicable Borrower, as applicable, on the books of the Swing Line Lender in immediately available funds.

 

(c)                                  Refinancing of Swing Line Loans.

 

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

 

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

 

(iii)                               If any Lender fails to make available to the Administrative Agent or the Canadian Agent, as applicable, for the account of the Swing Line Lender any amount required to be paid

 

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

 

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

 

(d)                                 Repayment of Participations.

 

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

 

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

 

(iii)                               If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan made to the Canadian Borrower is required to be returned by the

 

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

 

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

 

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

 

2.05                        Prepayments.

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)                                  Prepayments made on account of the Obligations first, shall be applied ratably to the Domestic L/C Borrowings and the Swing Line Loans made to the Domestic Borrowers and the Foreign Borrower (to the extent based on Domestic Availability), second, shall be applied ratably to the

 

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

 

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

 

(i)                                     In the case of Loans and Letters of Credit denominated in Optional Currencies, the Administrative Agent shall with the delivery of each Borrowing Base Certificate, and may, at its discretion, at other times, recalculate the aggregate exposure under such Loans and Letters of Credit denominated in Optional Currencies at any time to account for fluctuations in exchange rates affecting the Optional Currencies in which any such non-U.S. dollar loans and Letters of Credit are denominated.  The Borrowers shall promptly make payments in accordance with the provisions of Section 2.05(c) and (d) hereof, to the extent necessary as a result of any such recalculation.

 

2.06                        Termination or Reduction of Commitments.

 

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

 

(b)                                 The Canadian Borrower may, upon irrevocable notice from the Canadian Borrower to the Canadian Agent (except as set forth below), terminate the Canadian Total Commitments, the Canadian Letter of Credit Sublimit or the Canadian Swing Line Sublimit or from time to time permanently reduce in part the Canadian Total Commitments, the Canadian Letter of Credit Sublimit or

 

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

 

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

 

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

 

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

 

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

 

2.07                        Repayment of Loans.

 

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

 

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

 

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

 

2.08                        Interest.

 

(a)                                 Subject to the provisions of Section 2.08(b) below, (i) each LIBOR Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Adjusted LIBOR Rate for such Interest Period plus the Applicable Margin; (ii) each BA Equivalent Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the BA Rate for such Interest Period plus the Applicable Margin; (iii) each Domestic Prime Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the U.S. Prime Rate plus the Applicable Margin; (iv) each Canadian Prime Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Canadian Prime Rate plus the Applicable Margin; (v) each US Index Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the US Index Rate plus the Applicable Margin; (vi) each Euribor Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Euribor Rate plus the Applicable Margin; (vii) each Swing Line Loan made to the Domestic Borrowers or the Foreign Borrower (to the extent based on Domestic Availability) shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the U.S. Prime Rate plus the Applicable Margin; and (viii) each Swing Line Loan made to the Canadian Borrower or the Foreign Borrower (to the extent based on Canadian Availability) shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Canadian Prime Rate plus the Applicable Margin.

 

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

 

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

 

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

 

(c)                                  Except as provided in Section 2.08(b)(iii), interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

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

 

(a)                                 Commitment Fee.  The Borrowers shall pay to the Administrative Agent, for the account of each Lender (other than a Defaulting Lender) in accordance with its Applicable Percentage, a commitment fee (the “Commitment Fee”) equal to 0.500.25% multiplied by the actual daily amount by which the Aggregate Total Commitments exceed the Total Outstandings (excluding the principal amount of Swing Line Loans made to the Borrowers).  The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the first calendar day of each April, July, October and January, commencing with the first such date to occur after the ClosingEffective Date, and on the last day of the Availability Period.  The commitment fee shall be calculated quarterly in arrears.

 

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

 

2.10                        Computation of Interest and Fees.

 

(a)                                 All computations of interest for Prime Rate Loans and BA Equivalent Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day.  Each determination by the Administrative Agent or the Canadian Agent, as applicable, of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

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

 

(c)                                  If any provision of this Agreement or of any of the other Loan Documents would obligate a Loan Party to make any payment of interest or other amount payable to any of the Administrative Agent, the Canadian Agent or any Lender under this Agreement or any other Loan Document in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by any of the Administrative Agent, the Canadian Agent or any Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provisions, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by the Administrative Agent, the Canadian Agent or any Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (1) firstly, by reducing the amount or rate of interest required to be paid to the Administrative Agent, the Canadian Agent or any Lender under this subsection 4.1, and (2) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the Administrative Agent, the Canadian Agent or any Lender which would constitute “interest” for purposes of Section 347 of the Criminal Code (Canada).  Notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if the Administrative Agent,

 

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the Canadian Agent or any Lender shall have received an amount in excess of the maximum permitted by that Section of the Criminal Code (Canada), the Loan Parties shall be entitled, by notice in writing to the applicable Administrative Agent, Canadian Agent or Lender, to obtain reimbursement from such party in an amount equal to such excess and, pending such reimbursement, such amount shall be deemed to be an amount payable by the applicable Administrative Agent, Canadian Agent or Lender to the Canadian Borrower.  Any amount or rate of interest referred to in this subsection 4.1(c) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the applicable loan remains outstanding with the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall be included in the calculation of such effective rate and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Canadian Agent shall be conclusive for the purposes of such determination.

 

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

 

2.11                        Evidence of Debt.

 

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

 

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

 

2.12                        Payments Generally; Administrative Agent’s Clawback.

 

(a)                                 General.  All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made, as applicable, to the Administrative Agent, for the account of the respective Domestic Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and to the Canadian Agent, for the account of the respective Canadian Lenders to which such payment is owed, at the Canadian Agent’s Office, in each case, in immediately available funds not later than 2:00 p.m. on the date specified herein.  The Administrative Agent or the Canadian Agent, as applicable, will promptly distribute to each Domestic Lender or Canadian Lender, as applicable, its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office in accordance with the provisions of Section 2.14.  All payments received by the Administrative Agent or the Canadian Agent after 2:00 p.m. shall, at the option of the Administrative Agent or the Canadian Agent, as applicable, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment (other than with respect to payment of a LIBOR Rate Loan or a BA Equivalent Loan or a Euribor Rate Loan) to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

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

 

(c)                                  (i)                                     Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent or the Canadian Agent, as applicable, shall have received notice from a Lender prior to (A) the proposed date of any Committed Borrowing of LIBOR Rate Loans or BA Equivalent Loans, as applicable (or in the case of any Committed Borrowing of Prime Rate Loans, prior to 1:00 p.m. on the date of such Committed Borrowing) or (B) the date that such Lender’s participation in a Letter of Credit or Swing Line Loan is required to be funded that such Lender will not make available to the Administrative Agent or the Canadian Agent, as applicable, such Lender’s share of such Committed Borrowing or participation, the Administrative Agent or the Canadian Agent, as applicable, may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or in the case of a Committed Borrowing of Prime Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02), Section 2.03 or Section 2.04, as applicable,  and may, in reliance upon such assumption, make available to the applicable Borrowers, the L/C Issuer or the Swing Line Lender, as applicable,  a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent or the Canadian Agent, as applicable, then the applicable Lender and the Domestic Borrowers or the Foreign Borrower, as applicable, severally agree with respect to Domestic Committed Loans, and the Canadian Borrower or the Foreign Borrower, as applicable, severally agrees with respect to Canadian Committed

 

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Loans, to pay to the Administrative Agent or the Canadian Agent, as applicable, forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to such Borrowers to but excluding the date of payment to the Administrative Agent or the Canadian Agent, as applicable, at (A) in the case of a payment to be made by a Domestic Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, (B) in the case of a payment to be made by a Canadian Lender, the greater of the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars and the Federal Funds Rate with respect to payments due to the Canadian Agent in Dollars, and a rate determined by the Canadian Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Canadian Agent in connection with the foregoing, (C) in the case of a payment to be made by the Domestic Borrowers or the Foreign Borrower, as applicable, the interest rate applicable to Domestic Prime Rate Loans and (D) in the case of a payment to be made by the Canadian Borrower or the Foreign Borrower, as applicable, the interest rate applicable to Canadian Prime Rate Loans.  If the applicable  Borrowers and such Lender shall pay such interest to the Administrative Agent or the Canadian Agent, as applicable, for the same or an overlapping period, the Administrative Agent or the Canadian Agent, as applicable, shall promptly remit to such Borrowers the amount of such interest paid by such Borrowers for such period.  If such Lender pays its share of the applicable Committed Borrowing or participation to the Administrative Agent or the Canadian Agent, as applicable, then the amount so paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing or participation in such Letter of Credit or Swing Line Loan.  Any payment by the Borrowers shall be without prejudice to any claim the Borrowers may have against a Lender that shall have failed to make such payment to the Administrative Agent or the Canadian Agent, as applicable.

 

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

 

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

 

(d)                                 Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent or the Canadian Agent, as applicable, funds for any Loan to be made by such

 

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

 

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

 

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

 

2.13                        Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) if a Domestic Lender, notify the Administrative Agent of such fact, and if a Canadian Lender, notify the Canadian Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and Swing Line Loans of the other applicable Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably, provided that:

 

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

 

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

 

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

 

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2.14                        Settlement Amongst Lenders.

 

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

 

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

 

2.15                        Increase in Commitments.

 

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

 

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shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders).

 

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

 

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

 

(d)                                 Effective Date and Allocations.  If the Domestic Total Commitments or the Canadian Total Commitments are increased in accordance with this Section 2.15, the Administrative Agent, in consultation with the Parent, shall determine the effective date (the “Increase Effective Date”) and the final allocation of such Commitment Increase.  The Administrative Agent shall promptly notify the Parent and the Lenders of the final allocation of such Commitment Increase and the Increase Effective Date and on the Increase Effective Date (i) the Domestic Total Commitments and Canadian Total Commitments, if applicable, and the Aggregate Total Commitments under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Commitment Increase, and (ii) Schedule 2.01 shall be deemed modified, without further action, to reflect the revised Commitments and Applicable Percentages of the Lenders.

 

(e)                                  Conditions to Effectiveness of Increase.  As a condition precedent to such increase, (i) the Parent shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (B) in the case of the Borrowers, certifying that, before and after giving effect to such increase, (1) the representations and warranties contained in Article V and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.15, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, (ii) the Borrowers, the Administrative Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Administrative Agent shall reasonably require; (iii) the Borrowers shall have paid such fees and other compensation to the Additional Commitment Lenders and

 

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to any existing Lender increasing its Commitment as the Parent and such Additional Commitment Lenders shall agree; (iv) if the Parent has requested the Administrative Agent or any of its Affiliates to seek additional Lenders pursuant to Section 2.15(c), the Borrowers shall have paid such arrangement fees to the Administrative Agent and such Affiliates as the Parent and the Administrative Agent may agree; (v) the Borrowers shall deliver to the Administrative Agent and the Lenders an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrowers reasonably satisfactory to the Administrative Agent and dated such date; (vi) the Borrowers and the Additional Commitment Lender shall have delivered such other instruments, documents and agreements evidencing the Commitment Increase as the Administrative Agent may reasonably have requested; and (vii) no Default exists.  The Borrowers shall prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Commitments under this Section.

 

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

 

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

 

2.16                        Defaulting Lenders.

 

(a)                                 Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

 

(i)                                    Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 10.01.

 

(ii)                                Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 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 Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender hereunder; third, to Cash Collateralize the L/C Issuer’s Fronting Exposure with respect to such Defaulting Lender; fourth, as the Parent may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender 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 Parent, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the L/C Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement; sixth, to the payment of any amounts owing to the Lenders, the L/C Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer or the Swing Line Lender

 

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against such Defaulting Lender as a result of such Defaulting Lender’s 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 Borrowers against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender 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 Loans or L/C Borrowings in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such 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 Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with their Applicable Percentages hereunder without giving effect to Section 2.16(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.16(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)                            Certain Fees.

 

(A)                               No Defaulting Lender shall be entitled to receive any fee payable under Section 2.09 for any period during which that Lender is a Defaulting Lender (and the Borrowers shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

(B)                               Each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.03(g).

 

(C)                               With respect to any fee payable under Section 2.09 or any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrowers shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

 

(iv)                             Reallocation of Applicable Percentages to Reduce Fronting Exposure.  All or any part of such Defaulting Lender’s participation in L/C Obligations and Swing Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender’s 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 Borrowers 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)

 

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such reallocation does not cause the aggregate Outstanding Amount of Obligations or Canadian Liabilities of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Domestic Commitment or Canadian Commitment, as applicable.  No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v)                                 Cash Collateral, Repayment of Swing Line Loans.  If the reallocation described in clause (a)(iv) above cannot, or can only partially, be effected, the Borrowers shall, without prejudice to any right or remedy available to them hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lenders’ Fronting Exposure and (y) second, Cash Collateralize the L/C Issuers’ Fronting Exposure in accordance with the procedures set forth in Section 2.03(g).

 

(b)                                 Defaulting Lender Cure.  If the Parent, the Administrative Agent, the Swing Line Lender and the L/C Issuer agree in writing that a Lender is no longer a Defaulting 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 Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Committed Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.16(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; 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 Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

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

 

3.01                        Taxes.

 

(a)                                 Payments Free of Taxes.  ; Obligation to Withhold; Payments on Account of Taxes.  For purposes of this Section 3.01, the term “applicable Laws” includes FATCA.

 

(i)                                     Any and all payments by or on account of any obligation of the Loan Parties hereunder or under any otherany Loan Party under any Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Loan Parties shall be required by Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i)without deduction or withholding for any Taxes, except as required by applicable Laws.  If any applicable Laws (as determined in the good faith discretion of the Agent) require the deduction or withholding of any Tax from any such payment by the Agent or a Loan Party, then the Agent or such Loan Party shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.

 

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(ii)                                If any Loan Party or the Agent shall be required by any applicable Laws to withhold or deduct any Taxes from any payment, then (A) such Loan Party or the Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) such Loan Party or the Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Agents, Lenders or L/C Issuer, as the case may be, 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Loan Parties shall make such deductions and (iii) the Loan Parties shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Lawwithholding or deduction been made.

 

(b)                                 Payment of Other Taxes by the Borrowers.  Without limiting or duplicating the provisions of subsection (a) above, the Loan PartiesBorrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Law, or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)                                  Tax Indemnifications.

 

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

 

(ii)                                Each Lender and the L/C Issuer shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Agent against any Indemnified Taxes attributable to such Lender or the L/C Issuer (but only to the extent that any Loan Party has not already indemnified the Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (y) the Agent and the Loan Parties, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.06(d) relating to the maintenance of a Participant Register and (z) the Agent and the Loan Parties, as

 

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applicable, against any Excluded Taxes attributable to such Lender or the L/C Issuer, in each case, that are payable or paid by the Agent or a Loan Party in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Agent shall be conclusive absent manifest error.  Each Lender and the L/C Issuer hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Agent under this clause (ii).

 

(d)                                 Evidence of PaymentsAs soon as practicableUpon request by the Lead Borrower or the Agent, as the case may be, after any payment of Indemnified Taxes by the Lead Borrower or Other Taxes by the Loan Parties Agent to a Governmental Authority, the Parent shall deliver to the Administrative Agent or the Canadian as provided in this Section 3.01, the Lead Borrower shall deliver to the Canadian Agent, as applicable or the Agent shall deliver to the Lead Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of theany return reportingrequired by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Administrative AgentLead Borrower or the Canadian Agent, as applicablethe case may be.

 

(e)                                  Status of Lenders; Tax Documentation.

 

(i)                                    Any Lender that is entitled to an exemption from, or reduction of, withholding Tax under the law of the jurisdiction in which any Loan Party is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder ormade under any other Loan Document shall deliver to the Parent (with a copy to the Administrative Agent) or the CanadianLead Borrower (with a copy toand the Canadian Agent), as applicable, at the time or times prescribed by applicable Law or reasonably requested by the Parent, the Administrative Agent, the CanadianLead Borrower or the Canadian Agent, such properly completed and executed documentation prescribed by applicable Lawreasonably requested by the Lead Borrower or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  Such delivery shall be required on the Closing Date and on or before the date such documentation expires or becomes obsolete or after the occurrence of any event requiring a change in the documentation most recently delivered.  In addition, any Lender, if reasonably requested by the Parent, the Administrative Agent, the CanadianLead Borrower or the Canadian Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Parent, the Administrative Agent, the CanadianLead Borrower or the Canadian Agent, as will enable the Parent, the Administrative Agent, the CanadianLead Borrower or the Canadian Agent, to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

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(ii)                                Without limiting the generality of the foregoing, in the event that the Lead Borrower is a U.S. Person,

 

(A)                               any Lender that is a U.S. Person shall deliver to the Lead Borrower and the Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Lead Borrower or the Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

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

 

(i) duly completed copies of Internal Revenue Service Form W-8BEN (I)  in the case of a Foreign Lender claiming eligibility forthe benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(ii) duly completed copies of Internal Revenue Service(II)  executed originals of IRS Form W-8ECI,;

 

(iii) (III)  in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit G-1 to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Domestic BorrowersBorrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” related to the Domestic Borrowers, as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) duly completed copies of  Internal Revenue Serviceexecuted originals of IRS Form W-8BEN,; or

 

(IV)                          to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-2 or Exhibit G-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming

 

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the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-4 on behalf of each such direct and indirect partner;

 

(C)                               (iv) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Lead Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Lead Borrower or the Agent), executed originals of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in United States FederalU.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the ParentLead Borrower or the Agent to determine the withholding or deduction required to be made.; and

 

(D)                               if a payment made to a Lender under any Loan Document would be subject to U.S. 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 Agent at the time or times prescribed by law and at such time or times reasonably requested by the Lead Borrower or the 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 Agent as may be necessary for the Lead Borrower and the 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 clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(iii)                            Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Lead Borrower and the Agent in writing of its legal inability to do so.

 

(e)                                  Treatment of Certain RefundsIf any Credit PartyUnless required by applicable Laws, at no time shall the Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be.  If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by any Loan Party or with respect to which theany Loan Parties haveParty has paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan PartiesParty an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by sucha Loan Party under this Section 3.01 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the applicable Credit Party(including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Loan PartiesParty, upon the request of the Administrative Agent or the Canadian Agent, as applicable, such Lender or the L/C Issuer, agreeRecipient, agrees to repay the amount paid over to the Loan PartiesParty (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the applicable Credit PartyRecipient in the event such Credit Partythe Recipient is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the

 

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contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to the Loan Party pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This subsection shall not be construed to require any Credit PartyRecipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to theany Loan PartiesParty or any other Person.

 

(f)