Current Report Filing (8-k)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report: August 15, 2014
(Date of earliest event reported)

 

 

 

SEQUENTIAL BRANDS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware	000-16075	86-0449546
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

 

1065 Avenue of the Americas, 30^th Floor,
New York, NY 10018

(Address of Principal Executive Offices/Zip Code)

[phone]

(Registrant’s telephone number, including area code)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

Item 1.01

Entry into a Material Definitive Agreement

 

On August 15, 2014 (the “Closing Date”), Sequential Brands Group, Inc., a Delaware corporation (the “Company”), and Galaxy Brand Holdings, Inc., a Delaware corporation (“Galaxy”), announced the consummation of the transactions (the “Merger Transactions”) contemplated by the Agreement and Plan of Merger, dated as of June 24, 2014 (the “Merger Agreement”), among the Company, Galaxy, SBG Universe Brands, LLC, Universe Galaxy Merger Sub, Inc., Carlyle Equity Opportunity GP, L.P., solely in its capacity as the representative of the Galaxy stockholders and optionholders (the “Stockholder Representative”), and, for the limited purposes specified therein, Carlyle Galaxy Holdings, L.P. (“Carlyle”). The terms of the Merger Transactions are more fully described in the Company’s report on Form 8-K previously filed with the Securities and Exchange Commission on June 25, 2014 (the “Prior 8-K”), which is incorporated by reference in this report.

 

On the Closing Date, in connection with the consummation of the Merger Transactions, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Stockholder Representative, which grants the Stockholder Representative, on behalf of the former Galaxy stockholders and optionholders, certain “demand” registration rights for up to three offerings of greater than $10 million and “piggyback” registration rights with respect to the shares of the Company’s common stock and warrants, including the shares of common stock underlying such warrants, issued as part of the merger consideration to the Galaxy stockholders and optionholders. All reasonable expenses incident to such registrations are required to be borne by the Company. Such registration rights are in addition to the Company’s obligation, pursuant to the Merger Agreement, to file a registration statement with respect to such securities as promptly as practicable after the Closing Date.

 

The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the full text thereof, which is filed as Exhibit 10.1 and is incorporated by reference herein.

 

Item 2.01

Completion of Acquisition or Disposition of Assets

 

To the extent required by Item 2.01 of Form 8-K, the information relating to the consummation of the Merger Transactions contained or incorporated elsewhere in this report is incorporated by reference herein.

 

Item 2.02

Results of Operations and Financial Condition

 

To the extent required by Item 2.02 of Form 8-K, the information set forth or incorporated elsewhere in this report is incorporated by reference herein.

 

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On the Closing Date, in connection with consummation of the Merger Transactions, the Company entered into (i) an Amended and Restated First Lien Credit Agreement, dated as of August 15, 2014, among the Company, its subsidiaries party thereto and Bank of America, N.A., as administrative agent and collateral agent thereunder (as so amended and restated, the “First Lien Credit Agreement”), which provides for a term loan of up to $75 million, a revolving credit facility of up to $25 million and a swing line sub-facility of up to $10 million and (ii) a Second Lien Credit Agreement, dated as of August 15, 2014, among the Company, its subsidiaries party thereto, and Wilmington Trust, National Association, as administrative agent and collateral agent thereunder (the “Second Lien Credit Agreement” and, together with the First Lien Credit Agreement, the “Loan Agreements”), which provides for a term loan of up to $90 million. In addition, the First Lien Credit Agreement provides for incremental borrowings of up to $60 million following the closing date, to be allocated pro rata between the term loan and the revolving credit facility, and the Second Lien Credit Agreement provides for incremental borrowings of up to $70 million for the purpose of consummating permitted acquisitions, in each case subject to certain customary conditions.

 

On August 15, 2014, $75 million was drawn as a term loan under the First Lien Credit Agreement, $15 million was drawn as a revolving loan under the First Lien Credit Agreement and $90 million was drawn as a term loan under the Second Lien Credit Agreement (the “Term Loans”). The proceeds from the Term Loans were used to finance the Merger Transactions pursuant to the terms of the Merger Agreement, to repay the Company’s existing indebtedness, to pay fees and expenses in connection with the foregoing and for other lawful corporate purposes. After the closing date, the Company expects to use the proceeds of any borrowings of revolving loans under the First Lien Credit Agreement for working capital, capital expenditures, and other lawful corporate purposes of the Company and its subsidiaries, and any borrowings under any incremental facilities for working capital purposes and/or for permitted acquisitions.

 

 

Term loan borrowings under the First Lien Credit Agreement will be subject to amortization of principal (x) on September 30, 2014, in an amount equal to $1.5 million and (y) thereafter, quarterly, in equal amounts of $3 million and will mature on August 15, 2019. Borrowings under the First Lien Credit Agreement will bear interest at LIBOR or a base rate, plus, in each case, an applicable margin that fluctuates from 3.50% to 3.75% for LIBOR loans and from 1.50% to 1.75% for base rate loans, in each case based on the Company’s loan to value ratio, as described in the First Lien Credit Agreement.

 

The Second Lien Credit Agreement is not subject to amortization and will mature on August 15, 2020. Borrowings under the Second Lien Credit Agreement will bear interest at LIBOR plus 8.00% and will be subject to a LIBOR floor of 1.00%.

 

Subject to the terms of the Intercreditor Agreement (as described below), loans under the First Lien Credit Agreement are voluntarily prepayable from time to time in whole or in part, and loans under the Second Lien Credit Agreement are voluntarily prepayable after August 15, 2015, in whole or in part, subject in certain cases to the payment of customary “breakage” costs with respect to LIBOR-based borrowings and prepayment premiums as provided in the respective Loan Agreements. Mandatory prepayments of the loans under the Loan Agreements are required (x) in the case of any dispositions of intellectual property, 50% of the orderly liquidation value thereof, (y) in the case of any other dispositions, 100% of the net proceeds thereof and (z) at each fiscal year end, in the amount of 30% of the consolidated excess cash flow (as defined in the Loan Agreements) of the Company and its subsidiaries, in each case subject to certain exceptions set forth in the Loan Agreements.

 

The Company’s obligations under the Loan Agreements will be guaranteed jointly and severally by each domestic subsidiary of the Company (each a “Guarantor” and, together, the “Guarantors”), other than immaterial subsidiaries (as defined in the Loan Agreements) and certain other excluded subsidiaries and subject to certain other exceptions set forth in the Loan Agreements and the related loan documents (the guarantees provided by the Guarantors shall be referred to herein as the “Guarantees”). The Company’s and the Guarantors’ obligations under the Loan Agreements and the Guarantees will, in each case, be secured by first priority liens (subject, in the case of the Second Lien Credit Agreement, to the liens under the First Lien Credit Agreement) on, and security interests in, substantially all of the present and after-acquired assets of the Company and each Guarantor subject to certain customary exceptions.

 

After the closing date, borrowings of loans under the revolving credit facility of the First Lien Credit Agreement and incremental borrowings under the Loan Agreements are subject to (x) there being no default or event of default, (y) the representations and warranties of the Company and the Guarantors contained in the First Lien Credit Agreement and any other related loan document being true and correct in all material respects as of the date of such borrowings (except (i) to the extent such representations and warranties refer specifically to an earlier date, in which case they shall be true and correct as of such date and (ii) in the case of any representation and warranty qualified by materiality, they shall be true and correct in all respects) and (z) certain other customary conditions.

 

The Loan Agreements include customary representations and warranties, including representations relating to the intellectual property owned by the Company and its subsidiaries and the status of the Company’s material license agreements. The Loan Agreements also include customary covenants and events of default, including, in the case of the First Lien Credit Agreement, requirements that the Company satisfy a minimum positive net income test and maintain a minimum loan to value ratio (as calculated pursuant to the First Lien Credit Agreement), and, in the case of the Second Lien Credit Agreement, maintain a maintain a total leverage ratio and maintain a minimum loan to value ratio (as calculated pursuant to the Second Lien Credit Agreement). Covenants in the Loan Agreements also include certain limitations on the Company’s and its subsidiaries’ ability to incur indebtedness, grant liens on its assets, consummate acquisitions and make fundamental changes to the Company (including mergers and consolidations), dispose of its assets, make investments, loans, advances and enter into guarantees, pay dividends and make other restricted payments, prepay or amend certain indebtedness and material licenses, enter into affiliate transactions and issue equity interests, in each case, subject to certain exceptions as set forth in the Loan Agreements..

 

 

In connection with the First Lien Credit Agreement and the Second Lien Credit Agreement, Bank of America, N.A., as the administrative agent under the First Lien Credit Agreement and Wilmington Trust, National Association, as the administrative agent under the Second Lien Credit Agreement, entered into an Intercreditor Agreement (the “Intercreditor Agreement”), dated as of August 15, 2014, which was acknowledged by the Company and the Guarantors. The Intercreditor Agreement establishes various inter-lender terms, including, but not limited to, priority of liens, permitted actions by each party, application of proceeds, exercise of remedies in the case of a default, incurrence of additional indebtedness releases of collateral and limitations on the amendment of the respective Loan Agreements without consent of the other party.

 

The foregoing description of the Loan Agreements and the Intercreditor Agreement is qualified in its entirety by reference to the full text of each agreement, copies of which are attached hereto as Exhibits 10.2, 10.3 and 10.4 and are incorporated by reference herein. The Loan Agreements and the Intercreditor Agreement have been attached as exhibits to provide investors and security holders with information regarding their terms. They are not intended to provide any other financial information about the Company or its subsidiaries or affiliates. The representations, warranties and covenants contained in the Loan Agreements were made only for purposes of those agreements and as of specific dates, are solely for the benefit of the parties to the Loan Agreements, may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Loan Agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Investors should not rely on the representations, warranties, or covenants or any description thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the Loan Agreements, which subsequent information may or may not be fully reflected in public disclosures by the Company.

 

Item 3.02

Unregistered Sale of Equity Securities.

 

On the Closing Date, the Company issued to the former Galaxy stockholders and optionholders, as part of the consideration in the Merger Transactions, an aggregate of 12,375,000 shares of its common stock and performance-based warrants to purchase an aggregate of up to an additional 3,000,000 shares of its common stock, in each case subject to rounding. An additional 1,375,000 shares of the Company’s common stock are anticipated to be issued to the former Galaxy stockholders and optionholders on the 18 month anniversary of the Closing Date, as specified in the Merger Agreement. Such securities were and are anticipated to be issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

 

The terms of the warrants are described in the Prior 8-K, which is incorporated by reference in this report. Among other terms, the warrants only vest based upon the performance in the 2016 and 2017 calendar years of the Linens ‘n Things ® brand as follows: (i) 500,000 shares vest if net royalties are equal to or exceed $10 million in calendar year 2016; (ii) an additional 1,000,000 shares vest if net royalties are equal to or exceed $15 million in calendar year 2016, (iii) 500,000 shares vest if net royalties are equal to or exceed $10 million in calendar year 2017, and (iv) an additional 1,000,000 shares vest if net royalties are equal to or exceed $15 million in calendar year 2017. There can be no assurances that any or all of the Warrant Shares will vest; Galaxy currently does not derive any royalties from the Linens ‘n Things ® brand. The foregoing description is qualified in its entirety by reference to the full text of the form of the warrants, which is filed as Exhibit 10.5 and is incorporated by reference herein.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

The Company previously announced in the Prior 8-K the resignation of Mr. Matthew Eby as a Class II director and the appointment of Mr. Rodney Cohen as his replacement, conditioned and effective upon the closing of the Merger Transactions. On the Closing Date, in connection with the consummation of the Merger Transactions, such resignation and appointment became effective. Mr. Eby’s resignation is not due to any disagreement between Mr. Eby and the Company on any matter relating to the Company’s operations, policies or practices. Mr. Cohen serves as the representative of Carlyle pursuant to a letter agreement between Carlyle and the Company dated June 24, 2014, which grants Carlyle the right to nominate one director for election by the Company’s stockholders for so long as it and its affiliates hold at least 33% of the shares acquired by it in the Merger Transactions.

 

 

Mr. Cohen is a Managing Director and Co-Head of Carlyle Growth Partners III, L.P. and Carlyle U.S. Equity Opportunity Fund, L.P., affiliates of Carlyle which represent the U.S. smaller and middle market buyout activities of The Carlyle Group L.P. Mr. Cohen serves on the boards of directors of Philadelphia Energy Solutions LLC, Traxys S.A., Dynamic Precision Group, Inc. and InterLink Maritime Corp. Prior to joining The Carlyle Group L.P. in 2010, Mr. Cohen was with Pegasus Capital Advisors, L.P., a middle-market investment firm with approximately $2 billion of assets under management, where he was a Co-Managing Partner. In his two decades of private equity investing, operational restructuring and legal advisory work, Mr. Cohen has invested in a variety of sectors including commodities, natural resources, media, consumer, financial services, security and industrials. Mr. Cohen joined Pegasus Capital Advisors, L.P. in 1996. From 1993 to 1996, he consulted and managed several diverse business ventures. Prior to that Mr. Cohen practiced law with Anderson Kill Olick and Oshinsky P.C. Mr. Cohen earned his J.D. from Columbia Law School where he was a Harlan Fiske Stone Scholar and his B.A. from Franklin and Marshall College.

 

Item 5.07

Submission of Matters to a Vote of Security Holders.

 

As previously reported in the Prior 8-K, the Merger Transactions were approved on June 24, 2014, by written consent executed by stockholders holding approximately 51.4% of the issued and outstanding shares of the Company’s common stock.

 

Item 7.01

Regulation FD Disclosure.

 

On the Closing Date, the Company issued a press release announcing the consummation of the Merger Transactions described in Item 1.01, including certain projected financial information about the Company, pro forma for the Merger Transactions, for the fiscal year ending December 31, 2014, and the twelve months following the Closing Date. A copy of the press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

 

As noted in the press release, the Company has provided certain non–U.S. generally accepted accounting principles (“GAAP”) financial measures and a reconciliation of the non–U.S. GAAP measures to U.S. GAAP measures. The Company believes these non-U.S. GAAP financial measures provide useful information to investors because they allow for a more direct understanding of the Company’s business. Readers should consider non–U.S. GAAP measures in addition to, and not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.

 

The information contained herein and in the press release furnished as an exhibit hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. In addition, the press release contains statements intended as “forward-looking statements” which are subject to the cautionary statements about forward-looking statements set forth in such press release.

 

Item 9.01

Financial Statements and Exhibits

 

(a)

Financial Statements of Businesses Acquired.

 

The Company intends to file the financial statements of Galaxy required by Item 9.01(a) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.

 

(b)

Pro Forma Financial Information.

 

The Company intends to furnish the pro forma financial information required by Item 9.01(b) as an amendment to this Current Report on Form 8-K not later than 71 days after the date this Current Report on Form 8-K is required to be filed.

 

 

(d)

Exhibits.

 

Exhibit No.		Description
10.1		Registration Rights Agreement, dated as of August 15, 2014, between Sequential Brands Group, Inc. and Carlyle Equity Opportunity GP, L.P., as the representative of the former stockholders and option holders of Galaxy Brand Holdings, Inc.
10.2		Amended and Restated First Lien Credit Agreement, dated as of August 15, 2014, among Sequential Brands Group, Inc, its subsidiaries party thereto and Bank of America, N.A., as administrative agent and collateral agent.
10.3		Second Lien Credit Agreement, dated as of August 15, 2014, among the Company, its subsidiaries party thereto, and Wilmington Trust, National Association, as administrative agent and collateral agent thereunder.
10.4		Intercreditor Agreement, dated as of August 15, 2014, between Bank of America, N.A. and Wilmington Trust, National Association, and acknowledged by Sequential Brands Group, Inc.
10.5		Form of Common Stock Purchase Warrant.
99.1		Press Release.

  

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SEQUENTIAL BRANDS GROUP, INC.
Date: August 18, 2014	/s/ Gary Klein
	Gary Klein
	Chief Financial Officer

  

 

EXHIBIT INDEX

 

Exhibit No.		Description
10.1		Registration Rights Agreement, dated as of August 15, 2014, between Sequential Brands Group, Inc. and Carlyle Equity Opportunity GP, L.P., as the representative of the former stockholders and option holders of Galaxy Brand Holdings, Inc.
10.2		Amended and Restated First Lien Credit Agreement, dated as of August 15, 2014, among Sequential Brands Group, Inc, its subsidiaries party thereto and Bank of America, N.A., as administrative agent and collateral agent.
10.3		Second Lien Credit Agreement, dated as of August 15, 2014, among the Company, its subsidiaries party thereto, and Wilmington Trust, National Association, as administrative agent and collateral agent thereunder.
10.4		Intercreditor Agreement, dated as of August 15, 2014, between Bank of America, N.A. and Wilmington Trust, National Association, and acknowledged by Sequential Brands Group, Inc.
10.5		Form of Common Stock Purchase Warrant.
99.1		Press Release.

 

 

 

Exhibit 10.1

 

Execution Version

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of August 15, 2014, by and between Sequential Brands Group, Inc., a Delaware corporation (the “Company”), and Carlyle Equity Opportunity GP, L.P. (the “Representative”), a Delaware limited partnership, on behalf of, and for the benefit of, the former stockholders and optionholders and each of their permitted transferees (the “Stockholders”) of Galaxy Brand Holdings, Inc. (“Galaxy”).

 

RECITALS

 

WHEREAS, the Company, Galaxy, the Representative and certain other parties have entered into that certain Agreement and Plan of Merger, dated as of June 24, 2014 (the “Merger Agreement”), pursuant to which the Stockholders received, among other consideration, Parent Shares and the Warrants (each as defined in the Merger Agreement); and

 

WHEREAS, in connection with the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby, the Company has agreed to grant the Stockholders certain registration rights as set forth below.

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

 

AGREEMENT

 

ARTICLE I

DEFINITIONS

 

Section 1.1           Certain Definitions. As used in this Agreement, capitalized terms not otherwise defined herein shall have the meanings ascribed to them below:

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York.

 

“Common Stock” means the common stock, par value $.001 per share, of the Company, and any equity securities issued or issuable in exchange for or with respect to the Common Stock by way of a stock dividend, stock split or combination of shares or in connection with a reclassification, recapitalization, merger, consolidation or other reorganization or otherwise.

 

“Common Stock Equivalent” means all options, warrants (including the Warrants) and other securities convertible into, or exchangeable or exercisable for (at any time or upon the occurrence of any event or contingency and without regard to any vesting or other conditions to which such securities may be subject) Common Stock.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

 

“FINRA” means the Financial Industry Regulatory Authority, Inc.

 

“Holder” or “Holders” means the Stockholders and any Person who shall acquire and hold Registrable Securities in accordance with the terms of this Agreement.

 

“Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities.

 

“Person” means any individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity or any governmental or regulatory body or other agency or authority or political subdivision thereof, including any successor, by merger or otherwise, of any of the foregoing.

 

“Registrable Securities” means (i) the shares of Common Stock issued by the Company as consideration pursuant to the Merger Agreement, (ii) the Warrants and (iii) the shares of Common Stock issuable from time to time upon the exercise of the Warrants. Any particular Registrable Securities shall cease to be Registrable Securities (A) when a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) during the period that such securities shall be eligible to be resold to the public without any volume or manner of sale restrictions pursuant to Rule 144 (or any successor provision) under the Securities Act or (C) when such securities shall cease to be outstanding.

 

“Registration Expenses” means all fees and expenses incurred in connection with the Company’s performance of or compliance with the provisions of Article II, including: (i) all registration, listing, qualification and filing fees (including FINRA filing fees); (ii) fees and expenses of compliance with state securities or “blue sky” laws (including counsel fees in connection with the preparation of a blue sky and legal investment survey and FINRA filings); (iii) printing and copying expenses; (iv) messenger and delivery expenses; (v) expenses incurred in connection with any road show; (vi) fees and disbursements of counsel for the Company; (vii) with respect to each registration, the fees and disbursements of one counsel for the selling Holder(s) selected by the Representative, in the case of a registration pursuant to Section 2.1, and selected by the underwriter, in the case of a registration pursuant to Section 2.2; (viii) fees and disbursements of independent public accountants, including the expenses of any audit or “cold comfort” letter, and fees and expenses of other persons, including special experts, retained by the Company; (ix) underwriter fees, excluding discounts and commissions, and any other expenses which are customarily borne by the issuer or seller of securities in a public equity offering; and (x) all internal expenses of the Company (including all salaries and expenses of officers and employees performing legal or accounting duties).

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

2

 

“Warrants” means those certain warrants, issued in connection with the Merger Agreement, to acquire up to, in the aggregate, 3,000,000 shares of Common Stock, upon certain terms and subject to the conditions set forth thereon.

 

ARTICLE II

REGISTRATION RIGHTS

 

Section 2.1           Demand Registrations.

 

(a)          (i)          Subject to Section 2.1(c), at any time or from time to time after the first date on which the Warrants have been exercised, the Representative, on behalf of the Holders, or a group of Holders owning at least 50% of the remaining Registrable Securities, shall have the right to require the Company to file a registration statement under the Securities Act covering such aggregate number of Registrable Securities that have an aggregate anticipated offering price of at least $10,000,000 (based on the market price of the Common Stock as of the date of the Demand Registration Request), by delivering a written request therefor to the Company specifying the number of Registrable Securities to be included in such registration by such Holders and the intended method of distribution thereof. Any such request by the Representative pursuant to this Section 2.1(a)(i) is referred to as a “Demand Registration Request,” the registration so requested is referred to as a “Demand Registration.” As promptly as practicable, but no later than 10 days after receipt of a Demand Registration Request, the Company shall give written notice (a “Demand Exercise Notice”) of such Demand Registration Request to the Representative, and the Company shall distribute such Demand Exercise Notice to all Holders of record of Registrable Securities.

 

(ii)         The Company, subject to Sections 2.3 and 2.6, shall include in a Demand Registration the Registrable Securities of any Holder of Registrable Securities that shall have made a written request to the Company within the time limits specified below for inclusion in such registration (the “Participating Holders”). Any such request from the Holders must be delivered to the Company within 10 Business Days after the receipt of the Demand Exercise Notice and must specify the maximum number of Registrable Securities intended to be disposed of by such Holders.

 

(iii)        The Company, as expeditiously as possible but subject to Section 2.1(c), shall use its reasonable best efforts to effect such registration under the Securities Act of the Registrable Securities that the Company has been so requested to register for distribution in accordance with such intended method of distribution.

 

(b)          Registrations under this Section 2.1 shall be on such appropriate registration form of the SEC for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof, which form shall be selected by the Company and shall be reasonably acceptable to the Representative.

 

(c)          The Demand Registration rights granted in Section 2.1(a) to the Holders are subject to the following limitations:

 

3

 

(i)         the Company shall not be required to cause a registration pursuant to Section 2.1(a) to be filed within 45 days or to be declared effective within a period of 90 days after the effective date of any other registration statement of the Company filed pursuant to the Securities Act for which piggyback rights were available pursuant to Section 2.2 and for which a majority of the Piggyback Shares requested to be included in such registration have been included;

 

(ii)        if, in the opinion of counsel to the Company, any registration of Registrable Securities would require disclosure of information not otherwise then required by law to be publicly disclosed and, in the good faith judgment of the board of directors of the Company, such disclosure is reasonably likely to adversely affect any material financing, acquisition, corporate reorganization or merger or other material transaction or event involving the Company or otherwise have a material adverse effect on the Company (a “Valid Business Reason”), the Company may postpone or withdraw a filing of a registration statement relating to a Demand Registration Request until such Valid Business Reason no longer exists, but in no event shall the Company avail itself of such right for more than (A) 45 days after receipt of a Demand Registration Request or (B) 90 days, in the aggregate, in any period of 365 consecutive days (such period of postponement or withdrawal under this clause (ii), the “Postponement Period”); and the Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof; and

 

(iii)       the Company shall not be obligated to effect more than three Demand Registrations under Section 2.1(a) for the Holders.

 

If the Company shall give any notice of postponement or withdrawal of any registration statement pursuant to clause (ii) above, the Company shall not register any equity security of the Company during the period of postponement or withdrawal. Each Holder of Registrable Securities agrees that, upon receipt of any written notice from the Company that the Company has determined to withdraw any registration statement pursuant to clause (ii) above, such Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement. If the Company shall have withdrawn or prematurely terminated a registration statement filed under Section 2.1(a)(i), the Company shall not be considered to have effected an effective registration for the purposes of this Agreement until the Company shall have filed a new registration statement covering the Registrable Securities covered by the withdrawn registration statement and such registration statement shall have been declared effective and shall not have been withdrawn. If the Company shall give any notice of withdrawal or postponement of a registration statement, at such time as the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event more than 45 days after the date of the postponement or withdrawal), the Company shall use its reasonable best efforts to effect the registration under the Securities Act of the Registrable Securities covered by the withdrawn or postponed registration statement in accordance with this Section 2.1.

 

(d)          The Company, subject to Sections 2.3 and 2.6, may elect to include in any registration statement and offering made pursuant to Section 2.1(a)(i), (i) authorized but unissued shares of Common Stock or shares of Common Stock held by the Company as treasury shares and (ii) any other shares of Common Stock that are requested to be included in such registration pursuant to the exercise of piggyback rights granted by the Company that are not inconsistent with or (except to the extent approved by the board of directors of the Company, which approval includes the affirmative vote of the nominee of Carlyle Galaxy Holdings, L.P.) superior to the rights granted in, or otherwise conflict with the terms of, this Agreement (“Additional Piggyback Rights”); provided, however, that such inclusion shall be permitted only to the extent that it is pursuant to and subject to the terms of the underwriting agreement or arrangements, if any, entered into by the Participating Holders and does not materially impact the ability of the Participating Holders to sell thereunder.

 

4

 

(e)          A Holder may withdraw its Registrable Securities from a Demand Registration at any time. If all such Holders do so, the Company shall cease all efforts to secure registration and such registration nonetheless shall be deemed a Demand Registration for purposes of this Section 2.1 unless (i) the withdrawal is made following withdrawal or postponement of such registration by the Company pursuant to a Valid Business Reason as contemplated by Section 2.1(c), (ii) the withdrawal is based on the reasonable determination of the Holders who requested such registration that there has been, since the date of the Demand Registration Request, a material adverse change in the business or prospects of the Company or (iii) the Holders who requested such registration shall have paid or reimbursed the Company for all of the reasonable out-of-pocket fees and expenses incurred by the Company in connection with the withdrawn registration.

 

(f)          A Demand Registration shall not be deemed to have been effected and shall not count as such (i) unless a registration statement with respect thereto has become effective and has remained effective for a period of at least 180 days or such shorter period during which all Registrable Securities covered by such Registration Statement have been sold or withdrawn, or, if such Registration Statement relates to an underwritten offering, such longer period as, in the opinion of counsel for the underwriter(s), is required by law for delivery of a prospectus in connection with the sale of Registrable Securities by an underwriter or dealer, (ii) if, after the registration statement with respect thereto has become effective, it becomes subject to any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason, (iii) if it is withdrawn by the Company pursuant to a Valid Business Reason as contemplated by Section 2.1(c) or (iv) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such Demand Registration are not satisfied, other than solely by reason of some act or omission of the Participating Holders.

 

(g)          In connection with any Demand Registration, the Company may designate the lead managing underwriter in connection with such registration and each other managing underwriter for such registration, provided, that, in each case, each such underwriter is reasonably satisfactory to the Representative.

 

5

 

Section 2.2           Piggyback Registrations.

 

(a)          If, at any time, the Company proposes or is required to register any of its equity securities under the Securities Act (other than pursuant to (i) registrations on Form S-8 or any similar form(s) solely for registration of securities in connection with an employee benefit plan or dividend reinvestment plan, (ii) registrations on Form S-4 or any similar form(s) solely for registration of securities in connection with any business combination transaction, or (iii) a Demand Registration under Section 2.1) on a registration statement on Form S-1 or Form S-3 or an equivalent general registration form then in effect, whether or not for its own account, the Company shall give prompt written notice of its intention to do so to the Representative and each Holder. Upon the written request of any Holder, made within 10 Business Days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company, subject to Sections 2.2(b), 2.3 and 2.6, shall use reasonable best efforts to cause all such Registrable Securities to be included in the registration statement with the securities that the Company at the time proposes to register to permit the sale or other disposition by the Holders in accordance with the intended method of distribution thereof of the Registrable Securities to be so registered. No registration of Registrable Securities effected under this Section 2.2(a) shall relieve the Company of its obligations to effect Demand Registrations under Section 2.1.

 

(b)          If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company will give written notice of such determination to the Representative and each Holder and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 2.1 and (ii) in the case of a determination to delay such registration of its equity securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities.

 

(c)          Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.2 by giving written notice to the Company of its request to withdraw. Such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration. Such withdrawal shall be irrevocable and, after making such withdrawal, a Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made.

 

Section 2.3           Priority in Registrations.

 

(a)          If any requested registration made pursuant to Section 2.1 involves an underwritten offering and the lead managing underwriter of such offering (the “Manager”) shall advise the Company that, in its view, the number of securities requested to be included in such registration by the Holders of Registrable Securities or any other persons, including those shares of Common Stock requested by the Company to be included in such registration, exceeds the largest number (the “Section 2.3(a) Sale Number”) that can be sold in an orderly manner in such offering within a price range acceptable to the Representative, the Company shall use reasonable best efforts to include in such registration:

 

(i)          first, all Registrable Securities requested to be included in such registration by the Holders thereof; provided, however, that, if the number of such Registrable Securities exceeds the Section 2.3(a) Sale Number, the number of such Registrable Securities (not to exceed the Section 2.3(a) Sale Number) to be included in such registration shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities be included in such registration, based on the number of Registrable Securities then owned by each such Holder requesting inclusion in relation to the number of Registrable Securities owned by all Holders requesting inclusion;

 

6

 

(ii)         second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.3(a) is less than the Section 2.3(a) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all Holders requesting that securities be included in such registration pursuant to the exercise of Additional Piggyback Rights (“Piggyback Shares”), based on the aggregate number of Piggyback Shares then owned by each Holder requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Holders requesting inclusion, up to the Section 2.3(a) Sale Number; and

 

(iii)        third, to the extent that the number of securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(a) is less than the Section 2.3(a) Sale Number, any securities that the Company proposes to register, up to the Section 2.3(a) Sale Number.

 

If, as a result of the proration provisions of this Section 2.3(a), any Holder shall not be entitled to include all Registrable Securities in a registration that such Holder has requested be included, such Holder may elect to withdraw its request to include Registrable Securities in such registration or may reduce the number requested to be included; provided, however, that (A) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (B) such withdrawal shall be irrevocable and, after making such withdrawal, such Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made.

 

(b)          If any registration pursuant to Section 2.2 involves an underwritten offering that was proposed by the Company and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the number (the “Section 2.3(b) Sale Number”) that can be sold in an orderly manner in such registration within a price range acceptable to the Company, the Company shall include in such registration:

 

(i)          first, all Common Stock that the Company proposes to register for its own account; and

 

(ii)         second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.3(b) is less than the Section 2.3(b) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities or Piggyback Shares be included in such registration pursuant to the exercise of piggyback rights pursuant to Section 2.2 of this Agreement or Additional Piggyback Rights, based on the aggregate number of Registrable Securities and Piggyback Shares then owned by each Holder requesting inclusion in relation to the aggregate number of Registrable Securities and Piggyback Shares owned by all Holders requesting inclusion, up to the Section 2.3(b) Sale Number.

 

7

 

(c)          If any registration pursuant to Section 2.2 involves an underwritten offering that was proposed by holders of securities of the Company that have the right to require such registration pursuant to an agreement entered into by the Company (“Additional Demand Rights”) and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the number (the “Section 2.3(c) Sale Number”) that can be sold in an orderly manner in such registration within a price range acceptable to the Company, the Company shall include in such registration:

 

(i)          first, all securities requested to be included in such registration by the holders of Additional Demand Rights (“Additional Registrable Securities”); provided, however, that, if the number of such Additional Registrable Securities exceeds the Section 2.3(c) Sale Number, the number of such Additional Registrable Securities (not to exceed the Section 2.3(c) Sale Number) to be included in such registration shall be allocated on a pro rata basis among all holders of Additional Registrable Securities requesting that Additional Registrable Securities be included in such registration, based on the number of Additional Registrable Securities then owned by each such holder requesting inclusion in relation to the number of Additional Registrable Securities owned by all of such holders requesting inclusion;

 

(ii)         second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.3(c) is less than the Section 2.3(c) Sale Number, any Common Stock that the Company proposes to register for its own account, up to the Section 2.3(c) Sale Number; and

 

(iii)        third, to the extent that the number of securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(c) is less than the Section 2.3(c) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities or Piggyback Shares be included in such registration pursuant to the exercise of piggyback rights pursuant to Section 2.2 or Additional Piggyback Rights, based on the aggregate number of Registrable Securities and Piggyback Shares then owned by each Holder requesting inclusion in relation to the aggregate number of Registrable Securities and Piggyback Shares owned by all Holders requesting inclusion, up to the Section 2.3(c) Sale Number.

 

Section 2.4           Registration Procedures. Whenever the Company is required by the provisions of this Agreement to use reasonable best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company as expeditiously as possible, at the Company’s reasonable expense:

 

(a)          shall prepare and file with the SEC the requisite registration statement, which shall comply as to form in all material respects with the requirements of the applicable form and shall include all financial statements required by the SEC to be filed therewith, and use reasonable best efforts to cause such registration statement to become and remain effective (provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, or any Issuer Free Writing Prospectus related thereto, the Company will furnish to counsel for the Representative and the lead managing underwriter, if any, copies of all such documents proposed to be filed (including all exhibits thereto), which documents will be subject to the reasonable review and reasonable comment of such counsel, and the Company shall not file any registration statement or amendment thereto, any prospectus or supplement thereto or any Issuer Free Writing Prospectus related thereto to which the holders of a majority of the Registrable Securities covered by such registration, the Representative or the underwriters, if any, shall reasonably object);

 

8

 

(b)          shall prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for such period as any seller of Registrable Securities pursuant to such registration statement shall request and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement;

 

(c)          shall furnish, without charge, to each seller of such Registrable Securities and each underwriter, if any, of the securities covered by such registration statement such number of copies of such registration statement, each amendment thereto, the prospectus included in such registration statement, each preliminary prospectus and each Issuer Free Writing Prospectus utilized in connection therewith, all in conformity with the requirements of the Securities Act, and such other documents as such seller and underwriter reasonably may request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller, and shall consent to the use in accordance with all applicable law of each such registration statement, each amendment thereto, each such prospectus, preliminary prospectus or Issuer Free Writing Prospectus by each such seller of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such registration statement or prospectus;

 

(d)          shall use reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions as any sellers of Registrable Securities or any managing underwriter, if any, reasonably shall request, and do any and all other acts and things that may be reasonably necessary or advisable to enable such sellers or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions, except that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 2.4(d), it would not be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;

 

(e)          shall promptly notify each Holder selling Registrable Securities covered by such registration statement and each managing underwriter, if any:

 

(i)          when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto, any post-effective amendment to the registration statement or any Issuer Free Writing Prospectus has been filed and, with respect to the registration statement or any post-effective amendment, when the same has become effective;

 

9

 

(ii)         of any request by the SEC or state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information;

 

(iii)        of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose;

 

(iv)        of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose;

 

(v)         of the existence of any fact of which the Company becomes aware which results in the registration statement, the prospectus related thereto, any document incorporated therein by reference, any Issuer Free Writing Prospectus or the information conveyed to any purchaser at the time of sale to such purchaser containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading; and

 

(vi)        if at any time the representations and warranties contemplated by any underwriting agreement, securities sale agreement, or other similar agreement, relating to the offering shall cease to be true and correct in all material respects; and, if the notification relates to an event described in clause (v), the Company, subject to the provisions of Section 2.1(c), promptly shall prepare and file with the SEC, and furnish to each seller and each underwriter, if any, a reasonable number of copies of, a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading;

 

(f)          shall comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement (and in any event within 90 days after the end of such 12 month period described hereafter), an earnings statement, which need not be audited, covering the period of at least 12 consecutive months beginning with the first day of the Company’s first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

 

(g)          shall use reasonable best efforts to cause all Registrable Securities covered by such registration statement to be authorized to be listed on a national securities exchange if shares of the particular class of Registrable Securities are at that time, or will be immediately following the offering, listed on such exchange;

 

(h)          shall provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement;

 

10

 

(i)          shall enter into such customary agreements (including, if applicable, an underwriting agreement), deliver such certificates and take such other actions as the Representative shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (it being understood that the Holders of the Registrable Securities that are to be distributed by any underwriters shall be parties to any such underwriting agreement and may, at their option, require that the Company make to and for the benefit of such Holders the representations, warranties and covenants of the Company which are being made to and for the benefit of such underwriters);

 

(j)          shall use reasonable best efforts to obtain an opinion from the Company’s counsel and a “cold comfort” letter from the Company’s independent public accountants in customary form and covering such matters as are customarily covered by such opinions and “cold comfort” letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the underwriter, if any;

 

(k)          shall use reasonable best efforts to prevent the issuance of or obtain the withdrawal of any order suspending the effectiveness of the registration statement;

 

(l)           shall provide a CUSIP number for all Registrable Securities, not later than the effective date of the registration statement and use reasonable best efforts to cause all Registrable Securities covered by the applicable registration statement (other than the Warrants) to be listed on The NASDAQ Stock Market;

 

(m)         shall make reasonably available its employees and personnel for participation in “road shows” and other marketing efforts and otherwise provide reasonable assistance to the underwriters (including participating in and making all relevant financial and other records and pertinent corporate documents and information of the Company available for the due diligence review of the Representative and underwriters, if any, and their legal counsel and accountants), taking into account the needs of the Company’s businesses and the requirements of the marketing process so as not to unreasonably interfere with the conduct of the Company’s business, in the marketing of Registrable Securities in any underwritten offering;

 

(n)          shall promptly prior to the filing of any document that is to be incorporated by reference into the registration statement or the prospectus, and prior to the filing of any Issuer Free Writing Prospectus, provide copies of such document to counsel for the selling holders of Registrable Securities and to each managing underwriter, if any, and make the Company’s representatives reasonably available for discussion of such document and make such changes in such document concerning the selling holders prior to the filing thereof as counsel for such selling holders or underwriters may reasonably request;

 

(o)          shall cooperate with the sellers of Registrable Securities and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the sellers of Registrable Securities at least three Business Days prior to any sale of Registrable Securities and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof;

 

11

 

(p)          shall take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities;

 

(q)          shall not take any direct or indirect action prohibited by Regulation M under the Exchange Act; provided, however, that to the extent that any prohibition is applicable to the Company, the Company will take such action as is necessary to make any such prohibition inapplicable;

 

(r)          shall cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA; and

 

(s)          shall take all reasonable action to ensure that any Issuer Free Writing Prospectus utilized in connection with any registration covered by Section 2.1 or 2.2 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

To the extent the Company is a well-known seasoned issuer as defined in Rule 405 under the Securities Act (a “WKSI”) at the time any Demand Registration Request is submitted to the Company, and such Demand Registration Request requests that the Company file an automatic shelf registration statement as defined in Rule 405 under the Securities Act (an “automatic shelf registration statement”) on Form S-3, the Company shall file an automatic shelf registration statement that covers those Registrable Securities that are requested to be registered. The Company shall use reasonable best efforts to remain a WKSI and not become an ineligible issuer (as defined in Rule 405 under the Securities Act) during the period during which such automatic shelf registration statement is required to remain effective. If the Company does not pay the filing fee covering the Registrable Securities at the time the automatic shelf registration statement is filed, the Company shall pay such fee at such time or times as the Registrable Securities are to be sold. If the automatic shelf registration statement has been outstanding for at least three years, at the end of the third year the Company shall refile a new automatic shelf registration statement covering the Registrable Securities. If at any time when the Company is required to re-evaluate its WKSI status, the Company determines that it is not a WKSI, the Company shall use reasonable best efforts to refile the shelf registration statement on Form S-3 and, if such form is not available, Form S-1 and keep such registration statement effective during the period during which such registration statement is required to be kept effective.

 

If the Company files any shelf registration statement for the benefit of the holders of any of its securities other than the Holders, the Company shall include in such registration statement such disclosures as may be required by Rule 430B under the Securities Act, referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the Holders, in order to ensure that the Holders may be added to such shelf registration statement at a later time through the filing of a prospectus supplement rather than a post-effective amendment.

 

12

 

The Company may require as a condition precedent to the Company’s obligations under this Section 2.4 that each seller of Registrable Securities as to which any registration is being effected furnish the Company such information in writing regarding such seller and the distribution of such Registrable Securities as the Company from time to time reasonably may request; provided, that such information is necessary for the Company to consummate such registration and shall be used only in connection with such registration.

 

Each seller of Registrable Securities agrees that upon receipt of any notice from the Company under Section 2.4(e)(v), such seller will discontinue such seller’s disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such seller’s receipt of the copies of the supplemented or amended prospectus. In the event the Company shall give any such notice, the applicable period set forth in Section 2.4(b) shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus. No such discontinuation may be in effect in any twelve-month period for a total number of days greater than ninety.

 

If any such registration statement or comparable statement under “blue sky” laws refers to any Holder by name or otherwise as the Holder of any securities of the Company, such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company’s securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state “blue sky” or securities law then in force, the deletion of the reference to such Holder.

 

Section 2.5           Registration Expenses.

 

(a)          The Company shall pay (i) all reasonable Registration Expenses with respect to any Demand Registration whether or not it becomes effective or remains effective for the period contemplated by Section 2.4(b) and (ii) all Registration Expenses with respect to any registration effected under Section 2.2.

 

(b)          Notwithstanding the foregoing, (i) the provisions of this Section 2.5 shall be deemed amended to the extent necessary to cause these expense provisions to comply with “blue sky” laws of each state in which the offering is made, (ii) in connection with any registration hereunder, each Holder of Registrable Securities being registered shall pay all underwriting discounts and commissions and any transfer taxes, if any, attributable to the sale of such Registrable Securities, pro rata with respect to payments of discounts and commissions in accordance with the number of shares sold in the offering by such Holder and (iii) the Company shall, in the case of all registrations under this Article II, be responsible for all its internal expenses.

 

13

 

Section 2.6           Underwritten Offerings.

 

(a)          If requested by the underwriters for any underwritten offering by the Holders pursuant to a registration requested under Section 2.1, the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be satisfactory in form and substance to the Representative and shall contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally prevailing in agreements of that type. Any Holder participating in the offering shall be a party to such underwriting agreement and, at its option, may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters also shall be made to and for the benefit of such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a selling Holder for inclusion in the registration statement. No Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, its ownership of and title to the Registrable Securities and its intended method of distribution; and any liability of such Holder to any underwriter or other Person under such underwriting agreement shall be limited to liability arising from breach of its representations and warranties and shall be limited to an amount equal to the proceeds (net of expenses and underwriting discounts and commissions) that it derives from such registration.

 

(b)          In the case of a registration pursuant to Section 2.2, if the Company shall have determined to enter into an underwriting agreement in connection therewith, any Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Holder participating in such registration may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder. No Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, its ownership of and title to the Registrable Securities and its intended method of distribution; and any liability of such Holder to any underwriter or other Person under such underwriting agreement shall be limited to liability arising from breach of its representations and warranties and shall be limited to an amount equal to the proceeds (net of expenses and underwriting discounts and commissions) that it derives from such registration.

 

(c)          In the case of any registration under Section 2.1 pursuant to an underwritten offering, or, in the case of a registration under Section 2.2, if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such registration shall be subject to an underwriting agreement and no Person may participate in such registration unless such Person agrees to sell such Person’s securities on the basis provided therein and, subject to the provisions of this Section 2.6, completes and executes all reasonable questionnaires, and other documents, including custody agreements and powers of attorney, that must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be necessary to register such Person’s securities.

 

14

 

Section 2.7           No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement.

 

Section 2.8           Indemnification.

 

(a)          In the event of any registration of any securities of the Company under the Securities Act pursuant to this Article II, the Company will, and hereby agrees to, indemnify and hold harmless, to the fullest extent permitted by law, each Holder of Registrable Securities, its directors, officers, fiduciaries, employees, agents, affiliates, consultants, representatives, general and limited partners, stockholders, successors, assigns (and the directors, officers, employees and stockholders thereof), and each other Person, if any, who controls such Holder within the meaning of the Securities Act, from and against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) and expenses (including reasonable fees of counsel and, with respect to any settlement, any amounts paid in such settlement effected with the Company’s consent, which consent shall not be unreasonably denied, withheld, conditioned or delayed; provided, that no such consent shall be required (and the indemnifying party shall be liable) for any settlement effected or directed by the Company) to which each such indemnified party may become subject under the Securities Act or otherwise (collectively, “Losses”), insofar as such Losses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, in each case, together with the documents incorporated by reference therein, or any Issuer Free Writing Prospectus utilized in connection therewith, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Loss as such expenses are incurred; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Loss arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus or Issuer Free Writing Prospectus in reliance upon and in conformity with written information prepared and furnished to the Company by or on behalf of such indemnified party expressly for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder.

 

15

 

(b)          Each Holder of Registrable Securities that are included in the securities as to which any registration under Section 2.1 or 2.2 is being effected shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.8) to the extent permitted by law the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their respective directors, officers, fiduciaries, employees, agents, affiliates, consultants, representatives, general and limited partners, stockholders, successors, assigns and respective controlling Persons from and against any Loss with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus utilized in connection therewith, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information prepared and furnished to the Company or its representatives by or on behalf of such Holder specifically and expressly for use therein, and reimburse such indemnified party for any legal or other expenses reasonably incurred in connection with investigating, defending any such Loss as such expenses are incurred; provided, however, that the aggregate amount that any such Holder shall be required to pay pursuant to this Section 2.8(b) and Sections 2.8(c), (e) and (f) shall in no case be greater than the amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the registration statement giving rise to such claim. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder.

 

(c)          Any Person entitled to indemnification under this Agreement promptly shall notify the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.8, but the failure of any such Person to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.8, except to the extent the indemnifying party is actually and materially prejudiced thereby and shall not relieve the indemnifying party from any liability that it may have to any such Person otherwise than under this Article II. In case any action or proceeding is brought against an indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party, (ii) if such indemnified party who is a defendant in any action or proceeding that is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party that are not available to the indemnifying party or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have concluded that there may be legal defenses available to such party or parties that are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any expenses therefor. Without the written consent of the indemnified party, which consent shall not be unreasonably withheld, no indemnifying party shall effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder, whether or not the indemnified party is an actual or potential party to such action or claim, unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

 

16

 

(d)          If for any reason the foregoing indemnity is held by a court of competent jurisdiction to be unavailable with respect to any Loss hereunder, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of any Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with respect to the statement or omissions that resulted in such Loss as well as any other equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 2.8(d) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 2.8(d). The amount paid or payable in respect of any Loss shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Loss. No Person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 2.8(d) to the contrary, no indemnifying party other than the Company shall be required pursuant to this section 2.8(d) to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of Registrable Securities in the offering to which the Losses of the indemnified parties relate, less the amount of any indemnification payment made by such indemnifying party pursuant to Sections 2.8(b) and (c). No Person guilty of or liable for fraudulent misrepresentation shall be entitled to contribution from any other Person.

 

17

 

(e)          The indemnity and contribution agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.

 

(f)          The indemnification and contribution required by this Section 2.8 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.

 

ARTICLE III

GENERAL

 

Section 3.1           Adjustments Affecting Registrable Securities. The Company shall not effect or permit to occur any combination or subdivision of shares of Common Stock that would adversely affect the ability of any Holder of any Registrable Securities to include such Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration. The Company will take all reasonable steps necessary to effect a subdivision of shares if in the reasonable judgment of (a) the Representative or (b) the managing underwriter for the offering in respect of such Demand Registration Request, such subdivision would enhance the marketability of the Registrable Securities.

 

Section 3.2           Rule 144. The Company covenants that (a) upon such time as it becomes, and so long as it remains, subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act or, if it is not required to file such reports, upon the request of any Holder it shall make publicly available other information so long as necessary to permit sales of such Registrable Securities in compliance with Rule 144 under the Securities Act and (b) it will take such further action as any Holder of Registrable Securities reasonably may request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

 

Section 3.3           Nominees for Beneficial Owners. If Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares constituting Registrable Securities held by any Holder or Holders of Registrable Securities contemplated by this Agreement; provided, that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership.

 

Section 3.4           No Inconsistent Agreements. The Company shall not hereafter enter into or permit to continue in effect any agreement with respect to its securities that conflicts with or violates the rights granted to the holders of Registrable Securities in this Agreement.

 

18

 

ARTICLE IV

MISCELLANEOUS

 

Section 4.1           Amendment and Waiver.

 

(a)          Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Company and the Representative or, in the case of a waiver, by the party or parties against whom the waiver is to be effective, in an instrument specifically designated as an amendment or waiver hereto.

 

(b)          No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder.

 

Section 4.2           Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile or e-mail, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

(a)          if to the Representative, to:

 

The Carlyle Group

520 Madison Avenue, 39^th Floor

New York, NY 10022

Phone: [phone]

Facsimile: [phone]

Email: [e-mail]

Attention: David A. Stonehill

 

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

 

Latham & Watkins LLP

555 Eleventh Street, NW, Suite 1000

Washington, D.C. 20004

Phone: [phone]

Facsimile: [phone]

Email: [e-mail]

Attention: Paul F. Sheridan, Jr.

 

19

 

(b)          if to the Company, to:

 

Sequential Brands Group, Inc.

1065 Avenue of the Americas, 30th Floor

New York, NY 10018

Phone: [phone]

Facsimile: [phone]

Email: [e-mail]

Attention: Yehuda Shmidman

 

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

 

Tengram Capital Management, L.P.

15 Riverside Avenue

Westport, Connecticut 06880

Facsimile: [phone]

Email: [e-mail]

Attention: Andrew Tarshis

 

or such other address as the Company or the Representative shall have specified to the other party in writing in accordance with this Section 4.2. Any notice or other document required or permitted to be given or delivered to a Holder shall be delivered to the last address shown on the books of the Company or at any more recent address of which the Holder shall have notified the Company in writing.

 

Section 4.3           Interpretation. When a reference is made in this Agreement to a Section, Article, Exhibit or Schedule such reference shall be to a Section, Article, Exhibit or Schedule of this Agreement unless otherwise indicated. The headings contained in this Agreement or in any Exhibit or Schedule are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement. The term “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall.” References to days mean calendar days unless otherwise specified.

 

Section 4.4           Entire Agreement. This Agreement, the Warrants and the Merger Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings between the parties with respect to the subject matter hereof and thereof.

 

20

 

Section 4.5           No Third-Party Beneficiaries. Except as provided in Section 2.8, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.

 

Section 4.6           Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware.

 

Section 4.7           Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

Section 4.8           Assignment; Successors. This Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. If any Person shall acquire Registrable Securities from any Holder in any manner, whether by operation of law or otherwise, such Person shall promptly notify the Company and such Registrable Securities acquired from such Holder shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits of and be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. Any such successor or assign shall agree in writing to acquire and hold the Registrable Securities acquired from such Holder subject to all of the terms hereof. If any Holder shall acquire additional Registrable Securities, such Registrable Securities shall be subject to all of the terms, and entitled to all of the benefits, of this Agreement.

 

21

 

Section 4.9           Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware, this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

 

Section 4.10         Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

Section 4.11         Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 4.12         Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

 

Section 4.13         Time of Essence. Time is of the essence with regard to all dates and time periods set forth or referred to in this Agreement.

 

Section 4.14         No Presumption Against Drafting Party. Each of the parties hereto acknowledges that it has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

 

[The remainder of this page is intentionally left blank.]

 

22

 

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

  

	SEQUENTIAL BRANDS GROUP, INC.
	By:	/s/ Yehuda Shmidman
	Name:	Yehuda Shmidman
	Title:	Chief Executive Officer
	CARLYLE EQUITY OPPORTUNITY GP, L.P.
	By: Carlyle Equity Opportunity GP, L.L.C., its general partner
	By:	/s/ David Stonehill
	Name:	David Stonehill
	Title:

 

Signature Page to Registration Rights Agreement

 

 

 

Exhibit 10.2

  

Execution Version

  

 

 

AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT

 

Dated as of August 15, 2014

 

among

 

SEQUENTIAL BRANDS GROUP, INC.,
as the Borrower

 

The Guarantors Named Herein

 

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

 

The Lenders Party Hereto

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Sole Lead Arranger and Sole Bookrunner

  

 

 

  

TABLE OF CONTENTS

 

Section		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS		2
1.01	Defined Terms	2
1.02	Other Interpretive Provisions	38
1.03	Accounting Terms	39
1.04	Rounding	39
1.05	Times of Day	39
ARTICLE II THE COMMITMENTS AND LOANS		40
2.01	Loans	40
2.02	Borrowings and Continuations of Loans	40
2.03	Swing Line Loans	41
2.04	Prepayments	44
2.05	Termination or Reduction of Revolving Commitments	45
2.06	Repayment of Obligations	46
2.07	Interest	46
2.08	Fees	47
2.09	Computation of Interest and Fees	47
2.10	Evidence of Debt	47
2.11	Payments Generally; Agent’s Clawback	48
2.12	Sharing of Payments by Lenders	49
2.13	Settlement Amongst Revolving Lenders	50
2.14	Incremental Facility	50
2.15	Defaulting Lenders	52
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY		53
3.01	Taxes	53
3.02	Illegality	57
3.03	Inability to Determine Rates	58
3.04	Increased Costs; Reserves on LIBOR Rate Loans	58
3.05	Compensation for Losses	59
3.06	Mitigation Obligations; Replacement of Lenders	60
3.07	Survival	60
ARTICLE IV CONDITIONS PRECEDENT TO LOANS		61
4.01	Conditions of Initial Loans	61
4.02	Conditions to Revolving Credit Extensions made after the Closing Date	63
ARTICLE V REPRESENTATIONS AND WARRANTIES		63
5.01	Existence, Qualification and Power	64
5.02	Authorization; No Contravention	64
5.03	Governmental Authorization; Other Consents	64
5.04	Binding Effect	64
5.05	Financial Statements; No Material Adverse Effect	64
5.06	Litigation	65
5.07	No Default	65
5.08	Ownership of Property; Liens	65

 

(i)

 

5.09	Environmental Compliance	66
5.10	Insurance	66
5.11	Taxes	67
5.12	ERISA Compliance	67
5.13	Subsidiaries; Equity Interests	67
5.14	Margin Regulations; Investment Company Act	68
5.15	Disclosure	68
5.16	Compliance with Laws	68
5.17	Intellectual Property; Licenses, Etc.	68
5.18	Reserved	69
5.19	Security Documents	69
5.20	Solvency	69
5.21	Deposit Accounts	69
5.22	Brokers	69
5.23	Material Contracts	70
ARTICLE VI AFFIRMATIVE COVENANTS		70
6.01	Financial Statements	70
6.02	Certificates; Other Information	71
6.03	Notices	73
6.04	Payment of Obligations	74
6.05	Preservation of Existence, Etc.	74
6.06	Maintenance of Properties; Material Intellectual Property	74
6.07	Maintenance of Insurance	74
6.08	Compliance with Laws	75
6.09	Books and Records; Accountants	75
6.10	Inspection Rights; Appraisals of Intellectual Property	76
6.11	Additional Loan Parties	76
6.12	Cash Management	76
6.13	Information Regarding the Collateral	77
6.14	Environmental Laws	78
6.15	Further Assurances	78
6.16	Material Contracts	78
6.17	Right of First Refusal	79
6.18	[Post-Closing Items	79
ARTICLE VII NEGATIVE COVENANTS		79
7.01	Liens	79
7.02	Investments	79
7.03	Indebtedness; Disqualified Stock; Equity Issuances	79
7.04	Fundamental Changes	80
7.05	Dispositions	81
7.06	Restricted Payments	81
7.07	Prepayments of Indebtedness	82
7.08	Change in Nature of Business	82
7.09	Transactions with Affiliates	82
7.10	Burdensome Agreements	83
7.11	Use of Proceeds	83
7.12	Amendment of Material Documents; Material Licenses	83
7.13	Fiscal Year	83
7.14	Deposit Accounts	83

 

(ii)

 

7.15	Financial Covenants	83
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES		81
8.01	Events of Default	84
8.02	Remedies Upon Event of Default	86
8.03	Application of Funds	87
8.04	Right to Cure	88
ARTICLE IX THE AGENT		89
9.01	Appointment and Authority	89
9.02	Rights as a Lender	89
9.03	Exculpatory Provisions	89
9.04	Reliance by Agent	90
9.05	Delegation of Duties	90
9.06	Resignation of Agent	90
9.07	Non-Reliance on Agent and Other Lenders	91
9.08	Agent May File Proofs of Claim	91
9.09	Collateral and Guaranty Matters	92
9.10	Notice of Transfer	92
9.11	Reports and Financial Statements	92
9.12	Agency for Perfection	93
9.13	Indemnification of Agent	93
9.14	Relation among Lenders	94
ARTICLE X MISCELLANEOUS		94
10.01	Amendments, Etc.	94
10.02	Notices; Effectiveness; Electronic Communications	96
10.03	No Waiver; Cumulative Remedies	97
10.04	Expenses; Indemnity; Damage Waiver	97
10.05	Payments Set Aside	98
10.06	Successors and Assigns	99
10.07	Treatment of Certain Information; Confidentiality	102
10.08	Right of Setoff	103
10.09	Interest Rate Limitation	103
10.10	Counterparts; Integration; Effectiveness	104
10.11	Survival	104
10.12	Severability	104
10.13	Replacement of Lenders	104
10.14	Governing Law; Jurisdiction; Etc.	105
10.15	Waiver of Jury Trial	106
10.16	No Advisory or Fiduciary Responsibility	106
10.17	USA PATRIOT Act Notice	107
10.18	Foreign Asset Control Regulations	107
10.19	Time of the Essence	107
10.20	Press Releases	107
10.21	Additional Waivers	108
10.22	No Strict Construction	109
10.23	Attachments	109
10.24	Electronic Execution of Assignments and Certain Other Documents	109
10.25	Keepwell	109
10.26	California Judicial Reference	110

 

(iii)

 

10.27	Second Lien Intercreditor Agreement	110
SIGNATURES		S-111

 

(iv)

 

SCHEDULES
1.01	Non-Guarantor Subsidiaries
2.01	Commitments and Applicable Percentages
5.01	Loan Parties Organizational Information
5.08(b)(1)	Owned Real Estate
5.08(b)(2)	Leased Real Estate
5.10	Insurance
5.13	Subsidiaries; Other Equity Investments
5.17	Material Intellectual Property; Material Licenses
5.21	Deposit Accounts
5.23	Material Contracts
7.01	Existing Liens
7.02	Existing Investments
7.03	Existing Indebtedness
10.02	Agent’s Office; Certain Addresses for Notices

 

EXHIBITS
	Form of
A	Loan Notice
B	Swing Line Loan Notice
C-1	Revolving Note
C-2	Term Note
D	Compliance Certificate
E	Assignment and Assumption
F-1	Foreign Lender Exemption Certificate
F-2	Foreign Lender U.S. Tax Compliance Certificate
F-3	Alternative Form Foreign Lender U.S. Tax Compliance Certificate
F-4	Foreign Partnership U.S. Tax Compliance Certificate

 

(v)

 

AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT

 

This AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT (the “Agreement”) is entered into as of August 15, 2014, among

 

SEQUENTIAL BRANDS GROUP, INC., a Delaware corporation (the “Borrower”),

 

the Guarantors;

 

each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”); and

 

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

 

WITNESSETH:

 

WHEREAS, the Borrower, among others, has entered into that certain First Lien Term Loan Agreement, dated as of March 28, 2013 (as amended and in effect on and prior to the date hereof, the “Existing Credit Agreement”) by, among others, the Borrower, the Guarantors party thereto, the “Lenders” as defined therein, and Bank of America, N.A. as “Administrative Agent” and “Collateral Agent”;

 

WHEREAS, the Borrower has entered into that certain Agreement and Plan of Merger dated as of June 24, 2014 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof, the “Merger Agreement”) with, among others, SBG Universe Brands, LLC, a Delaware limited liability company and wholly owned Subsidiary of the Borrower (“SBG Universe”), Universe Galaxy Merger Sub, Inc., a Delaware corporation and an indirect wholly owned Subsidiary of the Borrower (the “Merger Sub”) and Galaxy Brand Holdings, Inc. (“GBH”), to acquire (the “Effective Date Acquisition”) all of the outstanding Equity Interests of GBH;

 

WHEREAS, the Effective Date Acquisition will be effected by (i) a merger of Merger Sub with and into GBH, with GBH as the surviving entity, such that immediately following such merger, GBH will be a wholly owned Subsidiary of SBG Universe, and (ii) a subsequent merger of GBH with and into SBG Universe, with SBG Universe as the surviving entity;

 

WHEREAS, the Borrower wishes to obtain financing for the Effective Date Acquisition, to refinance the Obligations under the Existing Credit Agreement, and to obtain a revolving credit facility for working capital and other corporate purposes;

 

WHEREAS, the Lenders have agreed to extend certain credit facilities to the Borrower in an aggregate amount not to exceed $100,000,000, consisting of $75,000,000 in aggregate principal amount of Term Loans and up to $25,000,000 in aggregate principal amount of Revolving Commitments; and

 

WHEREAS, in accordance with Section 10.01 of the Existing Credit Agreement, the Borrower, the Guarantors, the Lenders and the Agent desire to amend and restate the Existing Credit Agreement as provided herein.

 

-1-

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree that the Existing Credit Agreement shall be amended and restated in its entirety to read as follows:

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“Accommodation Payment” as defined in Section 10.21(c).

 

“Acquisition” means, with respect to any Person (a) 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, or (c) any merger 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, in each case in any transaction or group of transactions which are part of a common plan.

 

“Act” shall have the meaning provided in Section 10.17.

 

“Additional Commitment Lender” shall have the meaning provided in Section 2.14(c).

 

“Adjusted LIBOR Rate” means, with respect to any LIBOR Rate Loan 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 Rate Loans 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 with September 1, 2014.

 

“Affiliate” means, with respect to any Person, (x) 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, and (y) with respect to the Agent or any Lender, (i) any other Person directly or indirectly holding 10% or more of any class of the Equity Interests of that Person, and (ii) any other Person 10% or more of any class of whose Equity Interests is held directly or indirectly by that Person.

 

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

 

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

 

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

 

“Aggregate Commitments” means the sum of the Revolving Commitments and the Term Loan Commitments of all Lenders. As of the Effective Date, the Aggregate Commitments are $100,000,000.

 

“Agreement” means this Amended and Restated First Lien Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

-2-

 

“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 Effective Date until the first Adjustment Date, the percentages set forth in Level II of the pricing grid below; and

 

(b)          From and after the first Adjustment Date and on each Adjustment Date thereafter, the Applicable Margin shall be determined from the following pricing grid based upon the Average Loan to Value Ratio as of the Fiscal Quarter ended immediately preceding such Adjustment Date; provided, however, that notwithstanding anything to the contrary set forth herein, upon the occurrence of an Event of Default, the Agent may, and at the direction of the Required Lenders shall, immediately increase the Applicable Margin to that set forth in Level II (even if the Average Loan to Value Ratio requirements for a different Level have been met) and interest shall accrue at the Default Rate; provided further that if any financial statements or appraisals used to calculate the Loan to Value Ratio are at any time restated or otherwise revised (including as a result of an audit) or if the information set forth in such financial statements or appraisals 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 recalculated at such higher rate for any applicable periods and shall be due and payable on demand.

 

Level		Average Loan to Value Ratio		Applicable Margin for LIBOR Rate Loans		Applicable Margin for Base Rate Loans
I		Less than 40%		3.50%		1.50%
II		Equal to or greater than 40%		3.75%		1.75%

 

“Applicable Percentage” means, (a) with respect to the Revolving Credit Facility, the Revolving Credit Facility Applicable Percentage, (b) with respect to the Term Loan, the Term Loan Applicable Percentage, and (c) with respect to all of the Obligations due to any Lender at any time, the percentage (carried out to the ninth decimal place) of the outstanding amount of the Term Loan plus the Revolving Commitments (or, if the Revolving Commitments have been terminated, the Total Revolving Outstandings) held by such Lender at such time.

 

“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.

 

“Arranger” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its capacity as sole lead arranger and sole book manager.

 

“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.

 

-3-

 

“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 Agent, in substantially the form of Exhibit E or any other form approved by the 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 Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2013, and the related Consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year of the Borrower and its Subsidiaries, including the notes thereto.

 

“Availability Period” means the period from and including the Effective Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Revolving Commitments pursuant to Section 2.05, and (c) the date of termination of the Revolving Commitments pursuant to Section 8.02.

 

“Average Loan to Value Ratio” means the average of daily Loan to Value Ratios during the immediately preceding Fiscal Quarter of the Borrower.

 

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

 

“Bank Products” means any services of facilities provided to any Loan Party by the Agent, any Lender, or any of their respective Affiliates, including, without limitation, on account of (a) Swap Contracts, (b) purchase cards, (c) leasing, (d) factoring, and (e) supply chain finance services (including, without limitation, trade payable services and supplier accounts receivable purchases), but excluding Cash Management Services.

 

“Base 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 0.50%; and (c) the LIBOR Rate for a one month interest period as determined on such day, plus 1.00%. 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 Bank of America’s prime rate, the Federal Funds Rate or the LIBOR Rate, respectively, shall take effect at the opening of business on the day specified in the public announcement of such change.

 

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

 

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

 

“Blocked Account Agreement” means with respect to an account established by a Loan Party (other than Excluded Accounts), an agreement, in form and substance reasonably satisfactory to the Agent, establishing control (as defined in the UCC) of such account by the Agent and whereby the Blocked Account Bank agrees, upon the occurrence and during the continuance of an Event of Default, to comply only with the instructions originated by the Agent without the further consent of any Loan Party.

 

-4-

 

“Blocked Account Bank” means each bank with whom Deposit Accounts are maintained and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

 

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

 

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

 

“Business Day” means 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 Agent’s Office is located and, 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.

 

“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 Control Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) royalty revenues received by the Loan Parties during the immediately preceding twelve (12) months are less than 70% of the projected royalty revenues for such twelve (12) month period as set forth in the projections for such period delivered pursuant to Section 6.01(d) hereof. For purposes of this Agreement, the occurrence of a Cash Control Event shall be deemed continuing at the Agent’s option (i) so long as such Event of Default is continuing and has not been waived, and/or (ii) if the Cash Control Event arises as a result of the Loan Parties’ failure to achieve royalties revenues as required hereunder, until royalty revenues as of the end of each month exceed 70% of the projected royalties for each twelve (12) month period ending the last day of each such month, for a period of six (6) consecutive months; provided that a Cash Control Event shall be deemed continuing (even if an Event of Default is no longer continuing and/or royalty revenues received exceeds the required amount for six (6) consecutive months) at all times after a Cash Control Event has occurred and been discontinued on two (2) occasions in any twelve (12) month period. The termination of a Cash Control Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Cash Control Event in the event that the conditions set forth in this definition again arise.

 

“Cash Management Services” means any cash management services provided to any Loan Party by the Agent or any Lender or any of their respective Affiliates, including, without limitation, (a) automated clearinghouse transfer transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) credit card processing services, and (d) credit or debit cards.

 

-5-

 

“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 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, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding 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 and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“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 Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than any Permitted Holder, becomes 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”)), directly or indirectly, of 45% or more of the Equity Interests of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such “person” or “group” has the right to acquire pursuant to any option right); or

 

(b)          during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

 

-6-

 

(c)          any “change in control” or similar event as defined in any Material License or any document governing Material Indebtedness of any Loan Party; or

 

(d)          the Borrower fails at any time after the Merger Date 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 Agent and Liens permitted pursuant to clause (o) of the definition of Permitted Encumbrances), except where such failure is as a result of a transaction not prohibited by the Loan Documents.

 

“Closing Date” means March 28, 2013.

 

“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 that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Agent.

 

“Collection Account” has the meaning provided in Section 6.12(b).

 

“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 D.

 

“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.

 

“Consent” means actual consent given by a Lender from whom such consent is sought; or the passage of seven (7) Business Days from receipt of written notice to a Lender from the Agent of a proposed course of action to be followed by the Agent without such Lender’s giving the Agent written notice of that Lender’s objection to such course of action.

 

“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 the Borrower and its Subsidiaries on a Consolidated basis for the applicable 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, (iv) fees, expenses and charges (including restructuring charges, integration costs, net cost savings and transaction expenses) incurred in connection with (x) any Permitted Acquisition (of the type referred to in clause (ii) of the definition thereof) or fees in connection with any Permitted Indebtedness in an amount not to exceed $5,000,000 in any Fiscal Year of the Borrower and (y) the Transactions in an amount not to exceed $7,500,000 in the aggregate for the twelve-month period following the Effective Date, (v) non-cash compensation, (vi) other unusual or non-recurring expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period, and (vii) management fees and expenses incurred or paid to Tengram Capital Management L.P. to the extent permitted to be paid hereunder (in each case of or by the Borrower and its Subsidiaries for such period), minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Borrower and its Subsidiaries for such period), all as determined on a Consolidated basis in accordance with GAAP.

 

-7-

 

“Consolidated Excess Cash Flow” means, for any period, the amount by which (a)(i) Consolidated EBITDA, less (ii) the sum of (A) cash payments for all Federal, state and local income taxes paid during such period (less any cash refunds received by the Borrower and its Subsidiaries during such period), and (B) Capital Expenditures made during such period exceeds (b) the sum of (i) Consolidated Interest Charges paid in cash for such period, plus (ii) principal payments (other than payments to the Lenders made on account of mandatory prepayments of Consolidated Excess Cash Flow) made or scheduled to be made on Indebtedness in such period.

 

“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) Capital Expenditures made during such period, minus (iii) the aggregate amount of Federal, state, local and foreign income taxes paid in cash during such period (but not less than zero) to (b) the sum of (i) Debt Service Charges plus (ii) the aggregate amount of all Restricted Payments, in each case, of or by the Borrower and its Subsidiaries for the applicable measurement period, all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Interest Charges” means, for the applicable measurement period for the Borrower and its Subsidiaries on a Consolidated basis, 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 (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 (c) interest income during such period (excluding any portion of interest income representing accruals of amounts received in a previous period), in each case of or by the Borrower and its Subsidiaries for the most recently completed 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 the Borrower and its Subsidiaries for the applicable measurement period, all as determined on a Consolidated basis in accordance with GAAP, provided, however, that there shall be excluded (a) extraordinary gains and extraordinary losses for such period, (b) the income (or loss) of any Person in which a Person other than the Borrower and its wholly-owned Subsidiaries has an Equity Interest during such period in which such other Person has an Equity Interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to the Borrower during such period, (c) the income (or loss) of any Subsidiary during such period and accrued prior to the date it becomes a Subsidiary of the Borrower or any of its Subsidiaries or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries, and (d) the income of any direct or indirect Subsidiary of the Borrower 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 the cash proceeds received by any Loan Party from any licensing of any Intellectual Property (including any licensing in any foreign jurisdiction) shall be included in determining Consolidated Net Income and the Borrower’s equity in any net loss of any such Subsidiary for such period shall be included in determining Consolidated Net Income.

 

-8-

 

“Consolidated Positive Net Income” means, as of any date of determination, an amount equal to Consolidated Net Income of the Borrower and its Subsidiaries on a Consolidated basis for the applicable measurement period, plus the following to the extent deducted in calculating such Consolidated Net Income: (a) depreciation and amortization expense, (b) one-time non-cash charges, non-cash compensation, non-cash Federal, state, local and foreign income taxes relating to amortization of intangibles for tax purposes and non-cash interest, (c) one-time costs relating to any Permitted Acquisition (of the type referred to in clause (ii) of the definition thereof) or fees in connection with any Permitted Indebtedness in an amount not to exceed $5,000,000 in any Fiscal Year of the Borrower and (d) one-time costs or fees in connection with the Merger in an amount not to exceed $7,500,000 in the aggregate for the twelve month period following the Merger Date, all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Total Indebtedness” means, as of any date of determination, for the Borrower 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 in each case owed to a Person other than a Loan Party, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments in each case owed to a Person other than a Loan Party, (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, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Borrower or any Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary.

 

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

 

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

 

“Copyright” has the meaning specified in the Security Agreement.

 

“Copyright Security Agreement” means the Grant of Security Interest in United States Copyrights dated as of the Closing Date among certain Loan Parties and the Agent.

 

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and its Affiliates, (ii) the Agent, (iii) the Arranger, (iv) each beneficiary of each indemnification obligation undertaken by any Loan Party under any Loan Document, (v) any other Person to whom Obligations under this Agreement and other Loan Documents are owing, and (vi) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

 

-9-

 

“Credit Party Expenses” means (a) all reasonable out-of-pocket expenses incurred by the Agent, the Arranger and their respective Affiliates in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the Agent, (B) outside consultants for the Agent and the Arranger, (C) appraisers, and (D) commercial finance examiners, in connection with (1) 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), (2) the enforcement or protection of its rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with any proceeding under any Debtor Relief Laws, or (3) any workout, restructuring or negotiations in respect of any Obligations, and (ii) all customary fees and charges (as adjusted from time to time) of the Agent with respect to the disbursement of funds (or the receipt of funds) to or for the account of the Borrower (whether by wire transfer or otherwise), together with any out-of-pocket costs and expenses incurred in connection therewith, and (b) all reasonable out-of-pocket expenses incurred by the Credit Parties who are not the Agent, the Arranger or any Affiliate of either of them after the occurrence and during the continuance of an Event of Default, provided that such Credit Parties as a whole shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent an actual conflict of interest in which case such affected Credit Parties may engage and be reimbursed for one additional counsel for the affected Credit Parties taken as a whole).

 

“Debt Service Charges” means for any applicable measurement period for the Borrower and its Subsidiaries on a Consolidated basis, the sum of (a) Consolidated Interest Charges paid or required to be paid for such period, plus (b) principal payments made or required to be made on account of Indebtedness (excluding any Synthetic Lease Obligations but including, without limitation, the principal component of all Obligations and of any Capital Lease Obligations) for such period, in each case determined on a Consolidated basis in accordance with GAAP.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and 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 or other applicable jurisdictions from time to time in effect.

 

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

 

“Default Rate” means, with respect to any Loan, an interest rate equal to the interest rate otherwise applicable to such Loan plus two percent (2%) per annum.

 

“Defaulting Lender” means, subject to Section 2.15(b), any Revolving Lender that (a) has failed to (i) fund all or any portion of its Revolving Loans within two Business Days of the date such Revolving Loans were required to be funded hereunder, or (ii) pay to the Agent, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Swing Line Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Agent or the Swing Line Lender in 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 three Business Days after written request by the Agent or the Borrower, to confirm in writing to the Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Revolving Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Agent and the Borrower), 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, 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; provided that a Revolving Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Revolving 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 Revolving 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 Revolving Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Revolving Lender. Any determination by the Agent that a Revolving 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 Revolving Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(b)) as of the date established therefor by the Agent in a written notice of such determination, which shall be delivered by the Agent to the Borrower, the Swing Line Lender and each other Lender promptly following such determination.

 

-10-

 

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

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction), whether in one transaction or in a series of transactions, of any property (including, without limitation, any Equity Interests other than Equity Interests of the Borrower) 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 the Borrower 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.

 

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

 

“Early Termination Fee” has the meaning set forth in Section 2.08(b).

 

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

 

“Effective Date Acquisition” has the meaning provided therefor in the recitals.

 

“Eligible Assignee” means (a) a Credit Party which is a Credit Party on the Closing Date or becomes a Credit Party pursuant to any of clauses (b) through (d) below, or any of its Affiliates; (b) a bank, insurance company, or company 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; and (d) any other Person (other than a natural Person) satisfying the requirements of Section 10.06(b) hereof; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Loan Party or any of their respective Affiliates or Subsidiaries.

 

-11-

 

“Environmental Laws” means any and all applicable Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, 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.

 

“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 the 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.

 

“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 non-voting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“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 Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity 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 the Borrower 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 Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any 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; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) 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 the Borrower or any ERISA Affiliate.

 

“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.

 

-12-

 

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

 

(a)          the Revolving Loan Cap

 

minus

 

(b)          the Total Revolving Outstandings.

 

“Excluded Account” has the meaning specified in Section 6.12.

 

“Excluded Property” has the meaning set forth in the Security Agreement.

 

“Excluded Subsidiary” means a Subsidiary of the Borrower that is organized for the purpose of, and is engaged solely in the business of, owning Intellectual Property and related assets to be acquired pursuant to a Permitted Acquisition, and which Subsidiary complies with the following requirements: (i) such Subsidiary is subject to customary restrictions to make such Subsidiary a special purpose, bankruptcy remote entity, as determined by the Agent in its reasonable discretion; (ii) such Subsidiary maintains Deposit Accounts and other bank accounts which are separate from the Borrower and the other Loan Parties and does not co-mingle any cash or cash equivalents of such Subsidiary with the Borrower or any other Loan Party; (iii) no Loan Party issues or incurs any Indebtedness or Guarantee in respect of, or grants any Lien on any of its assets or properties to secure, any Indebtedness, liabilities or other obligations of such Subsidiary, and (iv) no Loan Party has any obligation to maintain such Subsidiary’s financial condition or cause such Subsidiary to achieve any level of operating results.

 

“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 of, or the grant under a Loan Document by such Loan Party of a security interest to secure, such Swap Obligation (or any Guarantee 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 10.25 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 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 net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending 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 Revolving Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Revolving 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) and (d) any withholding Taxes imposed pursuant to or in connection with FATCA.

 

-13-

 

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

 

“Existing Credit Agreement” has the meaning set forth in the recitals hereto.

 

“Facility Guaranty” means the Guaranty made by the Guarantors in favor of the Agent and the other Credit Parties, in form reasonably satisfactory to the Agent.

 

“FATCA” means Sections 1471 through 1474 of the Code, as in effect on the Effective Date (or any amended or successor provision 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 and any intergovernmental agreements (and related legislation or official administrative guidance) implementing the foregoing.

 

“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 Agent.

 

“Fee Letter” means, collectively, (i) the letter agreement dated June 24, 2014, between the Borrower and the Agent and (ii) the letter agreement dated June 24, 2014, between the Borrower and the Arranger.

 

“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 Borrower.

 

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

 

“Fiscal Year” means any period of twelve consecutive months ending on December 31 of any calendar year.

 

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

 

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower 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.

 

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

 

-14-

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, with respect to the Swing Line Lender, such Defaulting Lender’s Revolving Credit Facility 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 Revolving Lenders in accordance with the terms hereof.

 

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

 

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

 

“GBH” has the meaning provided therefor in the recitals.

 

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, 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. The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor” means (i) each domestic Subsidiary of the Borrower existing on the Effective Date, other than the Subsidiaries set forth on Schedule 1.01 hereto, (ii) each other Subsidiary of the Borrower that shall be required to execute and deliver a Facility Guaranty pursuant to Section 6.11, and (iii) with respect to any Swap Obligations of a Specified Loan Party, the Borrower.

 

“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, and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

 

-15-

 

“Identified Transaction” means the acquisition by the Borrower within 120 days following the Effective Date (or such longer period as may be agreed by the Administrative Agent) of 50.5% of the Equity Interests of a Person identified to the Administrative Agent prior to the Effective Date for an aggregate cash purchase price not in excess of $9,000,000.

 

“Immaterial Subsidiary” means (x) as of the Effective Date, the Subsidiaries set forth on Schedule 1.01 hereto and noted as Immaterial Subsidiaries, and (y) with respect to any Subsidiary formed or acquired after the Closing Date that is not an Excluded Subsidiary, any such Subsidiary of the Borrower that (i) had less than 5% of consolidated assets and 5% of annual consolidated revenues of the Borrower and its Subsidiaries as reflected on the most recent financial statements delivered pursuant to Section 6.01 prior to such date and (ii) has been designated as such by the Borrower in a written notice delivered to the Agent (other than any such Subsidiary as to which the Borrower has revoked such designation by written notice to the Agent); provided that no Subsidiary owning any Material Intellectual Property or Intellectual Property related thereto or party to a Material License may be designated as an Immaterial Subsidiary, and provided further that at no time shall all Immaterial Subsidiaries so designated by the Borrower have in the aggregate consolidated assets or annual consolidated revenues (as reflected on the most recent financial statements delivered pursuant to Section 6.01 prior to such time) in excess of 5% of consolidated assets or annual consolidated revenues, respectively, of the Borrower and its Subsidiaries.

 

“Increase Effective Date” shall have the meaning provided therefor in Section 2.14(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 direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(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 and, in each case, not past due for more than 60 days after the date on which such trade account payable was created);

 

(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)          All Attributable Indebtedness of such Person;

 

(g)          all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (including, without limitation, Disqualified Stock), or any warrant, right or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

 

-16-

 

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

 

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (1) contingent obligations incurred in the ordinary course of business and not in respect of borrowed money, (2) deferred or prepaid revenues, (3) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the respective seller, or (4) any royalty, licensing, revenue and/or profit sharing arrangements, in each case, characterized as such and arising expressly out of purchase and sale contracts, development contracts or licensing arrangements.

 

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

 

“Indemnified Taxes” means (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” has the meaning specified in the Security Agreement.

 

“Interest Payment Date” means, (a) as to any LIBOR Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a LIBOR Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the first Business Day of each calendar quarter and the Maturity Date.

 

“Interest Period” means, as to each LIBOR Rate Loan, the period commencing on the date such LIBOR Rate Loan is disbursed or continued as a LIBOR Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its 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;

 

(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 would be for a shorter period, such Interest Period shall not be available hereunder.

 

-17-

 

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

 

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

 

“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, or (d) any other investment of money or capital in order to obtain a profitable return. 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.

 

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

 

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

 

“Lender” has the meaning specified in the introductory paragraph hereto and, includes the Revolving Lenders, the Term Lenders and the Swing Line Lender, as the context requires.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender as a Lender may from time to time notify the Borrower and the Agent.

 

“LIBOR Rate” means:

 

(a)          for any Interest Period with respect to a LIBO Rate Loan, the rate per annum equal to the London interbank offered rate administered by ICE Benchmark Administration Limited (“ICE LIBOR”), as published by Reuters (or other commercially available source providing quotations of ICE LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “LIBO Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or Converted by 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 Business Days prior to the commencement of such Interest Period; and

 

-18-

 

(b)          for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) ICE 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 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 Base 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 Loan that bears interest at a rate based on the Adjusted LIBOR Rate.

 

“License” has the meaning specified in the Security Agreement.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement 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).

 

“Liquidation” means the exercise by the Agent of those rights and remedies accorded to the Agent 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 Agent, of any 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.

 

“Loan” means a Revolving Loan or the Term Loan, as applicable, and collectively, means all Revolving Loans (including all Swing Line Loans) and the Term Loan.

 

“Loan Account” has the meaning assigned to such term in Section 2.10(a).

 

“Loan Documents” means this Agreement, each Note, the Fee Letter, the Blocked Account Agreements, the Security Documents, the Facility Guaranty, the Second Lien 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.

 

“Loan Notice” means a notice of (a) a Revolving Borrowing, or (b) a continuation of LIBOR Rate Loans, pursuant to Section 2.02(b), which shall be substantially in the form of Exhibit A.

 

“Loan Parties” means, collectively, the Borrower and each Guarantor.

 

“Loan to Value Ratio” means the ratio of the Total Outstandings to the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, expressed as a percentage, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent with respect to such registered Trademarks pursuant to Section 6.10(b).

 

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

 

-19-

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, assets, properties or liabilities (actual or contingent), condition (financial or otherwise) of the Borrower and its subsidiaries, taken as a whole; (b) a material impairment of the rights and remedies of the Agent under this Agreement or any other Loan Document, or of the ability of the Borrower or any other Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower or any other Loan Party of any Loan Document to which it is a party.

 

“Material Contract” means, with respect to any Person, each contract to which such Person is a party material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person, and shall include, without limitation, the Merger Agreement and each Material License.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $10,000,000. 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, (b) undrawn committed or available amounts shall be included, and (c) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included. Without limiting the foregoing, all Indebtedness incurred under the Second Lien Facility shall be Material Indebtedness, regardless of the amount thereof.

 

“Material Intellectual Property” means those items of Intellectual Property described on Part 1 of Schedule 5.17 hereto, and all items of Intellectual Property established, registered or recorded in the United States acquired after the date hereof in respect of brands that are the subject of a Material License.

 

“Material License” means, as of the Effective Date, the Licenses described on Part 2 of Schedule 5.17 hereto, and thereafter, any License to the extent that the revenues from which constitute five percent (5%) or more of the annual revenues of the Borrower and its Subsidiaries.

 

“Maturity Date” means August 15, 2019.

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

“Merger Agreement” has the meaning provided therefor in the recitals.

 

“Merger Date” means the date of effectiveness of (i) the merger of Merger Sub with and into GBH, as Initial Surviving Corporation, and (ii) the merger of the Initial Surviving Corporation with and into SBG Universe, in each case pursuant to the Merger Agreement.

 

“Merger Documents” means, collectively, the Merger Agreement and the related instruments and agreement executed and delivered in connection therewith.

 

“Merger Representations” means such of the representations made by or on behalf of the Seller (as defined in the Merger Agreement) in the Merger Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower (or any of its Affiliates) has the right (taking into account any applicable cure provisions) to terminate its obligations under the Merger Agreement or not consummate the Merger as a result of a breach of such representations in the Merger Agreement.

 

“Merger Sub” has the meaning provided therefor in the recitals.

 

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

 

-20-

 

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower 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.

 

“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

 

“Net Proceeds” means, with respect to any Disposition by any Loan Party, 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 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), and (B) the reasonable and customary out-of-pocket expenses incurred by such Loan Party 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)).

 

“Non-Consenting Lender” has the meaning provided therefor in Section 10.01.

 

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

 

“Non-Guarantor Subsidiary” means any (i) non-wholly owned Subsidiary to the extent a guarantee of the Obligations and a pledge of the assets thereof in support of such guarantee would require the consent of any third-party holder of the Equity Interests thereof, (ii) Excluded Subsidiary, (iii) Immaterial Subsidiary, (iv) CFC, (v) domestic Subsidiary substantially all of the assets of which constitute equity and/or Indebtedness of direct or indirect foreign Subsidiaries or intercompany accounts, or (vi) any other Subsidiary organized in a jurisdiction outside of the United States.

 

“Note” means (a) a promissory note made by the Borrower in favor of a Revolving Lender evidencing Revolving Loans made by such Revolving Lender, substantially in the form of Exhibit C-1, and (b) a promissory note made by the Borrower in favor of a Term Lender evidencing the portion of the Term Loan made by such Term Lender, substantially in the form of Exhibit C-2, as each may be amended, supplemented or modified from time to time.

 

“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, 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 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.

 

-21-

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any 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, and (d) 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 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 Liabilities” means any obligation on account of (a) any Cash Management Services furnished to any of the Loan Parties or any of their Subsidiaries and/or (b) any Bank Product furnished to any of the Loan Parties and/or any of their Subsidiaries, including, without limitation, Swap Obligations.

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.06(b)).

 

“Outstanding Amount” means, with respect to Revolving 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 Loans occurring on such date.

 

“Overadvance” means a Revolving Credit Extension to the extent that, immediately after its having been made, Excess Availability is less than zero.

 

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

 

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

 

“Patent” has the meaning specified in the Security Agreement.

 

“Patent Security Agreement” means the Grant of Security Interest in United States Patents dated as of the Closing Date among certain Loan Parties and the Agent.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Act” means the Pension Protection Act of 2006.

 

-22-

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

 

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

 

“Permitted Acquisition” means (i) an Acquisition consummated by an Excluded Subsidiary, or (ii) any other Acquisition consummated by a Loan Party in which all of the following conditions are satisfied:

 

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

 

(b)          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)           For any Acquisition for total consideration in excess of $10,000,000, the Borrower shall have furnished the Agent with ten (10) Business Days’ prior written notice of such intended Acquisition and shall have furnished the Agent with a current draft of the documentation in connection with such Acquisition (and final copies thereof as and when executed), a summary of any due diligence undertaken by the Loan Parties in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve (12) month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by quarter for the acquired Person, individually, and on a Consolidated basis with all Loan Parties), and such other information as the Agent may reasonably require, all of which shall be in form reasonably satisfactory to the Agent;

 

(d)          The Loan Parties shall have complied with their obligations pursuant to Section 6.17, and in the event that the financing for the Permitted Acquisition is to be provided by the Lenders, the legal structure of the Acquisition shall be reasonably acceptable to the Agent;

 

(e)          After giving effect to the Acquisition, if the Acquisition is an Acquisition of Equity Interests, the Borrower 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;

 

(f)          Any assets acquired shall consist principally of Intellectual Property, and if the Acquisition involves a merger, consolidation or acquisition of Equity Interests, the Person which is the subject of such Acquisition shall be engaged in, the business of owning and licensing Intellectual Property; provided that unless otherwise agreed by the Agent, any Acquisition of assets which includes inventory, equipment and other working capital assets in addition to Intellectual Property or which involves the acquisition of Equity Interests of a Person which also owns inventory, equipment and other working capital assets in addition to Intellectual Property shall provide for the wind-down and sale of such working capital assets within twelve (12) months following the closing date of such acquisition; and

 

-23-

 

(g)          If the Person which is the subject of such Acquisition will be maintained as a Subsidiary (other than an Excluded Subsidiary) of a Loan Party, or if the assets acquired in an Acquisition will be transferred to a Subsidiary (other than an Excluded Subsidiary) which is not then a Loan Party, such Subsidiary shall have complied with the provisions of Section 6.11 and Section 6.15 hereof to the extent applicable.

 

“Permitted Disposition” means any of the following:

 

(a)          licenses and sublicenses of Intellectual Property of a Loan Party or any of its Subsidiaries in the ordinary course of business, other than, unless the Agent consents thereto, outbound licenses of any Material Intellectual Property which would result in a Material Adverse Effect on the value of the Collateral consisting of Intellectual Property;

 

(b)          Dispositions of Intellectual Property so long as the Borrower makes any prepayments required pursuant to Section 2.04(b) in connection therewith;

 

(c)          Dispositions of real property, inventory, equipment and other assets (other than Intellectual Property) in the ordinary course of business or property (other than Intellectual Property) that is substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no longer useful or necessary in its business or that of any Subsidiary;

 

(d)          Disposition of inventory, equipment and other working capital assets (other than Intellectual Property) and Real Estate acquired in connection with the Effective Date Acquisition or in connection with a Permitted Acquisition within twelve (12) months after the consummation of the Effective Date Acquisition or such Permitted Acquisition;

 

(e)          Dispositions among the Loan Parties or by any Subsidiary to a Loan Party;

 

(f)          Dispositions by any Subsidiary which is not a Loan Party to another Subsidiary that is not a Loan Party; and

 

(g)          other Dispositions the Net Proceeds of which, in the aggregate, do not exceed $10,000,000.

 

“Permitted Encumbrances” means:

 

(a)          Liens imposed by law for Taxes that are not yet due 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 thirty (30) 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 laws or regulations, other than any Lien imposed by ERISA;

 

-24-

 

(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, 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, taken as a whole, do not materially interfere with the current use of the real property;

 

(g)          Liens existing on the Effective Date listed on Schedule 7.01 and Liens to secure any Permitted Refinancings of the Indebtedness with respect thereto;

 

(h)          Liens on fixed or capital assets or on Real Estate of any Loan Party which secure Indebtedness permitted under clauses (c) and/or (d) of the definition of Permitted Indebtedness 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 the applicable assets, and (iii) such Liens shall attach only to the assets or Real Estate acquired, improved or refinanced with such Indebtedness and shall not extend to any other property or assets of the Loan Parties;

 

(i)          Liens in favor of the Agent;

 

(j)          Landlords’ and lessors’ statutory Liens in respect of rent not in default;

 

(k)          Possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments owned as of the Effective Date and other 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;

 

(l)          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;

 

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

 

(n)          Liens on property (other than Intellectual Property) 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;

 

-25-

 

(o)          Liens on Collateral securing Indebtedness in respect of the Second Lien Facility; provided such Liens are subject to the Second Lien Intercreditor Agreement (or, in the case of any other such credit facility or any Permitted Refinancing thereof permitted hereunder, another intercreditor agreement containing terms that are at least as favorable to the Credit Parties as those contained in the Second Lien Intercreditor Agreement) and the Indebtedness secured by such Liens is permitted to be incurred pursuant to clause (a)(i) of the definition of “Permitted Indebtedness”;

 

(q)          Liens on earnest money deposits made in connection with any agreement in respect of a Permitted Acquisition or consisting of an agreement to dispose of any property in a Permitted Disposition;

 

(r)          ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located;

 

(s)          (i) licenses, sublicenses, leases or subleases granted by any Loan Party to other Persons not materially interfering with the conduct of the business of such Loan Party, (ii) any interest or title of a lessor, sublessor or licensor under any Lease, (iii) restriction or encumbrance to which the interest or title of such lessor or sublessor may be subject and (iv) subordination of the interest of the lessee or sub-lessee under such Lease to any restriction or encumbrance referred to in the preceding clause (iii); and

 

(t)          Liens in connection with any zoning, building, land use or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any or dimensions of real property or the structure thereon.

 

“Permitted Holder” means each of TCP WR Acquisition, LLC, TCP SQBG Acquisition, LLC, TCP SQBG II, LLC, Carlyle Galaxy Holdings, L.P. and their respective Affiliates.

 

“Permitted Indebtedness” means each of the following:

 

(a)          (i) Indebtedness in respect of the Second Lien Credit Agreement and any Permitted Refinancing thereof (collectively, the “Second Lien Facility); provided that (A) the aggregate outstanding principal amount of any Indebtedness in respect of the Second Lien Facility shall not exceed $90,000,000 in the aggregate (as such amount may be increased by up to $70,000,000 pursuant to the incremental provisions therein) at any time and (B) any Indebtedness in respect of the Second Lien Facility shall not have an earlier maturity date than the Maturity Date or a decreased weighted average life than the Second Lien Facility in effect on the date hereof and (ii) any other Indebtedness outstanding on the date hereof and listed on Schedule 7.03 hereto and, in the case of the foregoing clause (ii), any Permitted Refinancing thereof;

 

(b)          Indebtedness of any Loan Party to any other Loan Party;

 

(c)          purchase money Indebtedness of any Loan Party to finance the acquisition of any personal property consisting solely of fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets (other than Intellectual Property) or secured by a Lien on any such assets prior to the acquisition thereof, and Permitted Refinancings thereof, provided, however, that the aggregate principal amount of Indebtedness permitted by this clause (c) shall not exceed $10,000,000 at any time outstanding and further provided that, if requested by the Agent, the Loan Parties shall use commercially reasonable efforts to cause the holders of any such Indebtedness incurred to finance the acquisition of assets containing information relating to Intellectual Property, licensing arrangements or financial information to enter into an intercreditor agreement with the Agent on terms reasonably satisfactory to the Agent;

 

-26-

 

(d)          Indebtedness incurred for the construction or acquisition or improvement of, or to finance or to refinance, any Real Estate owned by any Loan Party (including therein any Indebtedness incurred in connection with sale-leaseback transactions permitted hereunder and any Synthetic Lease Obligations), provided that, if requested by the Agent, the Loan Parties shall use commercially reasonable efforts to cause the holders of such Indebtedness and the lessors under any sale-leaseback transaction to enter into an access agreement with respect to any Real Estate in which the Loan Parties maintain information relating to Intellectual Property, licensing arrangements or financial information, on terms reasonably satisfactory to the Agent;

 

(e)          contingent liabilities under surety bonds or similar instruments incurred in the ordinary course of business;

 

(f)           obligations (contingent or otherwise) of any Loan Party or any Subsidiary thereof existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person (x) in connection with any issuance of convertible bonds permitted to be incurred under another clause of this definition of “Permitted Indebtedness” in the form of a call-spread overlay or any variation thereof or (y) in the ordinary course of business for the purpose of directly mitigating risks associated with fluctuations in interest rates or foreign exchange rates, and not for purposes of speculation or taking a “market view” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party;

 

(g)          Indebtedness of any Person that becomes a Subsidiary (other than an Excluded Subsidiary) of a Loan Party in a Permitted Acquisition, which Indebtedness is existing at the time such Person becomes a Subsidiary of a Loan Party (other than Indebtedness incurred solely in contemplation of such Person’s becoming a Subsidiary of a Loan Party);

 

(h)          the Obligations;

 

(i)          other unsecured Indebtedness or Indebtedness subordinated in right of payment (on terms reasonably acceptable to the Agent) in an aggregate principal amount not to exceed $250,000,000 at any time outstanding;

 

(k)          other unsecured Indebtedness or Indebtedness subordinated in right of payment (on terms reasonably acceptable to the Agent) not otherwise specifically described herein so long as, after giving pro forma effect to the incurrence of such Indebtedness and the consummation of any Permitted Acquisition or the application of the proceeds thereof, as applicable, in connection therewith, and (i) on a projected basis for the twelve (12) months immediately following such Indebtedness and related Permitted Acquisition or application of proceeds, as applicable, the ratio of Consolidated EBITDA (calculated for such purpose to include the projected Consolidated EBITDA of the entity or assets to be acquired in any applicable Permitted Acquisition) to Debt Service Charges shall be no less than the ratio of Consolidated EBITDA to Debt Service Charges as calculated prior to the incurrence of such Indebtedness and the consummation of such Permitted Acquisition or application of proceeds, as applicable, or, (ii) in the event that such ratio is less than the ratio calculated prior to the incurrence or application of proceeds of such Indebtedness, then the ratio of (A) Consolidated Total Indebtedness, less cash on the balance sheet of the Borrower, to (B) Consolidated EBITDA, in each case after giving pro forma effect to the incurrence of such Indebtedness and the consummation of any applicable Permitted Acquisition or application of proceeds, shall not be greater than 4.0:1.0;

 

-27-

 

(l)          Indebtedness consisting of unsecured guaranties by any Loan Party of the Indebtedness and lease and other contractual obligations (including, without limitation, guaranties of any license agreements entered into in the ordinary course of business by a Loan Party), in each case, of any other Loan Party, to the extent permitted under this Agreement;

 

(m)          Indebtedness arising from the honoring by any bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness is extinguished within five Business Days of its incurrence;

 

(n)          Indebtedness owed to any Person providing property, casualty, liability or other insurance to any Loan Party, so long as the amount of such Indebtedness is not in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the period in which such Indebtedness is incurred and such Indebtedness is outstanding only for a period not exceeding twelve months;

 

(o)          Indebtedness of any Loan Party which may be deemed to exist in connection with agreements providing indemnification, deferred purchase price, non-cash earn-outs, cash earn-outs in an amount not to exceed $10,000,000 at any time outstanding so long as after giving effect thereto the Loan Parties have cash on hand in an amount greater than $5,000,000, purchase price adjustments and other similar obligations in connection with the acquisition or disposition of assets in accordance with this Agreement, so long as any such obligations are those of the Person making the respective acquisition or sale, and are not guaranteed by any other Person except as permitted by sub-clause (l) herein;

 

(p)          Indebtedness representing deferred compensation or similar obligation to employees of Loan Parties incurred in the ordinary course of business; and

 

(q)          Indebtedness of any Loan Party in respect of letters of credit, bank guarantees, supporting obligations bankers’ acceptances, performance bonds, surety bonds, statutory bonds, appeal bonds, warehouse receipts or similar instruments issued or created in the ordinary course of business, including with respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 30 days following the due date thereof.

 

“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 any agency or instrumentality thereof 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 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 and rated 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;

 

-28-

 

(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 is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (b) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 180 days from the date of acquisition thereof;

 

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

 

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

 

(f)          Investments existing on the Effective Date set forth on Schedule 7.02, but not any additional Investment in respect thereof unless otherwise permitted hereunder;

 

(g)          (i) Investments by any Loan Party and its Subsidiaries in their respective Subsidiaries outstanding on the Effective Date, (ii) additional Investments by any Loan Party and its Subsidiaries in Loan Parties, (iii) Investments in Non-Guarantor Subsidiaries constituting (x) Investments made with contributions of the Equity Interests of the Borrower and cash proceeds of equity contributions to the Borrower made by the Borrower’s shareholders, (y) non-monetary Investments consisting of the acquisition or formation and ownership of the Equity Interests thereof to the extent permitted pursuant to clause (m) hereof and (z) so long as (A) no Default or Event of Default has occurred and is continuing or would result therefrom and (B) the Loan Parties have cash on hand in an amount greater than $10,000,000 after giving effect thereto, additional Investments by any Loan Party in any Non-Guarantor Subsidiary in an aggregate amount not to exceed $10,000,000 outstanding at any time, and (iv) additional Investments by Subsidiaries of the Loan Parties that are not Loan Parties in other 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 constituting Permitted Indebtedness;

 

(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;

 

-29-

 

(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 in the ordinary course of business in an amount not to exceed $500,000 to any individual at any time or in an aggregate amount not to exceed $2,000,000 at any time outstanding;

 

(m)          Investments constituting Permitted Acquisitions;

 

(n)          Loan Parties may own the equity interests of their respective Subsidiaries created or acquired in accordance with this Agreement (so long as all amounts invested in such Subsidiaries are independently justified under another clause of this definition);

 

(o)          deposits made in the ordinary course of business to secure the performance of leases or other obligations pursuant to Section 7.03;

 

(p)          purchases of assets in the ordinary course of business to the extent not constituting a Permitted Acquisition;

 

(q)          Investments consisting of (x) transactions permitted under Section 7.03 and 7.05, (y) Restricted Payments permitted by Section 7.06 and (z) repayments or other acquisitions of Indebtedness of any Loan Party not prohibited by Section 7.07;

 

(r)          promissory notes and other non-cash consideration received in connection with any asset sale permitted by Section 7.05;

 

(s)          the Effective Date Acquisition;

 

(t)          advances in the form of a prepayment of expense to vendors, suppliers and trade creditors consistent with their past practices, so long as such expenses were incurred in the ordinary course of business;

 

(u)          the Identified Transaction; and

 

(v)          Investments by the Borrower and its Subsidiaries not otherwise permitted under this definition of “Permitted Investments” in an aggregate amount not to exceed $10,000,000; provided that, with respect to each Investment made pursuant to this clause (v): (i) such Investment shall be in property that is part of, or in lines of business that are, substantially the same lines of business as one or more of the principal businesses of the Borrower and its Subsidiaries in the ordinary course; (ii) any determination of the amount of such Investment shall include all cash and noncash consideration paid by or on behalf of the Borrower and its Subsidiaries in connection with such Investment; (iii) (A) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (B) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Section 7.15, such compliance to be determined on the basis of the financial information most recently delivered to the Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such Investment had been consummated as of the first day of the fiscal period covered thereby; and (iv) if the Person which is the subject of such Investment will be maintained as a Subsidiary (other than an Excluded Subsidiary) of a Loan Party, or if the property acquired pursuant to such Investment will be transferred to a Subsidiary (other than an Excluded Subsidiary) which is not then a Loan Party, such Subsidiary shall have complied with the provisions of Section 6.11 and Section 6.15 hereof to the extent applicable;

 

-30-

 

provided, however, that notwithstanding the foregoing, after the occurrence and during the continuance of a Cash Control Event, no such Investments specified in clauses (a) through (e) shall be permitted unless 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, and such Investment us pledged to the Agent as additional collateral for the Obligations pursuant to such agreements as may be reasonably required by the Agent.

 

“Permitted Overadvance” means an Overadvance made by the 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;

 

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

 

(d)          together with all other Permitted Overadvances then outstanding, shall not (i) exceed $5,000,000 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 however, that the foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03 regarding the Lenders’ obligations with respect to Swing Line Loans, or (ii) result in any claim or liability against the Agent (regardless of the amount of any Overadvance) for Unintentional Overadvances, and such Unintentional Overadvances shall not reduce the amount of Permitted Overadvances allowed hereunder, and provided further, that in no event shall the Agent make an Overadvance, if after giving effect thereto, the principal amount of the Revolving Credit Extensions would exceed the Revolving Commitments (as in effect prior to any termination of the Revolving Commitments pursuant to Sections 2.05 or 8.02 hereof).

 

“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) such Permitted Refinancing shall not require any scheduled principal payments due prior to the Maturity Date in excess of or prior to the scheduled principal payments for the Indebtedness being Refinanced due prior to such Maturity Date, (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall be 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, (e) no Permitted Refinancing shall have direct or indirect obligors who were not also obligors of the Indebtedness being Refinanced, or greater guarantees or security, than the Indebtedness being Refinanced, (f) such Permitted Refinancing shall be otherwise on terms not materially less favorable to the Credit Parties than those contained in the documentation governing the Indebtedness being Refinanced, taken as a whole, including, without limitation, with respect to financial and other covenants and events of default, (g) the interest rate applicable to any such Permitted Refinancing shall not exceed the then applicable market interest rate, (h) at the time thereof, no Default or Event of Default shall have occurred and be continuing, and (i) in the case of a Refinance of any Indebtedness permitted pursuant to clause (a) of the definition of Permitted Indebtedness, the agent and lenders party thereto agree in writing to be bound by the Second Lien Intercreditor Agreement

 

-31-

 

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

 

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is required to contribute on behalf of any of its employees.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, 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 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 by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto.

 

“Realizable Orderly Liquidation Value” means the sum of one hundred percent (100%) of the appraised orderly liquidation value of the Intellectual Property of the Loan Parties, in each case based upon the most recent appraisal of such Intellectual Property undertaken by the Agent pursuant to Section 6.10(b) with respect thereto.

 

“Recipient” means the Agent or any Lender.

 

“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 Borrower 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, trustees, administrators, managers, advisors and representatives 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 9.11.

 

“Required Lenders” means, as of any date of determination, Lenders holding in the aggregate 51% or more of the aggregate outstanding principal amount of all Loans; provided that, at any time when there are two or more Lenders, “Required Lenders” shall mean at least two (2) Lenders holding in the aggregate 51% or more of the aggregate outstanding principal amount of all Loans.

 

-32-

 

“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 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.

 

“Restricted Payment Conditions” means, at the time of determination with respect to any specified Restricted Payment, that (a) no Default or Event of Default then exists or would arise as a result of making of such Restricted Payment, (b) after giving effect to such Restricted Payment, the Total Outstandings are not greater than twenty-five (25%) percent of the appraised orderly liquidation value of registered Trademarks of the Loan Parties, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent with respect to such registered Trademarks, and (c) the Consolidated Fixed Charge Coverage Ratio, as calculated on a pro-forma basis for the twelve Fiscal Months preceding such Restricted Payment, is equal to or greater than 1.0:1.0.

 

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

 

“Revolving Commitment” means, as to each Revolving Lender, its obligation to (a) make Revolving Loans to the Borrower pursuant to Section 2.01, and (b) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Revolving Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with Sections 2.05 and 2.14 of this Agreement. As of the Effective Date, the aggregate Revolving Commitments total $25,000,000.

 

“Revolving Commitment Fee” has the meaning specified in Section 2.08(a).

 

“Revolving Commitment Fee Percentage” means 0.375% per annum.

 

“Revolving Credit Extensions” mean each of the following: (a) a Revolving Borrowing and (b) a Swing Line Loan.

 

“Revolving Credit Facility” means the facility established pursuant to this Agreement for the making of Revolving Credit Extensions.

 

-33-

 

“Revolving Credit Facility Applicable Percentage” means with respect to any Revolving Lender at any time, the percentage (carried out to the ninth decimal place) of the aggregate Revolving Commitments represented by such Revolving Lender’s Revolving Commitment at such time. If the commitment of each Revolving Lender to make Revolving Loans has been terminated pursuant to Section 2.05 or Section 8.02 or if the Revolving Commitments have expired, then the Revolving Credit Facility Applicable Percentage of each Revolving Lender shall be determined based on the Revolving Credit Facility Applicable Percentage of such Revolving Lender most recently in effect, giving effect to any subsequent assignments.

 

“Revolving Lender” means each Lender with a Revolving Commitment.

 

“Revolving Loan” has the meaning specified in Section 2.01.

 

“Revolving Loan Cap” means, at any time of determination, the lesser of (a) the aggregate Revolving Commitments or (b) (x) fifty percent (50%) of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, minus (y) the sum of (A) $75,000,000 plus (B) any additional amounts advanced as a Term Loan pursuant to Sections 2.14 or 6.17 hereof.

 

“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.

 

“SBG Universe” has the meaning provided therefor in the recitals.

 

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

 

“Second Lien Agent” means Wilmington Trust, National Association, in its capacity as administrative agent and collateral agent for the lenders under the Second Lien Credit Agreement, together with any successor agent.

 

“Second Lien Credit Agreement” means that certain Second Lien Term Loan Agreement dated as of August 15, 2014 among the Borrower, the guarantors party thereto, the lenders party thereto, and the Second Lien Agent, as the same may be amended, restated, supplemented or otherwise modified, and any refinancings, refundings, renewals or extensions thereof permitted hereunder.

 

“Second Lien Facility” has the meaning set forth in clause (a)(i) of the definition of “Permitted Indebtedness”.

 

“Second Lien Intercreditor Agreement” means that certain Intercreditor Agreement, dated as August 15, 2014, among the Agent and the Second Lien Agent.

 

“Second Lien Loan Documents” means any and all documents executed in connection with the Second Lien Facility.

 

“Securities Laws” means 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.

 

“Security Agreement” means the Amended and Restated Security Agreement dated as of the Effective Date among the Loan Parties and the Agent.

 

-34-

 

“Security Documents” means the Security Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement, the Blocked Account Agreements and each other security agreement or other instrument or document executed and delivered to the Agent pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations.

 

“Settlement Date” has the meaning given to such term in Section 2.13(a).

 

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

 

“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, and (d) 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. The amount of all guarantees 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 Loan Party” means any Loan Party that is not then an “eligible contract participant” under the Commodity Exchange Act (as determined prior to giving effect to Section 10.25).

 

“Specified Representations” means the representations and warranties contained in Sections 5.01, 5.02(a), (b), (c) (solely as it relates to the Merger Agreement) and (d), 5.04, 5.14, 5.19, 5.20 (subject to the limitations set forth in the proviso to Section 4.01(a)(x), 10.17 and 10.18 of this Agreement.

 

“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 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.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the 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, but shall exclude Excluded Subsidiaries.

 

-35-

 

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

 

“Swap 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 Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.03.

 

“Swing Line Lender” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

 

“Swing Line Loan” has the meaning specified in Section 2.03(a).

 

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.03(b), which, if in writing, shall be substantially in the form of Exhibit B.

 

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

 

“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).

 

-36-

 

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

 

“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) in accordance with Article VIII, (iii) the date on which the Revolving Commitments are terminated (or deemed terminated) in accordance with Article VIII, or (iv) the date on which the Borrower prepays the Loans in full and terminates this Agreement in accordance with Section 2.04(a) hereof.

 

“Term Lender” means each Lender that has a Term Loan Commitment or holds a portion of the Term Loan.

 

“Term Loan” has the meaning specified in Section 2.01.

 

“Term Loan Applicable Percentage” means with respect to any Term Lender at any time, the percentage (carried out to the ninth decimal place) of the outstanding amount of the Term Loan held by such Term Lender.

 

“Term Loan Commitment” means, as to each Term Lender, its obligation to make the Term Loan on the Effective Date in an aggregate principal amount equal to the amount set forth opposite such Term Lender’s name on Schedule 2.01. As of the Effective Date, the aggregate Term Loan Commitments total $75,000,000.

 

“Total Outstandings” means the sum of the then outstanding principal amount of the Term Loan and the Total Revolving Outstandings.

 

“Total Revolving Outstandings” means the aggregate Outstanding Amount of all Revolving Loans and Swing Line Loans.

 

“Trademark” has the meaning specified in the Security Agreement.

 

“Trademark Security Agreement” means the Grant of Security Interest in United States Trademarks dated as of the Closing Date among certain Loan Parties and the Agent.

 

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

 

“Transactions” means, collectively, (a) the Effective Date Acquisition and the related transactions pursuant to the Merger Documents, (b) the entry into of the Loan Documents and the borrowings thereunder and (c) the refinancing of the Existing Credit Agreement and the existing Second Lien Credit Agreement (as defined in the Existing Credit Agreement).

 

“Type” means, with respect to the portion of any Loan outstanding, its character as a Base Rate Loan or a LIBOR Rate Loan.

 

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

 

-37-

 

“UFCA” has the meaning specified in Section 10.21(d).

 

“UFTA” has the meaning specified in Section 10.21(d).

 

“Unintentional Overadvance” means an Overadvance which, to the Agent’s knowledge, did not constitute an Overadvance when made but which has become an Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the appraised value of Intellectual Property of the Loan Parties.

 

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

 

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

 

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

 

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, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and 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 rules, regulations and orders thereunder and all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer 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.”

 

-38-

 

(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 reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (or, in the case of contingent reimbursement obligations with respect to Bank Products (other than Swap Contracts), providing cash collateralization) of all of the Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Swap Contracts) other than (i) unasserted contingent indemnification Obligations, (ii) any Obligations relating to Bank Products (including Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or cash collateralized, and (iii) any Obligations relating to Cash Management Services that, at such time, are allowed by the applicable provider of such Cash Management Services to remain outstanding without being required to be repaid.

 

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 Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the 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.

 

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).

 

-39-

 

ARTICLE II
THE COMMITMENTS AND LOANS

 

2.01         Loans Subject to the terms and conditions set forth herein, each Revolving Lender severally agrees to make loans (each such loan, a “Revolving Loan”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the lesser of (x) the amount of such Revolving Lender’s Revolving Commitment, or (y) such Lender’s Revolving Credit Facility Applicable Percentage of the Revolving Loan Cap; subject in each case to the following limitations:

 

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

 

(ii)         after giving effect to any Revolving Borrowing, the aggregate Outstanding Amount of the Revolving Loans of any Revolving Lender, plus such Revolving Lender’s Revolving Credit Facility Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Revolving Lender’s Revolving Commitment.

 

Within the limits of each Revolving Lender’s Revolving Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(a), prepay under Section 2.04, and reborrow under this Section 2.01(a).

 

(b)          Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make a loan (collectively, the “Term Loan”) to the Borrower on the Effective Date in an aggregate principal amount equal to such Term Lender’s Term Loan Commitment in immediately available funds in accordance with instructions provided by the Borrower. The aggregate amount of the Term Loan shall not exceed the aggregate Term Loan Commitments. The Term Loan made on the Effective Date shall be a LIBOR Rate Loan with an initial Interest Period of one month.

 

2.02         Borrowings and Continuations of Loans.

 

(a)          Subject to Sections 3.02 and 3.03 hereof, each Revolving Loan (other than Swing Line Loans) made hereunder shall be a LIBOR Rate Loan subject to and in accordance with this Section 2.02. All Swing Line Loans made hereunder shall be only Base Rate Loans.

 

(b)          Each Revolving Borrowing and each continuation of LIBOR Rate Loans shall be made upon the Borrower’s irrevocable notice to the Agent, which may be given by telephone. Each such notice must be received by the Agent not later than 11:00 a.m. three Business Days prior to the requested date of any Revolving Borrowing or continuation of LIBOR Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Revolving Borrowing or continuation of LIBOR Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Revolving Borrowing or a continuation of LIBOR Rate Loans, (ii) the requested date of the Revolving Borrowing or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed or continued, and (iv) the duration of the Interest Period with respect thereto. If the Borrower fails to specify an Interest Period in any such Loan Notice, it will be deemed to have specified an Interest Period of one month.

 

(c)          Following receipt of a Loan Notice, the Agent shall promptly notify each Revolving Lender of the amount of its Revolving Credit Facility Applicable Percentage of the applicable Revolving Loans. In the case of a Revolving Borrowing, each Revolving Lender shall make the amount of its Revolving Loan available to the Agent in immediately available funds at the Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Revolving Borrowing is made on the Effective Date, Section 4.01), the Agent shall make all funds so received available to the Borrower in like funds as received by the Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to the Agent by the Borrower.

 

-40-

 

(d)          The Agent, without the request of the Borrower, may advance any interest, fee, service charge (including direct wire fees), expenses, or other payment to which any Credit Party is entitled from the Loan Parties pursuant hereto or any other Loan Document and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby. The Agent shall advise the Borrower of any such advance or charge promptly after the making thereof. Such action on the part of the Agent shall not constitute a waiver of the Agent’s rights and the Borrower’s obligations under Section 2.04. Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.02(d) shall bear interest at the interest rate then and thereafter applicable to Revolving Loans.

 

(e)          The Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for LIBOR Rate Loans upon determination of such interest rate.

 

(f)          After giving effect to all Revolving Borrowings and all continuations of Revolving Loans, there shall not be more than six (6) Interest Periods in effect with respect to LIBOR Rate Loans.

 

(g)          The Agent, the Revolving Lenders and the Swing Line Lender shall have no obligation to make any Revolving Loan or Swing Line Loan if an Overadvance would result. The Agent may, in its discretion, make Permitted Overadvances without the consent of the Borrower, the Lenders or the Swing Line Lender and the Borrower and each Lender shall be bound thereby. Any Permitted Overadvance may, but shall not be required to, constitute a Swing Line Loan. A Permitted Overadvance is for the account of the Borrower and an Obligation and shall be repaid by the Borrower in accordance with the provisions of Section 2.04. The making of any such Permitted Overadvance on any one occasion shall not obligate the 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 the Agent of a Permitted Overadvance shall not modify or abrogate any of the provisions of Section 2.03 regarding the Revolving Lenders’ obligations to purchase participations with respect to Swing Line Loans. The Agent shall have no 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 Agent with respect to Unintentional Overadvances regardless of the amount of any such Overadvance(s).

 

2.03         Swing Line Loans.

 

(a)          The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender may, in its sole discretion, in reliance upon the agreements of the other Revolving Lenders set forth in this Section 2.03, to make loans (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Revolving Credit Facility Applicable Percentage of the Outstanding Amount of Revolving Loans of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Revolving Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Revolving Outstandings shall not exceed Revolving Loan Cap, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Revolving Lender at such time, plus such Revolving Lender’s Revolving Credit Facility Applicable Percentage of the Outstanding Amount of all Swing Line Loans at such time shall not exceed such Lender’s Revolving Commitment, and provided, further, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan, and provided further 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. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.03, prepay under Section 2.04, and reborrow under this Section 2.03. Each Swing Line Loan shall bear interest only at the Base Rate. Immediately upon the making of a Swing Line Loan, each Revolving 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 Revolving Lender’s Revolving Credit Facility Applicable Percentage multiplied by the amount of such Swing Line Loan. The Swing Line Lender shall have all of the benefits and immunities (A) provided to the 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 “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.

 

-41-

 

(b)          Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Agent 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, 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 Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Agent (by telephone or in writing) that the Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the 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 provisos to the first sentence of Section 2.03(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, not later than 4:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transferring such funds, in each case in accordance with instructions provided to the Swing Line Lender by the Borrower.

 

(c)          Refinancing of Swing Line Loans.

 

(i)          In addition to settlements required under Section 2.13 hereof, the Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Revolving Lender make a Revolving Loan in an amount equal to such Revolving Lender's Revolving Credit Facility Applicable Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a 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 Revolving Loans, but subject to the unutilized portion of the Revolving Loan Cap and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Loan Notice promptly after delivering such notice to the Agent. Each Revolving Lender shall make an amount equal to its Revolving Credit Facility Applicable Percentage of the amount specified in such Loan Notice available to the Agent in immediately available funds for the account of the Swing Line Lender at the Agent’s Office not later than 1:00 p.m. on the day specified in such Loan Notice, whereupon, subject to Section 2.03(c)(ii), each Revolving Lender that so makes funds available shall be deemed to have made a Revolving Loan to the Borrower in such amount. The Agent shall remit the funds so received to the Swing Line Lender.

 

-42-

 

(ii)         If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Borrowing in accordance with Section 2.03(c)(i), the request for Revolving 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 Revolving Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Lender’s payment to the Agent for the account of the Swing Line Lender pursuant to Section 2.03(c)(i) shall be deemed payment in respect of such participation.

 

(iii)        If any Revolving Lender fails to make available to the Agent for the account of the Swing Line Lender any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(i), the Swing Line Lender shall be entitled to recover from such Revolving Lender (acting through the Agent), 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 the Federal Funds Rate and 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 Revolving Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Revolving Lender’s Revolving Loan included in the relevant Revolving 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 Revolving Lender (through the Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

 

(iv)         Each Revolving Lender’s obligation to make Revolving Loans or to purchase and fund risk participations in Swing Line Loans pursuant to 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 Revolving Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default or an Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Lender’s obligation to make Revolving Loans pursuant to this Section 2.03(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 the Borrower to repay Swing Line Loans, together with interest as provided herein.

 

(d)          Repayment of Participations.

 

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

 

-43-

 

(ii)         If any payment received by the Swing Line Lender, or the Agent on behalf of the Swing Line Lender, in respect of principal or interest on any Swing Line Loan 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 Revolving Lender shall pay to the Swing Line Lender its Revolving Credit Facility Applicable Percentage thereof on demand of the 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 Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Revolving Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)          Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Lender funds its Revolving Loan or risk participation pursuant to this Section 2.03 to refinance such Revolving Lender’s Revolving Credit Facility Applicable Percentage of any Swing Line Loan, interest in respect of such Revolving Credit Facility Applicable Percentage shall be solely for the account of the Swing Line Lender.

 

(f)          Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

 

2.04         Prepayments.

 

(a)          (i)          The Borrower may, upon irrevocable notice from the Borrower to the Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty except as provided in Section 2.08(b) hereof; provided that (i) such notice must be received by the Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of LIBOR Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of LIBOR Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; or, if less, the entire principal amount thereof then outstanding or such lesser amount as is acceptable to the Agent. Each such notice shall specify the date and amount of such prepayment, whether the Term Loan or Revolving Loans are to be prepaid, and the Type(s) of Loans to be prepaid and, if LIBOR Rate Loans, the Interest Period(s) of such Loans. The Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, except that, to the extent delivered in connection with a full or partial refinancing of the Obligations, such notice shall not be irrevocable until such refinancing is closed and funded. Any prepayment of a LIBOR Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Subject to Section 2.12, each such prepayment shall be applied to the Revolving Loans of, or portion of the Term Loan held by, as applicable, the Lenders in accordance with their respective Applicable Percentages.

 

(ii)         The Borrower may, upon irrevocable notice from the Borrower to the Swing Line Lender (with a copy to the Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that such notice must be received by the Swing Line Lender and the Agent not later than 1:00 p.m. on the date of the prepayment. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, except that, to the extent delivered in connection with a full or partial refinancing of the Obligations, such notice shall not be irrevocable until such refinancing is closed and funded.

 

-44-

 

(b)          In connection with any Disposition of any Intellectual Property or related assets of the Borrower or its Subsidiaries, the Borrower shall prepay the Loans in an amount equal to fifty (50%) of the orderly liquidation value of such assets as determined by the most recent appraisal of such Intellectual Property or related assets undertaken by the Agent with respect thereto; provided that if an Event of Default has occurred and is continuing, the Borrower shall prepay the Loans in an amount equal to 100% of the orderly liquidation value of such assets as determined by the most recent appraisal of such Intellectual Property or related assets undertaken by the Agent with respect thereto.

 

(c)          In connection with any Disposition of any assets of the Borrower or its Subsidiaries (other than Permitted Dispositions of the type referred to in clauses (d), (e) and (f) of the definition thereof), the Borrower shall prepay the Loans in an amount equal to 100% of the Net Proceeds from the Disposition of such Collateral; provided that the Borrower shall have the right to reinvest such Net Proceeds, if such Net Proceeds are reinvested (or committed to be reinvested) within 365 days and, if so committed to be reinvested, so long as such reinvestment is actually completed within 180 days thereafter.

 

(d)          Not later than ninety (90) days after the end of each Fiscal Year of the Borrower and its Subsidiaries, the Borrower shall prepay the Loans in an amount equal to thirty (30%) of Consolidated Excess Cash Flow for the immediately preceding Fiscal Year of the Borrower and its Subsidiaries.

 

(e)          The Borrower shall prepay the Loans to the extent required pursuant to the provisions of Section 6.12 hereof.

 

(f)          Prepayments made to the Term Loan pursuant to Section 2.04(a)(i) above shall be applied ratably to the remaining scheduled installments of principal due in respect of the Term Loan in the inverse order of maturity. Prepayments made pursuant to Section 2.04(b), (c) and (d) above first, shall be applied ratably to the remaining scheduled installments under Section 2.06(a) of principal due in respect of the Term Loan in the inverse order of maturity, second, shall be applied to any outstanding Swing Line Loans, and third, shall be applied ratably to the outstanding Revolving Loans. Prepayments made pursuant to Section 2.04(a)(ii) and (e) above first, shall be applied to any outstanding Swing Line Loans, second, shall be applied ratably to the outstanding Revolving Loans, and third, after the occurrence and during the continuance of an Event of Default, be applied ratably to the remaining scheduled installments of principal due in respect of the Term Loan in the inverse order of maturity.

 

2.05         Termination or Reduction of Revolving Commitments

 

(a)          The Borrower may, upon irrevocable notice from the Borrower to the Agent, terminate the Revolving Commitments or from time to time permanently reduce the Revolving Commitments; provided that (i) any such notice shall be received by the Agent not later than 11:00 a.m. three Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolving Outstandings would exceed the Revolving Commitments.

 

-45-

 

(b)          After giving effect to any reduction of the Revolving Commitments, the Swing Line Sublimit shall be automatically reduced, if necessary, so that the Swing Line Sublimit in no case exceeds the Revolving Commitments.

 

(c)          The Agent will promptly notify the Revolving Lenders of any termination or reduction of the Swing Line Sublimit or the Revolving Commitments under this Section 2.05. Upon any reduction of the Revolving Commitments, the Revolving Commitment of each Revolving Lender shall be reduced by such Lender’s Revolving Credit Facility Applicable Percentage of such reduction amount. If, as a result of such termination or reduction, the Revolving Loans or the Swing Line Loans hereunder would exceed the Revolving Commitments or the Swing Line Sublimit, as applicable, the Borrower shall contemporaneously with such reduction or termination, pay the Agent an amount equal to such excess.

 

2.06         Repayment of Obligations.

 

(a)          In addition to the mandatory prepayment provisions set forth in Section 2.05 above, the Borrower shall repay the Term Loan in an amount equal to (x) on September 30, 2014, $1,500,000, and (y) thereafter, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2014, $3,000,000. Once repaid or prepaid, no portion of the Term Loan may be reborrowed.

 

(b)          Except as provided in Section 1.02(d), the Borrower shall repay to the Agent, for the account of the Lenders, on the Termination Date the aggregate principal amount of Loans and other Obligations outstanding on such date.

 

2.07         Interest.

 

(a)          Subject to the provisions of Section 2.07(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 for LIBOR Rate Loans; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate Loans; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate Loans.

 

(b)          If any Event of Default exists, 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 Obligations shall bear interest at the Default Rate to the fullest extent permitted by Law. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

(c)          Except as provided in Section 2.07(b), 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.

 

-46-

 

2.08         Fees.

 

(a)          Revolving Commitment Fee. The Borrower shall pay to the Agent for the account of each Revolving Lender in accordance with its Revolving Credit Facility Applicable Percentage, a commitment fee (the “Revolving Commitment Fee”) equal to the Revolving Commitment Fee Percentage multiplied by the actual daily amount by which the aggregate Revolving Commitments exceed the Total Revolving Outstandings excluding outstanding Swing Line Loans (subject to adjustment as provided in Section 2.13) during the immediately preceding quarter. The Revolving 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 last Business Day of each March, June, September and December, commencing with the first such date to occur after the Effective Date, and on the last day of the Availability Period.

 

(b)          Early Termination Fee. In the event that the Termination Date occurs prior to the first anniversary of the Effective Date pursuant to clause (iv) of the definition of “Termination Date” in connection with a refinancing of the Obligations for which Bank of America is not the administrative agent, then the Borrower shall pay to the Agent, for the ratable benefit of the Term Lenders, a fee (the “Early Termination Fee”) equal to one (1%) percent of the Term Loan then outstanding. All parties to this Agreement agree and acknowledge that the Term Lenders will have suffered damages on account of the early termination of this Agreement and that, in view of the difficulty in ascertaining the amount of such damages, the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate the Term Lenders on account thereof.

 

(c)          Other Fees. The Borrower shall pay to the Agent for its own account 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.

 

2.09         Computation of Interest and Fees All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” 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. 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. Each determination by the Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

2.10         Evidence of Debt.

 

(a)          The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by the Agent (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 Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower 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 Borrower 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 Agent in respect of such matters, the accounts and records of the Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Agent, the Borrower shall execute and deliver to such Lender (through the Agent) 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. Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.

 

-47-

 

(b)          In addition to the accounts and records referred to in Section 2.10(a), each Revolving Lender and the Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Revolving Lender of participations in Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Agent and the accounts and records of any Revolving Lender in respect of such matters, the accounts and records of the Agent shall control in the absence of manifest error.

 

2.11         Payments Generally; Agent’s Clawback.

 

(a)          General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Agent, for the account of the respective Lenders to which such payment is owed, at the Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Agent will, subject to Section 2.13 hereof, promptly distribute to each Lender 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. All payments received by the Agent after 2:00 p.m. shall, at the option of the Agent, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day (other than with respect to payment of a LIBOR Rate Loan), and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(b)          Funding by Revolving Lenders; Presumption by Agent. Unless the Agent shall have received notice from a Revolving Lender prior to (A) the proposed date of any Revolving Borrowing of LIBOR Rate Loans, or (B) the date that such Revolving Lender’s participation in a Swing Line Loan is required to be funded, that such Revolving Lender will not make available to the Agent such Revolving Lender’s share of such Revolving Borrowing or participation, the Agent may assume that such Revolving Lender has made such share available on such date in accordance with Section 2.02 or Section 2.03 as applicable, and may, in reliance upon such assumption, make available to the Borrower or the Swing Line Lender, as applicable, a corresponding amount. In such event, if a Revolving Lender has not in fact made its share of the applicable Revolving Borrowing or participation available to the Agent, then the applicable Revolving Lender and the Borrower severally agree to pay to the Agent 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 the Borrower to but excluding the date of payment to the Agent, at (A) in the case of a payment to be made by such Revolving Lender, the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Revolving Lender shall pay such interest to the Agent for the same or an overlapping period, the Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Revolving Lender pays its share of the applicable Revolving Borrowing or participation to the Agent, then the amount so paid shall constitute such Revolving Lender’s Revolving Loan included in such Revolving Borrowing or participation in such Swing Line Loan. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Revolving Lender that shall have failed to make such payment to the Agent.

 

-48-

 

(c)          Payments by Borrower; Presumptions by Agent. Unless the Agent shall have received notice from the Borrower prior to the time at which any payment is due to the Agent for the account of any of the Lenders hereunder that the Borrower will not make such payment, the Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Agent forthwith on demand the amount so distributed to such Lender, 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 the Agent, at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation.

 

(d)          Failure to Satisfy Conditions Precedent. If any Revolving Lender makes available to the Agent funds for any Revolving Loan to be made by such Revolving Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Agent because the conditions to the applicable Revolving 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 Agent shall return such funds (in like funds as received from such Revolving Lender) to such Revolving Lender, without interest.

 

(e)          Obligations of Lenders Several. The obligations of the Lenders hereunder to make Loans, to fund participations in Swing Line Loans and to make payments hereunder are several and not joint. The failure of any Lender to make any 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 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.

 

2.12         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, interest on, or other amounts with respect to, any of the Loans resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans greater than its pro rata share thereof as provided herein (including as in contravention of the priorities of payment set forth in Section 8.03), then the Lender receiving such greater proportion shall (a) notify the Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans of the other 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 and in the priorities set forth in Section 8.03, provided that:

 

(i)          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

 

(ii)         the provisions of this Section shall not be construed to apply to (x) any payment made by the Loan Parties 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 Loans (or sub-participations in Swing Line Loans) to any Eligible Assignee or Participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

 

-49-

 

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

 

2.13         Settlement Amongst Revolving Lenders

 

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

 

(b)          The Agent shall deliver to each of the Revolving Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Revolving Loans for the period and the amount of repayments received for the period. As reflected on the summary statement, each Revolving Lender shall transfer to the Agent (as provided below) or the Agent shall transfer to each Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Revolving Loans made by each Revolving Lender shall be equal to such Revolving Lender’s Revolving Credit Facility Applicable Percentage of all Revolving Loans outstanding as of such Settlement Date. If the summary statement requires transfers to be made to the Agent by the Revolving 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 Revolving Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Agent. If and to the extent any Revolving Lender shall not have so made its transfer to the Agent, such Revolving Lender agrees to pay to the 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 Agent, equal to the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation plus any administrative, processing, or similar fees customarily charged by the Agent in connection with the foregoing.

 

2.14         Incremental Facility.

 

(a)          Request for Increase. Provided no Event of Default then exists or would arise therefrom, upon notice to the Agent (which shall promptly notify the Lenders), the Borrower may from time to time, request an increase in the aggregate Revolving Commitments and the Term Loan by an amount (for all such requests in the aggregate) not exceeding $60,000,000; provided that (i) any such request for an increase shall be in minimum increments of $10,000,000, (ii) each such increase shall be allocated pro rata to the Revolving Credit Facility and the Term Loan, and (iii) the Borrower may make a maximum of three such requests. At the time of sending such notice, the Borrower (in consultation with the Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

 

(b)          Lender Elections to Increase. Each Lender shall notify the Agent within the time period specified in the Borrower’s notice as provided in Section 2.14(a) whether or not it agrees to increase its Revolving Commitment or outstanding portion of the Term Loan, as applicable, and, if so, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Revolving Commitment or outstanding portion of the Term Loan, as applicable.

 

-50-

 

(c)          Notification by Agent; Additional Lenders. On the last day of the time period specified in the Borrower’s notice as provided in Section 2.14(a), the Agent shall notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Agent and the Swing Line Lender, to the extent that the existing Lenders decline to increase their respective Revolving Commitment or outstanding portion of the Term Loan, as applicable, or decline to increase their respective Revolving Commitment and outstanding portion of the Term Loan to the amount requested by the Borrower, the Agent, in consultation with the Borrower, will use its reasonable efforts to arrange for other Eligible Assignees to become a Revolving Lender and Term Lender hereunder (each such Lender, an “Additional Commitment Lender”) and to issue commitments in an amount equal to the amount of the increase in the aggregate Revolving Commitment and the Term Loan requested by the Borrower and not accepted by the existing Lenders (and the Borrower may also invite additional Eligible Assignees to become Lenders), provided, however, that without the consent of the Agent, at no time shall the commitment of any Additional Commitment Lender be less than $5,000,000.

 

(d)          Effective Date and Allocations. If the aggregate Revolving Commitments and the Term Loan are increased in accordance with this Section 2.14, the Agent, in consultation with the Borrower, shall determine the effective date (the “Increase Effective Date”) and the final allocations in respect of such increase. The Agent shall promptly notify the Borrower and the Lenders of the final allocations in respect of such increase and the Increase Effective Date and on the Increase Effective Date (i) the aggregate Revolving Commitments and the Term Loan under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Commitment Increases, and (ii) Schedule 2.01 shall be deemed modified, without further action, to reflect the revised Aggregate Commitments and Applicable Percentages of the Lenders.

 

(e)          Conditions to Effectiveness of Increase. As a condition precedent to such increase, (i) the Borrower shall deliver to the Agent a certificate of each Loan Party dated as of the Increase Effective Date 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 Borrower, 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 2.14, 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, and (2) no Default or Event of Default exists or would arise therefrom, (ii) the Borrower, the Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Agent shall reasonably require; (iii) the Borrower shall have paid such fees and other compensation to the Additional Commitment Lenders as the Borrower and such Additional Commitment Lenders may agree; (iv) the Borrower shall have paid such arrangement fees to the Agent as the Borrower and the Agent may agree; (v) if requested by the Agent, the Borrower shall deliver an opinion or opinions, in form and substance reasonably satisfactory to the Agent, from counsel to the Borrower and dated such date; (vi) the Borrower and the Additional Commitment Lender shall have delivered such other instruments, documents and agreements as the Agent may reasonably have requested; and (vii) no Default or Event of Default shall exist. Any Revolving Loans outstanding on the Increase Effective Date shall be automatically adjusted to the extent necessary to keep the outstanding Revolving Loans ratable with any revised Revolving Credit Facility Applicable Percentages arising from any nonratable increase in the Revolving Commitments under this Section.

 

(f)          Conflicting Provisions. This Section shall supersede any provisions in Sections 2.12 or 10.01 to the contrary.

 

-51-

 

2.15         Defaulting Lenders.

 

(a)          Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Revolving Lender becomes a Defaulting Lender, then, until such time as that Revolving 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 Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Swing Line Lender hereunder; third, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Revolving Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Agent; fourth, if so determined by the Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Revolving Loans under this Agreement; fifth, to the payment of any amounts owing to the Revolving Lenders or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Revolving Lender or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; sixth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and seventh, 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 Revolving Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Revolving Loans were made at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Revolving Loans of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Revolving Loans of such Defaulting Lender until such time as all Revolving Loans and funded and unfunded participations in Swing Line Loans are held by the Revolving Lenders pro rata in accordance with the Revolving Commitments hereunder without giving effect to Section 2.15(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 pursuant to this Section 2.15(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Revolving Lender irrevocably consents hereto.

 

(iii)        Certain Fees.

 

(A)         No Defaulting Lender shall be entitled to receive any fee payable under Section 2.08(a) for any period during which that Revolving Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

-52-

  

(B)         With respect to any fee payable under Section 2.08(a) not required to be paid to any Defaulting Lender pursuant to clause (A) above, the Borrower 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 Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Swing Line Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the 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 Revolving Credit Facility Applicable Percentages to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Swing Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Revolving Credit Facility Applicable Percentages (calculated without regard to such Defaulting Lender’s Revolving 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 Borrower shall have otherwise notified the Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Outstanding Amount of Revolving Credit Extensions of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Revolving 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)          Repayment of Swing Line Loans. If the reallocation described in clause (a)(iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to them hereunder or under applicable Law, prepay Swing Line Loans in an amount equal to the Swing Line Lenders’ Fronting Exposure.

 

(b)          Defaulting Lender Cure. If the Borrower, the Agent and the Swing Line Lender agree in writing that a Revolving Lender is no longer a Defaulting Lender, the 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, that Revolving Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Loans of the other Revolving Lenders or take such other actions as the Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Swing Line Loans to be held on a pro rata basis by the Revolving Lenders in accordance with their Revolving Credit Facility Applicable Percentages (without giving effect to Section 2.15(a)(iv)), whereupon such Revolving 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 Borrower while that Revolving 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 Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Revolving Lender’s having been a Defaulting Lender.

 

ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01         Taxes.

 

(a)          Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.

 

-53-

 

(i)          Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made 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.

 

(ii)         If any Loan Party or the Agent shall be required by any applicable Laws other than the Code 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 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(b)          Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay 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)          The Loan Parties shall, and each Loan Party does hereby, jointly and severally indemnify each Recipient, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) payable or paid by such Recipient 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 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 Borrower by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

(ii)         Each Lender 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 (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 applicable, against any Excluded Taxes attributable to such Lender, 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 hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due to the Agent under this clause (ii).

 

-54-

 

(d)          Evidence of Payments. Upon request by the Borrower or the Agent, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as provided in this Section 3.01, the Borrower shall deliver to the Agent or the Agent shall deliver to the 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 any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Agent, as the case may be.

 

(e)          Status of Lenders; Tax Documentation.

 

(i)          Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Agent, at the time or times reasonably requested by the Borrower or the Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the 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.

 

(ii)         Without limiting the generality of the foregoing,

 

(A)         any Lender that is a U.S. Person shall deliver to the 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 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)         any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the 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 Borrower or the Agent), whichever of the following is applicable:

 

-55-

 

(I)         in the case of a Foreign Lender claiming the 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 or IRS Form W-8BEN-E, as applicable, 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 or IRS Form W-8BEN-E, as applicable, 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)        executed originals of IRS Form W-8ECI;

 

(III)       in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; 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 or IRS Form W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-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 the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner;

 

(C)         any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the 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 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 U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the 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 withholding Tax imposed pursuant to or in connection with 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 Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the 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 Borrower or the Agent as may be necessary for the 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.

 

-56-

  

(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 Borrower and the Agent in writing of its legal inability to do so.

 

(f)          Treatment of Certain Refunds. Unless 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 have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for the account of such Lender. If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by a Loan Party under this Section 3.01 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (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 Party, upon the request of the Recipient, agrees to repay the amount paid over to the Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the 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 Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.

 

(g)          Survival. Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, and the repayment, satisfaction or discharge of all of the Obligations.

 

3.02         Illegality   If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBOR Rate Loans, or to determine or charge interest rates based upon the LIBOR Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, (i) any obligation of such Lender to make or continue LIBOR Rate Loans or to convert Base Rate Loans to LIBOR Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the LIBOR Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Agent without reference to the LIBOR Rate component of the Base Rate, in each case, until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Agent) together with documentation reasonably supporting such request, prepay or, if applicable, convert all LIBOR Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Agent without reference to the LIBOR Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the LIBOR Rate, the Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the LIBOR Rate component thereof until the Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the LIBOR Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

 

-57-

 

3.03        Inability to Determine Rates If the Required Lenders determine that for any reason in connection with any request for a LIBOR Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such LIBOR Rate Loan, (b) adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or (c) the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Agent will promptly so notify the Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain LIBOR Rate Loans shall be suspended, and (y) in the event of a determination described in the preceding sentence with respect to the LIBOR Rate component of the Base Rate, the utilization of the LIBOR Rate component in determining the Base Rate shall be suspended, in each case until the Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for Borrowing of a Revolving Loan as a LIBOR Rate Loan, or a conversion to or continuation of LIBOR Rate Loans or, failing that, will be deemed to have converted such request into a request Base Rate Loans in the amount specified therein.

 

3.04        Increased Costs; Reserves on LIBOR Rate Loans.

 

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

 

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

 

(ii)         subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)        impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or LIBOR Rate Loans made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any LIBOR Rate Loan (or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, together with documentation reasonably supporting such request, the Loan Parties will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

-58-

 

(b)          Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital or liquidity of such Lender’s holding company, if any, as a consequence of this Agreement, or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then upon request from time to time from such Lender together with documentation reasonably supporting such request, the Loan Parties will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

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

 

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

 

(e)          Reserves on LIBOR Rate Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each LIBOR Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

 

(f)          Notwithstanding anything to the contrary contained in this Section 3.04, no Lender shall demand compensation for any increased costs pursuant to this Section 3.04 if it shall not be the general policy or practice of such Lender to demand such compensation in similar circumstances and unless such demand is generally consistent with such Lender’s treatment of comparable borrowers of such Lender in the United States with similarly affected loans.

 

3.05         Compensation for Losses. Upon demand of any Lender (with a copy to the Agent) from time to time, which demand shall set forth in reasonable detail the basis for such demand for compensation, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

-59-

 

(a)          any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

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

 

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

 

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

 

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

 

3.06        Mitigation Obligations; Replacement of Lenders.

 

(a)          Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or Section 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)          Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 and, in each case, such Lender has declined or is unable to designate a different Lending Office in accordance with Section 3.06(a), the Borrower may replace such Lender in accordance with Section 10.13.

 

3.07        Survival. All of the Borrower’s obligations under this Article III shall survive repayment of all Obligations hereunder and resignation of the Agent.

 

-60-

 

ARTICLE IV
CONDITIONS PRECEDENT TO LOANS

 

4.01        Conditions of Initial Loans. The obligation of each Lender to make any Revolving Credit Extensions or its portion of the Term Loan hereunder on the Effective Date is subject to satisfaction of the following conditions precedent:

 

(a)          The Agent’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif ” via e-mail) (followed promptly by originals) unless otherwise specified, each dated the Effective Date (or, in the case of certificates of governmental officials, a recent date before the Effective Date) and each in form and substance satisfactory to the Agent:

 

(i)          counterparts of this Agreement each properly executed by a Responsible Officer of the signing Loan Party and the Lenders sufficient in number for distribution to the Agent, each Lender and the Borrower;

 

(ii)         a Note executed by the Borrower in favor of each Lender requesting a Note;

 

(iii)        such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Agent may require evidencing (A) the authority of each Loan Party to enter into this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party and (B) the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party;

 

(iv)        copies of each Loan Party’s Organization Documents and such other documents and certifications as the Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing in its jurisdiction of organization or formation;

 

(v)         an opinion of White & Case LLP, counsel to the Loan Parties, addressed to the Agent and each Lender, as to such customary matters concerning the Loan Parties and the Loan Documents as the Agent may reasonably request;

 

(vi)        a certificate of a Responsible Officer of the Borrower certifying (A) that the conditions specified in this Article IV have been satisfied, and (B) to the Solvency of the Loan Parties as of the Effective Date after giving effect to the transactions contemplated hereby;

 

(vii)       the Security Documents, each duly executed by the applicable Loan Parties;

 

(viii)      all other Loan Documents, each duly executed by the applicable Loan Parties;

 

-61-

 

(ix)         results of searches or other evidence reasonably satisfactory to the Agent (in each case dated as of a date reasonably satisfactory to the Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Encumbrances and Liens for which termination statements satisfactory to the Agent are being tendered concurrently with such extension of credit or other arrangements satisfactory to the Agent for the delivery of such termination statements have been made; and

 

(x)          all documents and instruments, including Uniform Commercial Code financing statements, filings with the United States Patent and Trademark Office and the United States Copyright Office, and certificates evidencing any stock being pledged thereunder, together with undated stock powers executed in blank, each duly executed by the applicable Loan Parties, in each case required by law or reasonably requested by the Agent to be filed, registered, recorded or delivered to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered, recorded or delivered to the satisfaction of the Agent; provided that to the extent any security interest in the Collateral is not granted or perfected on the Effective Date after the Loan Parties’ commercially reasonable efforts to do so (other than (x) grants with respect to the Collateral subject to the UCC and the delivery of UCC financing statements or the filing of a security agreement with the U.S. Patent and Trademark Office or the U.S. Copyright Office and (y) the delivery of stock certificates and stock powers pursuant to this clause (x) (but, with respect to any entity acquired pursuant to the Merger Agreement, solely to the extent received from the seller thereunder)), the grant or perfection of such security interest shall be granted or perfected, as the case may be, within 60 days after the Effective Date (or such longer period as Agent may agree in its sole discretion).

 

(b)          The Agent and the Lenders shall have received and be satisfied with the substance of (i) audited financial statements of Galaxy Brand Holdings, Inc. and its Subsidiaries for the period from May 13, 2013 through December 31, 2013, and (ii) interim financial statements of Galaxy Brand Holdings, Inc. and its Subsidiaries dated the end of the most recent Fiscal Quarter ended at least forty-five (45) days prior to the Effective Date for which such financial statements are available.

 

(c)          Prior to or contemporaneously with the initial funding of the Loans, the Borrower shall consummate the Effective Date Acquisition substantially in accordance with the terms and conditions set forth in the Merger Agreement, without any amendment, modification or waiver of any of the terms or conditions thereof that would be materially adverse to the Agent and the Lenders without the consent of the Agent (such consent not to be unreasonably withheld).

 

(d)          All accrued fees and expenses of the Agent (including the reasonable and documented fees and expenses of counsel (including any local counsel) for the Agent) invoiced at least one (1) Business Day prior to the Effective Date shall have been paid.

 

(e)          The Agent and the Lenders shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act.

 

(f)          The Agent shall have received payoff letters with respect to the existing indebtedness of the Loan Parties under the Second Lien Facility (as defined in the Existing Credit Agreement), in each case satisfactory in form and substance to the Agent evidencing that the all obligations thereunder have been or concurrently with the Effective Date are being paid in full, and all Liens securing obligations thereunder have been or concurrently with the Effective Date are being released.

 

-62-

 

(g)          Prior to or contemporaneously with the initial funding of the Loans, the Loan Parties shall have entered into, and received the proceeds of, the Second Lien Facility, and the Agent shall have entered into the Intercreditor Agreement with the Second Lien Agent.

 

(h)          Each of the Merger Representations and the Specified Representations shall be true and correct in all material respects, except that any Merger Representations or Specified Representations subject to “materiality”, “Material Adverse Effect” or similar materiality qualifiers shall be true and correct in all respects.

 

(i)          Since the date of the Merger Agreement, no change, state of facts, circumstance, occurrence, development, event or effect that, individually or in the aggregate, has had or would reasonably be expected to have a “Galaxy Material Adverse Effect” (as defined in the Merger Agreement, without giving effect to any amendment or modification of such definition after the date of the Merger Agreement unless approved by the Agent in its reasonable discretion) shall have occurred.

 

4.02        Conditions to Revolving Credit Extensions made after the Effective Date. The obligations of each Revolving Lender to honor any request for a Revolving Credit Extension (other than a Loan Notice requesting only a continuation of LIBOR Rate Loans) after the Effective Date is subject to the following conditions precedent:

 

(a)          The representations and warranties of each Loan Party contained in Article V or in any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Revolving Credit Extension, except (i) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, (ii) in the case of any representation and warranty qualified by materiality, they shall be true and correct in all respects and (iii) for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.

 

(b)          No Default or Event of Default shall exist, or would result from such proposed Revolving Credit Extension or from the application of the proceeds thereof.

 

(c)          The Agent and, if applicable, the Swing Line Lender shall have received a Loan Notice in accordance with the requirements of Section 2.02(b) or a Swing Line Loan Notice in accordance with the requirements of Section 2.03(b), as applicable.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans hereunder, each Loan Party represents and warrants to the Agent and the other Credit Parties that (it being understood and agreed that only the Specified Representations shall be made on the Effective Date):

 

-63-

 

5.01         Existence, Qualification and Power Each Loan Party and each of their Subsidiaries (a) is a corporation, limited liability company, partnership or limited partnership, duly incorporated, organized or formed, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation, organization or formation, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) other than with respect to Subsidiaries that are not Loan Parties, execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, where applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. Schedule 5.01 annexed hereto sets forth, as of the Effective Date, each Loan Party’s name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization, and its federal employer identification number.

 

5.02         Authorization; No Contravention The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party, has been duly authorized by all necessary corporate or other organizational action, and does not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (i) any Material Contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; (c) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Agent under the Security Documents); or (d) violate any applicable Law, except in the case of clauses (b)(ii) and (d), to the extent that such conflict or violation would not reasonably be expected to result in a Material Adverse Effect.

 

5.03         Governmental Authorization; Other Consents No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (a) the perfection or maintenance of the Liens created under the Security Documents (including the first priority nature thereof) or (b) such as have been obtained or made and are in full force and effect.

 

5.04         Binding Effect This Agreement has been, and each other Loan Document, when delivered, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law, and (ii) the need for filings and registrations necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Credit Parties.

 

5.05         Financial Statements; No Material Adverse Effect.

 

 (a)          The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

-64-

 

(b)          The unaudited Consolidated balance sheet of the Borrower and its Subsidiaries (other than the Subsidiaries acquired pursuant to the Effective Date Acquisition) dated June 30, 2014, and the related Consolidated statements of income or operations, Shareholders’ Equity and cash flows for the Fiscal Quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

 

(c)          Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

(d)          To the best knowledge of the Borrower, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements that has resulted in or could reasonably be expected to result in a misstatement in any material respect, (i) in any financial information delivered or to be delivered to the Agent or the Lenders, (ii) of covenant compliance calculations provided hereunder or (iv) of the assets, liabilities, financial condition or results of operations of the Borrower and its Subsidiaries on a Consolidated basis.

 

(e)           The Consolidated forecasted balance sheet and statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 6.01(c) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Loan Parties’ best estimate of its future financial performance, it being recognized by the Lenders that projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by the projections may differ from the projected results included in such projections.

 

5.06        Litigation There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

 

5.07        No Default No Loan Party or any Subsidiary is in default under or with respect to, any Material Contract or any Material Indebtedness. As of the Effective Date, no Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

5.08        Ownership of Property; Liens

 

(a)          Each of the Loan Parties has good marketable title in fee simple to or valid leasehold interests or use rights in, all Real Estate necessary in the ordinary conduct of its business, except for (i) Permitted Encumbrances, and (ii) such defects in, or failures to have, title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Loan Parties and each of their Subsidiaries has good and marketable title to, or valid licenses to use, all personal property and assets material to the ordinary conduct of its business except for such defects in, or failures to have, title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

-65-

 

(b)          Schedule 5.08(b)(1) sets forth the address (including street address, county and state) of all Real Estate (excluding Leases, easements, rights of way and similar rights) that is owned by the Loan Parties, together with a list of the holders of any mortgage or other Lien thereon as of the Effective Date. Schedule 5.08(b)(2) sets forth the address (including street address, county and state) of all material Leases of the Loan Parties, together with the name of each lessor and its contact information with respect to each such Lease as of the Effective Date. Each of such Leases is in full force and effect and the Loan Parties are not in default of any material term thereof.

 

5.09         Environmental Compliance.

 

(a)          No Loan Party (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, except, in each case (i) to (iv), as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)          Except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) none of the properties currently owned or operated by any Loan Party is listed or, to the knowledge of the Loan Parties proposed for listing, on the NPL or on the CERCLIS; (ii) to the knowledge of the Loan Parties, there are no underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being treated, stored or disposed on any property currently owned or operated by any Loan Party; (iii) there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party; and (iv) Hazardous Materials have not been released, discharged or disposed of on any property currently owned or operated by any Loan Party in violation of any Environmental Law.

 

(c)          No Loan Party is undertaking, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and to the knowledge of the Loan Parties, all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently owned or operated by any Loan Party have been disposed of in a manner not reasonably expected to have a Material Adverse Effect.

 

5.10         Insurance The properties of the Loan Parties are insured with financially sound and reputable insurance companies which are not Affiliates of the Loan Parties, in such, with such deductibles and covering such risks (including, without limitation, workmen’s compensation, public liability, business interruption, property damage and directors and officers liability insurance) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Loan Parties operates. Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Loan Parties as of the Effective Date. As of the Effective Date, each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

 

-66-

 

5.11         Taxes The Loan Parties and each of their Subsidiaries (a) have filed all United States federal, state and other material tax returns and reports required to be filed, and (b) have paid all United States federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those (i) which are being contested in good faith by appropriate proceedings being diligently conducted, for which adequate reserves have been provided in accordance with GAAP or (ii) as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no proposed tax assessment against any Loan Party that would, if made, have a Material Adverse Effect. No Loan Party or any Subsidiary thereof is a party to any tax sharing agreement.

 

5.12         ERISA Compliance.

 

(a)          Each Pension Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other U.S. federal or state laws, except where any failure could not reasonably be expected to have a Material Adverse Effect. Each Pension Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the Internal Revenue Service. To the knowledge of the Borrower, nothing has occurred that would prevent or cause the loss of such tax-qualified status.

 

(b)          There are no pending or, to the knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no non-exempt prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(c)           (i) No ERISA Event has occurred, and neither the Borrower nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan; (ii) the Borrower and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained; (iii) neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (iv) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (v) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan, except, in each of clauses (i) through (v), as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5.13         Subsidiaries; Equity Interests As of the Effective Date, the Loan Parties have no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary. All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except for those Liens created under the Security Documents, Liens permitted by clause (o) of the definition of Permitted Encumbrances and Permitted Encumbrances having priority over the Lien of the Credit Parties under applicable Laws. Except as set forth in Schedule 5.13, there are no outstanding rights to purchase any Equity Interests in any Subsidiary. As of the Effective Date, the Loan Parties have no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the Loan Parties have been validly issued, and are fully paid and non-assessable and are owned in the amounts specified on Part (c) of Schedule 5.13 free and clear of all Liens except for those Liens created under the Security Documents and Permitted Encumbrances having priority over the Liens of the Credit Parties under applicable Laws. The copies of the Organization Documents of each Loan Party and each amendment thereto provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

 

-67-

 

5.14        Margin Regulations; Investment Company Act.

 

(a)          No Loan Party is engaged or will be engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. None of the proceeds of the Loans shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any margin stock or for any other purpose that might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulations T, U, or X issued by the FRB.

 

(b)          None of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

 

5.15        Disclosure Each Loan Party and each of their Subsidiaries has disclosed to the Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, in each case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. As of the Effective Date, no report, financial statement, certificate or other information relating to the Borrower or any of its Subsidiaries (other than any information of a general economic or industry specific nature and third party consultants reports) furnished by or on behalf of any Loan Party to the Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished prior to the execution hereof or thereof) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, after giving effect to any supplements thereto, not materially misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

5.16        Compliance with Laws Each of the Loan Parties and each of their Subsidiaries is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

5.17        Intellectual Property; Licenses, Etc. The Loan Parties and each of their Subsidiaries own, or are licensed to use, all Material Intellectual Property, and the use thereof by the Loan Parties or their Subsidiaries does not infringe upon the rights of any other Person. All items of Material Intellectual Property as of the Effective Date are: (a) subsisting and have not been adjudged invalid or unenforceable, in whole or part; and (b) to the knowledge of the Loan Parties, valid, in full force and effect and not in known conflict with the rights of any Person. The Loan Parties have made all filings and recordations necessary in the exercise of reasonable and prudent business judgment to protect their interests in the Material Intellectual Property in the United States Patent and Trademark Office, and the United States Copyright Office, as appropriate, including, the performance of all acts and the payment of all required fees and taxes to maintain each and every item of Material Intellectual Property in full force and effect. As of the Effective Date, no litigation is pending or, to the knowledge of any Loan Party, threatened which contains allegations respecting the validity, enforceability, infringement or ownership of any of the Material Intellectual Property. No Loan Party is in breach of or default under the provisions of any of the Material Licenses, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which reasonably could be expected to result in, either individually or in the aggregate, a Material Adverse Effect.

 

-68-

 

5.18         Reserved.

 

5.19         Security Documents.

 

 The Security Agreement creates in favor of the Agent, for the benefit of the Credit Parties, a valid and enforceable security interest in the Collateral (as defined in the Security Agreement), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. The UCC financing statements and other filings delivered by the Loan Parties on the Effective Date are in appropriate form for filing in the applicable offices. Upon such filings and/or the obtaining of “control” (as such term is defined in the UCC) to the extent required by the Loan Documents (and, in the case of Intellectual Property that is issued by, or registered or applied for in, the United States Copyright Office and constituting Collateral, the filing and recordation of the Copyright Security Agreement with the United States Copyright Office, the Agent will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected in the United States by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the UCC) (it being understood that subsequent recordings in the United States Copyright Office may be necessary to perfect a Lien on registered Copyrights acquired by the Loan Parties after the date hereof).

 

5.20         Solvency

 

After giving effect to the transactions contemplated by this Agreement, and before and after giving effect to each Revolving Credit Extension, the Loan Parties, on a Consolidated basis, are Solvent. No transfer of property has been or will be made by any Loan Party and no obligation has been or will be incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party.

 

5.21         Deposit Accounts.

 

Annexed hereto as Schedule 5.21 is a list of all Deposit Accounts maintained by the Loan Parties as of the Effective Date, which Schedule includes, with respect to each Deposit Account (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; (iii) a contact person at such depository, and (iv) the identification of each Blocked Account Bank.

 

5.22         Brokers No broker or finder brought about the obtaining, making or closing of the Loans or transactions contemplated by the Loan Documents, and no Loan Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

 

-69-

 

5.23         Material Contracts Schedule 5.23 sets forth all Material Contracts (other than Material Licenses set forth on Schedule 5.17) to which any Loan Party is a party or is bound as of the Effective Date. The Loan Parties have delivered true, correct and complete copies of such Material Contracts to the Agent on or before the Effective Date. The Loan Parties are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of default under, or of the intention of any other party thereto to terminate, any Material Contract.

 

ARTICLE VI
AFFIRMATIVE COVENANTS

 

So long as any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), the Loan Parties shall and shall cause their Subsidiaries to:

 

6.01        Financial Statements. Deliver to the Agent, in form and detail satisfactory to the Agent:

 

(a)          as soon as available, but in any event within 90 days after the end of each Fiscal Year of the Borrower (commencing with the fiscal year ended December 31, 2014), a Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

 

(b)          as soon as available, but in any event within 45 days after the end of each Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the Fiscal Quarter ended (x) June 30, 2014 with respect to the Borrower and its Subsidiaries other than those Subsidiaries acquired pursuant to the Effective Date Merger, and (y) September 30, 2014 with respect to the Borrower and its Subsidiaries after giving effect to the Effective Date Acquisition), a Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Quarter and for the portion of the Borrower’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Quarter of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(c)          solely to the extent prepared by the Borrower in the ordinary course of business, then as soon as available, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of each Fiscal Month of each Fiscal Year of the Borrower, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Month, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower and its Subsidiaries as of the end of such Fiscal Month in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

-70-

 

(d)          as soon as available, but in any event at least 30 days before the end of each Fiscal Year of the Borrower, forecasts prepared by management of the Borrower, representing the Borrower’s good faith estimate of future financial performance and based on assumptions believed by the Borrower to be fair and reasonable in light of current market conditions and consistent with historical practices and otherwise in form and based upon assumptions reasonably satisfactory to the Agent, of the consolidated balance sheets and statements of income or operations and cash flows, and projections of royalty revenues, of the Borrower and its Subsidiaries on a quarterly (or, solely to the extent prepared by the Borrower in the ordinary course of business, monthly) basis for the immediately following Fiscal Year (including the Fiscal Year in which the Maturity Date occurs), and as soon as available, any significant revisions to such forecast with respect to such Fiscal Year.

 

6.02       Certificates; Other Information. Deliver to the Agent, in form and detail satisfactory to the Agent:

 

(a)          concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its Registered Public Accounting Firm certifying such financial statements and stating that in making the examination necessary for their certification of such financial statements, such Registered Public Accounting Firm has not obtained any knowledge of the existence of any Default or Event of Default under Section 7.15 hereof or, if any such Default or Event of Default shall exist, stating the nature and status of such event;

 

(b)          concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the Fiscal Year ended December 31, 2014), (i) a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide a statement of reconciliation conforming such financial statements to GAAP and (ii) a copy of management’s discussion and analysis with respect to such financial statements;

 

(c)          concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), financial statements with respect to any Excluded Subsidiaries of the Loan Parties;

 

(d)          promptly upon receipt, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by its Registered Public Accounting Firm in connection with the accounts or books of the Loan Parties, or any audit of any of them, including, without limitation, specifying any Internal Control Event;

 

(e)          promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any national securities exchange;

 

-71-

 

(f)          as soon as available, but in any event within 15 days after the end of each Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the Fiscal Quarter ended June 30, 2014), an updated report of the royalty revenue summary by brand and related licensing detail with respect to the Material Licenses of the Loan Parties and any Subsidiary, as prepared on a trailing twelve month basis and including comparisons to the projected royalty revenue of the Loan Parties delivered as part of the projections set forth in Section 6.01(d) above;

 

(g)          prior to the consummation of any Permitted Acquisition, the Borrower shall provide the Agent with an updated calculation of the Loan to Value Ratio covenant as set forth in Section 7.15(b) hereof and Section 7.15(b) of the Second Lien Credit Agreement;

 

(h)          as soon as available, but in any event within 15 days after the end of each Fiscal Year of the Borrower, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for the Loan Parties and containing such additional information as the Agent, or any Lender through the Agent, may reasonably specify;

 

(i)          promptly after the Agent’s request therefor, copies of all Material Contracts and documents evidencing Material Indebtedness;

 

(j)          promptly, and in any event within five Business Days after receipt thereof by the Borrower, copies of each notice or other correspondence received from any Governmental Authority (including, without limitation, the SEC (or comparable agency in any applicable non-U.S. jurisdiction)) concerning any proceeding with, or investigation or possible investigation or other inquiry by such Governmental Authority regarding financial or other operational results of any Loan Party or any other matter which, if adversely determined, could reasonably expected to have a Material Adverse Effect;

 

(k)          promptly, any material amendments, modifications or waivers with respect to any Material Contract or Material License;

 

(l)          promptly, any Material License entered into by a Loan Party or its Subsidiary; and

 

(m)          promptly, such additional information regarding the business affairs, financial condition or operations of any Loan Party, or compliance with the terms of the Loan Documents, as the Agent or any Lender may from time to time reasonably request.

 

Documents required to be delivered pursuant to Section 6.01(a) or (b), or Section 6.02 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Agent or such Lender and (ii) the Borrower shall notify the Agent (by telecopier or electronic mail) of the posting of any such documents and provide to the Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

-72-

 

6.03        Notices Promptly notify the Agent:

 

(a)          of the occurrence of any Default or Event of Default;

 

(b)          of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect,

 

(c)          of any breach or non-performance of, or any default under, a Material Contract or with respect to Material Indebtedness of any Loan Party that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(d)          of any dispute, litigation, investigation, proceeding or suspension between any Loan Party and any Governmental Authority, or the commencement of, or any material development in, any litigation or proceeding affecting any Loan, including pursuant to any applicable Environmental Laws, in each case that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(e)          of the occurrence of any ERISA Event that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(f)          of any change in the Borrower’s senior executive officers;

 

(g)          of the discharge by the Borrower of its present Registered Public Accounting Firm or any withdrawal or resignation by such Registered Public Accounting Firm;

 

(h)          of the filing of any Lien for unpaid Taxes against any Loan Party that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(i)          of the Borrower’s obtaining knowledge that any application or registration relating to any Material Intellectual Property (whether now or hereafter existing) may become abandoned or dedicated, or of any material adverse determination or material development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding Borrower’s ownership of any Material Intellectual Property; and

 

(j)          of the failure to renew, or the cancelation of, any Material License.

 

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.

 

Documents required to be delivered pursuant to this Section 6.03 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent); provided that the Borrower shall notify the Agent (by telecopier or electronic mail) of the posting of any such documents and provide to the Agent by electronic mail electronic versions (i.e., soft copies) of such documents.

 

-73-

 

6.04         Payment of Obligations Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, (b) all lawful claims (including, without limitation, claims of landlords, warehousemen, customs brokers, freight forwarders, consolidators, and carriers) which, if unpaid, would by Law become a Lien upon its property (other than Permitted Encumbrances); and (c) all Material Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except, in each case, where (i) the validity or amount thereof is being contested in good faith by appropriate proceedings and such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP, or (ii) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

 

6.05         Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 7.04 or 7.05; and (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. Notwithstanding the foregoing, no provision herein or in any other Loan Document shall be deemed to restrict the dissolution of William Rast Europe Holdings, LLC or any Immaterial Subsidiary, and such dissolution is expressly permitted.

 

6.06         Maintenance of Properties; Material Intellectual Property

 

(a)           (i) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear, casualty and condemnation excepted; and (ii) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(b)          (i) Maintain all Material Intellectual Property in order that such Material Intellectual Property will be (A) subsisting and not adjudged invalid or unenforceable, in whole or part and (B) valid, in full force and effect and not in known conflict with the rights of any Person; (ii) make all filings and recordations necessary in the exercise of reasonable and prudent business judgment to protect such Loan Party’s interest in the Material Intellectual Property in the United States Patent and Trademark Office and the United States Copyright Office; (iii) perform all acts and pay all required fees and taxes to maintain each and every item of the Material Intellectual Property in full force and effect; and (iv) use commercially reasonable efforts to enforce all material provisions relating to quality assurance of products and services set forth in any Material License. For clarity, if any Loan Party determines, in its reasonable judgment, that any items of Intellectual Property which do not constitute Material Intellectual Property is no longer used or useful or of material value, such Loan Party may abandon, cancel or cease to protect such non- Material Intellectual Property.

 

6.07         Maintenance of Insurance (a) Maintain with financially sound and reputable insurance companies reasonably acceptable to the Agent and not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and operating in the same or similar locations or as is required by Law, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and as are reasonably acceptable to the Agent.

 

-74-

 

(b)          Cause each such policy referred to in clause (a) above (i) to be endorsed to name the Agent as an additional insured or a loss payee, as applicable, in a form reasonably satisfactory to the Agent, and (ii) to provide that it shall not be canceled, modified or not renewed (x) by reason of nonpayment of premium except upon not less than ten (10) days’ prior written notice thereof by the insurer to the Agent (giving the Agent the right to cure defaults in the payment of premiums) or (y) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Agent.

 

(c)          Deliver to the Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Agent, including an insurance binder) together with evidence satisfactory to the Agent of payment of the premium therefor.

 

None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07. Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees. The designation of any form, type or amount of insurance coverage by any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.

 

6.08         Compliance with Laws Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Loan Parties in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws, and (c) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

6.09         Books and Records; Accountants.

 

 (a)          Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties.

 

 (b)          At all times retain Grant Thornton LLP, any other Registered Public Accounting Firm of nationally recognized standing, or another Registered Public Accounting Firm which is reasonably satisfactory to the Agent, and, subject to the limitation set forth in Section 6.10 below, instruct such Registered Public Accounting Firm to cooperate with, and be available to, the Agent or its representatives to discuss the Loan Parties’ financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such Registered Public Accounting Firm, as may be raised by the Agent.

 

-75-

 

6.10         Inspection Rights; Appraisals of Intellectual Property.

 

 (a)          Permit representatives and independent contractors, including consultants, of the Agent to visit and inspect, under guidance of officers of the Borrower, any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its officers, and Registered Public Accounting Firm, all at the expense of the Loan Parties and at such reasonable times during normal business hours and as often as may be reasonably desired (but absent the existence of a Default or Event of Default, the Borrower shall not be required to pay for more than two such visits and inspections in any calendar year) upon reasonable advance notice to the Borrower; provided, however, that when a Default or an Event of Default exists the Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Loan Parties as often as it deems appropriate and at any time during normal business hours and without advance notice.

 

 (b)          Upon the request of the Agent after reasonable prior notice, permit the Agent or professionals (including appraisers) retained by the Agent to conduct (x) up to one (1) appraisal of the trade names and brands and other Intellectual Property of the Loan Parties in each calendar year at the Loan Parties’ expense and (y) up to one (1) additional appraisal of the trade names and brands and other Intellectual Property of the Loan Parties in each calendar year at the Lenders’ expense.

 

6.11         Additional Loan Parties Notify the Agent at the time that any Person becomes a domestic Subsidiary, and promptly thereafter (and in any event within fifteen (15) Business Days or such longer period as may be agreed to by the Administrative Agent in its reasonable discretion), cause any such Person (a) which does not qualify as a Non-Guarantor Subsidiary to (i) become a Loan Party by executing and delivering to the Agent a Joinder to this Agreement or a Joinder to the Facility Guaranty or such other documents as the Agent shall deem appropriate for such purpose, (ii) grant a Lien to the Agent on such Person’s Intellectual Property and other assets of the same type that constitute Collateral (other than for the avoidance of doubt, Real Estate and other Excluded Property) to secure the Obligations, and (iii) deliver to the Agent documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), and (b) if any Equity Interests or Indebtedness of such Person (other than an Excluded Subsidiary or any Subsidiary acquired in connection with the Identified Transaction) are owned by or on behalf of any Loan Party, to pledge such Equity Interests and promissory notes evidencing such Indebtedness (except that, if such Subsidiary is a CFC, the Equity Interests of such Subsidiary to be pledged shall be limited to 65% of the outstanding voting Equity Interests of such Subsidiary and 100% of the non-voting Equity Interests of such Subsidiary, in each case in form, content and scope reasonably satisfactory to the Agent (it being understood that in no event shall the Borrower be required to take any action outside of the United States in order to create or perfect any security interest in any Equity Interests of a foreign Subsidiary and no foreign law security or pledge agreements, deeds, filings or searches will be required). In no event shall compliance with this Section 6.11 waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.11 if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute, with respect to any Subsidiary, an approval of such Person as a Borrower.

 

6.12         Cash Management.

 

 (a)          On or prior to the day which is ninety (90) days following the Effective Date (or such longer period as may be agreed to by the Administrative Agent in its reasonable discretion), cause all Deposit Accounts that are concentration and controlled disbursement accounts of the Loan Parties to be maintained with Bank of America pursuant to such documentation as the Agent may reasonably request, including, without limitation, a Blocked Account Agreement satisfactory in form and substance to the Agent with respect to each such Deposit Account (collectively, the “Blocked Accounts”); provided that, so long as no Cash Control Event has occurred and is continuing, the Borrower shall be permitted to maintain up to $1,000,000 in the aggregate in any disbursement account(s) which are not held by Bank of America (such account(s), the “Excluded Accounts”); it being understood that no Blocked Account Control Agreements or other control agreements shall be required in respect of the Excluded Accounts, provided that the aggregate amount on deposit in the Excluded Accounts does not exceed the amounts set forth above.

 

-76-

 

(b)          After the occurrence and during the continuance of a Cash Control Event, cause the ACH or wire transfer to the collection account maintained by the Agent at Bank of America (the “Collection Account”), no less frequently than daily, all cash receipts and collections received by each Loan Party from all sources, whether or not constituting Collateral, including, without limitation, the then entire ledger balance of each Blocked Account, Excluded Account or any other Deposit Account of the Loan Parties (in each case, net of any minimum balance, not to exceed $2,500.00 per account, as may be required to be kept in the subject Blocked Account or other Deposit Account by the applicable Blocked Account Bank or depository).

 

(c)          The Collection Account shall at all times be under the sole dominion and control of the Agent. The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Collection Account, (ii) the funds on deposit in the Collection Account shall at all times be collateral security for all of the Obligations and (iii) during the continuance of a Cash Control Event, the funds on deposit in the Collection Account shall be applied to the repayment of the Obligations as provided in this Agreement. In the event that, notwithstanding the provisions of this Section 6.12, any Loan Party receives or otherwise has dominion and control of any such cash receipts or collections, such receipts and collections shall be held in trust by such Loan Party for the Agent, shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Collection Account or dealt with in such other fashion as such Loan Party may be instructed by the Agent.

 

(d)          Without limiting the provisions of this Section 6.12, during the continuance of a Cash Control Event, the Borrower shall maintain a minimum cash balance at all times of not less than $5,000,000 in a Blocked Account. Such amounts shall be used solely for such purposes as the Agent may agree in connection with the realization on the Collateral.

 

(e)          Upon the request of the Agent, cause bank statements and/or other reports to be delivered to the Agent not less often than monthly, accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

 

6.13         Information Regarding the Collateral.

 

Furnish to the Agent at least thirty (30) days prior written notice of any change in: (i) any Loan Party’s; (ii) the location of any Loan Party’s chief executive office, its principal place of business or any office in which it maintains books or records relating to Collateral owned by it; (iii) any Loan Party’s organizational structure or jurisdiction of incorporation or formation; or (iv) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its state of organization. The Loan Parties shall not effect or permit any change referred to in the preceding sentence unless all filings have been made or are made substantially concurrently therewith under the UCC or otherwise that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral for its own benefit and the benefit of the other Credit Parties.

 

-77-

 

6.14         Environmental Laws.

 

 Except in each case, where the failure to do so would not, individually or in the aggregate reasonably be expected to result in a Material Adverse Effect, (a) conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain and renew all material environmental permits necessary for its operations and properties; and (c) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, provided, however, that neither a Loan Party nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Loan Parties with respect to such circumstances in accordance with GAAP.

 

6.15         Further Assurances.

 

(a)          Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), that may be required under any Law, or which the Agent may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties (subject to the rights of the Loan Parties to dispose of the Collateral to the extent permitted herein). The Loan Parties also agree to provide to the Agent, from time to time upon request, evidence satisfactory to the Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

 

(b)          If any material assets of the type included in the Collateral as of the Effective Date (excluding for the avoidance of doubt, any Real Estate or any other Excluded Property) are acquired by any Loan Party after the Effective Date (other than assets constituting Collateral under the Security Documents that become subject to the perfected first-priority Lien under the Security Documents upon acquisition thereof and other than, for the avoidance of doubt, any Equity Interests of any Excluded Subsidiary or Equity Interests of a CFC in excess of the amount required to be pledged pursuant to Section 6.11), notify the Agent thereof, and the Loan Parties will cause such assets to be subjected to a Lien securing the Obligations and will take such actions as shall be necessary or shall be requested by any Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section 6.15, all at the expense of the Loan Parties (it being understood that in no event shall any Loan Party be required to take any action to create or perfect any security interest in any collateral outside of the United States and no foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches shall be required). In no event shall compliance with this Section 6.15(b) waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.15(b) if such transaction was not otherwise expressly permitted by this Agreement.

 

6.16         Material Contracts (a) Perform and observe all the terms and provisions of each Material License and each other Material Contract to be performed or observed by it, (b) maintain each such Material License and each other Material Contract in full force and effect except to the extent such Material License or other Material Contract is no longer used or useful in the conduct of the business of the Loan Parties in the ordinary course of business, consistent with past practices or unless such Material License is terminated and replaced with another Material License in the ordinary course of business, (c) enforce each such Material License and each other Material Contract in accordance with its terms, and (d) cause each of its Subsidiaries to do the foregoing, except, in each case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

 

-78-

 

6.17         Right of First Refusal.

 

In connection with any Indebtedness to be incurred by a Loan Party or an Excluded Subsidiary to finance a Permitted Acquisition (except for Permitted Acquisitions for total consideration of less than $10,000,000 which are paid from the Loan Parties’ cash on hand and not from proceeds of Indebtedness), provide the Lenders with a bona fide right to provide the financing for such Permitted Acquisition pursuant to an Incremental Facility pursuant to Section 2.14 hereof or otherwise on substantially the same terms as set forth herein or on such other terms as may be mutually agreed among the Lenders and the Loan Parties (in each case acting in good faith). In the event that (a) the Lenders and the Loan Parties, after acting diligently and in good faith, are unable to reach agreement with respect to the commercial terms of such financing or (b) the Lenders decline or fail to respond to the offer to provide financing for such Permitted Acquisition, in each case within ten (10) Business Days after receipt of the request from the Loan Parties, the Loan Parties shall have no further obligations pursuant to this Section 6.17 and shall be permitted to pursue financing for the applicable Permitted Acquisition from alternate sources.

 

6.18        Post-Closing Items.

 

(a)          Within ninety (90) days of the Effective Date (or such longer period as may be agreed by the Agent in its reasonable discretion), the Loan Parties shall cause to be obtained the Blocked Account Agreements required pursuant to Section 6.12 hereof.

 

(b)          Within thirty (30) days of the Effective Date (or such longer period as may be agreed by the Agent in its reasonable discretion), the Loan Parties shall cause to be delivered to the Agent all endorsements to the insurance policies in favor of the Agent as are required under the Loan Documents.

 

ARTICLE VII
NEGATIVE COVENANTS

 

So long as any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), no Loan Party shall nor shall it permit any of its Subsidiaries to:

 

7.01         Liens Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired or sign or file or suffer to exist under the UCC or any similar Law or statute of any jurisdiction a financing statement that names any Loan Party as debtor; sign or suffer to exist any security agreement authorizing any Person thereunder to file such financing statement; sell any of its property or assets subject to an understanding or agreement (contingent or otherwise) to repurchase such property or assets with recourse to it; or assign or otherwise transfer any accounts or other rights to receive income, other than, as to all of the above, Permitted Encumbrances.

 

7.02         Investments Make any Investments, except Permitted Investments.

 

7.03         Indebtedness; Disqualified Stock; Equity Issuances

 

 (a)          Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Indebtedness, except Permitted Indebtedness;

 

-79-

 

(b)          Issue Disqualified Stock;

 

(c)          Issue and sell any Equity Interests (other than Disqualified Stock) except for (i) with respect to the Borrower Qualified Stock so long as no Change of Control would result therefrom; and (ii) with respect to any Subsidiary of the Borrower (A) stock splits, stock dividends and additional issuances of Equity Interests which do not decrease the percentage ownership of the Borrower or any Subsidiary of the Equity Interests of such Subsidiary, (B) Subsidiaries of the Borrower formed or acquired after the Effective Date may issue Equity Interests to (A) the Borrower or the direct or indirect Subsidiary of the Borrower which is to own such Equity Interests or (B) to any other Person with an ownership interest in such Subsidiary in each case in proportion to its ownership interest in such Subsidiary, (C) Subsidiaries of the Borrower may issue (1) directors qualifying shares to the extent required by applicable Laws and (2) shares to local nationals to the extent required by applicable Laws, (D) issuances in connection with the Transaction and any Permitted Acquisition and (E) any Subsidiary of the Borrower may issue and sell Equity Interests in connection with any Permitted Disposition. All Equity Interests issued to any Loan Party shall, to the extent required by any Security Document, be pledged as Collateral pursuant to the applicable Security Document; or

 

(d)          Permit any Excluded Subsidiary to create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to any Indebtedness, except Indebtedness of an Excluded Subsidiary with respect to the purchase price for any Permitted Acquisition if the Lenders have determined not to provide such Indebtedness or have failed to respond to exercise their right of first refusal with respect to providing such Indebtedness as set forth in Section 6.17.

 

7.04        Fundamental Changes Merge, dissolve, liquidate, consolidate with or into another Person, (or agree to do any of the foregoing), except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom:

 

(a)          any Subsidiary which is not a Loan Party (other than an Excluded Subsidiary) may merge with (i) a Loan Party, provided that the Loan Party shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries which are not Loan Parties, provided that when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person;

 

(b)          any Excluded Subsidiary may merge with any other Excluded Subsidiary;

 

(c)          any Subsidiary which is a Loan Party may merge into any Subsidiary which is a Loan Party or into the Borrower, provided that in any merger involving the Borrower, the Borrower shall be the continuing or surviving Person;

 

(d)          the Loan Parties may consummate the transactions contemplated by the Merger Agreement; and

 

(e)          in connection with a Permitted Acquisition, any Subsidiary (other than an Excluded Subsidiary) of a Loan Party may merge with or into or consolidate with any other Person or permit any other Person to merge with or into or consolidate with it; provided that (i) the Person surviving such merger shall be a wholly-owned Subsidiary of a Loan Party and such Person shall become a Loan Party in accordance with the provisions of Section 6.11 hereof, and (ii) in the case of any such merger to which any Loan Party is a party, such Loan Party is the surviving Person.

 

-80-

 

7.05        Dispositions Make any Disposition, except Permitted Dispositions.

 

7.06        Restricted Payments Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:

 

(a)          each Subsidiary of a Loan Party may make Restricted Payments to any Loan Party or to another Subsidiary of the Borrower which is the immediate parent of the Subsidiary making such Restricted Payment;

 

(b)          the Loan Parties and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

 

(c)          if the Restricted Payments Conditions are satisfied, the Borrower may declare or pay cash dividends to its stockholders;

 

(d)          any non-wholly-owned Subsidiary of the Borrower may make Restricted Payments (which may be in cash) to its shareholders, members or partners generally, so long as the Borrower or its respective Subsidiary which owns the Equity Interest in the Subsidiary making such Restricted Payment receives at least its proportionate share thereof (based upon its relative holding of the Equity Interest in the Subsidiary making such Restricted Payment and taking into account the relative preferences, if any, of the various classes of Equity Interests of such Subsidiary);

 

(e)          the Borrower may acquire Equity Interests in connection with the exercise of stock options, warrants or other convertible or exchangeable securities to the extent such Equity Interests represent a portion of the exercise price of those stock options, warrants or other convertible or exchangeable securities by way of cashless exercise;

 

(f)          the Borrower may redeem, repurchase or otherwise acquire for value, outstanding Equity Interests of the Borrower (or options or warrants to purchase Equity Interests of the Borrower) following the death, disability or termination of employment of officers, directors or employees of the Borrower or any of its Subsidiaries, provided that (x) the aggregate amount paid by the Borrower in cash in respect of all such redemptions or purchases shall not exceed $10,000,000 in respect of all such redemptions, purchases and payments in any twenty-four month period and (y) at the time of any cash Dividend, purchase or payment permitted to be made pursuant to this Section 7.06(f), no Default or Event of Default shall then exist or result therefrom; and

 

(g)          the Borrower may pay (x) all costs, fees and expenses in connection with (i) the Transactions in an amount not to exceed $7,500,000 in the aggregate and (ii) any Permitted Acquisition after the Effective Date, in an amount not to exceed $5,000,000 in the aggregate for each Fiscal Year and (y) management fees to the extent permitted pursuant to Section 7.09(g) hereof.

 

-81-

 

7.07        Prepayments of Indebtedness Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness for borrowed money, except (a) (i) as long as no Default or Event of Default then exists, regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of Permitted Indebtedness (other than the Second Lien Facility), (ii) regularly scheduled payments under the Second Lien Facility and, so long as no Default or Event of Default then exists, prepayments and other repurchases, redemptions or defeasances of the Second Lien Facility and any Permitted Refinancing thereof, in each case not in violation of the Second Lien Intercreditor Agreement, (b) the purchase, redemption, defeasance or other acquisition or retirement of any Indebtedness of the Borrower or any Subsidiary or of any Equity Interests of the Borrower or any Subsidiary in exchange for, or out of the net cash proceeds of a contribution to the common equity of the Borrower or any Subsidiary, or a substantially concurrent sale of, Equity Interests (other than Disqualified Stock) of the Borrower or any Subsidiary and (c) the purchase, redemption, defeasance or other acquisition or retirement of Indebtedness with the net cash proceeds from an incurrence of any Permitted Refinancing thereof.

 

7.08        Change in Nature of Business

 

Engage in any line of business substantially different from the business conducted by the Loan Parties on the Effective Date or any business substantially related or incidental thereto.

 

7.09        Transactions with Affiliates Enter into, renew, extend or be a party to any transaction of any kind with any Affiliate of any Loan Party, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Loan Parties or such Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to:

 

(a)          a transaction between or among the Loan Parties;

 

(b)          dividends may be paid to the extent provided in Section 7.06;

 

(c)          loans may be made and other transactions may be entered into by the Borrower and its Subsidiaries to the extent permitted by Sections 7.02, 7.03 and 7.04;

 

(d)          customary fees, indemnities and reimbursements may be paid to non-officer directors of the Borrower and its Subsidiaries;

 

(e)          the Borrower and its Subsidiaries may enter into, and may make payments under, employment agreements, employee benefits plans, stock option plans, indemnification provisions and other similar compensatory arrangements with officers, employees and directors of the Borrower and its Subsidiaries in the ordinary course of business;

 

(f)          Subsidiaries of the Borrower may pay management fees, licensing fees and similar fees to the Borrower or to any wholly-owned domestic Subsidiary of the Borrower that is a Guarantor; and

 

(g)          The Borrower may pay (x) costs, fees and expenses in connection with (i) the Transactions in an amount not to exceed $7,500,000 in the aggregate and (ii) any Permitted Acquisition after the Effective Date, in an amount not to exceed $5,000,000 in the aggregate for any Fiscal Year and (y) management fees to Tengram Capital Management L.P. in the ordinary course of business and consistent with prior practices.

 

-82-

 

7.10         Burdensome Agreements Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary (other than an Excluded Subsidiary) to make Restricted Payments or other distributions to any Loan Party or to otherwise transfer property to or invest in a Loan Party, (ii) of any Subsidiary (other than an Excluded Subsidiary) to Guarantee the Obligations, (iii) of any Subsidiary (other than an Excluded Subsidiary) to make or repay loans to a Loan Party, or (iv) of the Loan Parties to create, incur, assume or suffer to exist Liens on property of such Person in favor of the Agent; provided, however, that this clause (iv) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under clauses (c), or (d) of the definition of Permitted Indebtedness solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.

 

7.11         Use of Proceeds Use the proceeds of any Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose, or (b) for any purposes other than (i) the payment of the purchase price and transaction costs in connection with the Effective Date Acquisition, (ii) to refinance the Indebtedness of the Borrower under the Existing Credit Agreement and the existing Second Lien Facility (as defined in the Existing Credit Agreement), (iii) to finance Capital Expenditures of the Loan Parties, and (iv) for general corporate purposes, in each case to the extent expressly permitted under Law and the Loan Documents.

 

7.12         Amendment of Material Documents; Material Licenses.

 

 (a)          Amend, modify or waive any of a Loan Party’s rights under (i) its Organization Documents in a manner materially adverse to the Credit Parties, (ii) the Second Lien Credit Agreement or any other documentation relating to the Second Lien Facility that would shorten the maturity thereof or otherwise, when taken as a whole, be materially adverse to the Credit Parties or in a manner that would violate the Second Lien Intercreditor Agreement, or (iii) any Material License which would have a material adverse impact on the Lenders (as reasonably determined by the Agent), without the prior express written consent of the Agent.

 

 (b)          Enter into any new Material Licenses unless such require each such licensee thereunder to pay any fees and other consideration thereunder into a Blocked Account.

 

7.13         Fiscal Year.

 

Change the Fiscal Year of any Loan Party, or the accounting policies or reporting practices of the Loan Parties, except as required by GAAP.

 

7.14         Deposit Accounts.

 

Open new Deposit Accounts (other than the Excluded Account) unless the Loan Parties shall have delivered to the Agent appropriate Blocked Account Agreements as required pursuant to Section 6.12 and otherwise satisfactory to the Agent.

 

7.15         Financial Covenants.

 

 (a)          Positive Net Income. Permit Consolidated Positive Net Income, as calculated on a quarterly basis commencing with the Fiscal Quarter of the Borrower ending June 30, 2014 (provided that, for the Fiscal Quarter ending June 30, 2014, Consolidated Positive Net Income shall be calculated without giving effect to the Effective Date Acquisition) to be equal to or less than $0.

 

-83-

 

(b)          Loan to Value Ratio. Permit the Total Outstandings to be greater than (i) from the Effective Date through September 30, 2014, 50.6%, and (ii) thereafter, fifty (50%) percent, in each case of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent with respect to such registered Trademarks pursuant to Section 6.10(b).

 

ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES

 

8.01        Events of Default Any of the following shall constitute an Event of Default:

 

(a)          Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as required to be paid, any amount of principal of any Loan, or (ii) within three (3) Business Days of any due date therefor, interest on any Loan, any fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or

 

(b)          Specific Covenants. Any Loan Party fails to perform or observe any term, covenant or agreement contained in any of (i) Sections 6.03(a), 6.05(a), 6.06(b)(i)(A), 6.17, 6.18 or Article VII, or (ii) Sections 6.01, 6.02, or 6.03 (other than 6.03(a)) and such failure continues for 10 days, (iii) Section 6.06(b)(i)(B) and (ii) – (iv) and such failure continues for 10 days or (iv) Sections 6.11 or 6.13 and such failure continues for 15 days; or

 

(c)          Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or

 

(d)          Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

 

(e)          Cross-Default. Any Loan Party (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness, or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or

 

(f)          Insolvency Proceedings, Etc. Any Loan Party institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or a proceeding shall be commenced or a petition filed, without the application or consent of such Person, seeking or requesting the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for 45 calendar days or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 45 calendar days, or an order for relief is entered in any such proceeding; or

 

-84-

 

(g)          Inability to Pay Debts; Attachment. (i) Any Loan Party becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issuance or levy; or

 

(h)          Judgments. There is entered against any Loan Party (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $10,000,000 (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or

 

(i)          ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000 or which would reasonably likely result in a Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $5,000,000 or which would reasonably likely result in a Material Adverse Effect; or

 

(j)          Invalidity of Loan Documents. (i) Any material provision of any Loan Document, at any time after its execution and delivery and for any reason, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any material provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any material provision of any Loan Document, or purports to revoke, terminate or rescind any material provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Material Intellectual Property, Material License or any other material portion of the Collateral, with the priority required by the applicable Security Document, except to the extent that any lack of perfection or enforceability results from any act or omission of the Agent (so long as such act or omission does not result from the breach or non-compliance by a Loan Party with the terms of any Loan Document); or

 

(k)          Change of Control. There occurs any Change of Control; or

 

-85-

 

(l)          Cessation of Business. Except as otherwise expressly permitted hereunder and subject to any applicable cure period in connection with a breach of any applicable covenant with respect to the same, the Loan Parties, taken as a whole, shall take any action to suspend the operation of their business in the ordinary course or liquidate all or a material portion of their assets or business; or

 

(m)          Breach of Contractual Obligation. Any default or event of default occurs under a Material License which gives rise to a right of a party to such Material License to cease payment to, or excuses payment to, the Borrower thereunder, or the termination of any Material License unless either (i) the Borrower reasonably demonstrates to the Agent, based on good faith and reasonable forecasts, that the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the occurrence of such default or termination, or (ii) the Borrower is disputing such default in good faith based on reasonable grounds (as determined by the Agent in its reasonable discretion), or (iii) the Borrower enters into a substitute Material License and the Borrower reasonably demonstrates to the Agent, based on good faith and reasonable forecasts, that, after giving effect to such substitute Material License, the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the occurrence of such default or termination; or

 

(n)          Indictment. Any director or senior officer of any Loan Party is (i) criminally indicted or convicted of a felony for fraud or dishonesty in connection with the Loan Parties’ business, unless such director or senior officer promptly resigns or is removed or replaced or (ii) charged by a Governmental Authority under any Law that would reasonably be expected to lead to forfeiture of any material portion of Collateral; or

 

(o)          Insolvency of Licensee. Any proceeding described in clause (f) above, whether voluntary or involuntary, shall commence with respect any licensee under a Material License and shall continue for a period of 45 days, unless (i) the applicable licensee shall “assume” the applicable Material License under applicable bankruptcy law, or (ii) either (A) the Borrower otherwise reasonably demonstrates to the Agent, based on good faith and reasonable forecasts, that the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the commencement of such proceeding or (B) the Borrower enters into a substitute Material License and the Borrower reasonably demonstrates to the Agent, based on good faith and reasonable forecasts, that, after giving effect to such substitute Material License, the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the occurrence of such default or termination; or

 

(p)          Subordination. (i) The subordination provisions of the documents evidencing or governing the Second Lien Facility (the “Subordinated Provisions”) shall, in whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the Second Lien Facility; or (ii) any Borrower or any other Loan Party shall, directly or indirectly, disavow or contest in any manner (A) the effectiveness, validity or enforceability of any of the Subordination Provisions, (B) that the Subordination Provisions exist for the benefit of the Credit Parties, or (C) that all payments of principal of or premium and interest on the Second Lien Facility, or realized from the liquidation of any property of any Loan Party, shall be subject to any of the Subordination Provisions.

 

8.02        Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Agent may, or, at the request of the Required Lenders shall, take any or all of the following actions:

 

-86-

 

(a)          declare the Revolving Commitments of each Revolving Lender to be terminated, whereupon such Revolving Commitments and obligations shall be terminated;

 

(b)          declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other Obligations to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties; and

 

(c)          whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies of the Credit Parties under this Agreement, any of the other Loan Documents or Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the occurrence of any Default or Event of Default with respect to any Loan Party under Section 8.01(f), the obligation of each Lender to make Loans shall automatically terminate, the unpaid principal amount of all outstanding Loans, all interest accrued thereon and all other Obligations shall automatically become due and payable without further act of the Agent or any Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.

 

8.03        Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Obligations have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Agent in the following order:

 

First, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Agent and amounts payable under Article III) payable to the Agent;

 

Second, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting indemnities (including indemnities due under Section 10.04 hereof), Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Lenders (including Credit Party Expenses to the respective Lenders and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, and fees (excluding any Early Termination Fee then owing), ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them;

 

-87-

 

Fifth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations and the payment of any Early Termination Fee then owing, but excluding any Other Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Fifth held by them;

 

Sixth, to payment of that portion of the Obligations arising from Cash Management Services, ratably among the Credit Parties in proportion to the respective amounts described in this clause Sixth held by them;

 

Seventh, to payment of all other Obligations arising from Bank Products, ratably among the Credit Parties in proportion to the respective amounts described in this clause Seventh held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Loan Parties or as otherwise required by Law.

 

Excluded Swap Obligations with respect to any Loan Party shall not be paid with amounts received from such Loan Party, but appropriate adjustments shall be made with respect to payments from other Loan Parties to preserve the allocation to Obligations otherwise set forth above in this Section.

 

8.04        Right to Cure.

 

(a)          Notwithstanding anything to the contrary contained in Section 8.01, in the event of any Event of Default under the financial covenant set forth in Section 7.15(b) and until the expiration of the fifteenth (15^th) calendar day thereafter (such date, the “Cure Expiration Date”), the Borrower may designate any portion of the Net Proceeds of any issuance of common Equity Interests of the Borrower or any cash capital contribution to the common equity of the Borrower, or any cash on hand of the Borrower, as a prepayment of the Loans in an amount equal to the amount by which the Total Outstandings exceed fifty (50%) percent of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent with respect to such registered Trademarks pursuant to Section 6.10(b).

 

(b)          If, after giving effect to the foregoing prepayment of the Loans, the Borrower shall then be in compliance with the requirements of Section 7.15(b), the Borrower shall be deemed to have satisfied the requirements of Section 7.15(b) as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable existing breach or default of Section 7.15(b) shall be deemed cured for this purpose of the Agreement.

 

-88-

 

ARTICLE IX
THE AGENT

 

9.01        Appointment and Authority.

 

Each of the Lenders (in its capacity as a Lender) and the Swing Line Lender hereby irrevocably appoints Bank of America to act on its behalf as the administrative agent and collateral agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof (including, without limitation, acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations), together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Agent and the other Credit Parties, and no Loan Party or any Subsidiary thereof shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

9.02        Rights as a Lender. The Person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03        Exculpatory Provisions. The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agent:

 

(a)          shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;

 

(b)          shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Applicable Lenders, provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

 

(c)          shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.

 

The Agent shall not be liable for any action taken or not taken by it (i) with the Consent or at the request of the Applicable Lenders (as the Agent shall believe in good faith shall be necessary under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.

 

The Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Agent by the Loan Parties or a Lender. In the event that the Agent obtains such actual knowledge or receives such a notice, the Agent shall give prompt notice thereof to each of the other Credit Parties. Upon the occurrence of a Default or an Event of Default, the Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Applicable Lenders. Unless and until the Agent shall have received such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as it shall deem advisable in the best interest of the Credit Parties. In no event shall the Agent be required to comply with any such directions to the extent that the Agent believes that its compliance with such directions would be unlawful.

 

-89-

 

The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.

 

9.04         Reliance by Agent.

 

The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including, but not limited to, any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. The Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

9.05         Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agent and any such sub-agent. The Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

 

9.06         Resignation of Agent. The Agent may at any time give written notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent hereunder.

 

-90-

 

9.07         Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except as provided in Section 9.11, the Agent shall not have any duty or responsibility to provide any Credit Party with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agent.

 

9.08         Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Agent (irrespective of whether the principal of the Loans shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent shall have made any demand on the Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise

 

 (a)          to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Agent and the other Credit Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Agent, such Credit Parties and their respective agents and counsel and all other amounts due the Lenders, the Agent and such Credit Parties under Sections 2.06 and 10.04) allowed in such judicial proceeding; and

 

 (b)          to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Agent and to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under Sections 2.06 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Credit Party any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Credit Party or to authorize the Agent to vote in respect of the claim of any Credit Party in any such proceeding.

 

-91-

 

9.09        Collateral and Guaranty Matters. The Credit Parties irrevocably authorize the Agent, at its option and in its discretion,

 

(a)          to release any Lien on any property granted to or held by the Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been asserted), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing by the Applicable Lenders in accordance with Section 10.01;

 

(b)          to subordinate any Lien on any property granted to or held by the Agent under any Loan Document to the holder of any Lien on such property that is permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)          to release any Guarantor from its obligations under the Facility Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

 

Upon request by the Agent at any time, the Applicable Lenders will confirm in writing the Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Facility Guaranty pursuant to this Section 9.09. In each case as specified in this Section 9.09, the Agent will, at the Loan Parties’ expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Facility Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.09.

 

9.10        Notice of Transfer.

 

The Agent may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Acceptance shall have become effective as set forth in Section 10.06.

 

9.11        Reports and Financial Statements.

 

By signing this Agreement, each Lender:

 

(a)          agrees to furnish the Agent at such frequency as the Agent may reasonably request) with a summary of all Other Liabilities due or to become due to such Lender. In connection with any distributions to be made hereunder, the Agent shall be entitled to assume that no amounts are due to any Lender on account of Other Liabilities unless the Agent has received written notice thereof from such Lender and if such notice is received, the Agent shall be entitled to assume that the only amounts due to such Lender on account of Other Liabilities is the amount set forth in such notice;

 

(b)          is deemed to have requested that the Agent furnish, and the Agent agrees to furnish, such Lender, promptly after they become available, copies of all financial statements required to be delivered by the Borrower hereunder;

 

-92-

 

(c)          is deemed to have requested that the Agent furnish, and the Agent agrees to furnish, such Lender, promptly after they become available, copies of all appraisals of the Collateral received by the Agent (collectively, the “Reports”);

 

(d)          expressly agrees and acknowledges that the Agent makes no representation or warranty as to the accuracy of the financial statements or Reports, and shall not be liable for any information contained in any financial statement or Report;

 

(e)          expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agent or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties' books and records, as well as on representations of the Loan Parties' personnel;

 

(f)          agrees to keep all financial statements and Reports confidential in accordance with the provisions of Section 10.07 hereof; and

 

(g)          without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, the Loans; and (ii) to pay and protect, and indemnify, defend, and hold the Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

 

9.12         Agency for Perfection.

 

Each Credit Party hereby appoints each other Credit Party as agent for the purpose of perfecting Liens for the benefit of the Credit Parties, in assets which, in accordance with Article 9 of the UCC or any other Law of the United States can be perfected only by possession or control. Should any Credit Party (other than the Agent) obtain possession or control of any such Collateral, such Credit Party shall notify the Agent thereof, and, promptly upon the Agent's request therefor shall deliver such Collateral to the Agent or otherwise deal with such Collateral in accordance with the Agent's instructions.

 

9.13         Indemnification of Agent. Without limiting the obligations of Loan Parties hereunder, to the extent that the Loan Parties for any reason fails to indefeasibly pay any amount required under Section 10.04 to be paid by them to the Agent (or any sub-agent thereof), the Lenders shall indemnify the Agent, any sub-agent thereof and any Related Party, as the case may be ratably according to their Applicable Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent, any sub-agent thereof and their Related Parties in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by the Agent, any sub-agent thereof and their Related Parties in connection therewith; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s, any sub-agent’s and their Related Parties’ gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

-93-

 

9.14         Relation among Lenders. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent) authorized to act for, any other Lender.

 

ARTICLE X
MISCELLANEOUS

 

10.01       Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no Consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Agent, with the Consent of the Required Lenders, and the Borrower or the applicable Loan Party, as the case may be, and each such waiver or Consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

 

(i)          increase the Revolving Commitment of any Revolving Lender (or reinstate any Revolving Commitment terminated pursuant to Section 8.02) without the written Consent of such Revolving Lender;

 

(ii)         as to any Lender, postpone any date fixed by this Agreement or any other Loan Document for any scheduled payment (including the Maturity Date) or mandatory prepayment of principal, interest, fees or other amounts due hereunder or under any of the other Loan Documents without the written Consent of such Lender,

 

(iii)        as to any Lender, reduce the principal of, or the rate of interest specified herein on, any Loan held by such Lender, or (subject to clause (ii) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document to or for the account of such Lender, without the written Consent of such Lender; provided, however, that only the Consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

 

(iv)        as to any Lender, change any provision of this Agreement, including, without limitation, Section 2.10 or Section 8.03, in a manner that would alter the pro rata sharing of payments required thereby without the written Consent of such Lender;

 

(v)         change any provision of this Section or the definition of “Required Lenders”, or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written Consent of each Lender;

 

(vi)        except as expressly permitted hereunder or under any other Loan Document, release, or limit the liability of, any Loan Party without the written Consent of each Lender;

 

(vii)       except for Permitted Dispositions or as provided in Section 9.09, release all or substantially all of the Collateral from the Liens of the Security Documents without the written Consent of each Lender;

 

-94-

 

(viii)      modify the definition of Permitted Overadvance so as to increase the amount thereof or, except as otherwise provided in such definition, the time period for which a Permitted Overadvance may remain outstanding without the written Consent of each Lender; and

 

(ix)         except as expressly permitted herein or in any other Loan Document, subordinate the Obligations hereunder or the Liens granted hereunder or under the other Loan Documents, to any other Indebtedness or Lien, as the case may be without the written Consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or Consent shall, unless in writing and signed by the Agent in addition to the Lenders required above, affect the rights or duties of any Agent under this Agreement or any other Loan Document; and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Revolving Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.

 

(b)          Notwithstanding anything to the contrary in this Agreement or any other Loan Document, (x) no provider or holder of any Bank Products or Cash Management Services shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as Lenders, to the extent applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or any Loan Party, and (y) any Loan Document may be amended and waived with the consent of the Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause any Loan Document to be consistent with this Agreement and the other Loan Documents.

 

(c)          If any Lender does not Consent (a “Non-Consenting Lender”) to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the Consent of each Lender and that has been approved by the Required Lenders, the Borrower may replace such Non-Consenting Lender in accordance with Section 10.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).

 

(d)          Notwithstanding any provision herein to the contrary, this Agreement may be amended with the written consent of the Required Lenders, the Agent and the Borrower (i) to add one or more additional revolving credit or term loan facilities to this Agreement, and to permit the extensions of credit and all related obligations and liabilities arising in connection therewith from time to time outstanding to share ratably (or on a basis subordinated to the existing facilities hereunder) in the benefits of this Agreement and the other Loan Documents with the obligations and liabilities from time to time outstanding in respect of the existing facilities hereunder, and (ii) in connection with the foregoing, to permit, as deemed appropriate by the Agent and approved by the Lenders, the Lenders providing such additional credit facilities to participate in any required vote or action required to be approved by the Required Lenders or by any other number, percentage or class of Lenders hereunder.

 

-95-

 

10.02       Notices; Effectiveness; Electronic Communications.

 

(a)          Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)          if to the Loan Parties or the Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

 

(ii)         if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in writing to the Borrower and the Agent.

 

Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)          Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Agent. The Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii), if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

(c)          Change of Address, Etc. Each of the Loan Parties and the Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower and the Agent. In addition, each Lender agrees to notify the Agent from time to time to ensure that the Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

 

-96-

 

(d)          Reliance by Agent and Lenders. The Agent and the Lenders shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Loan Parties even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Loan Parties shall indemnify the Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Loan Parties. All telephonic notices to and other telephonic communications with the Agent may be recorded by the Agent, and each of the parties hereto hereby consents to such recording.

 

10.03       No Waiver; Cumulative Remedies. No failure by any Credit Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law. Without limiting the generality of the foregoing, the making of the Loans shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at Law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Section 8.02 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents, (b) the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as Swing Line Lender) hereunder and under the other Loan Documents, or (c) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.10); and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clause (b) of the preceding proviso and subject to Section 2.10, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

 

10.04      Expenses; Indemnity; Damage Waiver.

 

(a)          Costs and Expenses. The Borrower shall pay all Credit Party Expenses.

 

-97-

 

(b)          Indemnification by the Loan Parties. The Loan Parties shall indemnify the Agent (and any sub-agent thereof), each other Credit Party, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis) from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs, and related expenses (including the reasonable fees, charges and disbursements of any one counsel for the Indemnitees (and in the event of an actual conflict of interest, one additional counsel for such affected parties) and one additional counsel in each other applicable jurisdiction), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or the administration of this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Loan Party, or any Environmental Liability related in any way to any Loan Party, (iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Borrower or any other Loan Party or any of the Loan Parties’ directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of, or material breach of the obligations under this Agreement of, such Indemnitee, or (y) are due to disputes between and among Indemnitees (other than disputes involving any act or omission of the Borrower or any of its Affiliates (other than the claims of the Agent)). Without limiting the provisions of Section 3.01(c), this Section 10.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(c)          Waiver of Consequential Damages, Etc. To the fullest extent permitted by Law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, the Loans or the use of the proceeds thereof.

 

(d)          Payments. All amounts due under this Section shall be payable on demand therefor.

 

(e)          Limitation of Liability. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

(f)          Survival. The agreements in this Section shall survive the resignation of the Agent or the Swing Line Lender, the assignment of the Loans by any Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

10.05       Payments Set Aside. To the extent that any payment by or on behalf of the Loan Parties is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Agent upon demand its Applicable Percentage (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

-98-

 

10.06      Successors and Assigns.

 

(a)          Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written Consent of the Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of Section 10.06(b), (ii) by way of participation in accordance with the provisions of subsection Section 10.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)          Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Commitment and the Revolving Loans (including for purposes of this Section 10.06(b), participations in Swing Line Loans), or its portion of the Term Loan, as applicable, at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)          Minimum Amounts.

 

(A)         in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, no minimum amount need be assigned; and

 

(B)         in any case not described in subsection (b)(i)(A)of this Section, the aggregate amount of the Revolving Commitment (which for this purpose includes the Revolving Loans outstanding thereunder), or the principal outstanding balance of the Term Loan of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;

 

-99-

 

(ii)         Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of the sum of (x) all the assigning Lender's rights and obligations under this Agreement with respect to the Revolving Loans or the Revolving Commitment assigned, except that this clause (ii) shall not apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans, plus (y) all the assigning Lender’s rights and obligations under this Agreement with respect to the portion of the Term Loan assigned (and for the avoidance of doubt, no Lender hereunder may assign (x) any portion of the Term Loan of such Lender without assigning a proportionate amount of the Revolving Loans and Revolving Commitment of such Lender or (y) any portion of the Revolving Loans and Revolving Commitment of such Lender without assigning a proportionate amount of the Term Loan of such Lender);

 

(iii)        Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

 

(A)         the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) a Default or Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender, and shall be deemed to have been given unless the Borrower has responded within five (5) Business Days of request therefor; and

 

(B)         the consent of the Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and

 

(iv)        Assignment and Assumption. The parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, provided, however, that the Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment.

 

(v)         No Assignment to Certain Persons. No such assignment shall be made (A) to the Loan Parties or any of the Loan Parties’ Subsidiaries, (B) to any Defaulting Lender or any of its Subsidiaries or Affiliates, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural Person.

 

(vi)        Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Agent, the applicable pro rata share of Revolving Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Revolving Loans and participations in Swing Line Loans in accordance with its Revolving Credit Facility Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

-100-

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

 

(c)          Register. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders and Revolving Commitments and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Loan Parties, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

 

(d)          Participations. (i) Any Lender may at any time, without the consent of, or notice to, the Loan Parties or the Agent, sell participations to any Person (other than a natural person or the Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender's rights and/or obligations under this Agreement (including its Revolving Commitment, if any, and/or all or a portion of the Loans (including any participations in Swing Line Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties, the Agent, the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 10.07 as if such Participant was a Lender hereunder.

 

(ii) Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in clauses (i) through (iii) of the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Loan Parties agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 (subject to the requirements and limitations therein, including the requirements under Section 3.01(e) (it being understood that the documentation required under Section 3.01(e) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b). To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.10 as though it were a Lender.

 

-101-

 

(iii) Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any Loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.

 

(e)          Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a Lender.

 

(f)          Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(g)          Resignation as Swing Line Lender after Assignment or Resignation. Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Revolving Commitment and Loans pursuant to subsection (b) above, or resigns as Agent in accordance with the provisions of Section 9.06, Bank of America may, upon 30 days’ notice to the Borrower, resign as Swing Line Lender. In the event of any such resignation as Swing Line Lender, the Borrower shall be entitled to appoint from among the Revolving Lenders a successor Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as Swing Line Lender.

 

10.07       Treatment of Certain Information; Confidentiality. Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates, Approved Funds, and to its and its Affiliates’ and Approved Funds’ respective partners, directors, officers, employees, agents, funding sources, attorneys, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (c) to the extent required by Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement (including any electronic agreement contained in any Platform) containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Contract relating to any Loan Party and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Credit Party or any of their respective Affiliates on a non-confidential basis from a source other than the Loan Parties.

 

-102-

 

For purposes of this Section, “Information” means all information received from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary thereof. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning the Loan Parties or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with Law, including Federal and state securities Laws.

 

10.08         Right of Setoff. If an Event of Default shall have occurred and be continuing or if any Lender shall have been served with a trustee process or similar attachment relating to property of a Loan Party, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Agent or the Required Lenders, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) or other property at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to such Lender, regardless of the adequacy of the Collateral, and irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Agent for further application in accordance with the provisions of Section 2.15 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Borrower and the Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

10.09         Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Law (the “Maximum Rate”). If the Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans and other Obligations (other than Other Liabilities not then due and owing) or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

-103-

 

10.10         Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agent and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

10.11         Survival. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default, and shall continue in full force and effect as long as the Loans or any other Obligation hereunder shall remain unpaid or unsatisfied. Further, the provisions of Sections 3.01, 3.04, 3.05 and 10.04 and Article IX shall survive and remain in full force and effect regardless of the repayment of the Obligations or the termination of this Agreement or any provision hereof.

 

10.12         Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 10.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Agent or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.

 

10.13         Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights (other than its existing rights to payments pursuant to Section 3.01 and 3.04) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

  (a)          the Borrower shall have paid to the Agent the assignment fee specified in Section 10.06(b);

 

-104-

 

(b)          such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

 

(c)          in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

 

(d)          such assignment does not conflict with Laws; and

 

(e)          in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

10.14      Governing Law; Jurisdiction; Etc.

 

(a)          GOVERNING LAW. This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of NEW yORK.

 

(b)          SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Agent, any Lender or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

-105-

 

(c)          WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)          SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

10.15       Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16       No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

 

-106-

 

10.17         USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Agent, as applicable, to identify each Loan Party in accordance with the Act. Each Loan Party is in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the Loans will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended. The Loan Parties shall, promptly following a request by the Agent or any Lender, provide all documentation and other information that the Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

 

10.18         Foreign Asset Control Regulations. Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the "Trading With the Enemy Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the "Foreign Assets Control Regulations") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Loan Parties or their Affiliates (a) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person" or in any manner violative of any such order.

 

10.19         Time of the Essence. Time is of the essence of the Loan Documents.

 

10.20         Press Releases.

 

   (a)          Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of the Agent or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Agent and without the prior written consent of the Agent unless (and only to the extent that) such Credit Party or Affiliate is required to do so under Law and then, in any event, such Credit Party or Affiliate will consult with the Agent before issuing such press release or other public disclosure.

 

   (b)          Each Loan Party consents to the publication by the Agent or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using any Loan Party’s name, product photographs, logo or trademark. The Agent or such Lender shall provide a draft reasonably in advance of any advertising material to the Borrower prior to the publication thereof. The Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

 

-107-

 10.21      Additional Waivers.

 

(a)          The Obligations are the joint and several obligation of each Loan Party. To the fullest extent permitted by Law, the obligations of each Loan Party shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement or any other Loan Document, (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Agent or any other Credit Party, or (iv) any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). The obligations of each Loan Party shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise.

 

(b)          To the fullest extent permitted by Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Agent and the other Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all of the Obligations have been indefeasibly paid in full in cash. Each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party.

 

(c)          Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all of the Obligations. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations and no Loan Party will demand, sue for or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Loan Party on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents. Subject to the foregoing, to the extent that any Loan Party shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Loans made to the Borrower hereunder or other Obligations incurred directly and primarily by the Borrower (an "Accommodation Payment"), then the Loan Party making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount, for each of such other Loan Parties, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Loan Party's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Loan Parties. As of any date of determination, the "Allocable Amount" of each Loan Party shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Loan Party hereunder without (a) rendering such Loan Party "insolvent" within the meaning of Section 101 (32) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (b) leaving such Loan Party with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Loan Party unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

-108-

 

   (d)          Without limiting the generality of the foregoing, or of any other waiver or other provision set forth in this Agreement, each Loan Party hereby absolutely, knowingly, unconditionally, and expressly waives any and all claim, defense or benefit arising directly or indirectly under any one or more of Sections 2787 to 2855 inclusive of the California Civil Code or any similar law of California.

 

10.22         No Strict Construction.

 

The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

10.23         Attachments.

 

The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.

 

10.24         Electronic Execution of Assignments and Certain Other Documents.

 

The words “execute,” “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

10.25         Keepwell.

 

Each Loan Party that is a Qualified ECP Guarantor at the time the Guaranty or the grant of a security interest under the Loan Documents, in each case, by any Specified Loan Party becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under the Guaranty voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section 10.25 shall remain in full force and effect until the Obligations have been indefeasibly paid and performed in full. Each Loan Party intends this Section 10.25 to constitute, and this Section 10.25 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.

 

-109-

 

10.26         California Judicial Reference.

 

If any action or proceeding is filed in a court of the State of California by or against any party hereto in connection with any of the transactions contemplated by this Agreement or any other Loan Document, (a) the court shall, and is hereby directed to, make a general reference pursuant to California Code of Civil Procedure Section 638 to a referee (who shall be a single active or retired judge) to hear and determine all of the issues in such action or proceeding (whether of fact or of law) and to report a statement of decision, provided that at the option of any party to such proceeding, any such issues pertaining to a “provisional remedy” as defined in California Code of Civil Procedure Section 1281.8 shall be heard and determined by the court, and (b) without limiting the generality of Section 10.04, the Borrower shall be solely responsible to pay all fees and expenses of any referee appointed in such action or proceeding.

 

10.27         Second Lien Intercreditor Agreement.

 

Notwithstanding anything herein to the contrary, the security interest granted to the Agent, for the benefit of the Credit Parties, pursuant to the Security Documents and the exercise of any right or remedy by the Agent hereunder and thereunder are subject to the provisions of the Second Lien Intercreditor Agreement. In the event of any conflict between the terms of the Second Lien Intercreditor Agreement and this Loan Agreement, the terms of the Second Lien Intercreditor Agreement shall govern and control. Except as specified herein, nothing contained in the Second Lien Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement, which, as among the Loan Parties and the Agent, shall remain in full force and effect.

 

-110-

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

	BORROWER:
	SEQUENTIAL BRANDS GROUP, INC.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	GUARANTORS:
	Sequential Licensing, Inc.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	BELLA ROSE, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	WILLIAM RAST SOURCING, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

 

Signature Page to Amended and Restated First Lien Credit Agreement

 

 

	WILLIAM RAST LICENSING, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	Heeling Management Corp.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	Heeling Holding Corporation
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	Heeling Sports Limited
	By:	Heeling Management Corp., as the General Partner
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	By:	Heeling Holding Corporation, as the Limited Partner
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

Signature Page to Amended and Restated First Lien Credit Agreement

 

 

	HEELYS, INC.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

	B®AND MATTER, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

     

	SBG Revo Holdings, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG FM, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG UNIVERSE BRANDS, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

  

 

Signature Page to Amended and Restated First Lien Credit Agreement

 

 

	Galaxy Brands LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	The Basketball Marketing Company, Inc.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	American Sporting Goods Corporation
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

   

	LNT Brands LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

 

Signature Page to Amended and Restated First Lien Credit Agreement

 

 

	bank of america, n.a., as Agent and as a Lender
	By:	/s/ Andrew Cerussi
	Name:	Andrew Cerussi
	Title:	Director

 

 

Signature Page to Amended and Restated First Lien Credit Agreement

 

 

	ISRAEL DISCOUNT BANK OF NEW YORK, as a Lender
	By:	/s/ Ekaterina Evenko
	Name:	Ekaterina Evenko
	Title:	Assistant Vice President
	By:	/s/ Michael Paul
	Name:	Michael Paul
	Title:	Senior Vice President

 

 

Signature Page to Amended and Restated First Lien Credit Agreement

 

 

 

Exhibit 10.3

 

EXECUTION VERSION

 

 

 

SECOND LIEN CREDIT AGREEMENT

 

Dated as of August 15, 2014

 

among

 

SEQUENTIAL BRANDS GROUP, INC.,
as the Borrower

 

The Guarantors Named Herein

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Administrative Agent and Collateral Agent
and

 

The Lenders Party Hereto

 

 

 

 

TABLE OF CONTENTS

 

		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS		1
1.01	Defined Terms	1
1.02	Other Interpretive Provisions	40
1.03	Accounting Terms	41
1.04	Rounding	41
1.05	Times of Day	41
ARTICLE II THE COMMITMENTS AND LOANS		41
2.01	Loans	41
2.02	Continuations and Conversions of Loans	42
2.03	[Reserved]	42
2.04	Prepayments	42
2.05	[Reserved]	43
2.06	Repayment of Obligations	44
2.07	Interest	44
2.08	Fees	44
2.09	Computation of Interest and Fees	45
2.10	Evidence of Debt	45
2.11	Payments Generally; Agent’s Clawback	45
2.12	Sharing of Payments by Lenders	46
2.13	[Reserved]	47
2.14	Incremental Facility	47
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY		49
3.01	Taxes	49
3.02	Illegality	54
3.03	Inability to Determine Rates	54
3.04	Increased Costs; Reserves on LIBOR Rate Loans	54
3.05	Compensation for Losses	56
3.06	Mitigation Obligations; Replacement of Lenders	57
3.07	Survival	57
ARTICLE IV CONDITIONS PRECEDENT TO LOANS		57
4.01	Conditions of Initial Loans	57

 

(i)

 

ARTICLE V REPRESENTATIONS AND WARRANTIES		60
5.01	Existence, Qualification and Power	60
5.02	Authorization; No Contravention	61
5.03	Governmental Authorization; Other Consents	61
5.04	Binding Effect	61
5.05	Financial Statements; No Material Adverse Effect	61
5.06	Litigation	62
5.07	No Default	62
5.08	Ownership of Property; Liens	62
5.09	Environmental Compliance	63
5.10	Insurance	63
5.11	Taxes	64
5.12	ERISA Compliance	64
5.13	Subsidiaries; Equity Interests	65
5.14	Margin Regulations; Investment Company Act	65
5.15	Disclosure	66
5.16	Compliance with Laws	66
5.17	Intellectual Property; Licenses, Etc.	66
5.18	Reserved	66
5.19	Security Documents	67
5.20	Solvency	67
5.21	Deposit Accounts	67
5.22	Brokers	67
5.23	Material Contracts	67
5.24	OFAC	67
5.25	Patriot Act
ARTICLE VI AFFIRMATIVE COVENANTS		68
6.01	Financial Statements	68
6.02	Certificates; Other Information	69
6.03	Notices	71
6.04	Payment of Obligations	72
6.05	Preservation of Existence, Etc.	72
6.06	Maintenance of Properties; Material Intellectual Property	72
6.07	Maintenance of Insurance	73
6.08	Compliance with Laws	74
6.09	Books and Records; Accountants	74
6.10	Inspection Rights; Appraisals of Intellectual Property	74
6.11	Additional Loan Parties	75
6.12	Cash Management	75
6.13	Information Regarding the Collateral	77
6.14	Environmental Laws	77

 

(ii)

 

6.15	Further Assurances	77
6.16	Material Contracts	78
6.17	Board Packages	78
6.18	Post-Closing Items	78
ARTICLE VII NEGATIVE COVENANTS		79
7.01	Liens	79
7.02	Investments	79
7.03	Indebtedness; Disqualified Stock; Equity Issuances	79
7.04	Fundamental Changes	79
7.05	Dispositions	80
7.06	Restricted Payments	80
7.07	Prepayments of Indebtedness	81
7.08	Change in Nature of Business	81
7.09	Transactions with Affiliates	81
7.10	Burdensome Agreements	82
7.11	Use of Proceeds	82
7.12	Amendment of Material Documents; Material Licenses	83
7.13	Fiscal Year	83
7.14	Deposit Accounts	83
7.15	Financial Covenants	83
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES		84
8.01	Events of Default	84
8.02	Remedies Upon Event of Default	87
8.03	Application of Funds	87
8.04	Right to Cure	88
ARTICLE IX THE AGENT		89
9.01	Appointment and Authority	89
9.02	Rights as a Lender	89
9.03	Exculpatory Provisions	89
9.04	Reliance by Agent	90
9.05	Delegation of Duties	91
9.06	Resignation or Replacement of Agent	91
9.07	Non-Reliance on Agent and Other Lenders	92
9.08	Agent May File Proofs of Claim	92
9.09	Collateral and Guaranty Matters	93
9.10	Notice of Transfer	93
9.11	Reports and Financial Statements	93
9.12	Agency for Perfection	94

 

(iii)

 

9.13	Indemnification of Agent	94
9.14	Relation among Lenders	95
ARTICLE X MISCELLANEOUS		95
10.01	Amendments, Etc.	95
10.02	Notices; Effectiveness; Electronic Communications	97
10.03	No Waiver; Cumulative Remedies	98
10.04	Expenses; Indemnity; Damage Waiver	99
10.05	Payments Set Aside	100
10.06	Successors and Assigns	100
10.07	Treatment of Certain Information; Confidentiality	104
10.08	Right of Setoff	105
10.09	Interest Rate Limitation	105
10.10	Counterparts; Integration; Effectiveness	105
10.11	Survival	106
10.12	Severability	106
10.13	Replacement of Lenders	106
10.14	Governing Law; Jurisdiction; Etc.	107
10.15	Waiver of Jury Trial	108
10.16	No Advisory or Fiduciary Responsibility	108
10.17	USA PATRIOT Act Notice	109
10.18	Foreign Asset Control Regulations	109
10.19	Time of the Essence	109
10.20	Press Releases	109
10.21	Additional Waivers	110
10.22	No Strict Construction	112
10.23	Attachments	112
10.24	Electronic Execution of Assignments and Certain Other Documents	112
10.25	Keepwell	112
10.26	California Judicial Reference	112
10.27	First Lien Intercreditor Agreement	113
SIGNATURES		S-114

 

(iv)

 

SCHEDULES

 

1.01	Non-Guarantor Subsidiaries
2.01	Commitments and Applicable Percentages
5.01	Loan Parties Organizational Information
5.08(b)(1)	Owned Real Estate
5.08(b)(2)	Leased Real Estate
5.10	Insurance
5.13	Subsidiaries; Other Equity Investments
5.17	Material Intellectual Property; Material Licenses
5.21	Deposit Accounts
5.23	Material Contracts
7.01	Existing Liens
7.02	Existing Investments
7.03	Existing Indebtedness
10.02	Agent’s Office; Certain Addresses for Notices

 

EXHIBITS

 

Form of

 

A	Loan Notice
B	Term Note
C	Compliance Certificate
D	Assignment and Assumption
E-1	Foreign Lender Exemption Certificate
E-2	Foreign Lender U.S. Tax Compliance Certificate
E-3	Alternative Form Foreign Lender U.S. Tax Compliance Certificate
E-4	Foreign Partnership U.S. Tax Compliance Certificate

 

(v)

 

SECOND LIEN CREDIT AGREEMENT

 

This SECOND LIEN CREDIT AGREEMENT (the “Agreement”) is entered into as of August 15, 2014, among SEQUENTIAL BRANDS GROUP, INC., a Delaware corporation (the “Borrower”), the Guarantors; each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”); and WILMINGTON TRUST, NATIONAL ASSOCIATION, as Administrative Agent and Collateral Agent (collectively, with any successor thereto, the “Agent”).

 

WITNESSETH:

 

WHEREAS, the Borrower has entered into that certain Agreement and Plan of Merger dated as of June 24, 2014 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof, the “Merger Agreement”) with, among others, SBG Universe Brands, LLC, a Delaware limited liability company and wholly owned Subsidiary of the Borrower (“SBG Universe”), Universe Galaxy Merger Sub, Inc., a Delaware corporation and an indirect wholly owned Subsidiary of the Borrower (the “Merger Sub”) and Galaxy Brand Holdings, Inc. (“GBH”), to acquire (the “Effective Date Acquisition”) all of the outstanding Equity Interests of GBH;

 

WHEREAS, the Effective Date Acquisition will be effected by (i) a merger of Merger Sub with and into GBH, with GBH as the surviving entity, such that immediately following such merger, GBH will be a wholly owned Subsidiary of SBG Universe, and (ii) a subsequent merger of GBH with and into SBG Universe, with SBG Universe as the surviving entity;

 

WHEREAS, the Borrower wishes to obtain financing for the Effective Date Acquisition and to refinance the certain outstanding Indebtedness; and

 

WHEREAS, the Lenders have agreed to extend a term loan to the Borrower in an aggregate amount not to exceed $90,000,000 on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows:

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“Accommodation Payment” as defined in Section 10.21(c).

 

“Acquisition” means, with respect to any Person (a) 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, or (c) any merger 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, in each case in any transaction or group of transactions which are part of a common plan.

 

-1-

 

“Act” shall have the meaning provided in Section 10.17.

 

“Additional Commitment Lender” shall have the meaning provided in Section 2.14(c).

 

“Adjusted LIBOR Rate” means, with respect to any LIBOR Rate Loan 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 Rate Loans then outstanding as of the effective date of any change in the Statutory Reserve Rate.

 

“Affiliate” means, (a) with respect to any Person, 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, and (b) with respect to the Agent or any Lender (i) any other Person directly or indirectly holding 10% or more of any class of the Equity Interests of that Person, and (ii) any other Person 10% or more of any class of whose Equity Interests is held directly or indirectly by that Person.

 

“Agent” shall have the meaning ascribed to it in the Preamble.

 

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

 

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

 

“Aggregate Commitments” means the Commitments of all Lenders. As of the Effective Date, the Aggregate Commitments are $90,000,000.

 

“Agreement” means this Second Lien Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

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

 

“Applicable Margin” means (a) for LIBOR Rate Loans, eight percent (8.00%) and (b) for Base Rate Loans, seven percent (7.00%).

 

“Applicable Percentage” means with respect to all of the Obligations due to any Lender at any time, the percentage (carried out to the ninth decimal place) of the outstanding amount of the Loan held by such Lender at such time.

 

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

 

-2-

 

“Arranger” means GSO Capital Partners LP, in its capacity as sole lead arranger and sole book manager, together with its successors and assigns.

 

“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 Agent, in substantially the form of Exhibit D or any other form approved by the GSO Entities and the 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 Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2013, and the related Consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year of the Borrower and its Subsidiaries, including the notes thereto.

 

“Average Loan to Value Ratio” means the average of daily Loan to Value Ratios during the immediately preceding Fiscal Quarter of the Borrower.

 

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

 

“Bank Products” means any services of facilities provided to any Loan Party by the Agent, any Lender, or any of their respective Affiliates, including, without limitation, on account of (a) Swap Contracts, (b) purchase cards, (c) leasing, (d) factoring, and (e) supply chain finance services (including, without limitation, trade payable services and supplier accounts receivable purchases), but excluding Cash Management Services.

 

“Base 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 0.50%; and (c) the LIBOR Rate for a one month interest period as determined on such day, plus 1.00%. 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 Bank of America’s prime rate, the Federal Funds Rate or the LIBOR Rate, respectively, shall take effect at the opening of business on the day specified in the public announcement of such change.

 

-3-

 

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

 

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

 

“Blocked Account Agreement” means with respect to an account established by a Loan Party (other than Excluded Accounts), an agreement, in form and substance reasonably satisfactory to the GSO Entities, establishing control (as defined in the UCC) of such account by the Agent and whereby the Blocked Account Bank agrees, upon the occurrence and during the continuance of an Event of Default, to comply only with the instructions originated by the Agent without the further consent of any Loan Party.

 

“Blocked Account Bank” means each bank with whom Deposit Accounts are maintained and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

 

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

 

“Business Day” means 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, New York, New York and, 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.

 

“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.

 

-4-

 

“Cash Control Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) royalty revenues received by the Loan Parties during the immediately preceding twelve (12) months are less than 70% of the projected royalty revenues for such twelve (12) month period as set forth in the projections for such period delivered pursuant to Section 6.01(d) hereof. For purposes of this Agreement, the occurrence of a Cash Control Event shall be deemed continuing at the GSO Entities’ option (i) so long as such Event of Default is continuing and has not been waived, and/or (ii) if the Cash Control Event arises as a result of the Loan Parties’ failure to achieve royalties revenues as required hereunder, until royalty revenues as of the end of each month exceed 70% of the projected royalties for each twelve (12) month period ending the last day of each such month, for a period of six (6) consecutive months; provided that a Cash Control Event shall be deemed continuing (even if an Event of Default is no longer continuing and/or royalty revenues received exceeds the required amount for six (6) consecutive months) at all times after a Cash Control Event has occurred and been discontinued on two (2) occasions in any twelve (12) month period. The termination of a Cash Control Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Cash Control Event in the event that the conditions set forth in this definition again arise.

 

“Cash Management Services” means any cash management services provided to any Loan Party by the Agent or any Lender or any of their respective Affiliates, including, without limitation, (a) automated clearinghouse transfer transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) credit card processing services, and (d) credit or debit cards.

 

“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 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, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding 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 and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“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 Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than any Permitted Holder, becomes 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”)), directly or indirectly, of 45% or more of the Equity Interests of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such “person” or “group” has the right to acquire pursuant to any option right); or

 

-5-

 

(b)          during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

 

(c)          any “change in control” or similar event as defined in any Material License or any document governing Material Indebtedness of any Loan Party; or

 

(d)          the Borrower fails at any time after the Merger Date 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 Agent and Liens permitted pursuant to clause (o) of the definition of Permitted Encumbrances), except where such failure is as a result of a transaction not prohibited by the Loan Documents.

 

“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 that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Agent.

 

“Collection Account” has the meaning provided in Section 6.12(b).

 

“Commitment” means, as to each Lender, its obligation to make a Loan on the Effective Date in an aggregate principal amount equal to the amount set forth opposite such Lender’s name on Schedule 2.01. As of the Effective Date, the aggregate Commitments total $90,000,000.

 

-6-

 

“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 C.

 

“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.

 

“Consent” means actual consent given by a Lender from whom such consent is sought; or the passage of seven (7) Business Days from receipt of written notice to a Lender from the Agent of a proposed course of action to be followed by the Agent without such Lender’s giving the agent (a) a written notice of such Lender’s objection to such course of action or (b) a written request for additional information from such Lender to the Agent or Borrower regarding such course of action.

 

“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 the Borrower and its Subsidiaries on a Consolidated basis for the applicable 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, (iv) fees, expenses and charges (including restructuring charges, integration costs, net cost savings and transaction expenses) incurred in connection (x) with any Permitted Acquisition (of the type referred to in clause (ii) of the definition thereof) or fees in connection with any Permitted Indebtedness in an amount not to exceed $5,000,000 in any Fiscal Year of the Borrower and (y) one-time costs or fees in connection with the Transactions in an amount not to exceed $7,500,000 in the aggregate for the twelve-month period following the Effective Date, (v) non-cash compensation, (vi) other unusual or non-recurring expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period, and (vii) management fees and expenses incurred or paid to Tengram Capital Management L.P. to the extent permitted to be paid hereunder (in each case of or by the Borrower and its Subsidiaries for such period), minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Borrower and its Subsidiaries for such period), all as determined on a Consolidated basis in accordance with GAAP.

 

Notwithstanding anything to the contrary contained above, for purposes of determining Consolidated EBITDA for the purposes of Section 7.16(c) for any Fiscal Quarter which ends prior to the second anniversary of the Effective Date, Consolidated EBITDA for each applicable Fiscal Quarter occurring prior to the first anniversary of the Effective Date shall be calculated as the sum of (a) the Consolidated EBITDA for Sequential Brands Group Inc. (on a standalone basis without giving effect to the Merger) plus (ii) the greater of (x) $6,250,000 and (y) Consolidated EBITDA for GBH for such Fiscal Quarter (on a standalone basis without giving effect to the Merger).

 

-7-

 

“Consolidated Excess Cash Flow” means, for any period, the amount by which (a)(i) Consolidated EBITDA, less (ii) the sum of (A) cash payments for all Federal, state and local income Taxes paid during such period (less any cash refunds received by the Borrower and its Subsidiaries during such period), and (B) Capital Expenditures made during such period exceeds (b) the sum of (i) Consolidated Interest Charges paid in cash for such period, plus (ii) principal payments (other than payments to the Lenders made on account of mandatory prepayments of Consolidated Excess Cash Flow) made or scheduled to be made on Indebtedness in such period.

 

“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) Capital Expenditures made during such period, minus (iii) the aggregate amount of Federal, state, local and foreign income Taxes paid in cash during such period (but not less than zero) to (b) the sum of (i) Debt Service Charges plus (ii) the aggregate amount of all Restricted Payments, in each case, of or by the Borrower and its Subsidiaries for the applicable measurement period, all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Interest Charges” means, for the applicable measurement period for the Borrower and its Subsidiaries on a Consolidated basis, 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 (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 (c) interest income during such period (excluding any portion of interest income representing accruals of amounts received in a previous period), in each case of or by the Borrower and its Subsidiaries for the most recently completed 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 the Borrower and its Subsidiaries for the applicable measurement period, all as determined on a Consolidated basis in accordance with GAAP, provided, however, that there shall be excluded (a) extraordinary gains and extraordinary losses for such period, (b) the income (or loss) of any Person in which a Person other than the Borrower and its wholly-owned Subsidiaries has an Equity Interest during such period in which such other Person has an Equity Interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to the Borrower during such period, (c) the income (or loss) of any Subsidiary during such period and accrued prior to the date it becomes a Subsidiary of the Borrower or any of its Subsidiaries or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries, and (d) the income of any direct or indirect Subsidiary of the Borrower 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 the cash proceeds received by any Loan Party from any licensing of any Intellectual Property (including any licensing in any foreign jurisdiction) shall be included in determining Consolidated Net Income and the Borrower’s equity in any net loss of any such Subsidiary for such period shall be included in determining Consolidated Net Income.

 

-8-

 

“Consolidated Positive Net Income” means, as of any date of determination, an amount equal to Consolidated Net Income of the Borrower and its Subsidiaries on a Consolidated basis for the applicable measurement period, plus the following to the extent deducted in calculating such Consolidated Net Income: (a) depreciation and amortization expense, (b) one-time non-cash charges, non-cash compensation, non-cash Federal, state, local and foreign income Taxes relating to amortization of intangibles for tax purposes and non-cash interest, (c) one-time costs relating to any Permitted Acquisition (of the type referred to in clause (ii) of the definition thereof) or fees in connection with any Permitted Indebtedness in an amount not to exceed $5,000,000 in any Fiscal Year of the Borrower and (d) one-time costs or fees in connection with the Merger in an amount not to exceed $7,500,000 in the aggregate for the twelve month period following the Merger Date, all as determined on a Consolidated basis in accordance with GAAP.

 

“Consolidated Total Indebtedness” means, as of any date of determination, for the Borrower 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 in each case owed to a Person other than a Loan Party, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments in each case owed to a Person other than a Loan Party, (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, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Borrower or any Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary.

 

“Consolidated Total Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Total Indebtedness on such date to (b) Consolidated EBITDA for the trailing twelve months then ending.

 

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

 

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

 

-9-

 

“Copyright” has the meaning specified in the Security Agreement.

 

“Copyright Security Agreement” means the Grant of Security Interest in United States Copyrights dated as of the Effective Date among certain Loan Parties and the Agent.

 

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and its Affiliates, (ii) the Agent, (iii) the Arranger, (iv) each beneficiary of each indemnification obligation undertaken by any Loan Party under any Loan Document, (v) any other Person to whom Obligations under this Agreement and other Loan Documents are owing, and (vi) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

 

“Credit Party Expenses” means (a) all reasonable out-of-pocket expenses incurred by the Agent, the Arranger and their respective Affiliates in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the Agent and the Arranger, (B) outside consultants for the Agent and the Arranger, to the extent such consultants are retained with the consent of the Borrower, (C) appraisers, and (D) commercial finance examiners, in connection with (1) 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), (2) the enforcement or protection of its rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with any proceeding under any Debtor Relief Laws, or (3) any workout, restructuring or negotiations in respect of any Obligations, and (ii) all customary fees and charges (as adjusted from time to time) of the Agent with respect to the disbursement of funds (or the receipt of funds) to or for the account of the Borrower (whether by wire transfer or otherwise), together with any out-of-pocket costs and expenses incurred in connection therewith, and (b) all reasonable out-of-pocket expenses incurred by the Credit Parties who are not the Agent, the Arranger or any Affiliate of either of them after the occurrence and during the continuance of an Event of Default, provided that such Credit Parties as a whole shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent an actual conflict of interest in which case such affected Credit Parties may engage and be reimbursed for one additional counsel for the affected Credit Parties taken as a whole).

 

“Debt Service Charges” means for any applicable measurement period for the Borrower and its Subsidiaries on a Consolidated basis, the sum of (a) Consolidated Interest Charges paid or required to be paid for such period, plus (b) principal payments made or required to be made on account of Indebtedness (excluding any Synthetic Lease Obligations but including, without limitation, the principal component of all Obligations and of any Capital Lease Obligations) for such period, in each case determined on a Consolidated basis in accordance with GAAP.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and 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 or other applicable jurisdictions from time to time in effect.

 

-10-

 

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

 

“Default Rate” means, with respect to any Loan, an interest rate equal to the interest rate otherwise applicable to such Loan plus two percent (2%) per annum.

 

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

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction), whether in one transaction or in a series of transactions, of any property (including, without limitation, any Equity Interests other than Equity Interests of the Borrower) 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 Loan matures. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that the Borrower 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.

 

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

 

“Early Termination Fee” has the meaning set forth in Section 2.08(b).

 

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

 

“Effective Date Acquisition” has the meaning provided therefor in the recitals.

 

“Eligible Assignee” means (a) a Credit Party which is a Credit Party on the Effective Date or becomes a Credit Party pursuant to any of clauses (b) through (d) below, or any of its Affiliates; (b) a bank, insurance company, or company 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; and (d) any other Person (other than a natural Person) satisfying the requirements of Section 10.06(b) hereof; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Loan Party or any of their respective Affiliates or Subsidiaries.

 

-11-

 

“Environmental Laws” means any and all applicable Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, 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.

 

“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 the 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.

 

“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 non-voting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“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 Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity 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 the Borrower 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 Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any 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; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) 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 the Borrower or any ERISA Affiliate.

 

-12-

 

“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.

 

“Excluded Account” has the meaning specified in Section 6.12.

 

“Excluded Property” has the meaning set forth in the Security Agreement.

 

“Excluded Subsidiary” means a Subsidiary of the Borrower that is organized for the purpose of, and is engaged solely in the business of, owning Intellectual Property and related assets to be acquired pursuant to a Permitted Acquisition, and which Subsidiary complies with the following requirements: (i) such Subsidiary is subject to customary restrictions to make such Subsidiary a special purpose, bankruptcy remote entity, as determined by the GSO Entities in their reasonable discretion; (ii) such Subsidiary maintains Deposit Accounts and other bank accounts which are separate from the Borrower and the other Loan Parties and does not co-mingle any cash or cash equivalents of such Subsidiary with the Borrower or any other Loan Party; (iii) no Loan Party issues or incurs any Indebtedness or Guarantee in respect of, or grants any Lien on any of its assets or properties to secure, any Indebtedness, liabilities or other obligations of such Subsidiary, and (iv) no Loan Party has any obligation to maintain such Subsidiary’s financial condition or cause such Subsidiary to achieve any level of operating results.

 

“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 of, or the grant under a Loan Document by such Loan Party of a security interest to secure, such Swap Obligation (or any Guarantee 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 10.25 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.

 

-13-

 

“Excluded Taxes” means 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 net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending 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 pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan (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) and (d) any withholding Taxes imposed pursuant to or in connection with FATCA.

 

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

 

“Existing Credit Agreement” means that certain First Lien Term Loan Agreement dated as of March 28, 2013, among the Borrower, the guarantors party thereto, the lenders party thereto, and Bank of America, as agent for the Lenders.

 

“Facility Guaranty” means the Guaranty made by the Guarantors in favor of the Agent and the other Credit Parties, in form reasonably satisfactory to the GSO Entites.

 

“FATCA” means Sections 1471 through 1474 of the Code, as in effect on the Effective Date (or any amended or successor provision 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 and any intergovernmental agreements (and related legislation or official administrative guidance) implementing the foregoing.

 

“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 Agent.

 

“Fee Letter” means, collectively, (i) the letter agreement dated as of the Effective Date, between the Borrower and the Agent and (ii) the letter agreement dated as of the Effective Date, between the Borrower and the Arranger.

 

“First Lien Agent” means Bank of America, in its capacity as administrative agent and collateral agent for the lenders under the First Lien Credit Agreement, together with any successor agent.

 

-14-

 

“First Lien Credit Agreement” means that certain Amended and Restated First Lien Term Loan Agreement dated as of August 15, 2014 among the Borrower, the guarantors party thereto, the lenders party thereto, and the First Lien Agent, as the same may be amended, restated, supplemented or otherwise modified, and any refinancings, refundings, renewals or extensions thereof permitted hereunder.

 

“First Lien Facility” has the meaning set forth in clause (a)(i) of the definition of “Permitted Indebtedness”.

 

“First Lien Intercreditor Agreement” means that certain Intercreditor Agreement, dated as August 15, 2014, among the Agent and the First Lien Agent.

 

“First Lien Loan Documents” means any and all documents executed in connection with the First Lien Facility.

 

“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 Borrower.

 

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

 

“Fiscal Year” means any period of twelve consecutive months ending on December 31 of any calendar year.

 

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

 

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower 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.

 

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

 

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

 

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

 

“GBH” has the meaning provided therefor in the recitals.

 

-15-

 

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, 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).

 

“GSO Entity” shall mean any of GSO Capital Partners LP or certain funds and accounts managed or sub-advised by GSO Capital Partners LP or its Affiliates, as the context may require.

 

“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. The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor” means (i) each domestic Subsidiary of the Borrower existing on the Effective Date, other than the Subsidiaries set forth on Schedule 1.01 hereto, (ii) each other Subsidiary of the Borrower that shall be required to execute and deliver a Facility Guaranty pursuant to Section 6.11, and (iii) with respect to any Swap Obligations of a Specified Loan Party, the Borrower.

 

“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, and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

 

“Identified Transaction” means the acquisition by the Borrower within 120 days following the Effective Date (or such longer period as may be agreed by the Administrative Agent) of 50.5% of the Equity Interests of a Person identified to the Administrative Agent prior to the Effective Date for an aggregate cash purchase price not in excess of $9,000,000.

 

-16-

 

“Immaterial Subsidiary” means (x) as of the Effective Date, the Subsidiaries set forth on Schedule 1.01 hereto and noted as Immaterial Subsidiaries, and (y) with respect to any Subsidiary formed or acquired after the Closing Date that is not an Excluded Subsidiary, any such Subsidiary of the Borrower that (i) had less than 5% of consolidated assets and 5% of annual consolidated revenues of the Borrower and its Subsidiaries as reflected on the most recent financial statements delivered pursuant to Section 6.01 prior to such date and (ii) has been designated as such by the Borrower in a written notice delivered to the Agent (other than any such Subsidiary as to which the Borrower has revoked such designation by written notice to the Agent); provided that no Subsidiary owning any Material Intellectual Property or Intellectual Property related thereto or party to a Material License may be designated as an Immaterial Subsidiary, and provided further that at no time shall all Immaterial Subsidiaries so designated by the Borrower have in the aggregate consolidated assets or annual consolidated revenues (as reflected on the most recent financial statements delivered pursuant to Section 6.01 prior to such time) in excess of 5% of consolidated assets or annual consolidated revenues, respectively, of the Borrower and its Subsidiaries.

 

“Increase Effective Date” shall have the meaning provided therefor in Section 2.14(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 direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(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 and, in each case, not past due for more than 60 days after the date on which such trade account payable was created);

 

(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)          All Attributable Indebtedness of such Person;

 

(g)          all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (including, without limitation, Disqualified Stock), or any warrant, right or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

 

-17-

 

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

 

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (1) contingent obligations incurred in the ordinary course of business and not in respect of borrowed money, (2) deferred or prepaid revenues, (3) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the respective seller, or (4) any royalty, licensing, revenue and/or profit sharing arrangements, in each case, characterized as such and arising expressly out of purchase and sale contracts, development contracts or licensing arrangements.

 

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

 

“Indemnified Taxes” means (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” has the meaning specified in the Security Agreement.

 

“Interest Payment Date” means, (a) as to any LIBOR Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a LIBOR Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the first Business Day of each calendar quarter and the Maturity Date.

 

“Interest Period” means, as to each LIBOR Rate Loan,

 

(a)          initially, the period commencing on the date such LIBOR Rate Loan is disbursed or converted to a LIBOR Rate Loan and ending on the date one months thereafter; and

 

(b)          thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Rate Loan and ending on month thereafter; provided that the foregoing provisions are subject to the following:

 

(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;

 

-18-

 

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

 

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

 

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

 

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

 

“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, or (d) any other investment of money or capital in order to obtain a profitable return. 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.

 

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority.

 

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

 

“Lender” has the meaning specified in the introductory paragraph hereto.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender as a Lender may from time to time notify the Borrower and the Agent.

 

-19-

 

“LIBOR Rate” means:

 

(a)          for any Interest Period with respect to a LIBOR Rate Loan, the greater of (i) the rate per annum equal to the London interbank offered rate administered by ICE Benchmark Acquisition Limited (“ICE LIBOR”), as published by Reuters (or other commercially available source providing quotations of ICE LIBOR as designated by the GSO Entities from time to time) at approximately 11:00 a.m., London time, two 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 Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period and (ii) one percent (1.00%); and

 

(b)          for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) ICE 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 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 Base 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 Loan that bears interest at a rate based on the Adjusted LIBOR Rate.

 

“License” has the meaning specified in the Security Agreement.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement 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).

 

“Liquidation” means the exercise by the Agent of those rights and remedies accorded to the Agent 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 GSO Entities, of any 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.

 

“Loan” has the meaning specified in Section 2.01.

 

“Loan Account” has the meaning assigned to such term in Section 2.10(a).

 

-20-

 

“Loan Documents” means this Agreement, each Note, the Fee Letter, the Blocked Account Agreements, the Security Documents, the Facility Guaranty, the First Lien 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.

 

“Loan Notice” means a notice of a continuation or conversion of LIBOR Rate Loans, pursuant to Section 2.02(b), which shall be substantially in the form of Exhibit A.

 

“Loan Parties” means, collectively, the Borrower and each Guarantor.

 

“Loan to Value Ratio” means the ratio of the Total Outstandings to the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, expressed as a percentage, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent with respect to such registered Trademarks pursuant to Section 6.10(b).

 

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

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, assets, properties or liabilities (actual or contingent), condition (financial or otherwise) of the Borrower and its subsidiaries, taken as a whole; (b) a material impairment of the rights and remedies of the Agent under this Agreement or any other Loan Document, or of the ability of the Borrower or any other Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower or any other Loan Party of any Loan Document to which it is a party.

 

“Material Contract” means, with respect to any Person, each contract to which such Person is a party material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person, and shall include, without limitation, the Merger Agreement and each Material License.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $11,500,000. 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, (b) undrawn committed or available amounts shall be included, and (c) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included. Without limiting the foregoing, all Indebtedness incurred under the First Lien Facility shall be Material Indebtedness, regardless of the amount thereof.

 

“Material Intellectual Property” means those items of Intellectual Property described on Part 1 of Schedule 5.17 hereto, and all items of Intellectual Property established, registered or recorded in the United States acquired after the date hereof in respect of brands that are the subject of a Material License.

 

-21-

 

“Material License” means, as of the Effective Date, the Licenses described on Part 2 of Schedule 5.17 hereto, and thereafter, any License to the extent that the revenues from which constitute five percent (5%) or more of the annual revenues of the Borrower and its Subsidiaries.

 

“Maturity Date” means August 15, 2020.

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

“Merger Agreement” has the meaning provided therefor in the recitals.

 

“Merger Date” means the date of effectiveness of (i) the merger of Merger Sub with and into GBH, as Initial Surviving Corporation, and (ii) the merger of the Initial Surviving Corporation with and into SBG Universe, in each case pursuant to the Merger Agreement.

 

“Merger Documents” means, collectively, the Merger Agreement and the related instruments and agreement executed and delivered in connection therewith.

 

“Merger Representations” means such of the representations made by or on behalf of the Seller (as defined in the Merger Agreement) in the Merger Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower (or any of its Affiliates) has the right (taking into account any applicable cure provisions) to terminate its obligations under the Merger Agreement or not consummate the Merger as a result of a breach of such representations in the Merger Agreement.

 

“Merger Sub” has the meaning provided therefor in the recitals.

 

“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 the Borrower 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.

 

“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

 

“Net Proceeds” means, with respect to any Disposition by any Loan Party, 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 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), and (B) the reasonable and customary out-of-pocket expenses incurred by such Loan Party 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)).

 

-22-

 

“Non-Consenting Lender” has the meaning provided therefor in Section 10.01.

 

“Non-Guarantor Subsidiary” means any (i) non-wholly owned Subsidiary to the extent a guarantee of the Obligations and a pledge of the assets thereof in support of such guarantee would require the consent of any third-party holder of the Equity Interests thereof, (ii) Excluded Subsidiary, (iii) Immaterial Subsidiary, (iv) CFC, (v) domestic Subsidiary substantially all of the assets of which constitute equity and/or Indebtedness of direct or indirect foreign Subsidiaries or intercompany accounts, or (vi) any other Subsidiary organized in a jurisdiction outside of the United States.

 

“Note” means a promissory note made by the Borrower in favor of a Lender evidencing the portion of the Loan made by such Lender, substantially in the form of Exhibit B, as each may be amended, supplemented or modified from time to time.

 

“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, 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 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.

 

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any 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, and (d) 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.

 

-23-

 

“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 Liabilities” means any obligation on account of (a) any Cash Management Services furnished to any of the Loan Parties or any of their Subsidiaries and/or (b) any Bank Product furnished to any of the Loan Parties and/or any of their Subsidiaries, including, without limitation, Swap Obligations.

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.06(b)).

 

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

 

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

 

“Patent” has the meaning specified in the Security Agreement.

 

“Patent Security Agreement” means the Grant of Security Interest in United States Patents dated as of the Effective Date among certain Loan Parties and the Agent.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Act” means the Pension Protection Act of 2006.

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

 

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

 

“Permitted Acquisition” means (i) an Acquisition consummated by an Excluded Subsidiary, or (ii) any other Acquisition consummated by a Loan Party in which all of the following conditions are satisfied:

 

-24-

 

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

 

(b)          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)           For any Acquisition for total consideration in excess of $10,000,000, the Borrower shall have furnished the Agent and the Arranger with ten (10) Business Days’ prior written notice of such intended Acquisition and shall have furnished the Agent and the Arranger with a current draft of the documentation in connection with such Acquisition (and final copies thereof as and when executed), a summary of any due diligence undertaken by the Loan Parties in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve (12) month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by quarter for the acquired Person, individually, and on a Consolidated basis with all Loan Parties), and such other information as the Agent or the Arranger may reasonably require, all of which shall be in form reasonably satisfactory to the Agent and the Arranger;

 

(d)          The legal structure of the Acquisition shall be reasonably acceptable to the Agent and the Arranger;

 

(e)          After giving effect to the Acquisition, if the Acquisition is an Acquisition of Equity Interests, the Borrower 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;

 

(f)          Any assets acquired shall consist principally of Intellectual Property, and if the Acquisition involves a merger, consolidation or acquisition of Equity Interests, the Person which is the subject of such Acquisition shall be engaged in, the business of owning and licensing Intellectual Property; provided that unless otherwise agreed by the GSO Entities, any Acquisition of assets which includes inventory, equipment and other working capital assets in addition to Intellectual Property or which involves the acquisition of Equity Interests of a Person which also owns inventory, equipment and other working capital assets in addition to Intellectual Property shall provide for the wind-down and sale of such working capital assets within twelve (12) months following the closing date of such acquisition; and

 

(g)          If the Person which is the subject of such Acquisition will be maintained as a Subsidiary (other than an Excluded Subsidiary) of a Loan Party, or if the assets acquired in an Acquisition will be transferred to a Subsidiary (other than an Excluded Subsidiary) which is not then a Loan Party, such Subsidiary shall have complied with the provisions of Section 6.11 and Section 6.15 hereof to the extent applicable.

 

-25-

 

“Permitted Disposition” means any of the following:

 

(a)          licenses and sublicenses of Intellectual Property of a Loan Party or any of its Subsidiaries in the ordinary course of business, other than, unless the GSO Entities consent thereto, outbound licenses of any Material Intellectual Property which would result in a Material Adverse Effect on the value of the Collateral consisting of Intellectual Property;

 

(b)          Dispositions of Intellectual Property so long as the Borrower makes any prepayments required pursuant to Section 2.04(b) in connection therewith;

 

(c)          Dispositions of real property, inventory, equipment and other assets (other than Intellectual Property) in the ordinary course of business or property (other than Intellectual Property) that is substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no longer useful or necessary in its business or that of any Subsidiary;

 

(d)          Disposition of inventory, equipment and other working capital assets (other than Intellectual Property) and Real Estate acquired in connection with the Effective Date Acquisition or in connection with a Permitted Acquisition within twelve (12) months after the consummation of the Effective Date Acquisition or such Permitted Acquisition;

 

(e)          Dispositions among the Loan Parties or by any Subsidiary to a Loan Party;

 

(f)          Dispositions by any Subsidiary which is not a Loan Party to another Subsidiary that is not a Loan Party; and

 

(g)          other Dispositions the Net Proceeds of which, in the aggregate, do not exceed $11,500,000.

 

“Permitted Encumbrances” means:

 

(a)          Liens imposed by law for Taxes that are not yet due 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 thirty (30) 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 laws or regulations, other than any Lien imposed by ERISA;

 

-26-

 

(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, 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, taken as a whole, do not materially interfere with the current use of the real property;

 

(g)          Liens existing on the Effective Date listed on Schedule 7.01 and Liens to secure any Permitted Refinancings of the Indebtedness with respect thereto;

 

(h)          Liens on fixed or capital assets or on Real Estate of any Loan Party which secure Indebtedness permitted under clauses (c) and/or (d) of the definition of Permitted Indebtedness 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 the applicable assets, and (iii) such Liens shall attach only to the assets or Real Estate acquired, improved or refinanced with such Indebtedness and shall not extend to any other property or assets of the Loan Parties;

 

(i)          Liens in favor of the Agent;

 

(j)          Landlords’ and lessors’ statutory Liens in respect of rent not in default;

 

(k)          Possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments owned as of the Effective Date and other 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;

 

(l)          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;

 

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

 

-27-

 

(n)          Liens on property (other than Intellectual Property) 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;

 

(o)          Liens on Collateral securing Indebtedness in respect of the First Lien Facility; provided such Liens are subject to the First Lien Intercreditor Agreement (or, in the case of any other such credit facility or any Permitted Refinancing thereof permitted hereunder, another intercreditor agreement containing terms that are at least as favorable to the Credit Parties as those contained in the First Lien Intercreditor Agreement) and the Indebtedness secured by such Liens is permitted to be incurred pursuant to clause (a)(i) of the definition of “Permitted Indebtedness”;

 

(q)          Liens on earnest money deposits made in connection with any agreement in respect of a Permitted Acquisition or consisting of an agreement to dispose of any property in a Permitted Disposition;

 

(r)          ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located;

 

(s)          (i) licenses, sublicenses, leases or subleases granted by any Loan Party to other Persons not materially interfering with the conduct of the business of such Loan Party, (ii) any interest or title of a lessor, sublessor or licensor under any Lease, (iii) restriction or encumbrance to which the interest or title of such lessor or sublessor may be subject and (iv) subordination of the interest of the lessee or sub-lessee under such Lease to any restriction or encumbrance referred to in the preceding clause (iii); and

 

(t)          Liens in connection with any zoning, building, land use or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any or dimensions of real property or the structure thereon.

 

“Permitted Holder” means each of TCP WR Acquisition, LLC, TCP SQBG Acquisition, LLC, TCP SQBG II, LLC, Carlyle Galaxy Holdings, L.P. and their respective Affiliates.

 

“Permitted Indebtedness” means each of the following:

 

(a)          (i) Indebtedness in respect of the First Lien Credit Agreement and any Permitted Refinancing thereof (collectively, the “First Lien Facility); provided that (A) the aggregate outstanding principal amount of any Indebtedness in respect of the First Lien Facility shall not exceed $100,000,000 in the aggregate (as such amount may be increased by up to $60,000,000 pursuant to the incremental provisions therein) at any time and (B) any Indebtedness in respect of the First Lien Facility shall not have an earlier maturity date than the Maturity Date or a decreased weighted average life than the First Lien Facility in effect on the date hereof and (ii) any other Indebtedness outstanding on the date hereof and listed on Schedule 7.03 hereto and, in the case of the foregoing clause (ii), any Permitted Refinancing thereof;

 

-28-

 

(b)          Indebtedness of any Loan Party to any other Loan Party;

 

(c)          purchase money Indebtedness of any Loan Party to finance the acquisition of any personal property consisting solely of fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets (other than Intellectual Property) or secured by a Lien on any such assets prior to the acquisition thereof, and Permitted Refinancings thereof, provided, however, that the aggregate principal amount of Indebtedness permitted by this clause (c) shall not exceed $11,500,000 at any time outstanding and further provided that, if requested by the GSO Entities, the Loan Parties shall use commercially reasonable efforts to cause the holders of any such Indebtedness incurred to finance the acquisition of assets containing information relating to Intellectual Property, licensing arrangements or financial information to enter into an intercreditor agreement with the Agent on terms reasonably satisfactory to the GSO Entities;

 

(d)          Indebtedness incurred for the construction or acquisition or improvement of, or to finance or to refinance, any Real Estate owned by any Loan Party (including therein any Indebtedness incurred in connection with sale-leaseback transactions permitted hereunder and any Synthetic Lease Obligations), provided that, if requested by the GSO Entities, the Loan Parties shall use commercially reasonable efforts to cause the holders of such Indebtedness and the lessors under any sale-leaseback transaction to enter into an access agreement with respect to any Real Estate in which the Loan Parties maintain information relating to Intellectual Property, licensing arrangements or financial information, on terms reasonably satisfactory to the GSO Entities;

 

(e)          contingent liabilities under surety bonds or similar instruments incurred in the ordinary course of business;

 

(f)           obligations (contingent or otherwise) of any Loan Party or any Subsidiary thereof existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person (x) in connection with any issuance of convertible bonds permitted to be incurred under another clause of this definition of “Permitted Indebtedness” in the form of a call-spread overlay or any variation thereof or (y) in the ordinary course of business for the purpose of directly mitigating risks associated with fluctuations in interest rates or foreign exchange rates, and not for purposes of speculation or taking a “market view” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party;

 

(g)          Indebtedness of any Person that becomes a Subsidiary (other than an Excluded Subsidiary) of a Loan Party in a Permitted Acquisition, which Indebtedness is existing at the time such Person becomes a Subsidiary of a Loan Party (other than Indebtedness incurred solely in contemplation of such Person’s becoming a Subsidiary of a Loan Party);

 

-29-

 

(h)          the Obligations;

 

(i)          other unsecured Indebtedness or Indebtedness subordinated in the right of payment (on terms reasonably acceptable to the GSO Entities) in an aggregate principal amount not to exceed $287,500,000 at any time outstanding;

 

(k)          other unsecured Indebtedness or Indebtedness subordinated in right of payment (on terms reasonably acceptable to the Agent) not otherwise specifically described herein so long as, after giving pro forma effect to the incurrence of such Indebtedness and the consummation of any Permitted Acquisition or the application of the proceeds thereof, as applicable, in connection therewith, and (i) on a projected basis for the twelve (12) months immediately following such Indebtedness and related Permitted Acquisition or application of proceeds, as applicable, the ratio of Consolidated EBITDA (calculated for such purpose to include the projected Consolidated EBITDA of the entity or assets to be acquired in any applicable Permitted Acquisition) to Debt Service Charges shall be no less than the ratio of Consolidated EBITDA to Debt Service Charges as calculated prior to the incurrence of such Indebtedness and the consummation of such Permitted Acquisition or application of proceeds, as applicable, or, (ii) in the event that such ratio is less than the ratio calculated prior to the incurrence or application of proceeds of such Indebtedness, then the ratio of (A) Consolidated Total Indebtedness, less cash on the balance sheet of the Borrower, to (B) Consolidated EBITDA, in each case after giving pro forma effect to the incurrence of such Indebtedness and the consummation of any applicable Permitted Acquisition or application of proceeds, shall not be greater than 4.0:1.0;

 

(l)          Indebtedness consisting of unsecured guaranties by any Loan Party of the Indebtedness and lease and other contractual obligations (including, without limitation, guaranties of any license agreements entered into in the ordinary course of business by a Loan Party), in each case, of any other Loan Party, to the extent permitted under this Agreement;

 

(m)          Indebtedness arising from the honoring by any bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness is extinguished within five (5) Business Days of its incurrence;

 

(n)          Indebtedness owed to any Person providing property, casualty, liability or other insurance to any Loan Party, so long as the amount of such Indebtedness is not in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the period in which such Indebtedness is incurred and such Indebtedness is outstanding only for a period not exceeding twelve months;

 

-30-

 

(o)          Indebtedness of any Loan Party which may be deemed to exist in connection with agreements providing indemnification, deferred purchase price, non-cash earn-outs, cash earn-outs in an amount not to exceed $11,500,000 at any time outstanding so long as after giving effect thereto the Loan Parties have cash on hand in an amount greater than $5,000,000, purchase price adjustments and other similar obligations in connection with the acquisition or disposition of assets in accordance with this Agreement, so long as any such obligations are those of the Person making the respective acquisition or sale, and are not guaranteed by any other Person except as permitted by sub-clause (l) herein;

 

(p)          Indebtedness representing deferred compensation or similar obligation to employees of Loan Parties incurred in the ordinary course of business; and

 

(q)          Indebtedness of any Loan Party in respect of letters of credit, bank guarantees, supporting obligations bankers’ acceptances, performance bonds, surety bonds, statutory bonds, appeal bonds, warehouse receipts or similar instruments issued or created in the ordinary course of business, including with respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 30 days following the due date thereof.

 

“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 any agency or instrumentality thereof 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 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 and rated 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 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;

 

-31-

 

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

 

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

 

(f)          Investments existing on the Effective Date set forth on Schedule 7.02, but not any additional Investment in respect thereof unless otherwise permitted hereunder;

 

(g)          (i) Investments by any Loan Party and its Subsidiaries in their respective Subsidiaries outstanding on the Effective Date, (ii) additional Investments by any Loan Party and its Subsidiaries in Loan Parties, (iii) Investments in Non-Guarantor Subsidiaries constituting (x) Investments made with contributions of the Equity Interests of the Borrower and cash proceeds of equity contributions to the Borrower made by the Borrower’s shareholders, (y) non-monetary Investments consisting of the acquisition or formation and ownership of the Equity Interests thereof to the extent permitted pursuant to clause (m) hereof and (z) so long as (A) no Default or Event of Default has occurred and is continuing or would result therefrom and (B) the Loan Parties have cash on hand in an amount greater than $10,000,000 after giving effect thereto, additional Investments by any Loan Party in any Non-Guarantor Subsidiary in an aggregate amount not to exceed $11,500,000 outstanding at any time, and (iv) additional Investments by Subsidiaries of the Loan Parties that are not Loan Parties in other 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 constituting Permitted Indebtedness;

 

(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;

 

-32-

 

(l)          advances to officers, directors and employees of the Loan Parties in the ordinary course of business in an amount not to exceed $575,000 to any individual at any time or in an aggregate amount not to exceed $2,300,000 at any time outstanding;

 

(m)          Investments constituting Permitted Acquisitions;

 

(n)          Loan Parties may own the equity interests of their respective Subsidiaries created or acquired in accordance with this Agreement (so long as all amounts invested in such Subsidiaries are independently justified under another clause of this definition);

 

(o)          deposits made in the ordinary course of business to secure the performance of leases or other obligations pursuant to Section 7.03;

 

(p)          purchases of assets in the ordinary course of business to the extent not constituting a Permitted Acquisition;

 

(q)          Investments consisting of (x) transactions permitted under Section 7.03 and 7.05, (y) Restricted Payments permitted by Section 7.06 and (z) repayments or other acquisitions of Indebtedness of any Loan Party not prohibited by Section 7.07;

 

(r)          promissory notes and other non-cash consideration received in connection with any asset sale permitted by Section 7.05;

 

(s)          the Effective Date Acquisition;

 

(t)          advances in the form of a prepayment of expense to vendors, suppliers and trade creditors consistent with their past practices, so long as such expenses were incurred in the ordinary course of business;

 

(u)          the Identified Transaction; and

 

(v)          Investments by the Borrower and its Subsidiaries not otherwise permitted under this definition of “Permitted Investments” in an aggregate amount not to exceed $11,500,000; provided that, with respect to each Investment made pursuant to this clause (v): (i) such Investment shall be in property that is part of, or in lines of business that are, substantially the same lines of business as one or more of the principal businesses of the Borrower and its Subsidiaries in the ordinary course; (ii) any determination of the amount of such Investment shall include all cash and noncash consideration paid by or on behalf of the Borrower and its Subsidiaries in connection with such Investment; (iii) (A) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Default shall have occurred and be continuing and (B) immediately after giving effect to such purchase or other acquisition, the Borrower and its Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Section 7.15, such compliance to be determined on the basis of the financial information most recently delivered to the Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such Investment had been consummated as of the first day of the fiscal period covered thereby; and (iv) if the Person which is the subject of such Investment will be maintained as a Subsidiary (other than an Excluded Subsidiary) of a Loan Party, or if the property acquired pursuant to such Investment will be transferred to a Subsidiary (other than an Excluded Subsidiary) which is not then a Loan Party, such Subsidiary shall have complied with the provisions of Section 6.11 and Section 6.15 hereof to the extent applicable;

 

-33-

 

provided, however, that notwithstanding the foregoing, after the occurrence and during the continuance of a Cash Control Event, no such Investments specified in clauses (a) through (e) shall be permitted unless 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, and such Investment is pledged to the Agent as additional collateral for the Obligations pursuant to such agreements as may be reasonably required by the GSO Entities.

 

“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) such Permitted Refinancing shall not require any scheduled principal payments due prior to the Maturity Date in excess of or prior to the scheduled principal payments for the Indebtedness being Refinanced due prior to such Maturity Date, (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall be 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, (e) no Permitted Refinancing shall have direct or indirect obligors who were not also obligors of the Indebtedness being Refinanced, or greater guarantees or security, than the Indebtedness being Refinanced, (f) such Permitted Refinancing shall be otherwise on terms not materially less favorable to the Credit Parties than those contained in the documentation governing the Indebtedness being Refinanced, taken as a whole, including, without limitation, with respect to financial and other covenants and events of default, (g) the interest rate applicable to any such Permitted Refinancing shall not exceed the then applicable market interest rate, (h) at the time thereof, no Default or Event of Default shall have occurred and be continuing, and (i) in the case of a Refinance of any Indebtedness permitted pursuant to clause (a) of the definition of Permitted Indebtedness, the agent and lenders party thereto agree in writing to be bound by the First Lien Intercreditor Agreement

 

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

 

-34-

 

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is required to contribute on behalf of any of its employees.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, 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 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 by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto.

 

“Realizable Orderly Liquidation Value” means the sum of one hundred percent (100%) of the appraised orderly liquidation value of the Intellectual Property of the Loan Parties, in each case based upon the most recent appraisal of such Intellectual Property undertaken by the Agent or received from the First Lien Agent pursuant to Section 6.10(b) with respect thereto.

 

“Recipient” means the Agent or any Lender.

 

“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 Borrower 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, trustees, administrators, managers, advisors and representatives 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 9.11.

 

“Required Lenders” means, as of any date of determination, Lenders holding in the aggregate more than 50% of the aggregate outstanding principal amount of the Loan.

 

“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 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.

 

-35-

 

“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.

 

“Restricted Payment Conditions” means, at the time of determination with respect to any specified Restricted Payment, that (a) no Default or Event of Default then exists or would arise as a result of making of such Restricted Payment, (b) after giving effect to such Restricted Payment, the Total Outstandings are not greater than twenty-five (25%) percent of the appraised orderly liquidation value of registered Trademarks of the Loan Parties, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent with respect to such registered Trademarks, and (c) the Consolidated Fixed Charge Coverage Ratio, as calculated on a pro-forma basis for the twelve Fiscal Months preceding such Restricted Payment, is equal to or greater than 1.0:1.0.

 

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

 

“Sanctioned Country” shall mean a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treasury.gov/resource-center/sanctions/Pages/default.aspx, or as otherwise published from time to time.

 

“Sanctioned Person” shall mean (i) a Person named on the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx, or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.

 

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

 

“SBG Universe” has the meaning provided therefor in the recitals.

 

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

 

“Securities Laws” means 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.

 

-36-

 

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

 

“Security Documents” means the Security Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement, the Blocked Account Agreements and each other security agreement or other instrument or document executed and delivered to the Agent pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations.

 

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

 

“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, and (d) 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. The amount of all guarantees 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 Loan Party” means any Loan Party that is not then an “eligible contract participant” under the Commodity Exchange Act (as determined prior to giving effect to Section 10.25).

 

“Specified Representations” means the representations and warranties contained in Sections 5.01, 5.02(a), (b), (c) (solely as it relates to the Merger Agreement) and (d), 5.04, 5.14, 5.19, 5.20 (subject to the limitations set forth in the proviso to Section 4.01(a)(x), 5.24, 10.17 and 10.18 of this Agreement.

 

“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 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.

 

-37-

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the 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, but shall exclude Excluded Subsidiaries.

 

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

 

“Swap 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).

 

“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).

 

-38-

 

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

 

“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) in accordance with Article VIII, or (iii) the date on which the Borrower prepays the Loan in full and terminates this Agreement in accordance with Section 2.04(a) hereof.

 

“Total Outstandings” means the sum of the (a) then outstanding principal amount of the Term Loan (as defined in the First Lien Credit Agreement), plus (b) the Total Revolving Outstandings (as defined in the First Lien Credit Agreement), plus (c) then outstanding principal amount of the Loan.

 

“Trademark” has the meaning specified in the Security Agreement.

 

“Trademark Security Agreement” means the Grant of Security Interest in United States Trademarks dated as of the Effective Date among certain Loan Parties and the Agent.

 

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

 

“Transactions” means, collectively, (a) the Effective Date Acquisition and the related transactions pursuant to the Merger Documents, (b) the entry into of the Loan Documents and the borrowings thereunder and (c) the entry into the First Lien Facility, the borrowings thereunder and the refinancing of the Existing Credit Agreement.

 

“Type” means, with respect to the portion of any Loan outstanding, its character as a Base Rate Loan or a LIBOR Rate Loan.

 

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

 

“UFCA” has the meaning specified in Section 10.21(d).

 

“UFTA” has the meaning specified in Section 10.21(d).

 

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

 

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

 

-39-

 

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

 

“Wilmington” means Wilmington Trust, National Association and its successors.

 

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, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and 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 rules, regulations and orders thereunder and all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer 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 reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (or, in the case of contingent reimbursement obligations with respect to Bank Products (other than Swap Contracts), providing cash collateralization) of all of the Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Swap Contracts) other than (i) unasserted contingent indemnification Obligations, (ii) any Obligations relating to Bank Products (including Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or cash collateralized, and (iii) any Obligations relating to Cash Management Services that, at such time, are allowed by the applicable provider of such Cash Management Services to remain outstanding without being required to be repaid.

 

-40-

 

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 Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the 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.

 

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).

 

ARTICLE II
THE COMMITMENTS AND LOANS

 

2.01       Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make a loan (collectively, the “Loan”) to the Borrower on the Effective Date in an aggregate principal amount equal to such Lender’s Commitment in immediately available funds in accordance with instructions provided by the Borrower. The aggregate amount of the Loan shall not exceed the aggregate Commitments. The Loan shall be LIBOR Rate Loans unless converted pursuant to Section 3.02 or 3.03 with an initial Interest Period of one month.

 

-41-

 

2.02       Continuations and Conversions of Loans.

 

(a)          [Reserved].

 

(b)          Each (i) continuation of LIBOR Rate Loans or (ii) conversion of a Base Rate Loan to a LIBOR Rate Loan shall be made upon the Borrower’s irrevocable notice to the Agent, which may be given by telephone. Each such notice must be received by the Agent not later than 11:00 a.m. three Business Days prior to the requested date of any continuation or, or conversion to, LIBOR Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each continuation of, or conversion to, LIBOR Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) he requested date of the continuation, as the case may be (which shall be a Business Day) and (iii) the principal amount of Loan to be continued or converted.

 

(c)          [Reserved].

 

(d)          [Reserved].

 

(e)          The Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for LIBOR Rate Loans upon determination of such interest rate.

 

(f)          After giving effect to all continuations of the Loan, there shall not be more than six (6) Interest Periods in effect with respect to LIBOR Rate Loans.

 

2.03       [Reserved].

 

2.04       Prepayments.

 

(a)          After the first anniversary of the Effective Date, the Borrower may, upon irrevocable written notice from the Borrower to the Agent, at any time or from time to time voluntarily prepay the Loan in whole or in part without premium or penalty except as provided in Section 2.08(b) hereof; provided that (i) such notice must be received by the Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of LIBOR Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of LIBOR Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; or, if less, the entire principal amount thereof then outstanding or such lesser amount as is acceptable to the applicable Lenders. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loan to be prepaid and, if LIBOR Rate Loans, the Interest Period(s) of such Loan. The Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, except that, to the extent delivered in connection with a full or partial refinancing of the Obligations, such notice shall not be irrevocable until such refinancing is closed and funded. Any prepayment of a LIBOR Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Subject to Section 2.12, each such prepayment shall be applied to the portion of the Loan held by, as applicable, the Lenders in accordance with their respective Applicable Percentages.

 

-42-

 

(b)          In connection with any Disposition of any Intellectual Property or related assets of the Borrower or its Subsidiaries, the Borrower shall prepay the Loan in an amount equal to fifty (50%) of the greater of (i) the orderly liquidation value of such assets as determined by the most recent appraisal of such Intellectual Property or related assets undertaken by the Agent or received from the First Lien Agent with respect thereto and (ii) the Net Proceeds received from such Disposition; provided that if an Event of Default has occurred and is continuing, the Borrower shall prepay the Loan in an amount equal to 100% of the greater of (i) the orderly liquidation value of such assets as determined by the most recent appraisal of such Intellectual Property or related assets undertaken by the Agent or received from the First Lien Agent with respect thereto and (ii) the Net Proceeds received from such Disposition.

 

(c)          In connection with any Disposition of any assets of the Borrower or its Subsidiaries (other than Permitted Dispositions of the type referred to in clauses (d), (e) and (f) of the definition thereof), the Borrower shall prepay the Loan in an amount equal to 100% of the Net Proceeds from the Disposition of such Collateral; provided that the Borrower shall have the right to reinvest such Net Proceeds, if such Net Proceeds are reinvested (or committed to be reinvested) within 180 days and, if so committed to be reinvested, so long as such reinvestment is actually completed within 180 days thereafter.

 

(d)          Not later than ninety (90) days after the end of each Fiscal Year of the Borrower and its Subsidiaries, the Borrower shall prepay the Loan in an amount equal to thirty (30%) of Consolidated Excess Cash Flow for the immediately preceding Fiscal Year of the Borrower and its Subsidiaries.

 

(e)          Subject to the First Lien Intercreditor Agreement, the Borrower shall prepay the Loan to the extent required pursuant to the provisions of Section 6.12 hereof.

 

(f)          Prepayments made to the Loan pursuant to Section 2.04, above shall be applied ratably to the remaining scheduled installments of principal due in respect of the Loan in the inverse order of maturity.

 

(g)          Notwithstanding anything to the contrary contained herein, no prepayment shall be required to be made by the Borrower pursuant to Sections 2.04(b)-(d) above to the extent any such prepayment is required to be made pursuant to Section 2.04 of the First Lien Credit Agreement; provided, that the Borrower shall prepay the Loan in the amount of any such prepayment waived by the First Lien Agent.

 

2.05       [Reserved].

 

-43-

 

2.06       Repayment of Obligations.

 

Except as provided in Section 1.02(d), the Borrower shall repay to the Agent, for the account of the Lenders, on the Termination Date the aggregate principal amount of Loan and other Obligations outstanding on such date.

 

2.07       Interest.

 

(a)          Subject to the provisions of Section 2.07(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 for LIBOR Rate Loans and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate Loans.

 

(b)          If any Event of Default exists, 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 Obligations shall bear interest at the Default Rate to the fullest extent permitted by Law. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

(c)          Except as provided in Section 2.07(b), interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

2.08       Fees.

 

(a)          [Reserved].

 

(b)          Early Termination Fee. In the event that the Borrower prepays the Loan pursuant to Section 2.04, then the Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a fee (the “Early Termination Fee”) equal to (i) if such prepayment occurs after the first anniversary of the Effective Date and prior to the second anniversary of the Effective Date, three percent (3%) and (ii) if such prepayments occurs on or after the second anniversary of the Effective Date and prior to the third anniversary of the Effective Date, one (1%) percent of the Loan then outstanding; provided, that if such prepayment occurs on or after the third anniversary of the Effective Date no Early Termination Fee shall be due and payable. All parties to this Agreement agree and acknowledge that the Lenders will have suffered damages on account of the prepayment of the Loan and that, in view of the difficulty in ascertaining the amount of such damages, the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate the Lenders on account thereof.

 

(c)          Other Fees. The Borrower shall pay to the Agent and the Arranger for their own account 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.

 

-44-

 

2.09       Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” 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. 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. Each determination by the Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

2.10       Evidence of Debt.

 

The Loan made by each Lender shall be evidenced by one or more accounts or records maintained by the Agent (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 Agent and each Lender shall be conclusive absent manifest error of the amount of the Loan made by the Lenders to the Borrower 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 Borrower 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 Agent in respect of such matters, the accounts and records of the Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Agent, the Borrower shall execute and deliver to such Lender (through the Agent) a Note, which shall evidence such Lender’s Loan 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 Loan and payments with respect thereto. Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.

 

2.11       Payments Generally; Agent’s Clawback.

 

(a)          General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Agent, for the account of the respective Lenders to which such payment is owed, at the Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Agent will promptly distribute to each Lender 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. All payments received by the Agent after 2:00 p.m. shall, at the option of the Agent, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day (other than with respect to payment of a LIBOR Rate Loan), and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

-45-

 

(b)          [Reserved].

 

(c)          Payments by Borrower; Presumptions by Agent. Unless the Agent shall have received notice from the Borrower prior to the time at which any payment is due to the Agent for the account of any of the Lenders hereunder that the Borrower will not make such payment, the Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Agent forthwith on demand the amount so distributed to such Lender, 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 the Agent, at the Federal Funds Rate.

 

(d)          [Reserved].

 

(e)          Obligations of Lenders Several. The obligations of the Lenders hereunder to make a Loan and to make payments hereunder are several and not joint. The failure of any Lender to make any 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 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.

 

2.12       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, interest on, or other amounts with respect to, the Loan resulting in such Lender’s receiving payment of a proportion of the aggregate amount of the Loan greater than its pro rata share thereof as provided herein (including as in contravention of the priorities of payment set forth in Section 8.03), then the Lender receiving such greater proportion shall (a) notify the Agent of such fact, and (b) purchase (for cash at face value) participations in the Loan of the other 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 and in the priorities set forth in Section 8.03, provided that:

 

(i)          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

 

-46-

 

(ii)         the provisions of this Section shall not be construed to apply to (x) any payment made by the Loan Parties pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loan to any Eligible Assignee or Participant, other than to the Borrower 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 Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

 

2.13       [Reserved].

 

2.14       Incremental Facility.

 

(a)          Request for Increase. Provided no Event of Default then exists or would arise therefrom, upon notice to the Agent and the Arranger (which shall promptly notify the Lenders), the Borrower may from time to time, request an increase in the Loan by an amount (for all such requests in the aggregate) not exceeding $70,000,000; provided that (i) any such request for an increase shall be in minimum increments of $10,000,000 and (ii) the Borrower may make a maximum of three (3) such requests. At the time of sending such notice, the Borrower (in consultation with the Agent and the Arranger) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders).

 

(b)          Lender Elections to Increase. Each Lender shall notify the Agent within the time period specified in the Borrower’s notice as provided in Section 2.14(a) whether or not it agrees to increase its outstanding portion of the Loan, as applicable, and, if so, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its outstanding portion of the Loan.

 

(c)          Notification by Agent; Additional Lenders. On the last day of the time period specified in the Borrower’s notice as provided in Section 2.14(a), the Agent shall notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the GSO Entities, to the extent that the existing Lenders decline to increase their respective outstanding portion of the Loan, as applicable, or decline to increase their respective outstanding portion of the Loan to the amount requested by the Borrower, the Agent and the Arranger, in consultation with the Borrower, will use their reasonable efforts to arrange for other Eligible Assignees to become a Lender hereunder (each such Lender, an “Additional Commitment Lender”) and to issue commitments in an amount equal to the amount of the increase in the Loan requested by the Borrower and not accepted by the existing Lenders (and the Borrower may also invite additional Eligible Assignees to become Lenders), provided, however, that without the consent of the Agent and the Arranger, at no time shall the commitment of any Additional Commitment Lender be less than $5,000,000.

 

-47-

 

(d)          Effective Date and Allocations. If the Loan is increased in accordance with this Section 2.14, the Agent and the Arranger, in consultation with the Borrower, shall determine the effective date (the “Increase Effective Date”) and the final allocations in respect of such increase. The Agent shall promptly notify the Borrower and the Lenders of the final allocations in respect of such increase and the Increase Effective Date and on the Increase Effective Date (i) the Loan under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such increase, and (ii) Schedule 2.01 shall be deemed modified, without further action, to reflect the revised Aggregate Commitments and Applicable Percentages of the Lenders.

 

(e)          Conditions to Effectiveness of Increase. As a condition precedent to such increase, (i) the Borrower shall deliver to the Agent a certificate of each Loan Party dated as of the Increase Effective Date 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 Borrower, 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 2.14, 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, (2) no Default or Event of Default exists or would arise therefrom and (3) on a pro forma basis after giving effect to such increase, the Borrower has a Loan to Value Ratio greater than eighty-five percent (85%), (ii) the Borrower, the Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Agent and such Additional Commitment Lender shall reasonably require; (iii) the Borrower shall have paid such fees and other compensation to the Additional Commitment Lenders as the Borrower and such Additional Commitment Lenders may agree; (iv) the Borrower shall have paid such arrangement fees to the Agent and the Arranger as the Borrower and the Agent or the Arranger, as applicable, may agree; (v) if requested by the Agent and Arranger, the Borrower shall deliver an opinion or opinions, in form and substance reasonably satisfactory to the Agent and Arranger, from counsel to the Borrower and dated such date; (vi) the Borrower and the Additional Commitment Lender shall have delivered such other instruments, documents and agreements as the Agent and Arranger may reasonably have requested; and (vii) no Default or Event of Default shall exist.

 

(f)          Conflicting Provisions. This Section shall supersede any provisions in Sections 2.12 or 10.01 to the contrary.

 

-48-

 

ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01       Taxes.

 

(a)          Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.

 

(i)          Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made 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 applicable Lender) 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.

 

(ii)         If any Loan Party or the Agent shall be required by any applicable Laws other than the Code 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 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(b)          Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of the applicable Lender timely reimburse it for the payment of, any Other Taxes.

 

(c)          Tax Indemnifications.

 

(i)          The Loan Parties shall, and each Loan Party does hereby, jointly and severally indemnify each Recipient, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) payable or paid by such Recipient 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 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 Borrower by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

-49-

 

(ii)         Each Lender 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 (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 applicable, against any Excluded Taxes attributable to such Lender, 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 hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due to the Agent under this clause (ii).

 

(d)          Evidence of Payments. Upon request by the Borrower or the Agent, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as provided in this Section 3.01, the Borrower shall deliver to the Agent or the Agent shall deliver to the 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 any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Agent, as the case may be.

 

(e)          Status of Lenders; Tax Documentation.

 

(i)          Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Agent, at the time or times reasonably requested by the Borrower or the Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the 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.

 

-50-

 

(ii)         Without limiting the generality of the foregoing,

 

(A)         any Lender that is a U.S. Person shall deliver to the 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 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)         any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the 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 Borrower or the Agent), whichever of the following is applicable:

 

(I)         in the case of a Foreign Lender claiming the 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 or IRS Form W-8BEN-E, as applicable, 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 or IRS Form W-8BEN-E, as applicable, 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)        executed originals of IRS Form W-8ECI;

 

(III)       in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit E-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; or

 

-51-

 

(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 or IRS Form W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-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 the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-4 on behalf of each such direct and indirect partner;

 

(C)         any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the 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 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 U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the 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 withholding Tax imposed pursuant to or in connection with 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 Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the 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 Borrower or the Agent as may be necessary for the 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.

 

-52-

 

(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 Borrower and the Agent in writing of its legal inability to do so.

 

(f)          Treatment of Certain Refunds. Unless 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 have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for the account of such Lender. If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by a Loan Party under this Section 3.01 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (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 Party, upon the request of the Recipient, agrees to repay the amount paid over to the Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the 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 Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.

 

(g)          Survival. Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, and the repayment, satisfaction or discharge of all of the Obligations.

 

-53-

 

3.02       Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBOR Rate Loans, or to determine or charge interest rates based upon the LIBOR Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, (i) any obligation of such Lender to make or continue LIBOR Rate Loans or to convert Base Rate Loans to LIBOR Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the LIBOR Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Agent without reference to the LIBOR Rate component of the Base Rate, in each case, until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Agent) together with documentation reasonably supporting such request, prepay or, if applicable, convert all LIBOR Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Agent without reference to the LIBOR Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the LIBOR Rate, the Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the LIBOR Rate component thereof until the Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the LIBOR Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

 

3.03       Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a LIBOR Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such LIBOR Rate Loan, (b) adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan , or (c) the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Agent will promptly so notify the Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain LIBOR Rate Loans shall be suspended, and (y) in the event of a determination described in the preceding sentence with respect to the LIBOR Rate component of the Base Rate, the utilization of the LIBOR Rate component in determining the Base Rate shall be suspended, in each case until the Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a conversion to or continuation of LIBOR Rate Loans or, failing that, will be deemed to have converted such request into a request Base Rate Loans in the amount specified therein.

 

3.04       Increased Costs; Reserves on LIBOR Rate Loans.

 

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

 

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

 

-54-

 

(ii)         subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)        impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or LIBOR Rate Loans made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any LIBOR Rate Loan (or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, together with documentation reasonably supporting such request, the Loan Parties will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

(b)          Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital or liquidity of such Lender’s holding company, if any, as a consequence of this Agreement, or the Loan made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then upon request from time to time from such Lender together with documentation reasonably supporting such request, the Loan Parties will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

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

 

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

 

-55-

 

(e)          Reserves on LIBOR Rate Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each LIBOR Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

 

(f)          Notwithstanding anything to the contrary contained in this Section 3.04, no Lender shall demand compensation for any increased costs pursuant to this Section 3.04 if it shall not be the general policy or practice of such Lender to demand such compensation in similar circumstances and unless such demand is generally consistent with such Lender’s treatment of comparable borrowers of such Lender in the United States with similarly affected loans.

 

3.05       Compensation for Losses. Upon demand of any Lender (with a copy to the Agent) from time to time, which demand shall set forth in reasonable detail the basis for such demand for compensation, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)          any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

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

 

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

 

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

 

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

 

-56-

 

3.06       Mitigation Obligations; Replacement of Lenders.

 

(a)          Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loan hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or Section 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)          Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 and, in each case, such Lender has declined or is unable to designate a different Lending Office in accordance with Section 3.06(a), the Borrower may replace such Lender in accordance with Section 10.13.

 

3.07       Survival. All of the Borrower’s obligations under this Article III shall survive repayment of all Obligations hereunder and resignation of the Agent.

 

ARTICLE IV
CONDITIONS PRECEDENT TO LOANS

 

4.01       Conditions of Initial Loans.

 

The obligation of each Lender to fund its portion of the Loan hereunder on the Effective Date is subject to satisfaction of the following conditions precedent:

 

(a)          The GSO Entities’ and the Agent’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif “ via e-mail) (followed promptly by originals) unless otherwise specified, each dated the Effective Date (or, in the case of certificates of governmental officials, a recent date before the Effective Date) and each in form and substance satisfactory to the GSO Entities:

 

(i)          counterparts of this Agreement each properly executed by a Responsible Officer of the signing Loan Party and the Lenders sufficient in number for distribution to the Agent, each Lender and the Borrower;

 

(ii)         a Note executed by the Borrower in favor of each Lender requesting a Note;

 

-57-

  

(iii)        such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the GSO Entities may require evidencing (A) the authority of each Loan Party to enter into this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party and (B) the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to become a party;

 

(iv)        copies of each Loan Party’s Organization Documents and such other documents and certifications as the GSO Entities may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing in its jurisdiction of organization or formation;

 

(v)       an opinion of White & Case LLP, counsel to the Loan Parties, addressed to the Agent and each Lender, as to such customary matters concerning the Loan Parties and the Loan Documents as the GSO Entities may reasonably request;

 

(vi)        a certificate of a Responsible Officer of the Borrower certifying (A) that the conditions specified in this Article IV have been satisfied and (B) to the Solvency of the Loan Parties as of the Effective Date after giving effect to the transactions contemplated hereby;

 

(vii)       the Security Documents, each duly executed by the applicable Loan Parties;

 

(viii)      all other Loan Documents, each duly executed by the applicable Loan Parties;

 

(ix)       results of searches or other evidence reasonably satisfactory to the GSO Entities (in each case dated as of a date reasonably satisfactory to the GSO Entities) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Encumbrances and Liens for which termination statements satisfactory to the GSO Entities are being tendered concurrently with such extension of credit or other arrangements satisfactory to the Agent for the delivery of such termination statements have been made; and

 

-58-

 

(x)        all documents and instruments, including Uniform Commercial Code financing statements, filings with the United States Patent and Trademark Office and the United States Copyright Office, and certificates evidencing any stock being pledged thereunder, together with undated stock powers executed in blank, each duly executed by the applicable Loan Parties, in each case required by law or reasonably requested by the GSO Entities to be filed, registered, recorded or delivered to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered, recorded or delivered to the satisfaction of the GSO Entities; provided that to the extent any security interest in the Collateral is not granted or perfected on the Effective Date after the Loan Parties’ commercially reasonable efforts to do so (other than (x) grants with respect to the Collateral subject to the UCC and the delivery of UCC financing statements or the filing of a security agreement with the U.S. Patent and Trademark Office or the U.S. Copyright Office and (y) the delivery of stock certificates and stock powers pursuant to this clause (x) (but, with respect to any entity acquired pursuant to the Merger Agreement, solely to the extent received from the seller thereunder)), the grant or perfection of such security interest shall be granted or perfected, as the case may be, within 60 days after the Effective Date (or such longer period as GSO Entities may agree in their sole discretion).

 

(b)        The Agent and the Lenders shall have received and the Lenders shall be satisfied with the substance of (i) audited financial statements of Galaxy Brand Holdings, Inc. and its Subsidiaries for the period from May 13, 2013 through December 31, 2013, and (ii) interim financial statements of Galaxy Brand Holdings, Inc. and its Subsidiaries dated the end of the most recent Fiscal Quarter ended at least forty-five (45) days prior to the Effective Date for which such financial statements are available.

 

(c)        Prior to or contemporaneously with the initial funding of the Loan, the Borrower shall consummate the Effective Date Acquisition substantially in accordance with the terms and conditions set forth in the Merger Agreement, without any amendment, modification or waiver of any of the terms or conditions thereof that would be materially adverse to the Agent and the Lenders without the consent of the GSO Entities (such consent not to be unreasonably withheld).

 

(d)        All accrued fees and expenses of the Agent and the Arranger (including the reasonable and documented fees and expenses of counsel (including any local counsel) for the Agent and the Arranger) invoiced at least one (1) Business Day prior to the Effective Date shall have been paid.

 

(e)        The Agent and the Lenders shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act.

 

(f)        The GSO Entities shall have received payoff letters with respect to the existing indebtedness of the Loan Parties under the Second Lien Facility (as defined in the Existing Credit Agreement), in each case satisfactory in form and substance to the GSO Entities evidencing that the all obligations thereunder have been or concurrently with the Effective Date are being paid in full, and all Liens securing obligations thereunder have been or concurrently with the Effective Date are being released.

 

(g)        Prior to or contemporaneously with the initial funding of the Loan, (i) the Loan Parties shall have entered into, and received the proceeds of, the First Lien Facility, (ii) the Agent shall have entered into the Intercreditor Agreement with the First Lien Agent and (iii) the Agent shall have received duly executed copies of all First Lien Documents certified by a Responsible Officer of the Borrower as being true, complete and correct.

 

-59-

  

(h)        Each of the Merger Representations and the Specified Representations shall be true and correct in all material respects, except that any Merger Representations or Specified Representations subject to “materiality”, “Material Adverse Effect” or similar materiality qualifiers shall be true and correct in all respects.

 

(i)        Since the date of the Merger Agreement, no change, state of facts, circumstance, occurrence, development, event or effect that, individually or in the aggregate, has had or would reasonably be expected to have a “Galaxy Material Adverse Effect” (as defined in the Merger Agreement, without giving effect to any amendment or modification of such definition after the date of the Merger Agreement unless approved by the GSO Entities in their reasonable discretion) shall have occurred.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loan hereunder, each Loan Party represents and warrants to the Agent and the other Credit Parties that (it being understood and agreed that only the Specified Representations shall be made on the Effective Date):

 

5.01       Existence, Qualification and Power. Each Loan Party and each of their Subsidiaries (a) is a corporation, limited liability company, partnership or limited partnership, duly incorporated, organized or formed, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation, organization or formation, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) other than with respect to Subsidiaries that are not Loan Parties, execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, where applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. Schedule 5.01 annexed hereto sets forth, as of the Effective Date, each Loan Party’s name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization, and its federal employer identification number.

 

-60-

 

5.02       Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party, has been duly authorized by all necessary corporate or other organizational action, and does not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (i) any Material Contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; (c) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Agent under the Security Documents); or (d) violate any applicable Law, except in the case of clauses (b)(ii) and (d), to the extent that such conflict or violation would not reasonably be expected to result in a Material Adverse Effect.

 

5.03       Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (a) the perfection or maintenance of the Liens created under the Security Documents (including the second priority nature thereof) or (b) such as have been obtained or made and are in full force and effect.

 

5.04       Binding Effect. This Agreement has been, and each other Loan Document, when delivered, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law, and (ii) the need for filings and registrations necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Credit Parties.

 

5.05       Financial Statements; No Material Adverse Effect.

 

(a)        The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

(b)        The unaudited Consolidated balance sheet of the Borrower and its Subsidiaries (other than the Subsidiaries acquired pursuant to the Effective Date Acquisition) dated June 30, 2014, and the related Consolidated statements of income or operations, Shareholders’ Equity and cash flows for the Fiscal Quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

 

-61-

 

(c)        Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

(d)        To the best knowledge of the Borrower, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements that has resulted in or could reasonably be expected to result in a misstatement in any material respect, (i) in any financial information delivered or to be delivered to the Agent or the Lenders, (ii) of covenant compliance calculations provided hereunder or (iv) of the assets, liabilities, financial condition or results of operations of the Borrower and its Subsidiaries on a Consolidated basis.

 

(e)        The Consolidated forecasted balance sheet and statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 6.01(c) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Loan Parties’ best estimate of its future financial performance, it being recognized by the Lenders that projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by the projections may differ from the projected results included in such projections.

 

5.06       Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

 

5.07       No Default. No Loan Party or any Subsidiary is in default under or with respect to, any Material Contract or any Material Indebtedness. As of the Effective Date, no Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

5.08       Ownership of Property; Liens.

 

(a)        Each of the Loan Parties has good marketable title in fee simple to or valid leasehold interests or use rights in, all Real Estate necessary in the ordinary conduct of its business, except for (i) Permitted Encumbrances, and (ii) such defects in, or failures to have, title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Loan Parties and each of their Subsidiaries has good and marketable title to, or valid licenses to use, all personal property and assets material to the ordinary conduct of its business except for such defects in, or failures to have, title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

-62-

 

(b)        Schedule 5.08(b)(1) sets forth the address (including street address, county and state) of all Real Estate (excluding Leases, easements, rights of way and similar rights) that is owned by the Loan Parties, together with a list of the holders of any mortgage or other Lien thereon as of the Effective Date. Schedule 5.08(b)(2) sets forth the address (including street address, county and state) of all material Leases of the Loan Parties, together with the name of each lessor and its contact information with respect to each such Lease as of the Effective Date. Each of such Leases is in full force and effect and the Loan Parties are not in default of any material term thereof.

 

5.09       Environmental Compliance.

 

(a)        No Loan Party (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, except, in each case (i) to (iv), as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)        Except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) none of the properties currently owned or operated by any Loan Party is listed or, to the knowledge of the Loan Parties proposed for listing, on the NPL or on the CERCLIS; (ii) to the knowledge of the Loan Parties, there are no underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being treated, stored or disposed on any property currently owned or operated by any Loan Party; (iii) there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party; and (iv) Hazardous Materials have not been released, discharged or disposed of on any property currently owned or operated by any Loan Party in violation of any Environmental Law.

 

(c)        No Loan Party is undertaking, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and to the knowledge of the Loan Parties, all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently owned or operated by any Loan Party have been disposed of in a manner not reasonably expected to have a Material Adverse Effect.

 

5.10       Insurance. The properties of the Loan Parties are insured with financially sound and reputable insurance companies which are not Affiliates of the Loan Parties, in such, with such deductibles and covering such risks (including, without limitation, workmen’s compensation, public liability, business interruption, property damage and directors and officers liability insurance) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Loan Parties operates. Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Loan Parties as of the Effective Date. As of the Effective Date, each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

 

-63-

 

5.11       Taxes. The Loan Parties and each of their Subsidiaries (a) have filed all United States federal, state and other material tax returns and reports required to be filed, and (b) have paid all United States federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those (i) which are being contested in good faith by appropriate proceedings being diligently conducted, for which adequate reserves have been provided in accordance with GAAP or (ii) as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no proposed tax assessment against any Loan Party that would, if made, have a Material Adverse Effect. No Loan Party or any Subsidiary thereof is a party to any tax sharing agreement.

 

5.12       ERISA Compliance.

 

(a)        Each Pension Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other U.S. federal or state laws, except where any failure could not reasonably be expected to have a Material Adverse Effect. Each Pension Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the Internal Revenue Service. To the knowledge of the Borrower, nothing has occurred that would prevent or cause the loss of such tax-qualified status.

 

(b)        There are no pending or, to the knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no non-exempt prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(c)        (i) No ERISA Event has occurred, and neither the Borrower nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan; (ii) the Borrower and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained; (iii) neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (iv) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (v) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan, except, in each of clauses (i) through (v), as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

-64-

  

5.13       Subsidiaries; Equity Interests. As of the Effective Date, the Loan Parties have no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary. All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except for those Liens created under the Security Documents, Liens permitted by clause (o) of the definition of Permitted Encumbrances and Permitted Encumbrances having priority over the Lien of the Credit Parties under applicable Laws. Except as set forth in Schedule 5.13, there are no outstanding rights to purchase any Equity Interests in any Subsidiary. As of the Effective Date, the Loan Parties have no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the Loan Parties have been validly issued, and are fully paid and non-assessable and are owned in the amounts specified on Part (c) of Schedule 5.13 free and clear of all Liens except for those Liens created under the Security Documents and Permitted Encumbrances having priority over the Liens of the Credit Parties under applicable Laws. The copies of the Organization Documents of each Loan Party and each amendment thereto provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

 

5.14       Margin Regulations; Investment Company Act.

 

(a)        No Loan Party is engaged or will be engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. None of the proceeds of the Loan shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any margin stock or for any other purpose that might cause any of the Loan to be considered a “purpose credit” within the meaning of Regulations T, U, or X issued by the FRB.

 

(b)        None of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

 

-65-

 

5.15       Disclosure. Each Loan Party and each of their Subsidiaries has disclosed to the Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, in each case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. As of the Effective Date, no report, financial statement, certificate or other information relating to the Borrower or any of its Subsidiaries (other than any information of a general economic or industry specific nature and third party consultants reports) furnished by or on behalf of any Loan Party to the Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished prior to the execution hereof or thereof) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, after giving effect to any supplements thereto, not materially misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

5.16       Compliance with Laws. Each of the Loan Parties and each of their Subsidiaries is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

5.17       Intellectual Property; Licenses, Etc.. The Loan Parties and each of their Subsidiaries own, or are licensed to use, all Material Intellectual Property, and the use thereof by the Loan Parties or their Subsidiaries does not infringe upon the rights of any other Person. All items of Material Intellectual Property as of the Effective Date are: (a) subsisting and have not been adjudged invalid or unenforceable, in whole or part; and (b) to the knowledge of the Loan Parties, valid, in full force and effect and not in known conflict with the rights of any Person. The Loan Parties have made all filings and recordations necessary in the exercise of reasonable and prudent business judgment to protect their interests in the Material Intellectual Property in the United States Patent and Trademark Office, and the United States Copyright Office, as appropriate, including, the performance of all acts and the payment of all required fees and taxes to maintain each and every item of Material Intellectual Property in full force and effect. As of the Effective Date, no litigation is pending or, to the knowledge of any Loan Party, threatened which contains allegations respecting the validity, enforceability, infringement or ownership of any of the Material Intellectual Property. No Loan Party is in breach of or default under the provisions of any of the Material Licenses, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which reasonably could be expected to result in, either individually or in the aggregate, a Material Adverse Effect.

 

5.18       Reserved.

 

-66-

 

5.19       Security Documents. The Security Agreement creates in favor of the Agent, for the benefit of the Credit Parties, a valid and enforceable security interest in the Collateral (as defined in the Security Agreement), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. The UCC financing statements and other filings delivered by the Loan Parties on the Effective Date are in appropriate form for filing in the applicable offices. Upon such filings and/or the obtaining of “control” (as such term is defined in the UCC) to the extent required by the Loan Documents (and, in the case of Intellectual Property that is issued by, or registered or applied for in, the United States Copyright Office and constituting Collateral, the filing and recordation of the Copyright Security Agreement with the United States Copyright Office), the Agent will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected in the United States by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the UCC) (it being understood that subsequent recordings in the United States Copyright Office may be necessary to perfect a Lien on registered Copyrights acquired by the Loan Parties after the date hereof).

 

5.20       Solvency. After giving effect to the transactions contemplated by this Agreement, the Loan Parties, on a Consolidated basis, are Solvent. No transfer of property has been or will be made by any Loan Party and no obligation has been or will be incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party.

 

5.21       Deposit Accounts. Annexed hereto as Schedule 5.21 is a list of all Deposit Accounts maintained by the Loan Parties as of the Effective Date, which Schedule includes, with respect to each Deposit Account (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; (iii) a contact person at such depository, and (iv) the identification of each Blocked Account Bank.

 

5.22       Brokers. No broker or finder brought about the obtaining, making or closing of the Loan or transactions contemplated by the Loan Documents, and no Loan Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

 

5.23       Material Contracts. Schedule 5.23 sets forth all Material Contracts (other than Material Licenses set forth on Schedule 5.17) to which any Loan Party is a party or is bound as of the Effective Date. The Loan Parties have delivered true, correct and complete copies of such Material Contracts to the Agent on or before the Effective Date. The Loan Parties are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of default under, or of the intention of any other party thereto to terminate, any Material Contract.

 

5.24       OFAC. Neither any Loan Party nor any of its Subsidiaries or Controlled Affiliates, nor, to the knowledge of the Borrower, any of the respective directors, officers, brokers, employees or agents of such Loan Party, Subsidiary or Controlled Affiliate is a Sanctioned Person. No part of the proceeds of the Loan hereunder will be used directly or indirectly to fund any operations in, finance any investments or activities in or make any payments to a Sanctioned Person or a Sanctioned Country or for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in each case in violation of the United States Foreign Corrupt Practices Act of 1977, as amended and in effect from time to time.

 

-67-

  

ARTICLE VI
AFFIRMATIVE COVENANTS

 

So long as any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), the Loan Parties shall and shall cause their Subsidiaries to:

 

6.01       Financial Statements. Deliver to the Agent, in form and detail satisfactory to the GSO Entities:

 

(a)        as soon as available, but in any event within 90 days after the end of each Fiscal Year of the Borrower (commencing with the fiscal year ended December 31, 2014), a Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the GSO Entities, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

 

(b)        as soon as available, but in any event within 45 days after the end of each Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the Fiscal Quarter ended (x) June 30, 2014 with respect to the Borrower and its Subsidiaries other than those Subsidiaries acquired pursuant to the Effective Date Acquisition and (y) September 30, 2014 with respect to the Borrower and its Subsidiaries after giving effect to the Effective Date Acquisition), a Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Quarter and for the portion of the Borrower’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Quarter of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(c)        solely to the extent prepared by the Borrower in the ordinary course of business, then as soon as available, a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of each Fiscal Month of each Fiscal Year of the Borrower, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Month, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower and its Subsidiaries as of the end of such Fiscal Month in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

-68-

  

(d)        as soon as available, but in any event at least 30 days before the end of each Fiscal Year of the Borrower, forecasts prepared by management of the Borrower, representing the Borrower’s good faith estimate of future financial performance and based on assumptions believed by the Borrower to be fair and reasonable in light of current market conditions and consistent with historical practices and otherwise in form and based upon assumptions reasonably satisfactory to the GSO Entities, of the consolidated balance sheets and statements of income or operations and cash flows, and projections of royalty revenues, of the Borrower and its Subsidiaries on a quarterly (or, solely to the extent prepared by the Borrower in the ordinary course of business, monthly) basis for the immediately following Fiscal Year (including the Fiscal Year in which the Maturity Date occurs), and as soon as available, any significant revisions to such forecast with respect to such Fiscal Year.

 

6.02       Certificates; Other Information. Deliver to the Agent, in form and detail satisfactory to the GSO Entities:

 

(a)        concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its Registered Public Accounting Firm certifying such financial statements and stating that in making the examination necessary for their certification of such financial statements, such Registered Public Accounting Firm has not obtained any knowledge of the existence of any Default or Event of Default under Section 7.15 hereof or, if any such Default or Event of Default shall exist, stating the nature and status of such event;

 

(b)        concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the Fiscal Year ended December 31, 2014), (i) a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide a statement of reconciliation conforming such financial statements to GAAP and (ii) a copy of management’s discussion and analysis with respect to such financial statements;

 

(c)        concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), financial statements with respect to any Excluded Subsidiaries of the Loan Parties;

 

(d)        promptly upon receipt, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by its Registered Public Accounting Firm in connection with the accounts or books of the Loan Parties, or any audit of any of them, including, without limitation, specifying any Internal Control Event;

 

(e)        promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any national securities exchange;

 

-69-

 

(f)        as soon as available, but in any event within 15 days after the end of each Fiscal Quarters of each Fiscal Year of the Borrower (commencing with the Fiscal Quarter ended June 30, 2014), an updated report of the royalty revenue summary by brand and related licensing detail with respect to the Material Licenses of the Loan Parties and any Subsidiary, as prepared on a trailing twelve month basis and including comparisons to the projected royalty revenue of the Loan Parties delivered as part of the projections set forth in Section 6.01(d) above;

 

(g)        prior to the consummation of any Permitted Acquisition, the Borrower shall provide the Agent with an updated calculation of the Loan to Value Ratio covenant as set forth in Section 7.15(b) hereof and Section 7.15(b) of the First Lien Credit Agreement;

 

(h)        as soon as available, but in any event within 15 days after the end of each Fiscal Year of the Borrower, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for the Loan Parties and containing such additional information as the Agent, or any Lender through the Agent, may reasonably specify;

 

(i)        promptly after the Agent’s, or any Lender’s through the Agent, request therefor, copies of all Material Contracts and documents evidencing Material Indebtedness;

 

(j)        promptly, and in any event within five Business Days after receipt thereof by the Borrower, copies of each notice or other correspondence received from any Governmental Authority (including, without limitation, the SEC (or comparable agency in any applicable non-U.S. jurisdiction)) concerning any proceeding with, or investigation or possible investigation or other inquiry by such Governmental Authority regarding financial or other operational results of any Loan Party or any other matter which, if adversely determined, could reasonably expected to have a Material Adverse Effect;

 

(k)        promptly, any material amendments, modifications or waivers with respect to any Material Contract or Material License;

 

(l)        promptly, any Material License entered into by a Loan Party or its Subsidiary; and

 

(m)        promptly, such additional information regarding the business affairs, financial condition or operations of any Loan Party, or compliance with the terms of the Loan Documents, as the Agent or any Lender may from time to time reasonably request.

 

-70-

 

Documents required to be delivered pursuant to Section 6.01(a) or (b), or Section 6.02 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Agent or such Lender and (ii) the Borrower shall notify the Agent (by telecopier or electronic mail) of the posting of any such documents and provide to the Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

6.03       Notices. Promptly notify the Agent:

 

(a)        of the occurrence of any Default or Event of Default;

 

(b)        of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect,

 

(c)        of any breach or non-performance of, or any default under, a Material Contract or with respect to Material Indebtedness of any Loan Party that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(d)        of any dispute, litigation, investigation, proceeding or suspension between any Loan Party and any Governmental Authority, or the commencement of, or any material development in, any litigation or proceeding affecting any Loan, including pursuant to any applicable Environmental Laws, in each case that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(e)        of the occurrence of any ERISA Event that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(f)        of any change in the Borrower’s senior executive officers;

 

(g)        of the discharge by the Borrower of its present Registered Public Accounting Firm or any withdrawal or resignation by such Registered Public Accounting Firm;

 

(h)        of the filing of any Lien for unpaid Taxes against any Loan Party that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(i)        of the Borrower’s obtaining knowledge that any application or registration relating to any Material Intellectual Property (whether now or hereafter existing) may become abandoned or dedicated, or of any material adverse determination or material development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding Borrower’s ownership of any Material Intellectual Property; and

 

-71-

  

(j)        of the failure to renew, or the cancelation of, any Material License.

 

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.

 

Documents required to be delivered pursuant to this Section 6.03 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent); provided that the Borrower shall notify the Agent (by telecopier or electronic mail) of the posting of any such documents and provide to the Agent by electronic mail electronic versions (i.e., soft copies) of such documents.

 

6.04       Payment of Obligations. Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, (b) all lawful claims (including, without limitation, claims of landlords, warehousemen, customs brokers, freight forwarders, consolidators, and carriers) which, if unpaid, would by Law become a Lien upon its property (other than Permitted Encumbrances); and (c) all Material Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except, in each case, where (i) the validity or amount thereof is being contested in good faith by appropriate proceedings and such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP, or (ii) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

 

6.05       Preservation of Existence, Etc.. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 7.04 or 7.05; and (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. Notwithstanding the foregoing, no provision herein or in any other Loan Document shall be deemed to restrict the dissolution of William Rast Europe Holdings, LLC or any Immaterial Subsidiary, and such dissolution is expressly permitted.

 

6.06       Maintenance of Properties; Material Intellectual Property

 

(a)        (i) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear, casualty and condemnation excepted; and (ii) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

-72-

 

(b)        (i) Maintain all Material Intellectual Property in order that such Material Intellectual Property will be (A) subsisting and not adjudged invalid or unenforceable, in whole or part and (B) valid, in full force and effect and not in known conflict with the rights of any Person; (ii) make all filings and recordations necessary in the exercise of reasonable and prudent business judgment to protect such Loan Party’s interest in the Material Intellectual Property in the United States Patent and Trademark Office and the United States Copyright Office; (iii) perform all acts and pay all required fees and taxes to maintain each and every item of the Material Intellectual Property in full force and effect; and (iv) use commercially reasonable efforts to enforce all material provisions relating to quality assurance of products and services set forth in any Material License. For clarity, if any Loan Party determines, in its reasonable judgment, that any items of Intellectual Property which do not constitute Material Intellectual Property is no longer used or useful or of material value, such Loan Party may abandon, cancel or cease to protect such non- Material Intellectual Property.

 

6.07       Maintenance of Insurance. (a) Maintain with financially sound and reputable insurance companies reasonably acceptable to the GSO Entities and not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and operating in the same or similar locations or as is required by Law, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and as are reasonably acceptable to the GSO Entities.

 

(b)        Cause each such policy referred to in clause (a) above (i) to be endorsed to name the Agent as an additional insured or a loss payee, as applicable, in a form reasonably satisfactory to the GSO Entities, and (ii) to provide that it shall not be canceled, modified or not renewed (x) by reason of nonpayment of premium except upon not less than ten (10) days’ prior written notice thereof by the insurer to the Agent (giving the Agent the right to cure defaults in the payment of premiums) or (y) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Agent.

 

(c)        Deliver to the Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Agent, including an insurance binder) together with evidence satisfactory to the GSO Entities of payment of the premium therefor.

 

(d)        None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07. Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees. The designation of any form, type or amount of insurance coverage by any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.

 

-73-

  

6.08       Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Loan Parties in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws, and (c) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

6.09       Books and Records; Accountants.

 

(a)        Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties.

 

(b)        At all times retain Grant Thornton LLP, any other Registered Public Accounting Firm of nationally recognized standing, or another Registered Public Accounting Firm which is reasonably satisfactory to the GSO Entities, and, subject to the limitation set forth in Section 6.10 below, instruct such Registered Public Accounting Firm to cooperate with, and be available to, the Lenders or their representatives to discuss the Loan Parties’ financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such Registered Public Accounting Firm, as may be raised by the GSO Entities.

 

6.10       Inspection Rights; Appraisals of Intellectual Property.

 

(a)        Permit representatives and independent contractors, including consultants, of the Agent to visit and inspect, under guidance of officers of the Borrower, any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its officers, and Registered Public Accounting Firm, all at the expense of the Loan Parties and at such reasonable times during normal business hours and as often as may be reasonably desired (but absent the existence of a Default or Event of Default, the Borrower shall not be required to pay for more than two such visits and inspections in any calendar year) upon reasonable advance notice to the Borrower; provided, however, that the Borrower shall not be required to pay for any such visit and inspection to the extent the First Lien Agent had such an inspection done pursuant to the terms of the First Lien Documents and the results of such inspection were provided to the Agent; provided, further, however, that when a Default or an Event of Default exists the Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Loan Parties as often as it deems appropriate and at any time during normal business hours and without advance notice.

 

-74-

 

(b)        Upon the request of the Agent after reasonable prior notice, permit the Agent or professionals (including appraisers) retained by the Agent to conduct (x) up to one (1) appraisal of the trade names and brands and other Intellectual Property of the Loan Parties in each calendar year at the Loan Parties’ expense and (y) up to one (1) additional appraisal of the trade names and brands and other Intellectual Property of the Loan Parties in each calendar year at the Lenders’ expense; provided, however, that the Borrower shall not be required to pay for any such appraisal to the extent the First Lien Agent had such an appraisal done pursuant to the terms of the First Lien Documents and the results of such appraisal were provided to the Agent.

 

6.11       Additional Loan Parties. Notify the Agent at the time that any Person becomes a domestic Subsidiary, and promptly thereafter (and in any event within fifteen (15) Business Days or such longer period as may be agreed to by the GSO Entities in its reasonable discretion), cause any such Person (a) which does not qualify as a Non-Guarantor Subsidiary to (i) become a Loan Party by executing and delivering to the Agent a Joinder to this Agreement or a Joinder to the Facility Guaranty or such other documents as the GSO Entities shall deem appropriate for such purpose, (ii) grant a Lien to the Agent on such Person’s Intellectual Property and other assets of the same type that constitute Collateral (other than for the avoidance of doubt, Real Estate and other Excluded Property) to secure the Obligations, and (iii) deliver to the Agent documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), and (b) if any Equity Interests or Indebtedness of such Person (other than an Excluded Subsidiary or any Subsidiary acquired in connection with the Identified Transaction) are owned by or on behalf of any Loan Party, to pledge such Equity Interests and promissory notes evidencing such Indebtedness (except that, if such Subsidiary is a CFC, the Equity Interests of such Subsidiary to be pledged shall be limited to 65% of the outstanding voting Equity Interests of such Subsidiary and 100% of the non-voting Equity Interests of such Subsidiary, in each case in form, content and scope reasonably satisfactory to the GSO Entities (it being understood that in no event shall the Borrower be required to take any action outside of the United States in order to create or perfect any security interest in any Equity Interests of a foreign Subsidiary and no foreign law security or pledge agreements, deeds, filings or searches will be required). In no event shall compliance with this Section 6.11 waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.11 if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute, with respect to any Subsidiary, an approval of such Person as a Borrower.

 

6.12       Cash Management.

 

(a)        On or prior to the day which is ninety (90) days following the Effective Date (or such longer period as may be agreed to by the First Lien Agent in their reasonable discretion), cause all Deposit Accounts that are concentration and controlled disbursement accounts of the Loan Parties to be maintained with Bank of America pursuant to such documentation as the Agent or any Lender may reasonably request, including, without limitation, a Blocked Account Agreement satisfactory in form and substance to the GSO Entities with respect to each such Deposit Account (collectively, the “Blocked Accounts”); provided that, so long as no Cash Control Event has occurred and is continuing, the Borrower shall be permitted to maintain up to $1,000,000 in the aggregate in any disbursement accounts which are not held by Bank of America (such account(s), the “Excluded Accounts”); it being understood that no Blocked Account Control Agreements or other control agreements shall be required in respect of the Excluded Accounts, provided that the aggregate amount on deposit in the Excluded Accounts does not exceed the amounts set forth above.

 

-75-

 

(b)        After the occurrence and during the continuance of a Cash Control Event, cause the ACH or wire transfer to the collection account maintained by the First Lien Agent (or after Discharge of the First Lien Obligations (as defined in the First Lien Intercreditor Agreement) the Agent) at Bank of America (the “Collection Account”), no less frequently than daily, all cash receipts and collections received by each Loan Party from all sources, whether or not constituting Collateral, including, without limitation, the then entire ledger balance of each Blocked Account, Excluded Account or any other Deposit Account of the Loan Parties (in each case, net of any minimum balance, not to exceed $2,500.00 per account, as may be required to be kept in the subject Blocked Account or other Deposit Account by the applicable Blocked Account Bank or depository).

 

(c)        The Collection Account shall at all times be under the sole dominion and control of the First Lien Agent (or after Discharge of the First Lien Obligations (as defined in the First Lien Intercreditor Agreement) the Agent). The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Collection Account, (ii) the funds on deposit in the Collection Account shall at all times be collateral security for all of the Obligations and (iii) during the continuance of a Cash Control Event, the funds on deposit in the Collection Account shall be applied to the repayment of the Obligations as provided in this Agreement. In the event that, notwithstanding the provisions of this Section 6.12, any Loan Party receives or otherwise has dominion and control of any such cash receipts or collections, such receipts and collections shall be held in trust by such Loan Party for the First Lien Agent (or after Discharge of the First Lien Obligations (as defined in the First Lien Intercreditor Agreement), shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Collection Account or dealt with in such other fashion as such Loan Party may be instructed by the First Lien Agent (or after Discharge of the First Lien Obligations (as defined in the First Lien Intercreditor Agreement) the Agent).

 

(d)        Without limiting the provisions of this Section 6.12, during the continuance of a Cash Control Event, the Borrower shall maintain a minimum cash balance at all times of not less than $5,000,000 in a Blocked Account. Such amounts shall be used solely for such purposes as the (or after Discharge of the First Lien Obligations (as defined in the First Lien Intercreditor Agreement) the Agent) may agree in connection with the realization on the Collateral.

 

(e)        Upon the request of the Agent (at the direction of the Required Lenders), cause bank statements and/or other reports to be delivered to the Agent not less often than monthly, accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

 

-76-

 

6.13       Information Regarding the Collateral. Furnish to the Agent at least thirty (30) days prior written notice of any change in: (i) any Loan Party’s; (ii) the location of any Loan Party’s chief executive office, its principal place of business or any office in which it maintains books or records relating to Collateral owned by it; (iii) any Loan Party’s organizational structure or jurisdiction of incorporation or formation; or (iv) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its state of organization. The Loan Parties shall not effect or permit any change referred to in the preceding sentence unless all filings have been made or are made substantially concurrently therewith under the UCC or otherwise that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral for its own benefit and the benefit of the other Credit Parties.

 

6.14       Environmental Laws. Except in each case, where the failure to do so would not, individually or in the aggregate reasonably be expected to result in a Material Adverse Effect, (a) conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain and renew all material environmental permits necessary for its operations and properties; and (c) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, provided, however, that neither a Loan Party nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Loan Parties with respect to such circumstances in accordance with GAAP.

 

6.15       Further Assurances.

 

(a)        Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), that may be required under any Law, or which the Agent or the Arranger may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties (subject to the rights of the Loan Parties to dispose of the Collateral to the extent permitted herein). The Loan Parties also agree to provide to the Agent or the Arranger, from time to time upon request, evidence satisfactory to the Agent or the Arranger, as applicable, as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

 

-77-

 

(b)        If any material assets of the type included in the Collateral as of the Effective Date (excluding for the avoidance of doubt, any Real Estate or any other Excluded Property) are acquired by any Loan Party after the Effective Date (other than assets constituting Collateral under the Security Documents that become subject to the perfected first-priority Lien under the Security Documents upon acquisition thereof and other than, for the avoidance of doubt, any Equity Interests of any Excluded Subsidiary or Equity Interests of CFC in excess of the amount required to be pledged pursuant to Section 6.11), notify the Agent thereof, and the Loan Parties will cause such assets to be subjected to a Lien securing the Obligations and will take such actions as shall be necessary or shall be requested by the Agent or the Arranger to grant and perfect such Liens, including actions described in paragraph (a) of this Section 6.15, all at the expense of the Loan Parties (it being understood that in no event shall any Loan Party be required to take any action to create or perfect any security interest in any collateral outside of the United States and no foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches shall be required). In no event shall compliance with this Section 6.15(b) waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.15(b) if such transaction was not otherwise expressly permitted by this Agreement.

 

6.16       Material Contracts. (a) Perform and observe all the terms and provisions of each Material License and each other Material Contract to be performed or observed by it, (b) maintain each such Material License and each other Material Contract in full force and effect except to the extent such Material License or other Material Contract is no longer used or useful in the conduct of the business of the Loan Parties in the ordinary course of business, consistent with past practices or unless such Material License is terminated and replaced with another Material License in the ordinary course of business, (c) enforce each such Material License and each other Material Contract in accordance with its terms, and (d) cause each of its Subsidiaries to do the foregoing, except, in each case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect.

 

6.17       Board Packages.

 

Promptly upon request of the Arranger, the Borrower shall provide to the Arranger copies of any reports or other written materials provided to the members of the Board of Directors of the Borrower for discussion at regularly scheduled meetings of the Board of Directors of the Borrower, which shall be held no less frequently than quarterly (in each case other than any portions of such reports or materials that contain confidential information or are attorney-client privileged information or work product).

 

6.18       Post-Closing Items.

 

(a)        Within ninety (90) days of the Effective Date (or such longer period as may be agreed by the First Lien Agent in its reasonable discretion), the Loan Parties shall cause to be obtained the Blocked Account Agreements required pursuant to Section 6.12 hereof.

 

(b)        Within thirty (30) days of the Effective Date (or such longer period as may be agreed by the Agent and the Arranger in their reasonable discretion), the Loan Parties shall cause to be delivered to the Agent all endorsements to the insurance policies in favor of the Agent as are required under the Loan Documents.

 

-78-

 

ARTICLE VII
NEGATIVE COVENANTS

 

So long as any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), no Loan Party shall nor shall it permit any of its Subsidiaries to:

 

7.01       Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired or sign or file or suffer to exist under the UCC or any similar Law or statute of any jurisdiction a financing statement that names any Loan Party as debtor; sign or suffer to exist any security agreement authorizing any Person thereunder to file such financing statement; sell any of its property or assets subject to an understanding or agreement (contingent or otherwise) to repurchase such property or assets with recourse to it; or assign or otherwise transfer any accounts or other rights to receive income, other than, as to all of the above, Permitted Encumbrances.

 

7.02       Investments. Make any Investments, except Permitted Investments.

 

7.03       Indebtedness; Disqualified Stock; Equity Issuances.

 

(a)        Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Indebtedness, except Permitted Indebtedness;

 

(b)        Issue Disqualified Stock;

 

(c)        Issue and sell any Equity Interests (other than Disqualified Stock) except for (i) with respect to the Borrower Qualified Stock so long as no Change of Control would result therefrom; and (ii) with respect to any Subsidiary of the Borrower (A) stock splits, stock dividends and additional issuances of Equity Interests which do not decrease the percentage ownership of the Borrower or any Subsidiary of the Equity Interests of such Subsidiary, (B) Subsidiaries of the Borrower formed or acquired after the Effective Date may issue Equity Interests to (A) the Borrower or the direct or indirect Subsidiary of the Borrower which is to own such Equity Interests or (B) to any other Person with an ownership interest in such Subsidiary in each case in proportion to its ownership interest in such Subsidiary, (C) Subsidiaries of the Borrower may issue (1) directors qualifying shares to the extent required by applicable Laws and (2) shares to local nationals to the extent required by applicable Laws, (D) issuances in connection with the Transaction and any Permitted Acquisition and (E) any Subsidiary of the Borrower may issue and sell Equity Interests in connection with any Permitted Disposition. All Equity Interests issued to any Loan Party shall, to the extent required by any Security Document, be pledged as Collateral pursuant to the applicable Security Document; or

 

(d)        Permit any Excluded Subsidiary to create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to any Indebtedness, except Indebtedness of an Excluded Subsidiary with respect to the purchase price for any Permitted Acquisition.

 

7.04       Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, (or agree to do any of the foregoing), except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom:

 

-79-

 

(a)        any Subsidiary which is not a Loan Party (other than an Excluded Subsidiary) may merge with (i) a Loan Party, provided that the Loan Party shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries which are not Loan Parties, provided that when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person;

 

(b)        any Excluded Subsidiary may merge with any other Excluded Subsidiary;

 

(c)        any Subsidiary which is a Loan Party may merge into any Subsidiary which is a Loan Party or into the Borrower, provided that in any merger involving the Borrower, the Borrower shall be the continuing or surviving Person;

 

(d)        the Loan Parties may consummate the transactions contemplated by the Merger Agreement; and

 

(e)        in connection with a Permitted Acquisition, any Subsidiary (other than an Excluded Subsidiary) of a Loan Party may merge with or into or consolidate with any other Person or permit any other Person to merge with or into or consolidate with it; provided that (i) the Person surviving such merger shall be a wholly-owned Subsidiary of a Loan Party and such Person shall become a Loan Party in accordance with the provisions of Section 6.11 hereof, and (ii) in the case of any such merger to which any Loan Party is a party, such Loan Party is the surviving Person.

 

7.05       Dispositions. Make any Disposition, except Permitted Dispositions.

 

7.06       Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:

 

(a)        each Subsidiary of a Loan Party may make Restricted Payments to any Loan Party or to another Subsidiary of the Borrower which is the immediate parent of the Subsidiary making such Restricted Payment;

 

(b)        the Loan Parties and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

 

(c)        if the Restricted Payments Conditions are satisfied, the Borrower may declare or pay cash dividends to its stockholders;

 

(d)        any non-wholly-owned Subsidiary of the Borrower may make Restricted Payments (which may be in cash) to its shareholders, members or partners generally, so long as the Borrower or its respective Subsidiary which owns the Equity Interest in the Subsidiary making such Restricted Payment receives at least its proportionate share thereof (based upon its relative holding of the Equity Interest in the Subsidiary making such Restricted Payment and taking into account the relative preferences, if any, of the various classes of Equity Interests of such Subsidiary);

 

-80-

  

(e)        the Borrower may acquire Equity Interests in connection with the exercise of stock options, warrants or other convertible or exchangeable securities to the extent such Equity Interests represent a portion of the exercise price of those stock options, warrants or other convertible or exchangeable securities by way of cashless exercise;

 

(f)        the Borrower may redeem, repurchase or otherwise acquire for value, outstanding Equity Interests of the Borrower (or options or warrants to purchase Equity Interests of the Borrower) following the death, disability or termination of employment of officers, directors or employees of the Borrower or any of its Subsidiaries, provided that (x) the aggregate amount paid by the Borrower in cash in respect of all such redemptions or purchases shall not exceed $11,500,000 in respect of all such redemptions, purchases and payments in any twenty-four month period and (y) at the time of any cash Dividend, purchase or payment permitted to be made pursuant to this Section 7.06(f), no Default or Event of Default shall then exist or result therefrom; and

 

(g)        the Borrower may pay (x) all costs, fees and expenses in connection with (i) the Transactions in an amount not to exceed $8,625,000 in the aggregate and (ii) any Permitted Acquisition after the Effective Date, in an amount not to exceed $5,750,000 in the aggregate for each Fiscal Year and (y) management fees to the extent permitted pursuant to Section 7.09(g) hereof.

 

7.07       Prepayments of Indebtedness. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness for borrowed money, except (a) as long as no Default or Event of Default then exists, regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of Permitted Indebtedness (other than the First Lien Facility), (ii) regularly scheduled payments and mandatory prepayments under the First Lien Credit Agreement, and so long as no Default or Event of Default then exists, prepayment and other repurchases, redemptions or defeasances under the First Lien Facility and any Permitted Refinancing thereof, in each case not in violation of the First Lien Intercreditor Agreement, (b) the purchase, redemption, defeasance or other acquisition or retirement of any Indebtedness of the Borrower or any Subsidiary or of any Equity Interests of the Borrower or any Subsidiary in exchange for, or out of the net cash proceeds of a contribution to the common equity of the Borrower or any Subsidiary, or a substantially concurrent sale of, Equity Interests (other than Disqualified Stock) of the Borrower or any Subsidiary and (c) the purchase, redemption, defeasance or other acquisition or retirement of Indebtedness with the net cash proceeds from an incurrence of any Permitted Refinancing thereof.

 

7.08       Change in Nature of Business. Engage in any line of business substantially different from the business conducted by the Loan Parties on the Effective Date or any business substantially related or incidental thereto.

 

7.09       Transactions with Affiliates. Enter into, renew, extend or be a party to any transaction of any kind with any Affiliate of any Loan Party, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Loan Parties or such Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to:

 

-81-

 

(a)        a transaction between or among the Loan Parties;

 

(b)        dividends may be paid to the extent provided in Section 7.06;

 

(c)        loans may be made and other transactions may be entered into by the Borrower and its Subsidiaries to the extent permitted by Sections 7.02, 7.03 and 7.04;

 

(d)        customary fees, indemnities and reimbursements may be paid to non-officer directors of the Borrower and its Subsidiaries;

 

(e)        the Borrower and its Subsidiaries may enter into, and may make payments under, employment agreements, employee benefits plans, stock option plans, indemnification provisions and other similar compensatory arrangements with officers, employees and directors of the Borrower and its Subsidiaries in the ordinary course of business;

 

(f)        Subsidiaries of the Borrower may pay management fees, licensing fees and similar fees to the Borrower or to any wholly-owned domestic Subsidiary of the Borrower that is a Guarantor; and

 

(g)        the Borrower may pay (x) costs, fees and expenses in connection with (i) the Transaction in an amount not to exceed $8,625,000 in the aggregate and (ii) any Permitted Acquisition after the Effective Date, in an amount not to exceed $5,750,000 in the aggregate for any Fiscal Year and (y) management fees to Tengram Capital Management L.P. in the ordinary course of business and consistent with prior practices.

 

7.10       Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary (other than an Excluded Subsidiary) to make Restricted Payments or other distributions to any Loan Party or to otherwise transfer property to or invest in a Loan Party, (ii) of any Subsidiary (other than an Excluded Subsidiary) to Guarantee the Obligations, (iii) of any Subsidiary (other than an Excluded Subsidiary) to make or repay loans to a Loan Party, or (iv) of the Loan Parties to create, incur, assume or suffer to exist Liens on property of such Person in favor of the Agent; provided, however, that this clause (iv) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under clauses (c), or (d) of the definition of Permitted Indebtedness solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.

 

7.11       Use of Proceeds. Use the proceeds of any Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose, or (b) for any purposes other than (i) the payment of the purchase price and transaction costs in connection with the Effective Date Acquisition, (ii) to refinance the Indebtedness of the Borrower under the Existing Credit Agreement, (iii) to finance Capital Expenditures of the Loan Parties, and (iv) for general corporate purposes, in each case to the extent expressly permitted under Law and the Loan Documents.

 

-82-

 

7.12       Amendment of Material Documents; Material Licenses.

 

(a)        Amend, modify or waive any of a Loan Party’s rights under (i) its Organization Documents in a manner materially adverse to the Credit Parties, (ii) the First Lien Credit Agreement or any other documentation relating to the First Lien Facility that would shorten the maturity thereof or otherwise, when taken as a whole, be materially adverse to the Credit Parties or in a manner that would violate the First Lien Intercreditor Agreement, or (iii) any Material License which would have a material adverse impact on the Lenders (as reasonably determined by the Agent and the Arranger), without the prior express written consent of the GSO Entities.

 

(b)        Enter into any new Material Licenses unless such require each such licensee thereunder to pay any fees and other consideration thereunder into a Blocked Account.

 

7.13       Fiscal Year. Change the Fiscal Year of any Loan Party, or the accounting policies or reporting practices of the Loan Parties, except as required by GAAP.

 

7.14       Deposit Accounts. Open new Deposit Accounts (other than the Excluded Account) unless the Loan Parties shall have delivered to the Agent appropriate Blocked Account Agreements as required pursuant to Section 6.12 and otherwise satisfactory to the GSO Entities.

 

7.15       Financial Covenants.

 

(a)        Positive Net Income. Permit Consolidated Positive Net Income, as calculated on a quarterly basis commencing with the Fiscal Quarter of the Borrower ending June 30, 2014 (provided, that, for the Fiscal Quarter ending June 30, 2014, Consolidated Positive Net Income shall be calculated without giving effect to the Effective Date Acquisition) to be equal to or less than $0.

 

(b)        Loan to Value Ratio. Permit the Total Outstandings to be greater than 50.6% of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent (or the First Lien Agent and received by the Agent) with respect to such registered Trademarks pursuant to Section 6.10(b).

 

(c)        Consolidated Total Leverage Ratio. Permit the Consolidated Total Leverage Ratio, as calculated on a quarterly basis commencing with the Fiscal Quarter of the Borrower ending June 30, 2014, to exceed the ratio of 5.00 to 1.00.

 

-83-

 

ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES

 

8.01       Events of Default. Any of the following shall constitute an Event of Default:

 

(a)        Non-Payment. The Borrower or any other Loan Party fails to pay (i) when and as required to be paid, any amount of principal of any Loan, or (ii) within three (3) Business Days of any due date therefor, interest on any Loan, any fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or

 

(b)        Specific Covenants. Any Loan Party fails to perform or observe any term, covenant or agreement contained in any of (i) Sections 6.03(a), 6.05(a), 6.06(b)(i)(A), 6.07, 6.17, 6.18 or Article VII, or (ii) Sections 6.01, 6.02, or 6.03 (other than 6.03(a)) and such failure continues for 10 days, (iii) Section 6.06(b)(i)(B) and (ii) – (iv) and such failure continues for 10 days or (iv) Sections 6.11 or 6.13 and such failure continues for 15 days; or

 

(c)        Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or

 

(d)        Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

 

(e)        Cross-Default. Any Loan Party (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness, or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or

 

(f)        Insolvency Proceedings, Etc. Any Loan Party institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or a proceeding shall be commenced or a petition filed, without the application or consent of such Person, seeking or requesting the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for 45 calendar days or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 45 calendar days, or an order for relief is entered in any such proceeding; or

 

-84-

 

(g)        Inability to Pay Debts; Attachment. (i) Any Loan Party becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issuance or levy; or

 

(h)        Judgments. There is entered against any Loan Party (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $11,500,000 (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or

 

(i)        ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,750,000 or which would reasonably likely result in a Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $5,750,000 or which would reasonably likely result in a Material Adverse Effect; or

 

(j)        Invalidity of Loan Documents. (i) Any material provision of any Loan Document, at any time after its execution and delivery and for any reason, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any material provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any material provision of any Loan Document, or purports to revoke, terminate or rescind any material provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Material Intellectual Property, Material License or any other material portion of the Collateral, with the priority required by the applicable Security Document, except to the extent that any lack of perfection or enforceability results from any act or omission of the Agent (so long as such act or omission does not result from the breach or non-compliance by a Loan Party with the terms of any Loan Document); or

 

(k)        Change of Control. There occurs any Change of Control; or

 

-85-

 

(l)        Cessation of Business. Except as otherwise expressly permitted hereunder and subject to any applicable cure period in connection with a breach of any applicable covenant with respect to the same, the Loan Parties, taken as a whole, shall take any action to suspend the operation of their business in the ordinary course or liquidate all or a material portion of their assets or business; or

 

(m)        Breach of Contractual Obligation. Any default or event of default occurs under a Material License which gives rise to a right of a party to such Material License to cease payment to, or excuses payment to, the Borrower thereunder, or the termination of any Material License unless either (i) the Borrower reasonably demonstrates to the Agent and the Arranger, based on good faith and reasonable forecasts, that the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the occurrence of such default or termination, or (ii) the Borrower is disputing such default in good faith based on reasonable grounds (as determined by the Agent and the Arranger in their reasonable discretion), or (iii) the Borrower enters into a substitute Material License and the Borrower reasonably demonstrates to the Agent and the Arranger, based on good faith and reasonable forecasts, that, after giving effect to such substitute Material License, the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the occurrence of such default or termination; or

 

(n)        Indictment. Any director or senior officer of any Loan Party is (i) criminally indicted or convicted of a felony for fraud or dishonesty in connection with the Loan Parties’ business, unless such director or senior officer promptly resigns or is removed or replaced or (ii) charged by a Governmental Authority under any Law that would reasonably be expected to lead to forfeiture of any material portion of Collateral; or

 

(o)        Insolvency of Licensee. Any proceeding described in clause (f) above, whether voluntary or involuntary, shall commence with respect to any licensee under a Material License and shall continue for a period of 45 days, unless (i) the applicable licensee shall “assume” the applicable Material License under applicable bankruptcy law, or (ii) either (A) the Borrower otherwise reasonably demonstrates to the Agent and the Arranger, based on good faith and reasonable forecasts, that the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the commencement of such proceeding or (B) the Borrower enters into a substitute Material License and the Borrower reasonably demonstrates to the Agent and the Arranger, based on good faith and reasonable forecasts, that, after giving effect to such substitute Material License, the Borrower will remain in pro forma compliance with the provisions of Section 7.15 for a period of twelve months after the occurrence of such default or termination; or

 

(p)        Subordination. (i) The lien subordination provisions of the documents evidencing or governing the First Lien Facility (the “Subordination Provisions”) shall, in whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the First Lien Facility; or (ii) any Borrower or any other Loan Party shall, directly or indirectly, disavow or contest in any manner (A) the effectiveness, validity or enforceability of any of the Subordination Provisions, (B) that the Subordination Provisions exist for the benefit of the Credit Parties, or (C) that all payments of principal of or premium and interest on the First Lien Facility, or realized from the liquidation of any property of any Loan Party, shall be subject to any of the Subordination Provisions

 

-86-

 

8.02       Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Agent may, or, at the request of the Required Lenders shall, take any or all of the following actions:

 

(a)        [Reserved];

 

(b)        declare the unpaid principal amount of the Loan, all interest accrued and unpaid thereon, and all other Obligations to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties; and

 

(c)        whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies of the Credit Parties under this Agreement, any of the other Loan Documents or Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the occurrence of any Default or Event of Default with respect to any Loan Party under Section 8.01(f), the unpaid principal amount of the Loan, all interest accrued thereon and all other Obligations shall automatically become due and payable without further act of the Agent or any Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.

 

8.03       Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Obligations have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Agent in the following order:

 

First, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Agent and the Arranger and amounts payable under Article III) payable to the Agent;

 

Second, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting indemnities (including indemnities due under Section 10.04 hereof), Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Lenders (including Credit Party Expenses to the respective Lenders and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

-87-

 

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loan, and fees (excluding any Early Termination Fee then owing), ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loan, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them;

 

Fifth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations and the payment of any Early Termination Fee then owing, but excluding any Other Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Fifth held by them;

 

Sixth, to payment of that portion of the Obligations arising from Cash Management Services, ratably among the Credit Parties in proportion to the respective amounts described in this clause Sixth held by them;

 

Seventh, to payment of all other Obligations arising from Bank Products, ratably among the Credit Parties in proportion to the respective amounts described in this clause Seventh held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Loan Parties or as otherwise required by Law.

 

Excluded Swap Obligations with respect to any Loan Party shall not be paid with amounts received from such Loan Party, but appropriate adjustments shall be made with respect to payments from other Loan Parties to preserve the allocation to Obligations otherwise set forth above in this Section.

 

8.04       Right to Cure.

 

(a)        Notwithstanding anything to the contrary contained in Section 8.01, in the event of any Event of Default under the financial covenant set forth in Section 7.15(b) and until the expiration of the fifteenth (15^th) calendar day thereafter (such date, the “Cure Expiration Date”), the Borrower may designate any portion of the Net Proceeds of any issuance of common Equity Interests of the Borrower or any cash capital contribution to the common equity of the Borrower, or any cash on hand of the Borrower, as a prepayment of the Loan in an amount equal to the amount by which the outstanding principal amount of the Loan exceed fifty (50%) percent of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, as determined pursuant to the most recent appraisal conducted by or on behalf of the Agent (or the First Lien Agent and received by the Agent) with respect to such registered Trademarks pursuant to Section 6.10(b).

 

-88-

 

(b)        If, after giving effect to the foregoing prepayment of the Loan, the Borrower shall then be in compliance with the requirements of Section 7.15(b), the Borrower shall be deemed to have satisfied the requirements of Section 7.15(b) as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable existing breach or default of Section 7.15(b) shall be deemed cured for this purpose of the Agreement.

 

ARTICLE IX
THE AGENT

 

9.01       Appointment and Authority. Each of the Lenders (in its capacity as a Lender) hereby irrevocably appoints Wilmington to act on its behalf as the administrative agent and collateral agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof (including, without limitation, acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations), together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Agent and the other Credit Parties, and no Loan Party or any Subsidiary thereof shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

9.02       Rights as a Lender. The Person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03       Exculpatory Provisions. The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agent:

 

(a)        shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;

 

(b)        shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Applicable Lenders, provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or Law; and

 

-89-

 

(c)        shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.

 

The Agent shall not be liable for any action taken or not taken by it (i) with the Consent or at the request of the Applicable Lenders (as the Agent shall believe in good faith shall be necessary under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.

 

The Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until a written notice describing such Default or Event of Default is given to the Agent by the Loan Parties or a Lender. In the event that the Agent obtains such actual knowledge or receives such a notice, the Agent shall give prompt notice thereof to each of the other Credit Parties. Upon the occurrence of a Default or an Event of Default, the Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Applicable Lenders. Unless and until the Agent shall have received such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as it shall deem advisable in the best interest of the Credit Parties. In no event shall the Agent be required to comply with any such directions to the extent that the Agent believes that its compliance with such directions would be unlawful.

 

The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.

 

9.04       Reliance by Agent. The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including, but not limited to, any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. The Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

-90-

 

9.05       Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agent and any such sub-agent. The Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

 

9.06       Resignation or Replacement of Agent.   The Agent may at any time give written notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section.

 

(b)        The Required Lenders may at any time given written notice to the Agent and the Borrower or their election to replace the Agent with a successor agent. The Required Lenders shall with the consultation of the Borrower appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.

 

(c)        Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent hereunder.

 

-91-

 

9.07       Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except as provided in Section 9.11, the Agent shall not have any duty or responsibility to provide any Credit Party with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agent.

 

9.08       Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Agent (irrespective of whether the principal of the Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent shall have made any demand on the Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise:

 

(a)        to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loan and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Agent and the other Credit Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Agent, such Credit Parties and their respective agents and counsel and all other amounts due the Lenders, the Agent and such Credit Parties under Sections 2.06 and 10.04) allowed in such judicial proceeding; and

 

(b)        to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Agent and to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under Sections 2.06 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Credit Party any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Credit Party or to authorize the Agent to vote in respect of the claim of any Credit Party in any such proceeding.

 

-92-

  

9.09       Collateral and Guaranty Matters. The Credit Parties irrevocably authorize the Agent, at its option and in its discretion,

 

(a)        to release any Lien on any property granted to or held by the Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been asserted), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing by the Applicable Lenders in accordance with Section 10.01;

 

(b)        to subordinate any Lien on any property granted to or held by the Agent under any Loan Document to the holder of any Lien on such property that is permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)        to release any Guarantor from its obligations under the Facility Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

 

Upon request by the Agent at any time, the Applicable Lenders will confirm in writing the Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Facility Guaranty pursuant to this Section 9.09. In each case as specified in this Section 9.09, the Agent will, at the Loan Parties’ expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Facility Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.09.

 

9.10       Notice of Transfer.The Agent may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Acceptance shall have become effective as set forth in Section 10.06.

 

9.11       Reports and Financial Statements.

 

By signing this Agreement, each Lender:

 

(a)        agrees to furnish the Agent at such frequency as the Agent may reasonably request) with a summary of all Other Liabilities due or to become due to such Lender. In connection with any distributions to be made hereunder, the Agent shall be entitled to assume that no amounts are due to any Lender on account of Other Liabilities unless the Agent has received written notice thereof from such Lender and if such notice is received, the Agent shall be entitled to assume that the only amounts due to such Lender on account of Other Liabilities is the amount set forth in such notice;

 

(b)        is deemed to have requested that the Agent furnish, and the Agent agrees to furnish, such Lender, promptly after they become available, copies of all financial statements required to be delivered by the Borrower hereunder;

 

-93-

 

 

(c)        is deemed to have requested that the Agent furnish, and the Agent agrees to furnish, such Lender, promptly after they become available, copies of all appraisals of the Collateral received by the Agent (collectively, the “Reports”);

 

(d)        expressly agrees and acknowledges that the Agent makes no representation or warranty as to the accuracy of the financial statements or Reports, and shall not be liable for any information contained in any financial statement or Report;

 

(e)        expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agent or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records, as well as on representations of the Loan Parties’ personnel;

 

(f)        agrees to keep all financial statements and Reports confidential in accordance with the provisions of Section 10.07 hereof; and

 

(g)        without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, the Loan; and (ii) to pay and protect, and indemnify, defend, and hold the Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

 

9.12       Agency for Perfection. Each Credit Party hereby appoints each other Credit Party as agent for the purpose of perfecting Liens for the benefit of the Credit Parties, in assets which, in accordance with Article 9 of the UCC or any other Law of the United States can be perfected only by possession or control. Should any Credit Party (other than the Agent) obtain possession or control of any such Collateral, such Credit Party shall notify the Agent thereof, and, promptly upon the Agent’s request therefor shall deliver such Collateral to the Agent or otherwise deal with such Collateral in accordance with the Agent’s instructions.

 

9.13       Indemnification of Agent. Without limiting the obligations of Loan Parties hereunder, to the extent that the Loan Parties for any reason fails to indefeasibly pay any amount required under Section 10.04 to be paid by them to the Agent (or any sub-agent thereof), the Lenders shall indemnify the Agent, any sub-agent thereof and any Related Party, as the case may be ratably according to their Applicable Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent, any sub-agent thereof and their Related Parties in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by the Agent, any sub-agent thereof and their Related Parties in connection therewith; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s, any sub-agent’s and their Related Parties’ gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

-94-

 

9.14       Relation among Lenders. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent) authorized to act for, any other Lender.

 

ARTICLE X
MISCELLANEOUS

 

10.01     Amendments, Etc.

 

(a)        No amendment or waiver of any provision of this Agreement or any other Loan Document, and no Consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Agent, with the Consent of the Required Lenders, and the Borrower or the applicable Loan Party, as the case may be, and each such waiver or Consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

 

(i)        [Reserved];

 

(ii)       as to any Lender, postpone any date fixed by this Agreement or any other Loan Document for any scheduled payment (including the Maturity Date) or mandatory prepayment of principal, interest, fees or other amounts due hereunder or under any of the other Loan Documents without the written Consent of such Lender,

 

(iii)        as to any Lender, reduce the principal of, or the rate of interest specified herein on, any Loan held by such Lender, or (subject to clause (ii) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document to or for the account of such Lender, without the written Consent of such Lender; provided, however, that only the Consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

 

(iv)        as to any Lender, change Section 2.10 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written Consent of such Lender;

 

(v)       change any provision of this Section or the definition of “Required Lenders”, or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written Consent of each Lender;

 

-95-

  

(vi)        except as expressly permitted hereunder or under any other Loan Document, release, or limit the liability of, any Loan Party without the written Consent of each Lender;

 

(vii)       except for Permitted Dispositions or as provided in Section 9.09, release all or substantially all of the Collateral from the Liens of the Security Documents without the written Consent of each Lender;

 

(viii)      [Reserved]; and

 

(ix)       except as expressly permitted herein or in any other Loan Document, subordinate the Obligations hereunder or the Liens granted hereunder or under the other Loan Documents, to any other Indebtedness or Lien, as the case may be without the written Consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or Consent shall, unless in writing and signed by the Agent in addition to the Lenders required above, affect the rights or duties of any Agent under this Agreement or any other Loan Document; and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.

 

(b)        Notwithstanding anything to the contrary in this Agreement or any other Loan Document, (x) no provider or holder of any Bank Products or Cash Management Services shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as Lenders, to the extent applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or any Loan Party, and (y) any Loan Document may be amended and waived with the consent of the Agent and the Arranger at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause any Loan Document to be consistent with this Agreement and the other Loan Documents.

 

(c)        If any Lender does not Consent (a “Non-Consenting Lender”) to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the Consent of each Lender and that has been approved by the Required Lenders, the Borrower may replace such Non-Consenting Lender in accordance with Section 10.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).

 

-96-

 

(d)        Notwithstanding any provision herein to the contrary, this Agreement may be amended with the written consent of the Required Lenders, the Agent and the Borrower (i) to add one or more additional term loan facilities to this Agreement, and to permit the extensions of credit and all related obligations and liabilities arising in connection therewith from time to time outstanding to share ratably (or on a basis subordinated to the existing facilities hereunder) in the benefits of this Agreement and the other Loan Documents with the obligations and liabilities from time to time outstanding in respect of the existing facilities hereunder, and (ii) in connection with the foregoing, to permit, as deemed appropriate by the Agent and approved by the Lenders, the Lenders providing such additional credit facilities to participate in any required vote or action required to be approved by the Required Lenders or by any other number, percentage or class of Lenders hereunder.

 

10.02     Notices; Effectiveness; Electronic Communications.

 

(a)        Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)        if to the Loan Parties, the Agent or the GSO Entities, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

 

(ii)       if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in writing to the Borrower and the Agent.

 

Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)        Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Agent. The Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

-97-

 

Unless the Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii), if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

(c)        Change of Address, Etc. Each of the Loan Parties and the Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower and the Agent. In addition, each Lender agrees to notify the Agent from time to time to ensure that the Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

 

(d)        Reliance by Agent and Lenders. The Agent and the Lenders shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Loan Parties even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Loan Parties shall indemnify the Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Loan Parties. All telephonic notices to and other telephonic communications with the Agent may be recorded by the Agent, and each of the parties hereto hereby consents to such recording.

 

10.03     No Waiver; Cumulative Remedies. No failure by any Credit Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law. Without limiting the generality of the foregoing, the making of the Loan shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at Law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Section 8.02 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents or (b) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.10); and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clause (b) of the preceding proviso and subject to Section 2.10, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

 

-98-

 

 

10.04     Expenses; Indemnity; Damage Waiver.

 

(a)        Costs and Expenses. The Borrower shall pay all Credit Party Expenses.

 

(b)        Indemnification by the Loan Parties. The Loan Parties shall indemnify the Agent (and any sub-agent thereof), each other Credit Party, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis) from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs, and related expenses (including the reasonable fees, charges and disbursements of any one counsel for the Indemnitees (and in the event of an actual conflict of interest, one additional counsel for such affected parties) and one additional counsel in each other applicable jurisdiction), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or the administration of this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Loan Party, or any Environmental Liability related in any way to any Loan Party, (iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Borrower or any other Loan Party or any of the Loan Parties’ directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of, or material breach of the obligations under this Agreement of, such Indemnitee, or (y) are due to disputes between and among Indemnitees (other than disputes involving any act or omission of the Borrower or any of its Affiliates (other than the claims of the Agent)). Without limiting the provisions of Section 3.01(c), this Section 10.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(c)        Waiver of Consequential Damages, Etc. To the fullest extent permitted by Law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, the Loan or the use of the proceeds thereof.

 

-99-

 

(d)        Payments. All amounts due under this Section shall be payable on demand therefor.

 

(e)        Limitation of Liability. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

(f)        Survival. The agreements in this Section shall survive the resignation or removal of the Agent, the assignment of any portion of the Loan by any Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

10.05     Payments Set Aside. To the extent that any payment by or on behalf of the Loan Parties is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Agent upon demand its Applicable Percentage (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

10.06     Successors and Assigns.

 

(a)        Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written Consent of the Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of Section 10.06(b), (ii) by way of participation in accordance with the provisions of subsection Section 10.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

-100-

 

(b)        Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement, or its portion of the Loan, as applicable, at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)        Minimum Amounts.

 

(A)       in the case of an assignment of the entire remaining amount of the assigning Lender’s Loan at the time owing to it or in the case of an assignment to a GSO Entity, a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, no minimum amount need be assigned; and

 

(B)       in any case not described in subsection (b)(i)(A) of this Section, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;

 

(ii)         [Reserved];

 

(iii)        Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

 

(A)       other than with respect to any assignment to a GSO Entity, the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) a Default or Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender, and shall be deemed to have been given unless the Borrower has responded within five (5) Business Days of request therefor; and

 

-101-

 

(B)       other than with respect to any assignment to a GSO Entity, the consent of the Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and

 

(iv)        Assignment and Assumption. The parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, provided, however, that the Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment.

 

(v)       No Assignment to Certain Persons. No such assignment shall be made (A) to the Loan Parties or any of the Loan Parties’ Subsidiaries or (B) to a natural Person.

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

 

(c)        Register. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders and principal amounts (and stated interest) of the Loan owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Loan Parties, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

 

-102-

 

(d)        Participations. (i) Any Lender may at any time, without the consent of, or notice to, the Loan Parties or the Agent, sell participations to any Person (other than a natural person or the Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement; provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties, the Agent, the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 10.07 as if such Participant was a Lender hereunder.

 

(ii) Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in clauses (i) through (iii) of the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Loan Parties agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 (subject to the requirements and limitations therein, including the requirements under Section 3.01(e) (it being understood that the documentation required under Section 3.01(e) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b). To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.10 as though it were a Lender.

 

(iii) Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loan or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in the Loan or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.

 

-103-

 

(e)        Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a Lender.

 

(f)        Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

10.07     Treatment of Certain Information; Confidentiality. Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to GSO Entities, and each Credit Party’s Affiliates, Approved Funds, and to GSO Entities’, each Credit Party’s and their respective Affiliates’ and Approved Funds’ respective partners, directors, officers, employees, agents, funding sources, attorneys, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (c) to the extent required by Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement (including any electronic agreement contained in any Platform) containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Contract relating to any Loan Party and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Credit Party or any of their respective Affiliates on a non-confidential basis from a source other than the Loan Parties.

 

For purposes of this Section, “Information” means all information received from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary thereof. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

-104-

 

Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning the Loan Parties or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with Law, including Federal and state securities Laws.

 

10.08     Right of Setoff. If an Event of Default shall have occurred and be continuing or if any Lender shall have been served with a trustee process or similar attachment relating to property of a Loan Party, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Agent or the Required Lenders, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) or other property at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to such Lender, regardless of the adequacy of the Collateral, and irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Borrower and the Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

10.09     Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Law (the “Maximum Rate”). If the Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loan and other Obligations (other than Other Liabilities not then due and owing) or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

10.10     Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agent and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

-105-

 

10.11     Survival. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default, and shall continue in full force and effect as long as the Loan or any other Obligation hereunder shall remain unpaid or unsatisfied. Further, the provisions of Sections 3.01, 3.04, 3.05 and 10.04 and Article IX shall survive and remain in full force and effect regardless of the repayment of the Obligations or the termination of this Agreement or any provision hereof.

 

10.12     Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

10.13     Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights (other than its existing rights to payments pursuant to Section 3.01 and 3.04) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

(a)        the Borrower shall have paid to the Agent the assignment fee specified in Section 10.06(b);

 

(b)        such Lender shall have received payment of an amount equal to the outstanding principal of its Loan, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

 

-106-

  

(c)        in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

 

(d)        such assignment does not conflict with Laws; and

 

(e)        in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

10.14     Governing Law; Jurisdiction; Etc.

 

(a)        GOVERNING LAW. This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of NEW yORK.

 

(b)        SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Agent, any Lender or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

(c)        WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

-107-

 

 

(d)        SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

10.15     Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16     No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

 

-108-

 

10.17     USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Agent, as applicable, to identify each Loan Party in accordance with the Act. Each Loan Party is in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the Loan will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended. The Loan Parties shall, promptly following a request by the Agent or any Lender, provide all documentation and other information that the Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

 

10.18     Foreign Asset Control Regulations. Neither of the advance of the Loan nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Loan Parties or their Affiliates (a) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person” or in any manner violative of any such order.

 

10.19     Time of the Essence. Time is of the essence of the Loan Documents.

 

10.20     Press Releases.

 

-109-

 

(a)        Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of the Agent, the Arranger or their respective Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Agent and the Arranger and without the prior written consent of the Agent and the Arranger unless (and only to the extent that) such Credit Party or Affiliate is required to do so under Law and then, in any event, such Credit Party or Affiliate will consult with the Agent and the Arranger before issuing such press release or other public disclosure.

 

(b)        Each Loan Party consents to the publication by the Agent or any Lender relating to the financing transactions on the Agent or such Lender’s internet site or in its marketing materials, press releases or published “tombstone” announcements or any announcements on any other print or electronic medium, and each such publication may include the aggregate amount of the investment, such Lender’s allocated investment amount, the pricing terms of the financing transaction, the identity of the Loan Parties, product photographs, logos or trademarks owned by the Loan Parties. The Agent or such Lender shall provide a draft reasonably in advance of any advertising material to the Borrower prior to the publication thereof; provided, however, that the Agent and any Lender shall not be required to provide the Borrower with an advance draft of any publication or materials where the information being published in such publication or materials may be disclosed publicly or is required to be disclosed by such party in accordance with applicable Laws or regulations. The Agent and the Arranger reserve the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements, including, without limitation, the facility size and pricing terms.

 

10.21     Additional Waivers.

 

(a)        The Obligations are the joint and several obligation of each Loan Party. To the fullest extent permitted by Law, the obligations of each Loan Party shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement or any other Loan Document, (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Agent or any other Credit Party, or (iv) any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). The obligations of each Loan Party shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise.

 

-110-

 

(b)        To the fullest extent permitted by Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Agent and the other Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all of the Obligations have been indefeasibly paid in full in cash. Each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party.

 

(c)        Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all of the Obligations. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations and no Loan Party will demand, sue for or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Loan Party on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents. Subject to the foregoing, to the extent that any Loan Party shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting the Loan made to the Borrower hereunder or other Obligations incurred directly and primarily by the Borrower (an “Accommodation Payment”), then the Loan Party making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount, for each of such other Loan Parties, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Loan Party’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Loan Parties. As of any date of determination, the “Allocable Amount” of each Loan Party shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Loan Party hereunder without (a) rendering such Loan Party “insolvent” within the meaning of Section 101 (32) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Loan Party with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Loan Party unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

(d)        Without limiting the generality of the foregoing, or of any other waiver or other provision set forth in this Agreement, each Loan Party hereby absolutely, knowingly, unconditionally, and expressly waives any and all claim, defense or benefit arising directly or indirectly under any one or more of Sections 2787 to 2855 inclusive of the California Civil Code or any similar law of California.

 

-111-

 

10.22     No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

10.23     Attachments. The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.

 

10.24     Electronic Execution of Assignments and Certain Other Documents. The words “execute,” “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

10.25     Keepwell. Each Loan Party that is a Qualified ECP Guarantor at the time the Guaranty or the grant of a security interest under the Loan Documents, in each case, by any Specified Loan Party becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under the Guaranty voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section 10.25 shall remain in full force and effect until the Obligations have been indefeasibly paid and performed in full. Each Loan Party intends this Section 10.25 to constitute, and this Section 10.25 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.

 

10.26     California Judicial Reference. If any action or proceeding is filed in a court of the State of California by or against any party hereto in connection with any of the transactions contemplated by this Agreement or any other Loan Document, (a) the court shall, and is hereby directed to, make a general reference pursuant to California Code of Civil Procedure Section 638 to a referee (who shall be a single active or retired judge) to hear and determine all of the issues in such action or proceeding (whether of fact or of law) and to report a statement of decision, provided that at the option of any party to such proceeding, any such issues pertaining to a “provisional remedy” as defined in California Code of Civil Procedure Section 1281.8 shall be heard and determined by the court, and (b) without limiting the generality of Section 10.04, the Borrower shall be solely responsible to pay all fees and expenses of any referee appointed in such action or proceeding.

 

-112-

 

10.27     First Lien Intercreditor Agreement. Notwithstanding anything herein to the contrary, the security interest granted to the Agent, for the benefit of the Credit Parties, pursuant to the Security Documents and the exercise of any right or remedy by the Agent hereunder and thereunder are subject to the provisions of the First Lien Intercreditor Agreement. In the event of any conflict between the terms of the First Lien Intercreditor Agreement and this Loan Agreement, the terms of the First Lien Intercreditor Agreement shall govern and control. Except as specified herein, nothing contained in the First Lien Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement, which, as among the Loan Parties and the Agent, shall remain in full force and effect.

 

-113-

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

	BORROWER:
	SEQUENTIAL BRANDS GROUP, INC.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	GUARANTORS:
	Sequential Licensing, Inc.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	BELLA ROSE, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	WILLIAM RAST SOURCING, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

  

	WILLIAM RAST LICENSING, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	HEELYS, INC.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

 

Second Lien Credit Agreement

 

 

	HEELING MANAGEMENT CORP.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

  

	HEELING HOLDING CORPORATION
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	HEELING SPORTS LIMITED
	By:	Healing Management Corp., as the General Partner
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	By:	Heeling Holding Corporation, as the Limited Partner
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	B®AND MATTER, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG Revo Holdings, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

  

Second Lien Credit Agreement

 

 

	SBG FM, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG UNIVERSE BRANDS, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

  

	Galaxy Brands LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	The Basketball Marketing Company, Inc.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	American Sporting Goods Corporation
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	LNT Brands LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

 

Second Lien Credit Agreement

 

 

	WILMINGTON TRUST, NATIONAL ASSOCIATION, as Agent
	By:	/s/ Megan H. McCauley
	Name:	Megan H. McCauley
	Title:	Assistant Vice President

 

 

Second Lien Credit Agreement

 

 

	LOCUST STREET FUNDING LLC
	By:	FS Investment Corporation, as Sole Member
	By:	GSO/Blackstone Debt Funds Management LLC,
		as Sub-Adviser
	By:	/s/ Marisa Beeney
	Name:	Marisa Beeney
	Title:	Authorized Signatory
	LEHIGH RIVER LLC
	By:	FS Investment Corporation II, as Sole Member
	By:	GSO/Blackstone Debt Funds Management LLC,
		as Sub-Adviser
	By:	/s/ Marisa Beeney
	Name:	Marisa Beeney
	Title:	Authorized Signatory
	DARBY CREEK LLC
	By:	FS Investment Corporation II, as Sole Member
	By:	GSO/Blackstone Debt Funds Management LLC,
		as Sub-Adviser
	By:	/s/ Marisa Beeney
	Name:	Marisa Beeney
	Title:	Authorized Signatory
	FS INVESTMENT CORPORATION III
	By:	GSO/Blackstone Debt Funds Management LLC,
		as Sub-Adviser
	By:	/s/ Marisa Beeney
	Name:	Marisa Beeney
	Title:	Authorized Signatory
	FS INVESTMENT CORPORATION II
	By:	GSO/Blackstone Debt Funds Management LLC,
		as Sub-Adviser
	By:	/s/ Marisa Beeney
	Name:	Marisa Beeney
	Title:	Authorized Signatory

 

 

Second Lien Credit Agreement

 

 

Exhibit 10.4

 

INTERCREDITOR AGREEMENT

 

by and among

 

BANK OF AMERICA, N.A.,

 

as First Lien Agent,

 

and

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,

 

as Second Lien Agent,

 

dated as of August 15, 2014

 

 

TABLE OF CONTENTS

 

		Page No.
ARTICLE 1. DEFINITIONS		2
Section 1.1.	UCC Definitions	2
Section 1.2.	Other Definitions	2
Section 1.3.	Rules of Construction	12
ARTICLE 2. LIEN PRIORITY		12
Section 2.1.	Priority of Liens	12
Section 2.2.	Waiver of Right to Contest Liens	14
Section 2.3.	Remedies Standstill	15
Section 2.4.	Release of Liens	17
Section 2.5.	No New Liens	17
Section 2.6.	Waiver of Marshalling	18
ARTICLE 3. ACTIONS OF THE PARTIES		18
Section 3.1.	Certain Actions Permitted	18
Section 3.2.	Agent for Perfection	18
Section 3.3.	Sharing of Information and Access; Notices of Default	19
Section 3.4.	Insurance	20
Section 3.5.	No Additional Rights For the Loan Parties Hereunder	20
Section 3.6.	Payments Over	21
Section 3.7.	Revolving Nature of Certain First Lien Obligations	21
Section 3.8.	Legends	21
ARTICLE 4. APPLICATION OF PROCEEDS		22
Section 4.1.	Application of Proceeds	22
Section 4.2.	Turnover of Collateral After Discharge	22
Section 4.3.	Limited Obligation or Liability	23
Section 4.4.	Specific Performance	23
ARTICLE 5. INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS		23
Section 5.1.	Notice of Acceptance and Other Waivers	23
Section 5.2.	Modifications to First Lien Documents and Second Lien Documents	24
Section 5.3.	Reinstatement and Continuation of Agreement	26
ARTICLE 6. INSOLVENCY PROCEEDINGS		27
Section 6.1.	DIP Financing	27
Section 6.2.	Relief From Stay	28
Section 6.3.	No Contest; Adequate Protection	28
Section 6.4.	Asset Sales	30
Section 6.5.	Separate Grants of Security and Separate Classification	30
Section 6.6.	Enforceability	30
Section 6.7.	First Lien Obligations Unconditional	31
Section 6.8.	Second Lien Obligations Unconditional	31
Section 6.9.	Reorganization Securities	31
Section 6.10.	Rights as Unsecured Creditors	31

 

i

 

TABLE OF CONTENTS (Cont’d)

 

		Page No.
ARTICLE 7. PURCHASE OPTION		32
Section 7.1.	Right to Purchase	32
Section 7.2.	Payments	32
Section 7.3.	Documentation	33
Section 7.4.	Retained Interest of First Lien Lenders	33
ARTICLE 8. MISCELLANEOUS		33
Section 8.1.	Rights of Subrogation	33
Section 8.2.	Further Assurances	34
Section 8.3.	Representations	34
Section 8.4.	Amendments	34
Section 8.5.	Addresses for Notices	34
Section 8.6.	No Waiver; Remedies	35
Section 8.7.	Continuing Agreement, Transfer of Secured Obligations	35
Section 8.8.	Governing Law; Entire Agreement	35
Section 8.9.	Counterparts	36
Section 8.10.	No Third Party Beneficiaries	36
Section 8.11.	Headings	36
Section 8.12.	Severability	36
Section 8.13.	VENUE; JURY TRIAL WAIVER	36
Section 8.14.	Intercreditor Agreement	37
Section 8.15.	No Warranties or Liability	37
Section 8.16.	Conflicts	37
Section 8.17.	Information Concerning Financial Condition of the Loan Parties	38
Section 8.18.	Initial Loan To Value	38

 

ii

 

INTERCREDITOR AGREEMENT

 

THIS INTERCREDITOR AGREEMENT (as amended, supplemented, restated or otherwise modified from time to time pursuant to the terms hereof, this “Agreement”) is entered into as of 15, 2014 among (a) BANK OF AMERICA, N.A., in its capacity as administrative agent and collateral agent (together with its successors and assigns in such capacity, the “First Lien Agent”) for (i) the financial institutions party from time to time to the First Lien Credit Agreement referred to below (such financial institutions, together with their respective successors, assigns and transferees, the “First Lien Lenders”) and (ii) any First Lien Bank Products Affiliates and First Lien Cash Management Affiliates (each as defined below) (such First Lien Bank Products Affiliates and First Lien Cash Management Affiliates, together with the First Lien Agent and the First Lien Lenders, the “First Lien Secured Parties”), and (b) WILMINGTON TRUST, NATIONAL ASSOCIATION, in its capacity as administrative agent and collateral agent (together with its successors and assigns in such capacity, the “Second Lien Agent”) for the financial institutions party from time to time to the Second Lien Credit Agreement referred to below (such financial institutions, together with their respective successors, assigns and transferees, the “Second Lien Lenders” and together with the Second Lien Agent and the Second Lenders, the “Second Lien Secured Parties”), and acknowledged by (c) SEQUENTIAL BRANDS GROUP, INC. (the “Borrower”), a Delaware corporation, and (d) each of the Guarantors (as defined below) which are signatories to this Agreement.

 

RECITALS

 

A.           Pursuant to that certain First Lien Credit Agreement dated as of the date hereof, by and among the Borrower, the Guarantors (as hereinafter defined), the First Lien Lenders and the First Lien Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “First Lien Credit Agreement”), the First Lien Lenders have agreed to make certain loans to or for the benefit of the Borrower.

 

B.           Pursuant to the Guaranty (as the same may be amended, supplemented, restated and/or otherwise modified in accordance with the terms hereof, the “First Lien Guaranty”) by certain subsidiaries of the Borrower (the “Guarantors”) in favor of the First Lien Secured Parties, the Guarantors have agreed to guarantee the payment and performance of the Borrower’s obligations under the First Lien Loan Documents (as hereinafter defined) as provided in the First Lien Guaranty.

 

C.           As a condition to the effectiveness of the First Lien Credit Agreement and to secure the obligations of the Borrower and the Guarantors (the Borrower, the Guarantors and each other direct or indirect subsidiary of the Borrower that is now or hereafter becomes a party to any First Lien Loan Document, collectively, the “First Lien Loan Parties”) under and in connection with the First Lien Loan Documents, the First Lien Loan Parties have granted to the First Lien Agent (for the benefit of the First Lien Secured Parties) Liens on the Collateral (as hereinafter defined).

 

 

D.           Pursuant to that certain Second Lien Term Loan Agreement dated as of the date hereof, by and among the Borrower, the Guarantors, the Second Lien Lenders and the Second Lien Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “Second Lien Loan Agreement”), the Second Lien Lenders have agreed to make certain loans to the Borrower.

 

E.           Pursuant to the Guaranty (as the same may be amended, supplemented, restated and/or otherwise modified in accordance with the terms hereof, the “Second Lien Guaranty”) by the Guarantors in favor of the Second Lien Secured Parties, the Guarantors have agreed to guarantee the payment and performance of the Borrower’s obligations under the Second Lien Loan Documents (as hereinafter defined) as provided in the Second Lien Guaranty.

 

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

 

G.           Each of the First Lien Agent (on behalf of the First Lien Secured Parties) and the Second Lien Agent (on behalf of the Second Lien Secured Parties) and, by their acknowledgment hereof, the First Lien Loan Parties and the Second Lien Loan Parties, desire to agree to the relative priority of Liens on the Collateral and certain other rights, priorities and interests as provided herein.

 

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

 

ARTICLE 1.

DEFINITIONS

 

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

 

Section 1.2.           Other Definitions. Subject to Section 1.1, as used in this Agreement, the following terms shall have the meanings set forth below:

 

“Affiliate” shall mean, any Person which, directly or indirectly, controls, is controlled by or is under common control with any Person.

 

“Agent(s)” means individually the First Lien Agent or the Second Lien Agent and collectively means both the First Lien Agent and the Second Lien Agent.

 

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

 

2

 

“Bank Products” shall have the meaning assigned to that term in the First Lien Credit Agreement.

 

“Bank Product Obligations” shall mean all obligations with respect to Bank Product Agreements.

 

“Bank Product Agreement” shall mean any agreement pursuant to which a First Lien Bank Product Affiliate agrees to provide Bank Products to a Loan Party.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code, as now or hereafter in effect or any successor thereto.

 

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

 

“Business Day” shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in Boston, Massachusetts or New York, New York are authorized or required by law to remain closed (or are in fact closed).

 

“Cash Management Services” shall have the meaning assigned to that term in the First Lien Credit Agreement.

 

“Cash Management Services Agreement” shall mean any agreement pursuant to which any First Lien Cash Management Affiliate agrees to provide Cash Management Services.

 

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

 

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

 

“Debtor Relief Laws” shall mean the Bankruptcy Code of the United States, and 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 or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

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

 

3

 

“Discharge of First Lien Obligations” shall mean (a) the payment in full in cash of all outstanding First Lien Obligations (other than (i) contingent indemnity obligations with respect to then unasserted claims (ii) any First Lien Obligations relating to Bank Products (including Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or cash collateralized, and (iii) any First Lien Obligations relating to Cash Management Services that, at such time, are allowed by the applicable provider of such Cash Management Services to remain outstanding without being required to be repaid); and (b) the termination of all commitments to make Loans of issue Letters of Credit under the First Lien Credit Agreement. If, at any time prior to or simultaneously with the occurrence of the Discharge of First Lien Obligations, the Loan Parties enter into (x) any refinancing of the First Lien Obligations, which refinancing is permitted under the terms of this Agreement or (y) DIP Financing provided by one or more of the First Lien Lenders and the First Lien Agent to one or more Loan Parties and such DIP Financing is entered into in accordance with Section 6.1, then, in each case, the Discharge of First Lien Obligations shall automatically be deemed not to have occurred for all purposes of this Agreement.

 

“Discharge of Second Lien Obligations” shall mean the payment in full in cash of all outstanding Second Lien Obligations (other than (i) contingent indemnity obligations with respect to then unasserted claims, (ii) any Second Lien Obligations relating to Bank Products (including Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or cash collateralized, and (iii) any Second Lien Obligations relating to Cash Management Services that, at such time, are allowed by the applicable provider of such Cash Management Services to remain outstanding without being required to be repaid). If, at any time prior to or simultaneously with the occurrence of the Discharge of Second Lien Obligations, the Loan Parties enter into any refinancing of the Second Lien Obligations, which refinancing is permitted under the terms of this Agreement, then the Discharge of Second Lien Obligations shall automatically be deemed not to have occurred for all purposes of this Agreement.

 

“Disposition” shall mean the sale, transfer, license, sublicense, lease or other disposition of any property by any Person, whether in one transaction or in a series of transactions.

 

“Domain Names” shall mean all Internet domain names and associated URL addresses in or to which any Loan Party now or hereafter has any right, title or interest.

 

“Excess First Lien Obligations” shall mean First Lien Obligations constituting (a) the aggregate outstanding principal amount of loans made pursuant to the First Lien Loan Documents in excess of the Maximum First Lien Facility Amount and any interest, fees or reimbursement obligations accrued on or with respect to such excess amounts, and (b) any early termination fee, make-whole payment or prepayment fee payable under the First Lien Credit Agreement.

 

“Excess Second Lien Obligations” shall mean Second Lien Obligations constituting (a) the aggregate outstanding principal amount of loans made pursuant to the Second Lien Loan Documents in excess of the Maximum Second Lien Facility Amount and any interest, fees or reimbursement obligations accrued on or with respect to such excess amounts and (b) any early termination fee, make-whole payment or prepayment fee payable under the Second Lien Credit Agreement.

 

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

 

4

 

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

 

(b)           the exercise by any Secured Party of any right or remedy provided to a secured creditor on account of a Lien in the Collateral under any of the Loan Documents, under applicable law, in an Insolvency Proceeding or otherwise, including, without limitation, the exercise by a Secured Party of any voting rights relating to any equity interests included in the Collateral;

 

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

 

(d)           the exercise of any other right of a secured creditor under Part 6 of Article 9 of the Uniform Commercial Code or under provisions of similar effect under other applicable law in respect of the Collateral.

 

For the avoidance of doubt, none of the following shall be deemed to constitute an Exercise of Secured Creditor Remedies: (i) acceleration by the relevant Secured Parties of the maturity of the First Lien Obligations or the Second Lien Obligations, as the case may be, (ii) the filing of a proof of claim in any Insolvency Proceeding or seeking adequate protection, (iii) the exercise of rights by the First Lien Agent upon the occurrence of a Cash Control Event consisting solely of the notification of licensees or other account debtors, depository institutions or any other Person to deliver Proceeds of Collateral to the First Lien Agent, or (iv) the consent by the First Lien Agent to a disposition by any Loan Party of any of the Collateral.

 

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

 

“First Lien Bank Products Affiliate” shall mean the First Lien Agent, any First Lien Lender or any Affiliate of any First Lien Lender or First Lien Agent that has entered into a agreement relating to Bank Products with a First Lien Loan Party with the obligations of such First Lien Loan Party thereunder being secured by one or more First Lien Security Documents, together with their respective successors, assigns and transferees.

 

“First Lien Cash Management Affiliate” shall mean any First Lien Agent, First Lien Lender or any Affiliate of an First Lien Lender or First Lien Agent that provides Cash Management Services to any of the First Lien Loan Parties with the obligations of such First Lien Loan Parties thereunder being secured by one or more First Lien Security Documents, together with their respective successors, assigns and transferees.

 

“First Lien Credit Agreement” shall have the meaning assigned to such term in the recitals to this Agreement and shall include any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the First Lien Obligations in accordance with the terms hereof (including any credit agreement in connection with a DIP Financing provided by any of the First Lien Secured Parties pursuant to Section 6.1(a) hereof), whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder; provided that any such amendment, modification or refinancing shall be in accordance with the terms and conditions of this Agreement.

 

5

 

“First Lien Event of Default” shall mean an Event of Default as defined in the First Lien Credit Agreement.

 

“First Lien Guaranty” shall have the meaning assigned to that term in the recitals to this Agreement and shall also include any further guaranty made by an Guarantor guaranteeing, inter alia, the payment and performance of the First Lien Obligations.

 

“First Lien Lenders” shall have the meaning assigned to that term in the introduction to this Agreement, as well as any Person designated as a “Lender” under any First Lien Credit Agreement.

 

“First Lien Loan Documents” shall mean the First Lien Credit Agreement, the First Lien Guaranty, the First Lien Security Documents, all agreements relating to Bank Products between any First Lien Loan Party and any First Lien Bank Products Affiliate, all Cash Management Services Agreements between any First Lien Loan Party and any First Lien Cash Management Affiliate, those other ancillary agreements as to which any First Lien Secured Party is a party or a beneficiary and all other related agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any First Lien Loan Party or any of its respective subsidiaries or Affiliates, and delivered to the First Lien Agent or any other First Lien Secured Party, in connection with any of the foregoing or any First Lien Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof.

 

“First Lien Loan Parties” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“First Lien Obligations” shall mean all obligations (including all “Obligations” under and as defined in the First Lien Credit Agreement) of every nature of each First Lien Loan Party from time to time owed to the First Lien Secured Parties, or any of them, under any First Lien Loan Document (including any obligations in connection with a DIP Financing provided by any of the First Lien Secured Parties pursuant to Section 6.1(a) hereof), whether for principal, interest, reimbursement of amounts drawn under letters of credit, payments for early termination of Bank Products, Cash Management Services, fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the First Lien Loan Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. For clarity, First Lien Obligations include interest, fees, expenses, indemnities and all other amounts owing or due under the terms of the First Lien Credit Agreement or any other First Lien Loan Documents regardless of whether to First Lien Agent’s or any First Lien Secured Party’s is allowed or allowable in any Insolvency Proceeding.

 

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

 

6

 

“First Lien Secured Parties” shall have the meaning to that term in the introduction to this Agreement.

 

“First Lien Security Documents” shall mean all “Security Documents” as defined in the First Lien Credit Agreement, and all other security agreements, mortgages, deeds of trust and other security documents executed and delivered in connection with the First Lien Loan Documents, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Governmental Authority” shall mean any foreign, federal, state, regional, local, municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof, or any court or arbitrator.

 

“Guarantor” shall have the meaning assigned to such term in the recitals to this Agreement.

 

“Inadvertent Overadvances” shall mean the funding of any loan under the First Lien Credit Agreement which did not result in an Overadvance when made but which has, on the relevant date of determination, become an Overadvance as the result of circumstances beyond the reasonable control of the First Lien Agent or the First Secured Parties (including as the result of the entry of an adverse order for use of cash collateral by the United States Bankruptcy Court), including (i) a decline in the value of the Collateral, (ii) errors or fraud on any report produced by the Loan Parties calculating the covenants set forth in Section 7.15(b) of the First Lien Credit Agreement and Section 7.15(b) of the Second Lien Credit Agreement, (iii) any failure of the First Lien Loan Parties to comply with Section 6.18(b) of the First Lien Credit Agreement, (iv) the return of uncollected checks or other items of payment applied to the reduction of Loans (as defined in the First Lien Credit Agreement) or other similar involuntary or unintentional actions, or (v) any other circumstance beyond the reasonable control of the First Lien Agent or the First Lien Secured Parties that results in the reduction of the Realizable Orderly Liquidation Value (as defined in the First Lien Credit Agreement) of the Collateral.

 

“Inadvertent Overadvance Amounts” shall mean the aggregate amount of Overadvances which have resulted from any and all Inadvertent Overadvances.

 

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

 

“Intellectual Property” shall have the meaning given to such term in the First Lien Credit Agreement.

 

“Lender(s)” means individually, the First Lien Lenders or the Second Lien Lenders and collectively means all of the First Lien Lenders and the Second Lien Lenders.

 

7

 

“Lien” shall mean, with respect to any asset, any mortgage, deed of trust, security interest, charge, pledge, hypothecation, assignment, attachment, deposit arrangement, encumbrance, lien (statutory, judgment or otherwise, but excluding any right of set off arising by operation of law or pursuant to agreements entered into in the ordinary course of business), or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale) or other title retention agreement, any capitalized lease, any synthetic lease, any financing lease involving substantially the same economic effect as any of the foregoing and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of the foregoing.

 

“Lien Priority” shall mean with respect to any Lien of the First Lien Secured Parties or the Second Lien Secured Parties in the Collateral, the order of priority of such Lien as specified in Section 2.1.

 

“Loan Documents” shall mean the First Lien Loan Documents and the Second Lien Loan Documents.

 

“Loan Parties” shall mean the First Lien Loan Parties and the Second Lien Loan Parties.

 

“Maximum First Lien Facility Amount” shall mean, on any date of determination thereof, a principal amount equal to (a) $110,000,000, plus (b) the aggregate principal amount of Indebtedness that may be incurred under Section 2.14 of the First Lien Credit Agreement, plus (c) the aggregate principal amount of all Indebtedness advanced by any First Lien Secured Party pursuant to the right of first refusal set forth in Section 6.17 of the First Lien Credit Agreement, provided that any such Indebtedness under this clause (c) that would cause the Loan to Value Ratio (as defined in the First Lien Credit Agreement as in effect on the Closing Date) to be greater than fifty percent (50%) at the time of, and after giving effect to, any such advance made pursuant to Section 6.17 of the First Lien Credit Agreement and the acquisition of any Intellectual Property by the Borrower or any of its Subsidiaries shall not be included in the Maximum First Lien Facility Amount; for clarity any Inadvertent Overadvance shall not be deemed violative of this proviso, plus (d) First Lien Obligations under Bank Product Agreements and Cash Management Services Agreement, plus (e) any additional principal amount extended pursuant to a DIP Financing permitted pursuant to Section 6.1(a) hereof, minus (f) the amount of any permanent repayment of the First Lien Obligations made after the date hereof or any commitment reduction of the First Lien Obligations after the date hereof.

 

“Maximum Second Lien Facility Amount” shall mean (a) the principal amount of $100,000,000 plus (b) the aggregate principal amount of Indebtedness that may be incurred under Section 2.14 of the Second Lien Credit Agreement.

 

“Overadvance” shall mean the principal amount of all Loans under the First Lien Credit Agreement which exceed the sum of the amounts set forth in clauses (a) and (b) of the definition of “Maximum First Lien Facility Amount”.

 

“Party” shall mean the First Lien Agent or the Second Lien Agent, and “Parties” shall mean both the First Lien Agent and the Second Lien Agent.

 

8

 

“Payment of Maximum First Lien Facility Amount” shall mean (a) the payment in full in cash of the Maximum First Lien Facility Amount and (b) the termination of all commitments to make Loans of issue Letters of Credit under the First Lien Credit Agreement. If, at any time prior to or simultaneously with the occurrence of the Payment of Maximum First Lien Facility Amount, the Loan Parties enter into (x) any refinancing of the First Lien Obligations, which refinancing is permitted under the terms of this Agreement or (y) DIP Financing provided by one or more of the First Lien Lenders and the First Lien Agent to one or more Loan Parties and such DIP Financing is entered into in accordance with Section 6.1, then, in each case, Payment of Maximum First Lien Facility Amount shall automatically be deemed not to have occurred for all purposes of this Agreement.

 

“Payment of Maximum Second Lien Facility Amount” shall mean the payment in full in cash of the Maximum Second Lien Facility Amount. If, at any time prior to or simultaneously with the occurrence of the Payment of Maximum Second Lien Facility Amount, the Loan Parties enter into any refinancing of the Second Lien Obligations, which refinancing is permitted under the terms of this Agreement, then, in each case, Payment of Maximum Second Lien Facility Amount shall automatically be deemed not to have occurred for all purposes of this Agreement.

 

“Person” shall mean an individual, corporation, limited liability company, partnership, limited liability partnership, trust, other unincorporated association, business, or other legal entity, and any Governmental Authority.

 

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

 

“Purchase Notice” shall have the meaning set forth in Section 7.1.

 

“Remedy Standstill Period” shall mean the period commencing on the date of the First Lien Agent’s receipt of written notice from the Second Lien Agent that a Second Lien Event of Default has occurred and is continuing and that the Second Lien Agent intends to commence the Exercise of Secured Creditor Remedies, and ending on earlier to occur of (i) the date which is 120 days after receipt of such notice and (ii) the date on which the Payment of Maximum First Lien Facility Amount has occurred. Such written notice from the Second Lien Agent to the First Lien Agent shall reference this Agreement, and shall declare a “Remedy Standstill Period” to commence.

 

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

 

“Second Lien Credit Agreement” shall have the meaning assigned to such term in the recitals to this Agreement and shall include any other agreement extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the Second Lien Obligations in accordance with the terms hereof, whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder; provided that any such amendment, modification or refinancing shall be in accordance with the terms and conditions of this Agreement.

 

9

 

“Second Lien Event of Default” shall mean an Event of Default as defined in the Second Lien Credit Agreement.

 

“Second Lien Guaranty” shall have the meaning assigned to that term in the recitals to this Agreement and shall also include any further guaranty made by a Guarantor guaranteeing, inter alia, the payment and performance of the Second Lien Obligations.

 

“Second Lien Lenders” shall have the meaning assigned to that term in the introduction to this Agreement, as well as any Person designated as a “Lender” under any Second Lien Credit Agreement.

 

“Second Lien Loan Documents” shall mean the Second Lien Credit Agreement, the Second Lien Guaranty, the Second Lien Security Documents, those other ancillary agreements as to which any Second Lien Secured Party is a party or a beneficiary and all other related agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any Second Lien Loan Party or any of its respective subsidiaries or Affiliates, and delivered to the Second Lien Agent, in connection with any of the foregoing or any Second Lien Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof.

 

“Second Lien Loan Parties” shall have the meaning assigned to that term in the recitals to this Agreement.

 

“Second Lien Obligations” shall mean all obligations of every nature of each Second Lien Loan Party from time to time owed to the Second Lien Secured Parties or any of them, under any Second Lien Loan Document, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Second Lien Loan Party, would have accrued on any Second Lien Obligation), fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the Second Lien Loan Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

 

“Second Lien Prepayment Fee” shall mean any prepayment premium, make-whole obligation, or early termination fee payable pursuant to the Second Lien Loan Documents.

 

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

 

“Second Lien Remedies Exercise Date” shall mean the date following the Remedy Standstill Period and identified in the prior written notice delivered by the Second Lien Agent to the First Lien Agent as provided in Section 2.3, provided that the Second Lien Remedies Exercise Date shall not be deemed to have occurred if prior to the expiration of the Remedy Standstill Period the First Lien Agent is diligently pursuing in good faith the exercise of its enforcement rights and remedies against all or a material portion of the Collateral or if the Second Lien Event of Default giving rise to the Remedy Standstill Period is no longer continuing at the time of such Second Lien Remedies Exercise Date.

 

“Second Lien Secured Parties” shall have the meaning assigned to that term in the introduction to this Agreement.

 

10

 

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

 

“Secured Parties” shall mean the First Lien Secured Parties and the Second Lien Secured Parties.

 

“Swap Contract” shall have the meaning assigned to that term in the First Lien Credit Agreement.

 

“Triggering Event” means (a) the acceleration of the First Lien Obligations (other than automatic acceleration as a result of the commencement of an Insolvency Proceeding), (b) the First Lien Agent’s Exercise of Secured Creditor Remedies with respect to any material portion of the Collateral, (c) the commencement of an Insolvency Proceeding with respect to any Loan Party (subject to the limitations set forth in Section 7.1 hereof), (d) any default under Section 8.01(a) of the First Lien Credit Agreement shall have occurred and shall continue remedied for sixty (60) days or more (other than as a result of the commencement of an Insolvency Proceeding), (e) the First Lien Lenders cease to make Borrowings (as defined in the First Lien Credit Agreement as in effect on the date hereof) for ten (10) consecutive Business Days during the continuance of an event of default under the First Lien Credit Agreement, (f) the First Lien Obligations exceed the Maximum First Lien Facility Amount for ten (10) consecutive Business Days, or (g) the expiration of the Remedy Standstill Period..

 

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

 

11

 

Section 1.3.           Rules of Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting and shall be deemed to be followed by the phrase “without limitation,” and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, schedule and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, restatements, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, restatements, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein); provided that any terms used herein which are defined by reference to the First Lien Credit Agreement or the Second Lien Credit Agreement and are subject to the modification restrictions set forth in Section 5.2 of this Agreement shall mean such terms as defined in the First Lien Credit Agreement as of the date hereof or the Second Lien Credit Agreement as of the date hereof, as the case may be, without giving effect to any modifications or amendments thereto except to the extent that such definitions have been modified or amended in accordance with this Agreement; and provided further that any such modifications or amendments shall be deemed to be automatically incorporated herein by reference. Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any reference herein to the repayment in full of an obligation shall mean the payment in full in cash of such obligation, or in such other manner as may be approved in writing by the requisite holders or representatives in respect of such obligation.

 

ARTICLE 2.

LIEN PRIORITY

 

Section 2.1.               Priority of Liens.

 

(a)           Notwithstanding (i) the date, time, method, manner, or order of grant, attachment, or perfection of any Liens granted to the First Lien Agent or the First Lien Secured Parties in respect of all or any portion of the Collateral or of any Liens granted to the Second Lien Agent or the Second Lien Secured Parties in respect of all or any portion of the Collateral and regardless of how any such Lien was acquired (whether by grant, statute, operation of law, subrogation or otherwise), (ii) the order or time of filing or recordation of any document or instrument for perfecting the Liens in favor of the First Lien Agent or the Second Lien Agent (or First Lien Secured Parties or Second Lien Secured Parties) in any Collateral, (iii) any provision of the Uniform Commercial Code, Debtor Relief Laws or any other applicable law, or of the First Lien Loan Documents or the Second Lien Loan Documents, (iv) whether the First Lien Agent or the Second Lien Agent, in each case, either directly or through agents, holds possession of, or has control over, all or any part of the Collateral, (v) the date on which the First Lien Obligations or the Second Lien Obligations are advanced or made available to the Loan Parties, or (vi) any failure of the First Lien Agent or the Second Lien Agent to perfect its Lien in the Collateral, the subordination of any Lien on the Collateral securing any First Lien Obligations or Second Lien Obligations, as applicable, to any Lien securing any other obligation of the Borrower or any Guarantor, or the avoidance, invalidation or lapse of any Lien on the Collateral securing any First Lien Obligations or Second Lien Obligations, the First Lien Agent, on behalf of itself and the First Lien Secured Parties, and the Second Lien Agent, on behalf of itself and the Second Lien Secured Parties, hereby agree that:

 

(1)           any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of the Second Lien Agent or any Second Lien Secured Party that secures all or any portion of the Second Lien Obligations shall in all respects be junior and subordinate to all Liens granted to the First Lien Agent and the First Lien Secured Parties in the Collateral to secure all or any portion of the First Lien Obligations (other than the Excess First Lien Obligations);

 

12

 

(2)           any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of the First Lien Agent or any First Lien Secured Party that secures all or any portion of the First Lien Obligations (other than the Excess First Lien Obligations) shall in all respects be senior and prior to all Liens granted to the Second Lien Agent or any Second Lien Secured Party in the Collateral to secure all or any portion of the Second Lien Obligations;

 

(3)           any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of the First Lien Agent or any First Lien Secured Party that secures all or any portion of the Excess First Lien Obligations shall in all respects be junior and subordinate to all Liens granted to the Second Lien Agent or any Second Lien Secured Party in the Collateral to secure all or any portion of the Second Lien Obligations (other than the Excess Second Lien Obligations);

 

(4)           any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of the Second Lien Agent or any Second Lien Secured Party that secures all or any portion of the Second Lien Obligations (other than Excess Second Lien Obligations) shall in all respects be senior and prior to all Liens granted to the First Lien Agent and the First Lien Secured Parties in the Collateral to secure all or any portion of the Excess First Lien Obligations;

 

(5)           any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of the First Lien Agent or any First Lien Secured Party that secures the Excess First Lien Obligations shall in all respects be senior and prior to all Liens granted to the Second Lien Agent and the Second Lien Secured Parties in the Collateral to secure all or any portion of the Excess Second Lien Obligations; and

 

(6)           any Lien in respect of all or any portion of the Collateral now or hereafter held by or on behalf of the Second Lien Agent or any Second Lien Secured Party that secures the Excess Second Lien Obligations shall in all respects be junior and subordinate to all Liens granted to the First Lien Agent and the First Lien Secured Parties in the Collateral to secure all or any portion of the Excess First Lien Obligations.

 

(b)           The Second Lien Agent, for and on behalf of itself and the Second Lien Secured Parties, acknowledges and agrees that, prior to or concurrently herewith, the First Lien Agent, for the benefit of itself and the First Lien Secured Parties, has been, or may be, granted Liens upon all of the Collateral in which the Second Lien Agent has been granted Liens and the Second Lien Agent hereby consents thereto. The First Lien Agent, for and on behalf of itself and the First Lien Secured Parties, acknowledges and agrees that, concurrently herewith, the Second Lien Agent, for the benefit of itself and the Second Lien Secured Parties, has been, or may be, granted Liens upon all of the Collateral in which the First Lien Agent has been granted Liens and the First Lien Agent hereby consents thereto. The subordination of Liens by the Second Lien Agent and the First Lien Agent in favor of one another as set forth herein shall not be deemed to subordinate the Second Lien Agent’s Liens or the First Lien Agent’s Liens to the Liens of any other Person nor be affected by the subordination of such Liens to any other Lien.

 

13

 

Section 2.2.               Waiver of Right to Contest Liens.

 

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

 

(b)           The First Lien Agent, for and on behalf of itself and the First Lien Secured Parties, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the Second Lien Agent or the Second Lien Secured Parties in respect of the Collateral or the provisions of this Agreement. The First Lien Agent, for itself and on behalf of the First Lien Secured Parties, agrees that none of the First Lien Agent or the First Lien Secured Parties will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the Second Lien Agent or any Second Lien Secured Party under the Second Lien Loan Documents with respect to the Collateral, subject to and in accordance with the terms of this Agreement. The foregoing shall not be construed to prohibit the First Lien Agent from enforcing the provisions of this Agreement.

 

(c)           Each of the Second Lien Agent, each Second Lien Secured Party, the First Lien Agent and each First Lien Secured Party agrees (i) that it will not institute any suit or other proceeding or assert in any suit, Insolvency Proceeding or other proceeding any claim, in the case of the Second Lien Agent and each Second Lien Secured Party, against either the First Lien Agent or any other First Lien Secured Party, and in the case of the First Lien Agent and each other First Lien Secured Party, against either the Second Lien Agent or any other Second Lien Secured Party, seeking damages from or other relief by way of specific performance, instructions or otherwise, with respect to, any action taken or omitted to be taken by such Person with respect to the Collateral which is consistent with the terms of this Agreement, and none of such Parties shall be liable for any such action taken or omitted to be taken, or (ii) it will not be a petitioning creditor or otherwise assist in the filing of an involuntary Insolvency Proceeding.

 

14

 

(d)           Notwithstanding anything to the contrary herein contained, none of the Parties hereto waives any claim that it may have against a Secured Party on the grounds that any sale, transfer or other disposition by the Secured Party was not commercially reasonable in every respect as required by the Uniform Commercial Code.

 

Section 2.3.               Remedies Standstill.

 

(a)           Following the occurrence of any Second Lien Event of Default and until the expiration of the Remedy Standstill Period, the Second Lien Agent may not commence or continue the Exercise of Any Secured Creditor Remedies in respect of the Collateral. On or after the Second Lien Remedies Exercise Date, upon ten (10) Business Days prior written notice to the First Lien Agent, the Second Lien Agent may take, for the benefit of the Second Lien Secured Parties, one or more of the following actions at the same or different times in respect of the Second Lien Event of Default that was the subject of the notice giving rise to such Remedy Standstill Period:

 

(1)           the Exercise of Any Secured Creditor Remedies (including, without limitation, foreclosure upon and taking possession of the Collateral); and

 

(2)           exercise any and all other remedies under the Second Lien Loan Documents and applicable law available to the Second Lien Secured Parties with respect to the Collateral.

 

(b)           All Proceeds of the Collateral received by the Second Lien Agent shall be turned over to the First Lien Agent for prompt application in accordance with Section 4.1(a) hereof. This Section 2.3 shall not be construed to in any way limit or impair the rights of the Second Lien Agent to join (but not control or object to in any way) any foreclosure or other Exercise of Secured Creditor Remedies with respect to the Collateral initiated by the First Lien Agent, so long as it does not delay or interfere in any material respect with the exercise by the First Lien Secured Parties of their respective rights as provided in this Agreement.

 

15

 

(c)           Nothing contained herein shall impair the Second Lien Agent’s or any Second Lien Secured Party’s rights (i) to exercise any remedies against any of the Loan Parties (other than any remedies against any the Collateral) pursuant to the Second Lien Loan Documents; (ii) to accelerate any of the Second Lien Obligations; (iii) to make demand upon any Loan Party or any other Person liable on the Second Lien Obligations; (iv) to institute a lawsuit to collect its debt; provided, however, that in the event that the Second Lien Agent or any Second Lien Secured Party becomes a judgment Lien creditor in respect of the Collateral as a result of its enforcement of its rights as an unsecured creditor with respect to the Second Lien Obligations, such judgment Lien shall be subject to the terms of this Agreement for all purposes as the other Liens securing the Second Lien Obligations are subject to this Agreement; (v) to exercise any of its rights or remedies with respect to the Collateral as and when permitted by Section 2.3(a), (vi) to file a claim or statement of interest with respect to the Second Lien Obligations; (vii) to take any action (not adverse to the priority and perfection status of, and validity and value of, the Liens of the First Lien Agent, or the rights of the First Lien Agent to exercise remedies in respect thereof) in order to create, perfect, preserve or protect its Lien on the Collateral subject to the other terms of this Agreement; (viii) to file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Second Lien Secured Parties, including, without limitation, any claims secured by the Collateral, if any, in each case not otherwise in contravention of the terms of this Agreement; (ix) to exercise any rights or remedies available to unsecured creditors or file any pleadings, objections, motions, or agreements which assert rights or interests available to unsecured creditors arising under the Second Lien Loan Documents, any Insolvency Proceeding or applicable non-bankruptcy law, in each case, not otherwise prohibited in its capacity of a secured creditor or in any other capacity by the terms of this Agreement; (x) to bid for or purchase any Collateral at any public, private or judicial foreclosure upon such Collateral initiated by the First Lien Agent or any sale of any Collateral during an Insolvency Proceeding; provided that such bid may not include a "credit bid" unless the cash proceeds of such bid paid on the closing date of the purchase are otherwise sufficient to cause the Discharge of First Lien Obligations; or (xi) to vote on any plan of reorganization, arrangement or compromise or any proposal, file any proof of claim, make other filings and make any arguments and motions in any Insolvency Proceeding that are, in each case, not otherwise prohibited by the terms of this Agreement.

 

(d)           Nothing contained herein shall impair the First Lien Agent’s or any First Lien Secured Party’s rights (i) to exercise any remedies against any of the Loan Parties or the Collateral pursuant to the First Lien Loan Documents; (ii) to accelerate any of the First Lien Obligations; (iii) to make demand upon any Loan Party or any other Person liable on the First Lien Obligations; (iv) to institute a lawsuit to collect its debt; (v) to file a claim or statement of interest with respect to the First Lien Obligations; (vi) to take any action (not adverse to the perfection status of, and validity and value of, the Liens of the Second Lien Agent, or the rights of the Second Lien Agent to exercise remedies in respect thereof) in order to create, perfect, preserve or protect its Lien on the Collateral subject to the other terms of this Agreement; (vii) to file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the First Lien Secured Parties, including, without limitation, any claims secured by the Collateral, if any, in each case not otherwise in contravention of the terms of this Agreement; (viii) to exercise any rights or remedies available to unsecured creditors or file any pleadings, objections, motions, or agreements which assert rights or interests available to unsecured creditors arising under the First Lien Loan Documents, any Insolvency Proceeding or applicable non-bankruptcy law, in each case, not otherwise prohibited in its capacity of a secured creditor or in any other capacity by the terms of this Agreement; and (ix) to vote on any plan of reorganization, arrangement or compromise or any proposal, file any proof of claim, make other filings and make any arguments and motions in any Insolvency Proceeding that are, in each case, not otherwise prohibited by the terms of this Agreement.

 

16

 

Section 2.4.               Release of Liens.

 

In the event of (A) any private or public sale of all or any portion of the Collateral in connection with any Exercise of Secured Creditor Remedies by the First Lien Agent or with the consent of the First Lien Agent after the occurrence and during the continuance of a First Lien Event of Default, or (B) any sale, transfer or other disposition of all or any portion of the Collateral (other than in connection with a refinancing as described in Section 5.2(c)), so long as such sale, transfer or other disposition is then permitted by the First Lien Loan Documents and the Second Lien Loan Documents or consented to by the requisite First Lien Lenders and the requisite Second Lien Lenders, the Second Lien Agent agrees, on behalf of itself and the Second Lien Lenders that such sale, transfer or other disposition will be free and clear of the Liens on such Collateral securing the Second Lien Obligations, and the Second Lien Agent’s and the Second Lien Secured Parties’ Liens with respect to the Collateral so sold, transferred, or disposed shall terminate and be automatically released without further action concurrently with, and to the same extent as, the release of the First Lien Secured Parties’ Liens on such Collateral; provided that, for the avoidance of doubt, the Second Lien Secured Parties’ Liens in respect of the Proceeds of such Collateral so sold, transferred, or disposed shall continue to exist to the same extent, and with the same relative priorities, as the First Lien Secured Parties’ Liens on such Proceeds; and provided, further, that to the extent Proceeds are required to repay obligations, such Proceeds shall be applied in accordance with Section 4.1(a). In furtherance of, and subject to, the foregoing, the Second Lien Agent agrees that it will promptly execute any and all Lien releases or other documents reasonably requested by the First Lien Agent in connection therewith. The Second Lien Agent hereby appoints the First Lien Agent and any officer or duly authorized person of the First Lien Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney to be exercised if the Second Lien Agent does not take such action within ten (10) Business Days after written notice, in the place and stead of the Second Lien Agent and in the name of the Second Lien Agent or in the First Lien Agent’s own name, from time to time, in the First Lien Agent’s sole discretion, for the purposes of carrying out the terms of this paragraph, to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this paragraph, including any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).

 

Section 2.5.               No New Liens. (a) Until the date upon which the Discharge of First Lien Obligations shall have occurred, the parties hereto agree that no Second Lien Secured Party shall acquire or hold any Lien (other than any judgment lien as set forth in Section 2.3(c) above) on any assets of any Loan Party securing any Second Lien Obligation which assets are not also subject to the Lien of the First Lien Agent under the First Lien Loan Documents. If any Second Lien Secured Party shall (nonetheless and in breach hereof) acquire or hold any Lien on any assets of any Loan Party securing any Second Lien Obligation which assets are not also subject to the Lien of the First Lien Agent under the First Lien Loan Documents, then the Second Lien Agent (or the relevant Second Lien Secured Party) shall, without the need for any further consent of any other Second Lien Secured Party, the Borrower or any Guarantor and notwithstanding anything to the contrary in any other Second Lien Loan Document, be deemed to also hold and have held such Lien as agent or bailee for the benefit of the First Lien Agent as security for the First Lien Obligations (subject to the Lien Priority and other terms hereof) and shall promptly notify the First Lien Agent in writing of the existence of such Lien.

 

17

 

(b)           Until the date upon which the Discharge of Second Lien Obligations shall have occurred, the parties hereto agree that no First Lien Secured Party shall acquire or hold any Lien (other than any judgment lien as set forth in Section 2.3(c) above) on any assets of any Loan Party securing any First Lien Obligation which assets are not also subject to the Lien of the Second Lien Agent under the Second Lien Loan Documents. If any First Lien Secured Party shall (nonetheless and in breach hereof) acquire or hold any Lien on any assets of any Loan Party securing any First Lien Obligation which assets are not also subject to the Lien of the Second Lien Agent under the Second Lien Loan Documents, then the First Lien Agent (or the relevant First Lien Secured Party) shall, without the need for any further consent of any other First Lien Secured Party, the Borrower or any Guarantor and notwithstanding anything to the contrary in any other First Lien Loan Document be deemed to also hold and have held such Lien as agent or bailee for the benefit of the Second Lien Agent as security for the Second Lien Obligations (subject to the Lien Priority and other terms hereof) and shall promptly notify the Second Lien Agent in writing of the existence of such Lien.

 

Section 2.6.               Waiver of Marshalling.

 

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

 

ARTICLE 3.
ACTIONS OF THE PARTIES

 

Section 3.1.               Certain Actions Permitted. The Second Lien Agent and the First Lien Agent may make such demands or file such claims in respect of the Second Lien Obligations or the First Lien Obligations, as applicable, as are necessary to prevent the waiver or bar of such claims under applicable statutes of limitations or other statutes, court orders, or rules of procedure at any time. Nothing in this Agreement shall prohibit the receipt by the Second Lien Agent or any Second Lien Secured Party of the payments of interest, principal and other amounts owed in respect of the Second Lien Obligations so long as such receipt is not the direct or indirect result of (a) the Exercise of any Secured Creditor Remedies or any other exercise by the Second Lien Agent or any Second Lien Secured Party of rights or remedies as a secured creditor (including set-off) with respect to the Collateral, (b) the enforcement of any Lien held by the Second Lien Agent or any Second Lien Secured Party in contravention of this Agreement or (c) the violation of the limitations set forth in the First Lien Credit Agreement as in effect on the date hereof. Nothing in this Agreement shall prohibit the receipt by the First Lien Agent or any First Lien Secured Party of the payments of interest, principal and other amounts owed in respect of the First Lien Obligations.

 

Section 3.2.               Agent for Perfection. The First Lien Agent, for and on behalf of itself and each First Lien Secured Party, acknowledges and agrees to hold all Control Collateral in its possession, custody, or control (or in the possession, custody, or control of agents or bailees for the First Lien Agent) as agent for the benefit of, and on behalf of, the Second Lien Agent and the Second Lien Secured Parties solely for the purpose of perfecting the security interest granted to the Second Lien Agent in such Collateral, subject to the terms and conditions of this Section 3.2. None of the First Lien Agent or the First Lien Secured Parties shall have any obligation whatsoever to the Second Lien Agent or the Second Lien Secured Parties to assure that the Collateral is genuine or owned by the Borrower, any Guarantor, or any other Person or to preserve rights or benefits of any Person. The duties or responsibilities of the First Lien Agent under this Section 3.2 are and shall be limited solely to holding or maintaining control of the Control Collateral as agent for the Second Lien Agent for purposes of perfecting the Lien held by the Second Lien Agent. The First Lien Agent is not and shall not be deemed to be a fiduciary of any kind for the Second Lien Secured Parties or any other Person.

 

18

 

Section 3.3.               Sharing of Information and Access; Notices of Default.

 

(a)           In the event that the First Lien Agent shall, in the exercise of its rights under the First Lien Security Documents or otherwise, receive possession or control of any books and records of any Loan Party which contain information identifying or pertaining to the Collateral, the First Lien Agent shall, upon request from the Second Lien Agent and as promptly as practicable thereafter, either make available to the Second Lien Agent such books and records for inspection and duplication or provide to the Second Lien Agent copies thereof. In the event that the Second Lien Agent shall, in the exercise of its rights under the Second Lien Security Documents or otherwise, receive possession or control of any books and records of any Loan Party which contain information identifying or pertaining to any of the Collateral, the Second Lien Agent shall, upon request from the First Lien Agent and as promptly as practicable thereafter, either make available to the First Lien Agent such books and records for inspection and duplication or provide the First Lien Agent copies thereof.

 

(b)           Each Agent shall give to the other Agent concurrently with the giving thereof to any Loan Party (a) a copy of any written notice by such Agent of an First Lien Event of Default or a Second Lien Event of Default, as the case may be, or a written notice of demand for payment from any Loan Party and (b) a copy of any written notice sent by such Agent to any Loan Party stating such Agent’s intention to Exercise of any Secured Creditors’ Remedies or to exercise any other material enforcement rights or remedies against such Loan Party, including written notice pertaining to any foreclosure on all or any material part of its Liens or other judicial or non-judicial remedy in respect thereof, and any legal process served or filed in connection therewith; provided that the failure of any Agent to give such required notice shall not result in any liability to such Agent or affect the enforceability of any provision of this Agreement, including the relative priorities of the Liens of the Agents and Secured Parties as provided herein, and shall not affect the validity or effectiveness of any such notice as against any Loan Party or of any action taken pursuant to such notice or in relation to the events giving rise thereto; provided, further, that the foregoing shall not in any way impair any claims that any Agent may have against the other Agent as a result of any failure of such Agent to provide any notice in connection with a foreclosure against the Collateral by such Agent as required under applicable law.

 

(c)           Upon the written request of the Second Lien Agent, the First Lien Agent shall promptly provide to the Second Lien Agent copies of all collateral reports, appraisals and results of field examinations that it receives. Prior to the Payment of Maximum First Lien Facility Amount, the First Lien Agent agrees that in the event it does not arrange for at least one appraisal of the trade names and brands and other Intellectual Property of the Loan Parties during any twelve-month period, the Second Lien Agent shall have the right to direct the First Lien Agent in writing to engage Hilco Appraisal Services or other appraisers reasonably acceptable to the First Lien Agent and the Second Lien Agent to conduct such appraisal, and the First Lien Agent agrees to promptly commence such engagement; provided that to the extent the First Lien Agent does not engage an appraiser to conduct such appraisal, the Second Lien Agent may engage an appraiser on behalf of the First Lien Agent. In addition, in the event that the Second Lien Agent requires a second appraisal of the trade names and brands and other Intellectual Property of the Loan Parties during any such twelve-month period, the Second Lien Agent shall have the right to direct the First Lien Agent in writing to engage Hilco Appraisal Services or other appraisers reasonably acceptable to the First Lien Agent and the Second Lien Agent to conduct such appraisal, and the First Lien Agent agrees to promptly commence such engagement. The parties hereby acknowledge that the First Lien Agent’s obligations under this Section 3.3(c) are subject to the Loan Parties’ compliance with their respective obligations under the First Lien Credit Agreement (including as to cooperation with the First Lien Agent) with respect to such appraisals and examinations.

 

19

 

Section 3.4.               Insurance. Proceeds of Collateral include insurance proceeds and, therefore, the Lien Priority shall govern the ultimate disposition of casualty insurance proceeds. The First Lien Agent and the Second Lien Agent shall each be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to the Collateral. Prior to the Payment of Maximum First Lien Facility Amount, the First Lien Agent shall have the sole and exclusive right, as against the Second Lien Agent, to adjust settlement of insurance claims with respect to the Collateral in a commercially reasonable manner. After the Payment of Maximum First Lien Facility Amount but prior to the Payment of Maximum Second Lien Facility Amount, the Second Lien Agent shall have the sole and exclusive right, as against the First Lien Agent, to adjust settlement of insurance claims with respect to the Collateral in a commercially reasonable manner. After the Payment of Maximum Second Lien Facility Amount, the First Lien Agent shall have the sole and exclusive right, as against the Second Lien Agent, to adjust settlement of insurance claims with respect to the Collateral in a commercially reasonable manner. Upon the receipt of any proceeds of insurance by the First Lien Agent or the Second Lien Agent, such proceeds shall be remitted to the First Lien Agent and applied as set forth in Section 4.1(a) hereof. The Second Lien Agent hereby appoints the First Lien Agent and any officer or duly authorized person of the First Lien Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney to make any endorsements as agent for the Second Lien Agent or any such other Second Lien Secured Parties; provided that such appointment shall be exercised only if the Second Lien Agent does not make such endorsement within ten (10) Business Days after written notice.

 

Section 3.5.               No Additional Rights For the Loan Parties Hereunder. If any First Lien Secured Party or Second Lien Secured Party shall enforce its rights or remedies in violation of the terms of this Agreement, the Loan Parties shall not be entitled to use such violation as a defense to any action by any First Lien Secured Party or Second Lien Secured Party, nor to assert such violation as a counterclaim or basis for set off or recoupment against any First Lien Secured Party or Second Lien Secured Party.

 

20

 

Section 3.6.               Payments Over.

 

So long as the Discharge of First Lien Obligations has not occurred, any Collateral or Proceeds thereof received by the Second Lien Agent or any Second Lien Secured Parties in connection with the Exercise of Secured Creditor Remedies or any other exercise of any right or remedy (including set off) relating to the Collateral shall be segregated and held in trust and forthwith paid over to the First Lien Agent in the same form as received, with any necessary endorsements for application in accordance with the provisions of Section 4.1 hereof or as a court of competent jurisdiction may otherwise direct; provided that after Payment of Maximum First Lien Facility Amount, the Second Lien Agent may retain such Proceeds for application to the Maximum Second Lien Facility Amount until Payment of Maximum Second Lien Facility Amount has occurred. The Second Lien Agent hereby appoints the First Lien Agent and any officer or duly authorized person of the First Lien Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney to make any endorsements as agent for the Second Lien Agent or any such other Second Lien Secured Parties; provided that such appointment shall be exercised only if the Second Lien Agent does not make such endorsement within ten (10) Business Days after written notice.

 

Section 3.7.               Revolving Nature of Certain First Lien Obligations. The Second Lien Agent, for and on behalf of itself and the Second Lien Secured Parties, expressly acknowledges and agrees that (i) the First Lien Credit Agreement includes a revolving commitment, that in the ordinary course of business the First Lien Agent and the First Lien Lenders will apply payments and make advances thereunder, and that no application of any Collateral or the release of any Lien by the First Lien Agent upon any portion of the Collateral in connection with a permitted disposition by the Loan Parties under the First Lien Credit Agreement shall constitute the Exercise of Secured Creditor Remedies under this Agreement; (ii) the amount of the First Lien Obligations that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the First Lien Obligations may be modified, extended or amended from time to time, and that the aggregate amount of the First Lien Obligations may be increased, replaced or refinanced, in each event, without notice to or consent by the Second Lien Secured Parties and without affecting the provisions hereof; and (iii) all Collateral received by the First Lien Agent may be applied, reversed, reapplied or credited, in whole or in part, to the First Lien Obligations at any time. The Lien Priority shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of either the First Lien Obligations or the Second Lien Obligations, or any portion thereof.

 

Section 3.8.               Legends. The First Lien Agent acknowledges with respect to the First Lien Security Documents, on the one hand, and the Second Lien Agent acknowledges with respect to the Second Lien Security Documents, on the other hand, that such documents will contain the following legend:

 

Intercreditor Agreement. Notwithstanding anything herein to the contrary, the security interest granted to the Agent, for the benefit of the Loan Parties, herein and the exercise of any right or remedy by the Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern and control.

 

21

 

ARTICLE 4.
APPLICATION OF PROCEEDS

 

Section 4.1.               Application of Proceeds.

 

The First Lien Agent and the Second Lien Agent hereby agree that all Collateral and all Proceeds thereof received by either of them (i) in connection with any Exercise of Secured Creditor Remedies with respect to the Collateral, (ii) in connection with the exercise of any right or remedy (including set off) relating to the Collateral, or (iii) following the commencement of any Insolvency Proceeding, in each case, shall be applied,

 

first, to the payment of reasonable costs and expenses of the First Lien Agent,

 

second, to the payment of the First Lien Obligations (other than the Excess First Lien Obligations) in accordance with the First Lien Loan Documents until the Discharge of First Lien Obligations (other than the Excess First Lien Obligations) shall have occurred;

 

third, to the payment of the Second Lien Obligations (other than the Excess Second Lien Obligations) in accordance with the Second Lien Loan Documents until the Discharge of Second Lien Obligations (other than the Excess Second Lien Obligations) shall have occurred,

 

fourth, to the payment of the Excess First Lien Obligations in accordance with the First Lien Loan Documents until the Discharge of First Lien Obligations shall have occurred,

 

fifth, to the payment of the Excess Second Lien Obligations in accordance with the Second Lien Loan Documents until the Discharge of Second Lien Obligations shall have occurred, and

 

sixth, the balance, if any, to the Loan Parties or as a court of competent jurisdiction may direct.

 

Section 4.2.               Turnover of Collateral After Discharge. Upon the Payment of Maximum First Lien Facility Amount, the First Lien Agent shall deliver to the Second Lien Agent or shall execute such documents as the Second Lien Agent may reasonably request (at the expense of the Borrower) to enable the Second Lien Agent to have control over any Control Collateral still in the First Lien Agent’s possession, custody, or control in the same form as received with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct. Thereafter, upon the Payment of Maximum Second Lien Facility Amount, the Second Lien Agent shall deliver to the First Lien Agent or shall execute such documents as the First Lien Agent may reasonably request (at the expense of the Borrower) to enable the First Lien Agent to have control over any Control Collateral still in the Second Lien Agent’s possession, custody, or control in the same form as received with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct.

 

22

 

Section 4.3.               Limited Obligation or Liability. In exercising remedies, whether as a secured creditor or otherwise, the First Lien Agent shall have no obligation or liability to the Second Lien Agent or to any Second Lien Secured Party regarding the adequacy of any Proceeds or for any action or omission, except solely for an action or omission that breaches the express obligations undertaken by the First Lien Agent under the terms of this Agreement. Notwithstanding anything to the contrary herein contained, none of the Parties hereto waives any claim that it may have against a Secured Party on the grounds that any sale, transfer or other disposition by the Secured Party was not commercially reasonable in every respect as required by the Uniform Commercial Code.

 

Section 4.4.              Specific Performance. Each of the First Lien Agent and the Second Lien Agent is hereby authorized to demand specific performance of this Agreement, whether or not the Borrower or any Guarantor shall have complied with any of the provisions of any of the Loan Documents, at any time when the other Party shall have failed to comply with any of the provisions of this Agreement applicable to it. Each of the First Lien Agent, for and on behalf of itself and the First Lien Secured Parties, and the Second Lien Agent, for and on behalf of itself and the Second Lien Secured Parties, hereby irrevocably waives any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance.

 

ARTICLE 5.

INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS

 

Section 5.1.               Notice of Acceptance and Other Waivers.

 

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

 

23

 

(b)           None of the First Lien Agent, any First Lien Secured Party, or any of their respective Affiliates, directors, officers, employees, or agents shall be liable for failure to demand, collect, or realize upon any of the Collateral or any Proceeds, or for any delay in doing so, or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof, except as specifically provided in this Agreement. If the First Lien Agent or any First Lien Secured Party otherwise should exercise any of its contractual rights or remedies under any First Lien Loan Documents (subject to the terms and conditions hereof), neither the First Lien Agent nor any First Lien Secured Party shall have any liability whatsoever to the Second Lien Agent or any Second Lien Secured Party as a result of such action, omission, or exercise (so long as any such exercise does not breach the terms and provisions of this Agreement). The First Lien Agent and the First Lien Secured Parties shall be entitled to manage and supervise their loans under any First Lien Credit Agreement and any of the other First Lien Loan Documents as they may, in their sole discretion, deem appropriate, and may manage their loans without regard to any rights or interests that the Second Lien Agent or any of the Second Lien Secured Parties have in the Collateral, except as otherwise expressly set forth in this Agreement. Subject to Section 4.1(b), the Second Lien Agent, on behalf of itself and the Second Lien Secured Parties, agrees that neither the First Lien Agent nor any First Lien Secured Party shall incur any liability as a result of a sale, lease, license, application, or other disposition of all or any portion of the Collateral or Proceeds thereof, pursuant to the First Lien Loan Documents, so long as such disposition is conducted in accordance with applicable law and does not breach the provisions of this Agreement.

 

Section 5.2.               Modifications to First Lien Documents and Second Lien Documents.

 

(a)           The First Lien Agent and the First Lien Secured Parties may at any time and from time to time and without the consent of or notice to the Second Lien Agent or any Second Lien Secured Party, without incurring any liability to the Second Lien Agent or any Second Lien Secured Party and without impairing or releasing any rights or obligations hereunder or otherwise, amend, restate, supplement, modify, waive, substitute, renew, refinance, or replace any or all of the First Lien Loan Documents; provided, however, that without the consent of the Second Lien Agent, the First Lien Secured Parties shall not amend, restate, supplement, modify, waive, substitute, renew, refinance or replace any or all of the First Lien Loan Documents to:

 

(1)           increase the sum of the then outstanding aggregate principal amount of the loans made under the First Lien Credit Agreement in excess of the amount of the Maximum First Lien Facility Amount;

 

(2)           increase the rates of interest set forth in the definition of “Applicable Margin” as defined in the First Lien Credit Agreement by more than 2.00% per annum at any level of the pricing grid applicable thereto (other than any increase occurring because of fluctuations in underlying rate indices or the imposition of the Default Rate), or increase the Default Rate by more than 2.00% per annum above the rate applicable thereto (other than any increase occurring because of fluctuations in underlying rate indices);

 

(3)           shorten the scheduled maturity of the First Lien Obligations;

 

(4)           require any mandatory prepayments or scheduled repayments of the First Lien Obligations except as provided in the First Lien Loan Documents as in effect on the date hereof or, other than a result of the occurrence of an Event of Default under the First Lien Loan Documents, require that any payment on the First Lien Obligations be made earlier than the date originally scheduled for such payment;

 

24

 

(5)           change any conditions, covenants, defaults or events of default thereunder that expressly restricts any Loan Party from making payments of the Second Lien Obligations that would otherwise be permitted under the First Lien Credit Agreement as in effect on the date hereof; or

 

(6)           make any other amendment or modification in contravention of this Agreement

 

(b)           The Second Lien Agent and the Second Lien Secured Parties may at any time and from time to time and without consent of or notice to the First Lien Secured Parties, without incurring any liability to the First Lien Secured Parties and without impairing or releasing any rights or obligations hereunder or otherwise, amend, restate, supplement, modify, waive, substitute, renew, refinance or replace any or all of the Second Lien Loan Documents; provided, however, that without the consent of the First Lien Agent, the Second Lien Agent and the Second Lien Secured Parties shall not amend, restate, supplement, modify, waive, substitute, renew, refinance or replace any or all of the Second Lien Loan Documents to:

 

(1)           increase the aggregate outstanding principal amount of the Second Lien Obligations in excess of the amount of the Maximum Second Lien Facility Amount;

 

(2)           increase the rate of interest set forth in Section 2.05 of the Second Lien Credit Agreement by more than 2.00% per annum (other than any increase occurring because of fluctuations in underlying rate indices or the imposition of the Default Rate) or increase the percentage with respect to the Default Rate by more than 2.00% per annum above the rate applicable thereto on the date hereof;

 

(3)           shorten the scheduled maturity of the Second Lien Obligations;

 

(4)           require any mandatory prepayments or scheduled repayments of the Second Lien Obligations except as provided in the Second Lien Loan Documents as in effect on the date hereof or require that any payment on the Second Lien Obligations be made earlier than the date originally scheduled for such payment;

 

(5)           change any conditions, covenants, defaults or events of default thereunder that expressly restricts any Loan Party from making payments of the First Lien Obligations that would otherwise be permitted under the Second Lien Loan Documents as in effect on the date hereof; or

 

(6)           make any other amendment or modification in contravention of this Agreement.

 

(c)           Subject to Sections 5.2(a) and (b) above, the First Lien Obligations and the Second Lien Obligations may be refinanced, in whole or in part, in each case, without notice to, or the consent (except to the extent a consent is required to permit the refinancing transaction under any First Lien Loan Document or any Second Lien Loan Document) of the First Lien Agent, the First Lien Secured Parties, the Second Lien Agent or the Second Lien Secured Parties, as the case may be, all without affecting the Lien Priority provided for herein or the other provisions hereof, provided, however, that the holders of such refinancing indebtedness (or an authorized agent or trustee on their behalf) bind themselves in writing to the terms of this Agreement pursuant to such documents or agreements (including amendments or supplements to this Agreement) as the First Lien Agent or the Second Lien Agent, as the case may be, shall reasonably request and in form and substance reasonably acceptable to the First Lien Agent or the Second Lien Agent, as the case may be, and any such refinancing transaction shall be in accordance with any applicable provisions of both the First Lien Loan Documents and the Second Lien Loan Documents (to the extent such documents survive the refinancing).

 

25

 

Section 5.3.               Reinstatement and Continuation of Agreement.

 

(a)           If the First Lien Agent or any First Lien Secured Party is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower, any Guarantor, or any other Person any payment made in satisfaction of all or any portion of the First Lien Obligations (a “First Lien Recovery”), then the First Lien Obligations shall be reinstated to the extent of such First Lien Recovery. If this Agreement shall have been terminated prior to such First Lien Recovery, this Agreement shall be reinstated in full force and effect in the event of such First Lien Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the Parties from such date of reinstatement, but such reinstatement shall not impose an obligation on the Second Lien Agent or Second Lien Secured Parties to disgorge payments received by the Second Lien Agent prior to such reinstatement, including from the Proceeds of Collateral, in accordance with the terms of Section 4.1 hereof. All rights, interests, agreements, and obligations of the First Lien Agent, the Second Lien Agent, the First Lien Secured Parties, and the Second Lien Secured Parties under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of, any Insolvency Proceeding by or against the Borrower or any Guarantor or any other circumstance which otherwise might constitute a defense available to, or a discharge of the Borrower or any Guarantor in respect of the First Lien Obligations or the Second Lien Obligations. No priority or right of the First Lien Agent or any First Lien Secured Party shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of the Borrower or any Guarantor or by the noncompliance by any Person with the terms, provisions, or covenants of any of the First Lien Loan Documents, regardless of any knowledge thereof which the First Lien Agent or any First Lien Secured Party may have.

 

(b)           If the Second Lien Agent or any Second Lien Secured Party is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower, any Guarantor, or any other Person any payment made in satisfaction of all or any portion of the Second Lien Obligations (a “Second Lien Recovery”), then the Second Lien Obligations shall be reinstated to the extent of such Second Lien Recovery. If this Agreement shall have been terminated prior to such Second Lien Recovery, this Agreement shall be reinstated in full force and effect in the event of such Second Lien Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the Parties from such date of reinstatement, but such reinstatement shall not impose an obligation on the First Lien Agent or First Lien Secured Parties to disgorge payments received by the First Lien Agent prior to such reinstatement, including from the Proceeds of Collateral, in accordance with the terms of Section 4.1 hereof. All rights, interests, agreements, and obligations of the First Lien Agent, the Second Lien Agent, the First Lien Secured Parties, and the Second Lien Secured Parties under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of, any Insolvency Proceeding by or against the Borrower or any Guarantor or any other circumstance which otherwise might constitute a defense available to, or a discharge of the Borrower or any Guarantor in respect of the First Lien Obligations or the Second Lien Obligations. No right of the Second Lien Agent or any Second Lien Secured Party shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of the Borrower or any Guarantor or by the noncompliance by any Person with the terms, provisions, or covenants of any of the Second Lien Loan Documents, regardless of any knowledge thereof which the Second Lien Agent or any Second Lien Secured Party may have.

 

26

 

ARTICLE 6.
INSOLVENCY PROCEEDINGS

 

Section 6.1.               DIP Financing.

 

(a)           If the Borrower or any Guarantor shall be subject to any Insolvency Proceeding at any time prior to Payment of Maximum First Lien Facility Amount, and the First Lien Agent or the First Lien Secured Parties shall seek to provide the Borrower or any Guarantor with, or consent to a third party providing, any financing under Section 364 of the Bankruptcy Code or consent to any order for the use of cash collateral constituting Collateral under Section 363 of the Bankruptcy Code (each, a “DIP Financing”), with such DIP Financing to be secured by all or any portion of the Collateral (including assets that, but for the application of Section 552 of the Bankruptcy Code (or any similar provision of any foreign Debtor Relief Laws) would be Collateral), then the Second Lien Agent, on behalf of itself and the Second Lien Secured Parties, agrees that it will raise no objection and will not support any objection to such DIP Financing or use of cash collateral or to the Liens securing the same on any grounds, including a failure to provide “adequate protection” for the Liens of the Second Lien Agent securing the Second Lien Obligations (and will not request any adequate protection solely as a result of such DIP Financing or use of cash collateral except as permitted by Section 6.3(b)(i) and will not offer or support any debtor-in-possession financing which would compete with such DIP Financing), so long as (i) the Second Lien Agent retains its Lien on the Collateral to secure the Second Lien Obligations (in each case, including Proceeds thereof arising after the commencement of the case under any Debtor Relief Laws), (ii) the additional amount advanced against the Collateral pursuant to any such DIP Financing does not exceed $10,000,000, (iii) all Liens on the Collateral securing any such DIP Financing shall be senior to or on a parity with the Liens of the First Lien Agent and the First Lien Secured Parties securing the First Lien Obligations on the Collateral; (iv) the non-default interest rate with respect to the DIP Financing is no more than 2.00% above the rate in effect immediately prior to the commencement of the Insolvency Proceeding and the default rate for such DIP Financing is no greater than 2.00% in excess of such non-default rate, (v) the closing fees with respect to the DIP Financing are no more than 1.50% of the maximum principal amount of the DIP Financing; (vi) the DIP Financing does not compel any Borrower or any Guarantor to seek confirmation of a specific plan of reorganization for which all or substantially all of the material terms are set forth in the DIP Financing documentation, (vii) the DIP Financing documentation or cash collateral order does not expressly require the liquidation of all of the Collateral prior to a default under the DIP Financing documentation or cash collateral order (it being agreed that the DIP Facility may require that certain of the Collateral be liquidated within a specified time period; provided, further, nothing herein shall prevent the Second Lien Agent or the Second Lien Secured Parties from (x) objecting to any provision in any DIP Financing relating to any provision or content of a plan or reorganization to the extent that such objection is not inconsistent with the terms of this Agreement, or (y) objecting to any agreement or arrangements that require a specific treatment of the claim in the Insolvency Proceeding for purposes of a plan of reorganization or contravene the terms of this Agreement in any material respect; provided that if the Second Lien Agent and the Second Lien Secured Parties exercise the purchase option set forth in Article 7 hereof with respect to the First Lien Obligations, the First Lien Agent agrees, on behalf of the First Lien Secured Parties, that the First Lien Agent and the First Lien Secured Parties shall not seek to provide the Borrower or any Guarantor with a DIP Financing following such purchase.

 

27

 

(b)           Notwithstanding the provisions of Section 6.1(a), if the First Lien Agent or some or all of the First Lien Secured Parties (i) do not offer to provide DIP Financing to the Borrower and/or the Guarantors; or (ii) propose to provide DIP Financing not conforming with the provisions of Section 6.1(a), the Second Lien Agent and some or all of the Second Lien Secured Parties may propose to provide (or support any other Person in providing) DIP Financing in lieu of, or competition with, the First Lien Agent and the First Lien Secured Parties, provided that any such DIP Financing shall be subject to the same limitations set forth in Section 6.1(a), shall be in conformity with the provisions of Section 5.2(b) and the other provisions of this Agreement, and shall not seek to prime the Lien of the First Lien Agent and the First Lien Secured Parties.

 

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

 

Section 6.2.               Relief From Stay. Until the Payment of Maximum First Lien Facility Amount has occurred, the Second Lien Agent, on behalf of itself and the Second Lien Secured Parties, agrees not to seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any portion of the Collateral without the First Lien Agent’s express written consent. In addition, neither the First Lien Agent nor the Second Lien Agent shall seek any relief from the automatic stay with respect to any Collateral without providing three (3) days’ prior written notice to the other, unless such period is agreed by both the First Lien Agent and the Second Lien Agent to be modified or unless, with respect to the First Lien Agent, it makes a good faith determination that either (A) the Collateral will decline speedily in value or (B) the failure to take any action will have a reasonable likelihood of endangering the First Lien Agent’s ability to realize upon the Collateral.

 

Section 6.3.               No Contest; Adequate Protection.

 

(a)           The Second Lien Agent, on behalf of itself and the Second Lien Secured Parties, agrees that, prior to the Discharge of First Lien Obligations, none of them shall contest (or support any other Person contesting) (i) any request by the First Lien Agent or any First Lien Secured Party for adequate protection of its interest in the Collateral in compliance with the terms of this Agreement, (ii) except as otherwise expressly provided herein, any proposed provision of DIP Financing by the First Lien Agent and some or all of the First Lien Secured Parties consistent with Section 6.1(a), or (iii) any objection by the First Lien Agent or any First Lien Secured Party to any motion, relief, action, or proceeding based on a claim by the First Lien Agent or any First Lien Secured Party that its interests in the Collateral are not adequately protected (or any other similar request under any law applicable to an Insolvency Proceeding), so long as any Liens granted to the First Lien Agent as adequate protection of its interests are subject to this Agreement.

 

28

 

(b)           The First Lien Agent, on behalf of itself and the First Lien Secured Parties, agrees that, prior to the Discharge of Second Lien Obligations, none of them shall contest (or support any other Person contesting) (i) any request by the Second Lien Agent or any Second Lien Secured Party for adequate protection of its interest in the Collateral (unless in contravention of Section 6.1(a) above), (ii) except as provided in Section 6.1(b), any proposed provision of DIP Financing by the Second Lien Agent and some or all of the Second Lien Secured Parties, or (ii) any objection by the Second Lien Agent or any Second Lien Secured Party to any motion, relief, action or proceeding based on a claim by the Second Lien Agent or any Second Lien Secured Party that its interests in the Collateral (unless in contravention of Section 6.1(a) above) are not adequately protected (or any other similar request under any law applicable to an Insolvency Proceeding), so long as (x) any Liens granted to the Second Lien Agent as adequate protection of its interests are subject to this Agreement and (y) any payments with respect to such adequate protection are limited to payments of interest (without giving effect to any default rate of interest under the Second Lien Credit Agreement) and reasonable attorneys fees and other reasonable out of pocket expenses of the Second Lien Secured Parties and are not made with the Proceeds from the Disposition of any Collateral.

 

(c)           Notwithstanding the foregoing provisions in this Section 6.3, in any Insolvency Proceeding, in the event that the First Lien Agent, on behalf of itself or any of the First Lien Secured Parties, is granted adequate protection with respect to the Collateral in the form of additional collateral (even if such collateral is not of a type which would otherwise have constituted Collateral), then the First Lien Agent, on behalf of itself and the First Lien Secured Parties, agrees that the Second Lien Agent, on behalf of itself or any of the Second Lien Secured Parties, may seek or request (and the First Lien Secured Parties will not oppose such request) adequate protection with respect to its interests in such Collateral in the form of a Lien on the same additional collateral, which Lien will be subordinated to the Liens securing the First Lien Obligations on the same basis as the other Liens of the Second Lien Agent on the Collateral.

 

(d)           Neither the Second Lien Agent nor any Second Lien Secured Party shall oppose or seek to challenge any claim by the First Lien Agent or any First Lien Secured Party for allowance in any Insolvency Proceeding of First Lien Obligations consisting of post-petition interest, fees or expenses to the extent of the value of the Lien securing any First Lien Secured Party’s claim, without regard to the existence of the Lien of the Second Lien Agent on behalf of the Second Lien Secured Parties on the Collateral.

 

(e)           Neither the First Lien Agent nor any other First Lien Secured Party shall oppose or seek to challenge any claim by the Second Lien Agent or any Second Lien Secured Party for allowance in any Insolvency Proceeding of Second Lien Obligations consisting of post-petition interest, fees or expenses to the extent of the value of the Lien securing any Second Lien Secured Party’s claim.

 

29

 

Section 6.4.               Asset Sales. The Second Lien Agent agrees, on behalf of itself and the Second Lien Secured Parties, that it will not oppose any sale consented to by the First Lien Agent of any Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar provision under any law applicable to any Insolvency Proceeding) so long as the Proceeds of such sale are applied in accordance with this Agreement provided that (i) the First Lien Agent has agreed to release the Liens securing the First Lien Obligations on such Collateral, (ii) the Second Lien Agent may request the Bankruptcy Court in the Insolvency Proceeding to grant the Second Lien Agent a Lien in the excess proceeds from such sale or disposition (and the First Lien Agent and the other First Lien Secured Parties shall not object thereto), (iv) the Second Lien Agent shall have had an opportunity to object to any bidding procedures motion filed in the Insolvency Proceeding and the sale is conducted in compliance with the bidding procedures approved by the Bankruptcy Court in such Insolvency Proceeding, and (v) such motion does not impair the rights of the Second Lien Secured Parties under Section 363(k) of the Bankruptcy Code..

 

Section 6.5.               Separate Grants of Security and Separate Classification. Each Second Lien Secured Party and each First Lien Secured Party acknowledges and agrees that (i) the grants of Liens pursuant to the First Lien Security Documents and the Second Lien Security Documents constitute two separate and distinct grants of Liens and (ii) because of, among other things, their differing rights in the Collateral, the Second Lien Obligations are fundamentally different from the First Lien Obligations and must be separately classified in any plan of reorganization (or other plan of similar effect under any Debtor Relief Laws) proposed or adopted in an Insolvency Proceeding. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the First Lien Secured Parties and the Second Lien Secured Parties in respect of the Collateral constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the Second Lien Secured Parties hereby acknowledge and agree that all distributions shall be made as if there were separate classes of First Lien Obligation claims and Second Lien Obligation claims against the Loan Parties, with the effect being that, to the extent that the aggregate value of the Collateral is sufficient (for this purpose ignoring all claims held by the Second Lien Secured Parties), the First Lien Secured Parties shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest, fees, expense reimbursements and other claims that are available from the Collateral before any distribution is made in respect of the claims held by the Second Lien Secured Parties from the Collateral, with the Second Lien Secured Parties hereby acknowledging and agreeing to turn over to the First Lien Secured Parties amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries of the Second Lien Secured Parties.

 

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

 

30

 

Section 6.7.               First Lien Obligations Unconditional. All rights of the First Lien Agent hereunder, and all agreements and obligations of the Second Lien Agent and the Loan Parties (to the extent applicable) hereunder, shall remain in full force and effect irrespective of any change in the time, place or manner of payment of, or in any other term of, all or any portion of the First Lien Obligations, or any amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding or restatement of any First Lien Loan Document, in each case, in accordance with the terms hereof.

 

Section 6.8.               Second Lien Obligations Unconditional. All rights of the Second Lien Agent hereunder, all agreements and obligations of the First Lien Agent and the Loan Parties (to the extent applicable) hereunder, shall remain in full force and effect irrespective of any change in the time, place or manner of payment of, or in any other term of, all or any portion of the Second Lien Obligations, or any amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding or restatement of any Second Lien Loan Document, in each case, in accordance with the terms hereof.

 

Section 6.9.               Reorganization Securities. Subject to the ability of the First Lien Secured Parties and the Second Lien Secured Parties, as applicable, to support or oppose confirmation or approval of any plan of reorganization as provided herein, if, in any Insolvency Proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed pursuant to a plan of reorganization, both on account of First Lien Obligations and on account of Second Lien Obligations, then, to the extent the debt obligations distributed on account of the First Lien Obligations and on account of the Second Lien Obligations are secured by Liens upon the same property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the debt obligations so distributed and to the Liens securing such debt obligations and the distribution of Proceeds thereof.

 

Section 6.10.            Rights as Unsecured Creditors. Except as expressly provided in this Agreement, nothing contained herein shall affect the rights or claims of any Agent or any Secured Party as an unsecured creditor in any Insolvency Proceeding, and the Agents and the Secured Parties shall retain all such rights and claims (it being understood that the Secured Parties may not directly or indirectly exercise rights as an unsecured creditor which such Secured Party is expressly prohibited from exercising as a secured creditor hereunder).

 

31

 

ARTICLE 7.
PURCHASE OPTION

 

Section 7.1.               Right to Purchase. Upon the occurrence and during the continuation of a Triggering Event, any one or more of the Second Lien Lenders (acting in their individual capacity or through one or more affiliates) shall have the right, subject to the third sentence of this Section 71, but not the obligation, upon written notice from the Second Lien Agent on behalf of such Second Lien Lenders (a “Purchase Notice”) to First Lien Agent to acquire from the First Lien Lenders all (but not less than all) of the right, title, and interest of the First Lien Lenders in and to the First Lien Obligations and the First Lien Loan Documents. The Purchase Notice, if given, shall be irrevocable. With respect to any Insolvency Proceeding constituting a Triggering Event, a Purchase Notice may be furnished only upon (i) the occurrence of any event which would permit the Second Lien Secured Parties to propose a DIP Financing under Section 6.1(b) hereof or (ii) the failure of any of the First Lien Secured Parties to offer to provide DIP Financing, and, in each such event, such Purchase Notice must be received by the First Lien Agent within ten (10) Business Days after the earlier of the commencement of the Insolvency Proceeding or the date that the First Lien Agent notifies the Second Lien Agent in writing of the First Lien Agent’s intention to provide (or not to provide) a DIP Financing; if not so furnished within that time period (time being of the essence), the rights of the Second Lien Lenders to purchase the First Lien Obligations as a result of the commencement of such Insolvency Proceeding shall terminate and be on no further force and effect unless and until another Triggering Event exists. On the date specified by the Second Lien Agent in the Purchase Notice (which shall not be more than ten (10) Business Days after the receipt by First Lien Agent of the Purchase Notice), the First Lien Lenders shall sell to the purchasing Second Lien Lenders and the purchasing Second Lien Lenders shall purchase from the First Lien Lenders, the First Lien Obligations. During the period commencing on the date such notice is received by the First Lien Agent and ending on the date specified in such notice for the consummation of the purchase, the First Lien Agent shall not Exercise Any Secured Creditor Remedies without the consent of the Second Lien Agent (such consent not to be unreasonably withheld or delayed). For the avoidance of doubt, each Triggering Event shall be deemed to be an independent event and shall in each case independently trigger the right of the Second Lien Agent and the Second Lien Lenders to purchase all of the First Lien Obligations, notwithstanding the prior occurrence of another Trigger Event.

 

Section 7.2.               Payments. On the date of such purchase and sale, the purchasing Second Lien Lenders shall:

 

(a)           pay to First Lien Agent, for the benefit of the First Lien Lenders, as the purchase price therefor, the full amount of all the First Lien Obligations (other than (x) indemnification obligations for which no claim or demand for payment has been made at such time, and (y) First Lien Obligations cash collateralized in accordance with Section 7.2(b) below) then outstanding and unpaid;

 

(b)           (i) furnish cash collateral to the First Lien Agent in such amounts as the First Lien Agent determines is reasonably necessary to secure the First Lien Agent and the First Lien Lenders (and their respective affiliates) in respect of any Cash Management Obligations (such cash collateral shall be applied to the reimbursement of Bank Product Obligations and Cash Management Obligations as and when such obligations become due and payable and, at such time as all of the Cash Management Obligations are paid in full, the remaining cash collateral held by First Lien Agent in respect of Cash Management Obligations shall be remitted to the Second Lien Agent for the benefit of the purchasing Second Lien Lenders), and (ii) furnish cash collateral to the First Lien Agent in such amounts as the First Lien Agent reasonably determines is necessary to secure the First Lien Agent and the First Lien Lenders in respect of any asserted or threatened (in writing) claims, demands, actions, suits, proceedings, investigations, liabilities, fines, costs, penalties, or damages that are the subject of the indemnification provisions of the First Lien Credit Agreement (such cash collateral shall be applied to the reimbursement of such obligations as and when they become due and payable and, at such time as all of such obligations are paid in full, the remaining cash collateral held by First Lien Agent in respect of indemnification obligations shall be remitted to the Second Lien Agent for the benefit of the purchasing Second Lien Lenders), or make such other accommodations as are reasonably agreed between the First Lien Agent and the Second Lien Agent with respect to such obligations; and

 

32

 

(c)           pay to First Lien Agent and the other First Lien Lenders the amount of all expenses in accordance with the First Lien Loan Documents (including the reimbursement of attorneys’ fees, field examination expenses, and appraisal fees).

 

Such purchase price and cash collateral shall be remitted by wire transfer of federal funds to such bank account of First Lien Agent as First Lien Agent may designate in writing to Second Lien Agent for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by the purchasing Second Lien Lenders to the bank account designated by First Lien Agent are received in such bank account prior to 2:00 p.m., Eastern time, and interest shall be calculated to and including such Business Day if the amounts so paid by the purchasing Second Lien Lenders to the bank account designated by First Lien Agent are received in such bank account later than 2:00 p.m., Eastern time.

 

Section 7.3.               Documentation. Any such purchase under this Article 7 shall be effected by the execution and delivery of a customary form of assignment and acceptance agreement and shall be expressly made without representation or warranty of any kind by First Lien Agent and the other First Lien Lenders as to the First Lien Obligations so purchased, or otherwise, and without recourse to First Lien Agent or any other First Lien Secured Party, except that each First Lien Lender shall represent and warrant: (i) that the amount quoted by such First Lien Lender as its portion of the purchase price represents the amount shown as owing with respect to the claims transferred as reflected on its books and records, and (ii) it owns, or has the right to transfer to the purchasing Second Lien Lenders, the rights being transferred.

 

Section 7.4.               Retained Interest of First Lien Lenders. In the event that any one or more of the Second Lien Lenders exercises and consummates the purchase option set forth in this Article 7, the First Lien Lenders shall retain their indemnification rights under the First Lien Credit Agreement.

 

ARTICLE 8.
MISCELLANEOUS

 

Section 8.1.               Rights of Subrogation. The Second Lien Agent, for and on behalf of itself and the Second Lien Secured Parties, agrees that no payment to the First Lien Agent or any First Lien Secured Party pursuant to the provisions of this Agreement shall entitle the Second Lien Agent or any Second Lien Secured Party to exercise any rights of subrogation in respect thereof until the Discharge of First Lien Obligations shall have occurred. Following the Discharge of First Lien Obligations, the First Lien Agent agrees to execute such documents, agreements, and instruments as the Second Lien Agent or any Second Lien Secured Party may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the First Lien Obligations resulting from payments to the First Lien Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by the First Lien Agent are paid by such Person upon request for payment thereof.

 

33

 

Section 8.2.               Further Assurances. The Parties will, at their own expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that either Party may reasonably request, in order to protect any right or interest granted or purported to be granted hereby or to enable the First Lien Agent or the Second Lien Agent to exercise and enforce its rights and remedies hereunder; provided, however, that no Party shall be required to pay over any payment or distribution, execute any instruments or documents, or take any other action referred to in this Section 8.2, to the extent that such action would contravene any law, order or other legal requirement or any of the terms or provisions of this Agreement, and in the event of a controversy or dispute, such Party may interplead any payment or distribution in any court of competent jurisdiction, without further responsibility in respect of such payment or distribution under this Section 8.2.

 

Section 8.3.               Representations. The Second Lien Agent represents and warrants to the First Lien Agent that it has the requisite power and authority under the Second Lien Loan Documents to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the Second Lien Secured Parties and that this Agreement shall be binding obligations of the Second Lien Agent and the Second Lien Secured Parties, enforceable against the Second Lien Agent and the Second Lien Secured Parties in accordance with its terms. The First Lien Agent represents and warrants to the Second Lien Agent that it has the requisite power and authority under the First Lien Loan Documents to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the First Lien Secured Parties and that this Agreement shall be binding obligations of the First Lien Agent and the First Lien Secured Parties, enforceable against the First Lien Agent and the First Lien Secured Parties in accordance with its terms.

 

Section 8.4.               Amendments. No amendment or waiver of any provision of this Agreement nor any consent to any departure by any Party hereto shall be effective unless it is in a written agreement executed by the Second Lien Agent and the First Lien Agent and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that this Agreement may be amended from time to time, without the consent of either Agent, to add additional Loan Parties, whereupon such Person will be bound by the terms hereof to the same extent as if it had executed and delivered this Agreement as of the date hereof.

 

Section 8.5.              Addresses for Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, sent electronically in PDF or similar format or sent by overnight express courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or electronic transmission or five (5) days after deposit in the United States mail (certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section) shall be as set forth below or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.

 

34

 

First Lien Agent:

Bank of America, N.A.

100 Federal Street

MA5 100 09-09

Boston, Massachusetts 02110

Attention: Andrew Cerussi

[e-mail]

 

Second Lien Agent:

Wilmington Trust, National Association

 

Attention:

 

Section 8.6.               No Waiver; Remedies. No failure on the part of any Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

Section 8.7.              Continuing Agreement, Transfer of Secured Obligations. This Agreement is a continuing agreement and shall (a) remain in full force and effect until the Discharge of First Lien Obligations and the Discharge of Second Lien Obligations shall have occurred, (b) be binding upon the Parties and their successors and assigns, and (c) inure to the benefit of and be enforceable by the Parties and their respective successors, transferees and assigns. Nothing herein is intended, or shall be construed to give, any other Person any right, remedy or claim under, to or in respect of this Agreement or any Collateral. All references to any Loan Party shall include any Loan Party as debtor-in-possession and any receiver or trustee for such Loan Party in any Insolvency Proceeding. Without limiting the generality of the foregoing clause (c), the First Lien Agent, any First Lien Secured Party, the Second Lien Agent, or any Second Lien Secured Party may assign or otherwise transfer all or any portion of the First Lien Obligations or the Second Lien Obligations, as applicable, to any other Person (other than the Borrower, any Guarantor or any subsidiary or Affiliate of the Borrower or any Guarantor), and such other Person shall thereupon become vested with all the rights and obligations in respect thereof granted to the First Lien Agent, the Second Lien Agent, any First Lien Secured Party, or any Second Lien Secured Party, as the case may be, herein or otherwise. The First Lien Secured Parties and the Second Lien Secured Parties may continue, at any time and without notice to the other parties hereto, to extend credit and other financial accommodations, lend monies and provide indebtedness to, or for the benefit of, any Loan Party on the faith hereof.

 

Section 8.8.              Governing Law; Entire Agreement. The validity, performance, and enforcement of this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. This Agreement constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.

 

35

 

Section 8.9.              Counterparts. This Agreement may be executed in any number of counterparts, and it is not necessary that the signatures of all Parties be contained on any one counterpart hereof, each counterpart will be deemed to be an original, and all together shall constitute one and the same document.

 

Section 8.10.             No Third Party Beneficiaries. This Agreement is solely for the benefit of the First Lien Agent, the First Lien Secured Parties, the Second Lien Agent and the Second Lien Secured Parties. No other Person (including the Borrower, any Guarantor or any Affiliate of the Borrower or any Guarantor, or any subsidiary of the Borrower or any Guarantor) shall be deemed to be a third party beneficiary of this Agreement.

 

Section 8.11.             Headings. The headings of the articles and sections of this Agreement are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof.

 

Section 8.12.            Severability. If any of the provisions in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement and shall not invalidate the Lien Priority or the application of Proceeds and other priorities set forth in this Agreement.

 

Section 8.13.             VENUE; JURY TRIAL WAIVER.

 

(a)           EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY FIRST LIEN SECURED PARTY OR ANY SECOND LIEN SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY FIRST LIEN LOAN DOCUMENTS, OR ANY SECOND LIEN LOAN DOCUMENTS AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

36

 

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

 

(c)           EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.5. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

Section 8.14.             Intercreditor Agreement. This Agreement is the Intercreditor Agreement referred to in the First Lien Credit Agreement and the Second Lien Credit Agreement. Nothing in this Agreement shall be deemed to subordinate the obligations due to (i) any First Lien Secured Party to the obligations due to any Second Lien Secured Party or (ii) any Second Lien Secured Party to the obligations due to any First Lien Secured Party (in each case, whether before or after the occurrence of an Insolvency Proceeding), it being the intent of the Parties that this Agreement shall effectuate a subordination of Liens but not a subordination of indebtedness.

 

Section 8.15.             No Warranties or Liability. The Second Lien Agent and the First Lien Agent acknowledge and agree that neither has made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any other First Lien Loan Document or any Second Lien Loan Document. Except as otherwise provided in this Agreement, the Second Lien Agent and the First Lien Agent will be entitled to manage and supervise their respective extensions of credit to any Loan Party in accordance with law and their usual practices, modified from time to time as they deem appropriate.

 

Section 8.16.            Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of any First Lien Loan Document or any Second Lien Loan Document, the provisions of this Agreement shall govern.

 

37

 

Section 8.17.            Information Concerning Financial Condition of the Loan Parties. Each of the Second Lien Agent and the First Lien Agent hereby assumes responsibility for keeping itself informed of the financial condition of the Loan Parties and all other circumstances bearing upon the risk of non-payment of the First Lien Obligations or the Second Lien Obligations. The Second Lien Agent and the First Lien Agent hereby agree that no party shall have any duty to advise any other party of information known to it regarding such condition or any such circumstances. In the event the Second Lien Agent or the First Lien Agent, in its sole discretion, undertakes at any time or from time to time to provide any information to any other party to this Agreement, (a) it shall be under no obligation (i) to provide any such information to such other party or any other party on any subsequent occasion except as required pursuant to Section 3.3, (ii) to undertake any investigation not a part of its regular business routine, or (iii) to disclose any other information, or (b) it makes no representation as to the accuracy or completeness of any such information and shall not be liable for any information contained therein, and (c) the Party receiving such information hereby to hold the other Party harmless from any action the receiving Party may take or conclusion the receiving Party may reach or draw from any such information, as well as from and against any and all losses, claims, damages, liabilities, and expenses to which such receiving Party may become subject arising out of or in connection with the use of such information.

 

Section 8.18.             Initial Loan To Value. The Parties acknowledge that, as of the date of this Agreement, the Loan to Value Ratio (as defined in the First Lien Credit Agreement) is greater than fifty percent (50%) and shall remain in excess of fifty percent (50%) until the date that the principal payment due on September 30, 2014 under the First Lien Credit Agreement is received by the First Lien Agent. The foregoing shall not give rise to any claim by any Party against the other or affect the rights of any Party hereunder.

 

[Remainder of page intentionally left blank.]

 

38

 

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

 

	BANK OF AMERICA, N.A., in its capacity as the First Lien Agent
	By:	/s/ Andrew Cerussi
		Name: Andrew Cerussi
		Title: Director

 

 

Signature Page to Intercreditor Agreement

 

 

	WILMINGTON TRUST, NATIONAL ASSOCIATION, in its capacity as the Second Lien Agent
	By:	/s/ Megan H. McCauley
		Name: Megan H. McCauley
		Title: Assistant Vice President

 

 

Signature Page to Intercreditor Agreement

 

 

ACKNOWLEDGMENT

 

The Borrower and each Guarantor hereby acknowledges that it has received a copy of this Agreement and consents thereto, agrees to recognize all rights granted thereby to the First Lien Agent, the First Lien Secured Parties, the Second Lien Agent, and the Second Lien Secured Parties and will not do any act or perform any obligation which is not in accordance with the agreements set forth in this Agreement. The Borrower and each Guarantor further acknowledges and agrees that it is not an intended beneficiary or third party beneficiary under this Agreement and (i) as between the First Lien Secured Parties, the Borrower and the Guarantors, the First Lien Loan Documents remain in full force and effect as written and are in no way modified hereby, and (ii) as between the Second Lien Secured Parties, the Borrower and the Guarantors, the Second Lien Loan Documents remain in full force and effect as written and are in no way modified hereby.

 

	WILLIAM RAST LICENSING, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	HEELYS, INC.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	HEELING MANAGEMENT CORP.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	HEELING HOLDING CORPORATION
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	HEELING SPORTS LIMITED
	By:	Heeling Management Corp., as the General Partner
		By:	/s/ Gary Klein
		Name:	Gary Klein
		Title:	Chief Financial Officer
	By:	Heeling Holding Corporation, as the Limited Partner
		By:	/s/ Gary Klein
		Name:	Gary Klein
		Title:	Chief Financial Officer

 

 

Acknowledgment to Intercreditor Agreement

 

 

	B®AND MATTER, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG REVO HOLDINGS, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG, FM, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	SBG UNIVERSE BRANDS, LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	GALAXY BRANDS LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	THE BASKETBALL MARKETING COMPANY, INC.
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

 

Acknowledgment to Intercreditor Agreement

 

 

	AMERICAN SPORTING GOODS CORPORATION
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer
	LNT BRANDS LLC
	By:	/s/ Gary Klein
	Name:	Gary Klein
	Title:	Chief Financial Officer

 

 

Acknowledgment to Intercreditor Agreement

 

 

 

 

 

Exhibit 10.5

 

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS (I) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR (II) IN COMPLIANCE WITH AN EXEMPTION THEREFROM AND ACCOMPANIED, IF REQUESTED BY THE ISSUER, WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH AN EXEMPTION THEREFROM.

 

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED
UPON ITS EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON

TRANSFER SET FORTH IN ARTICLE II OF THIS WARRANT

 

Warrant No.  ________		Number of Shares: ________
Date of Issuance August 15, 2014		(subject to adjustment)
Void after December 31, 2019

  

SEQUENTIAL BRANDS GROUP, INC.

 

Form of Common Stock Purchase Warrant

 

THIS IS TO CERTIFY THAT, for value received, ___________ or its permitted assigns (collectively, the “Registered Holder”) is entitled to purchase from Sequential Brands Group, Inc., a Delaware corporation (the “Company”), at the place where the Warrant Office designated pursuant to Section 2.1 is located, at a purchase price per share of $11.20 (as adjusted pursuant to the terms of this Warrant, the “Exercise Price”), __________ shares (the “Warrant Shares”) of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, $0.001 par value per share, of the Company (the “Common Stock”), and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter set forth. The number of shares of the Common Stock purchasable hereunder and the Exercise Price are subject to adjustment in accordance with Article III hereof. This Warrant shall expire at 5:00 p.m., New York time, on December 31, 2019 (the “Expiration Date”). Receipt of this Warrant by the Registered Holder shall constitute acceptance of and agreement to the terms and conditions set forth herein.

 

This Warrant is issued in connection with that certain Agreement and Plan of Merger, dated as of June 24, 2014 (the “Merger Agreement”), by and among the Company, SBG Universe Brands, LLC, Universe Galaxy Merger Sub, Inc., Galaxy Brand Holdings, Inc., solely in its capacity as the Stockholder Representative (as defined in the Merger Agreement) Carlyle Equity Opportunity GP, L.P, and, for purposes of Section 6.5(b) only, Carlyle Galaxy Holdings, L.P.

 

 

ARTICLE I

 

Exercise of Warrant

 

1.1           Method of Exercise. The Vested Warrant Shares pursuant to this Warrant may be exercised by the Registered Holder as a whole or in part at any time and from time to time subsequent to the date hereof and until the Expiration Date at which time this Warrant shall expire and be of no further force or effect; provided, however, that the minimum number of Warrant Shares that may be purchased on a single exercise shall be 1,000 or the entire number of shares remaining available for exercise hereunder, whichever is less. To exercise this Warrant, the Registered Holder shall deliver to the Company, at the Warrant Office designated in Section 2.1(a), a written notice in the form of the Purchase Form attached as Exhibit A hereto, stating therein the election of the Registered Holder to exercise this Warrant in the manner provided in the Purchase Form, along with payment in full of the Exercise Price (in the manner described below) for all Vested Warrant Shares purchased hereunder. Subject to compliance with Section 3.1(a)(vi), this Warrant shall be deemed to be exercised on the date of receipt by the Company of the Purchase Form, accompanied by payment for the Vested Warrant Shares to be purchased and surrender of this Warrant, as aforesaid, and such date is referred to herein as the “Exercise Date.” Upon such exercise (subject as aforesaid), the Company shall promptly (and in any event within three Business Days (as defined in the Merger Agreement) following the Exercise Date) issue and deliver to the Registered Holder a certificate or statement evidencing ownership in book-entry form for the full number of the Vested Warrant Shares purchasable by the Registered Holder hereunder, against the receipt by the Company of the total Exercise Price payable hereunder for all such Vested Warrant Shares, (a) in cash or by certified or cashier’s check or (b) pursuant to the Net Exercise provisions of Section 1.2. The person or entity in whose name the certificate(s) or book-entry statements for Common Stock is to be issued shall be deemed to have become a holder of record of such Common Stock on the Exercise Date. If the Company fails to deliver such certificate or statement during the time period specified above, then the Registered Holder will have the right to rescind such exercise; provided, that nothing herein shall limit a Registered Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance or injunctive relief with respect to the Company’s failure to deliver such certificate or statement in accordance with the terms of this Warrant.

 

1.2           Net Exercise. In lieu of exercising the Vested Warrant Shares by delivering payment of the Exercise Price to the Company in cash, if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), the Registered Holder of this Warrant may elect to receive a number of shares of Common Stock equal to the value of this Warrant (or of any portion of this Warrant being canceled) by surrender of this Warrant at the Warrant Office together with a properly completed and executed Purchase Form, in which event the Company shall issue the Registered Holder a number of shares of Common Stock computed as follows

 

X	=	Y (A – B)
		A

 

2

 

  Where:

X	=	the number of shares of Common Stock to be issued to the Registered Holder.
Y	=	the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation).
A	=	the Current Market Price of one share of Common Stock (at the date of such calculation).  For purposes of this Section 1, “Current Market Price” means, the volume-weighted average, rounded to the nearest cent, of the closing sales price of shares of Common Stock on the NASDAQ Stock Market, as reported by The Wall Street Journal for the immediately preceding ten (10) trading days.
B	=	Exercise Price (as adjusted to the date of such calculation).

 

1.3           Fractional Shares. No fractional shares of Common Stock shall be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the Current Market Price of one share of Common Stock at the date of exercise.

 

1.4           Termination. Notwithstanding any other provision of this Warrant, the right to exercise this Warrant shall terminate upon the Expiration Date; provided, however, if this Warrant shall not have been exercised in full prior to a Change of Control of any kind described in clause (i) of the definition thereof, this Warrant shall be automatically exercised upon the closing of such Change of Control pursuant to the Net Exercise provisions of Section 1.2.

 

1.5           Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of the Registered Holder and upon surrender of this Warrant, at the time of delivery of the certificate or statement evidencing ownership in book-entry form for the Vested Warrant Shares purchased by the Registered Holder hereunder, deliver to the Registered Holder a new Warrant evidencing the rights of the Registered Holder to purchase the unpurchased Warrant Shares pursuant to this Warrant, which new Warrant shall in all other respects be identical to this Warrant.

 

1.6           Withholding. Solely to the extent required by applicable law and upon prior notice, Parent shall be entitled to deduct and withhold from any amounts or Warrant Shares to be delivered hereunder to a Registered Holder which constitute compensation, any amounts required to be deducted and withheld with respect to the making of such payment. Any amounts so deducted and withheld shall be timely paid over to the appropriate governmental authority and shall be treated for all purposes of this Warrant as having been paid to the Registered Holder in respect of which such deduction and withholding was made.

 

3

 

ARTICLE II

 

Warrant Office; Transfer

 

2.1           Warrant Office. The Company shall maintain an office for certain purposes specified herein (the “Warrant Office”), which office shall initially be the Company’s principal office, and may subsequently be such other office of the Company or of any transfer agent of the Common Stock in the continental United States of which written notice has previously been given to the Registered Holder. The Company shall maintain, at the Warrant Office, a register for the Warrant in which the Company shall record the name and address of the Registered Holder, as well as the name and address of each permitted assignee of the rights of the Registered Holder.

 

2.2           Ownership of Warrant. The Company may deem and treat the Registered Holder as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in this Article II.

 

2.3           Transfer of Warrants. The Company agrees to maintain at the Warrant Office books for the registration and transfer of this Warrant. This Warrant may be transferred by any Registered Holder (including, for the avoidance of doubt, any subsequent transferee) in whole or in part only in compliance with applicable law and only to his, her or its Permitted Transferees. The Company, from time to time, shall register the transfer in whole or in part of this Warrant in such books upon surrender of this Warrant at the Warrant Office, properly endorsed, together with a written assignment of this Warrant, substantially in the form of the Assignment attached as Exhibit B hereto. Upon any such transfer, a new Warrant shall be issued to the transferee, and the Company shall cancel the surrendered Warrant. The Registered Holder shall pay all taxes and all other expenses and charges payable in connection with the transfer of Warrants pursuant to this Section 2.3. For purposes of this Warrant, “Permitted Transferees” shall mean (a) in the case of an individual, the individual’s spouse, child, estate, personal representative, heir or successor, a trust for the benefit of any of the foregoing persons, or a partnership or limited liability company the partners or members of which consist solely of any of the foregoing persons and (b) in the case of any Registered Holder that is not a natural person (other than a trust as described in clause (a) of this sentence, for whom transfers may be made to the persons described in such clause (a)), to a person or entity that is an Affiliate (as defined in the Merger Agreement), direct partner, member or stockholder of such Registered Holder.

 

2.4           No Rights as Shareholder Until Exercise. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed to be a stockholder of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Registered Holder of this Warrant, as such, any rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action, receive notice of meetings, receive dividends or subscription rights, or otherwise. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to the Registered Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

 

4

 

2.5           Expenses of Delivery of Warrants. Except as provided in Section 2.3, the Company shall pay all reasonable expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of Warrants and related Warrant Shares hereunder.

 

2.6           Compliance with Securities Laws. The Registered Holder (and its transferees and assigns), by acceptance of this Warrant, covenants and agrees that such Registered Holder is acquiring the Warrants evidenced hereby, and, upon exercise hereof, the Warrant Shares, for its own account as an investment and not with a view to distribution thereof in violation of applicable law. Neither this Warrant nor the Warrant Shares issuable hereunder have been registered under the Securities Act or any state securities laws and no transfer of this Warrant or any Warrant Shares shall be permitted unless the Company has received notice of such transfer in the form of the assignment attached hereto as Exhibit B, accompanied, if requested by the Company, by an opinion of counsel reasonably satisfactory to the Company that an exemption from registration of such Warrant or Warrant Shares under the Securities Act is available for such transfer, except that no such opinion shall be required after a registration for resale of the Warrant Shares has become effective. Upon any exercise of the Warrants prior to effective registration for resale or except as in accordance with Rule 144 under the Securities Act, certificates representing the Warrant Shares shall bear a restrictive legend substantially identical to that set forth as follows:

 

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state (collectively, the “Acts”). Neither the shares nor any interest therein may be offered, sold, transferred, pledged, or otherwise disposed of in the absence of an effective registration statement with respect to the shares under all of the applicable Acts, or an opinion of counsel reasonably satisfactory to the Company to the effect that such registrations are not required.”

 

Any purported transfer of the Warrant or Warrant Shares not in compliance with the provisions of this section shall be null and void. Stop transfer instructions have been or will be imposed with respect to the Warrant Shares so as to restrict resale or other transfer thereof, subject to this Section 2.6.

 

ARTICLE III

 

Anti-Dilution Provisions

 

3.1           Adjustment of Exercise Price and Number of Warrant Shares. The number of shares of Common Stock for which this Warrant is exercisable and/or the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events as follows:

 

5

 

a)

Subdivision or Combination of Common Stock. If at any time on or after the date of this Warrant the Company shall (i) subdivide its outstanding shares of Common Stock into a greater number of shares, or (ii) shall pay a dividend with respect to its outstanding shares of Common Stock in shares of Common Stock or any other equity or equity-equivalent securities, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares receivable shall be proportionately increased so that Registered Holder after such date shall be entitled to receive, upon payment of the same aggregate Exercise Price as would have been payable before such date, the aggregate number of shares of Common Stock that, if this Warrant had been exercised immediately prior to such date, the Registered Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend or subdivision; and, conversely, if at any time on or after the date of this Warrant the outstanding number of shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of shares receivable upon exercise of the Warrant shall be proportionately decreased so that the Registered Holder after such date shall be entitled to receive, upon payment of the same aggregate Exercise Price as would have been payable before such date, the aggregate number of shares of Common Stock that, if this Warrant had been exercised immediately prior to such date, the Registered Holder would have owned upon such exercise and been entitled to receive by virtue of such combination. Any adjustment under this subsection (a) shall become effective when the applicable dividend, subdivision or combination becomes effective.

 

b)

Reclassification, Reorganization, Consolidation or Merger. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Warrant (other than as a result of a subdivision or combination pursuant to Section 3.1(a)), or in case of any reorganization, consolidation or merger of the Company with or into another entity, the Company, or such successor entity, as the case may be, shall execute a new Warrant, providing that the holder of this Warrant shall have the right to exercise such new Warrant and procure upon such exercise in lieu of each Warrant Share theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, reorganization, consolidation or merger by a holder of one share of Common Stock. Such new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3. The provisions of this subsection shall similarly apply to successive reclassifications, changes, reorganizations, consolidations and mergers.

 

c)

Pro Rata Distributions. Except to the extent that Sections 3.1(a) or 3.1(b) would otherwise apply, during such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Registered Holder shall be entitled to participate in such Distribution to the same extent that the Registered Holder would have participated therein if the Holder had held the Vested Warrant Shares immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution; provided, however, that any such Distributions made with respect to unvested Warrant Shares that are not Expired Warrant Shares shall be held by Parent and released to the Registered Holder promptly upon such time, if any, as such unvested Warrant Shares shall have become Vested Warrant Shares and shall have been exercised by the Registered Holder.

 

6

  

d)

Adjustment of Number of Shares. Upon each adjustment in the Exercise Price, the number of shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter.

 

e)

Rounding of Calculations; Minimum Adjustment. All calculations under this Section 3.1(a) and under Section 3.1(b) shall be made to the nearest cent. Any provision of this Section 3.1 to the contrary notwithstanding, no adjustment in the Exercise Price shall be made if the amount of such adjustment would be less than one percent, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate one percent or more.

 

3.2           Statement Regarding Adjustments. Whenever the Exercise Price shall be adjusted as provided in Section 3.1, and upon each change in the number of shares of the Common Stock issuable upon exercise of this Warrant, the Company shall forthwith file, at the office of any transfer agent for this Warrant and at the principal office of the Company, a statement showing in detail the facts requiring such adjustment and the Exercise Price and new number of shares issuable that shall be in effect after such adjustment, and the Company shall also cause a copy of such statement to be given to the Registered Holder. Each such statement shall be signed by the Company’s chief financial or accounting officer.

 

3.3           Costs. The Company shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery of the Warrant Shares or any certificate or other document evidencing such Warrant Shares upon exercise of this Warrant. The Company shall, upon request, reimburse the Registered Holder for any such documented taxes assessed against the Registered Holder.

 

7

  

3.4           Reservations of Shares. The Company shall reserve at all times so long as this Warrant remains outstanding, free from preemptive rights, out of its treasury Common Stock or its authorized but unissued shares of Common Stock, or both, solely for the purpose of effecting the exercise of this Warrant, sufficient shares of Common Stock to provide for the exercise hereof. The Company shall cause to be executed and issued the necessary certificate or statement evidencing ownership in book-entry form for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Registered Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

3.5           Valid Issuance. All shares of Common Stock which may be issued upon exercise of this Warrant will, upon issuance by the Company, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof attributable to any act or omission by the Company, and the Company shall take no action which will cause a contrary result (including without limitation, any action which would cause the Exercise Price to be less than the par value, if any, of the Common Stock).

 

ARTICLE IV

 

Vesting

 

4.1           Vesting. The number of shares of Common Stock purchasable upon the exercise of this Warrant shall be subject to vesting in accordance with the following provisions:

 

a)

Vested Warrant Shares. This Warrant shall vest and become exercisable for the number of shares of Common Stock (such vested shares, the “Vested Warrant Shares”) as follows:

 

(i)          one-sixth (_______) of the Warrant Shares shall vest at the end of calendar year 2016 if the Net Royalties equal or exceed $10 million for calendar year 2016;

 

(ii)         an additional one-third (_______) of the Warrant Shares shall vest at the end of calendar year 2016 if the Net Royalties equal or exceed $15 million for calendar year 2016;

 

(iii)        one-sixth (_______) of the Warrant Shares shall vest at the end of calendar year 2017 if the Net Royalties equal or exceed $10 million for calendar year 2017; and

 

(iv)         an additional one-third (_______) of the Warrant Shares shall vest at the end of calendar year 2017 if the Net Royalties equal or exceed $15 million for calendar year 2017.

 

8

 

b)

Net Royalties. For purposes of this Warrant, “Net Royalties” shall mean, with respect to any calendar year, the gross aggregate royalties and other similar revenue that are both (1) earned by the Company (or any of its subsidiaries) during the applicable calendar year and (2) subject to the Company’s compliance with Section 4.1(d) below, received within 90 days after the date that such royalties or similar payments have become due and payable in accordance with the terms of the applicable royalty, licensing or other agreement between the Company (or any of its subsidiaries) and the party obligated to make such payment, in each case in respect of the licensing of the Linens ‘n Things Brand, less the commissions and other amounts payable to Earthbound LLC (“Earthbound”) pursuant to that certain Services Agreement, dated May 8, 2014, by and between LNT Brands LLC (“LNT Brands”) and Earthbound or another broker during the applicable calendar year and related to the licensing of the Linens ‘n Things Brand. For purposes of this Warrant, “Linens ‘n Things Brand” shall mean the intellectual property portfolio of registered trademarks, domain names and other intellectual property rights that encompass the “Linens ‘n Things” brand, licensed, used and exploited by LNT Brands, and its affiliates, contractual counterparties and licensees.

 

c)

Adjustments. The number of Warrant Shares subject to vesting set forth in Section 4.1(a) above shall be adjusted to the extent and in the same manner as the aggregate number of shares of Common Stock is adjusted under the provisions of Section 3 hereof.

 

d)

Operating Covenants. The Company hereby covenants that, from the date hereof until the earlier to occur of (i) a Change of Control or (ii) the end of calendar year 2017, (A) the Company and its subsidiaries shall use their respective reasonable best efforts to collect such royalties and other payments from such counterparties prior to the expiration of the 90-day period set forth in Section 4.1(b)(2) and (B) neither the Company nor its subsidiaries shall take or omit to take any action with the purpose or intent of depriving the Registered Holder of the opportunity for the Warrant Shares to become Vested Warrant Shares absent an independent and good faith business rationale for its actions. Any payment received by the Company (or any of its subsidiaries) from or on behalf of a party owing royalties or similar payments with respect to the Linens ‘n Things Brand who otherwise also owes any other amount(s) to the Company (or any of its subsidiaries) shall be deemed for purposes hereunder to be a payment in discharge of such party’s obligation relating to the Linens ‘n Things Brand to the extent such obligations are then due and payable.

 

9

 

4.2           Determination of Vesting. On or before April 30 of the year following the applicable calendar year, the Company shall deliver to the Stockholder Representative (as defined in the Merger Agreement) a statement setting forth in reasonable detail the amount of Net Royalties for such calendar year and the number of Vested Warrant Shares (the “Net Royalties Statement”); provided, however, that the Company shall, upon written notice from the Stockholder Representative, postpone the delivery of the Net Royalties Statement and the calculations thereunder until June 30 of such year following the applicable calendar year if, in the Stockholder Representative’s good faith judgment, any royalties or other similar revenue due and payable as of April 30 with respect to the applicable calendar year may be collected by June 30. Following such time, the Company shall provide the Stockholder Representative and its representatives reasonable access to the records, properties, personnel and (subject to the execution of customary work paper access letters if requested) auditors of the Company and its subsidiaries relating to the preparation of the Net Royalties Statement and shall cause the personnel of the Company and its subsidiaries to reasonably cooperate with the Stockholder Representative in connection with its review of the Net Royalties Statement. If the Stockholder Representative disagrees with the calculation of Net Royalties set forth in the Net Royalties Statement, the Stockholder Representative may, within 30 days after receipt of the Net Royalties Statement, deliver a Notice of Disagreement (as defined in the Merger Agreement) to the Company, in which event, the Stockholder Representative and the Company shall resolve such disagreement using the procedures set forth in Section 2.3(d) of the Merger Agreement. Following such resolution as provided in the preceding sentence, the Net Royalties so determined shall be deemed the “Net Royalties” for the applicable calendar year for all purposes under this Warrant. For the avoidance of doubt, the Registered Holder shall have no right or entitlement in any circumstances to challenge on its own behalf (unless such Registered Holder is the Stockholder Representative at such time) any determination of the Net Royalties hereunder.

 

4.3           Expired Warrant Shares. To the extent any Warrant Shares subject to this Warrant do not vest in accordance with the terms of Section 4(a)(i), (ii), (iii) and/or (iv) above, such Warrant Shares shall be deemed “Expired Warrant Shares” and shall automatically expire, be canceled and shall not be exercisable under any circumstances.

 

4.4           Change of Control. In each case, with respect to unvested Warrant Shares that are not Expired Warrant Shares:

 

a)

in the event of the consummation of a Change of Control of any kind described in clause (i) of the definition thereof before April 30, 2017, all Warrant Shares that are not already Vested Warrant Shares and are not Expired Warrant Shares shall immediately vest and be deemed Vested Warrant Shares upon such Change of Control; provided for the avoidance of doubt, in the event a Change of Control described in clause (i) of the definition thereof is consummated after April 30, 2017, the Warrant Shares shall vest, if applicable, in accordance with the terms of Section 4.1; or

 

b)

in the event of the consummation of a Change of Control of any kind described in clause (ii) of the definition thereof before the end of calendar year 2017 (provided, for the avoidance of doubt, in the event a Change of Control described in clause (ii) of the definition thereof is consummated after the end of calendar year 2017, the Warrant Shares shall vest, if applicable, in accordance with Section 4.1), the Warrant Shares that are not already Vested Warrant Shares and are not Expired Warrant Shares shall vest as follows:

 

10

  

(i)          if the value of the aggregate consideration in such Change of Control in respect of the Linens ‘n Things Brand as determined in good faith by the Company’s board of directors is equal to or in excess of $50,000,000, all such Warrant Shares shall immediately vest and be deemed Vested Warrant Shares, and the holder of this Warrant shall be entitled to exercise this Warrant with respect to all such Vested Warrant Shares at any time following consummation of such Change of Control and prior to the Expiration Date; and

 

(ii)         if the value of the aggregate consideration in such Change of Control in respect of the Linens ‘n Things Brand as determined in good faith by the Company’s board of directors is less than $50,000,000, such Warrant Shares shall vest proportionally based on the value of such consideration between $0 and $50,000,000 (e.g., if the consideration is $40,000,000, 80% of such Warrant Shares shall vest) and be deemed Vested Warrant Shares, and the holder of this Warrant shall be entitled to exercise this Warrant with respect to all such Vested Warrant Shares at any time following consummation of such Change of Control and prior to the Expiration Date.

 

c)

A “Change of Control” shall mean either (i) the consummation of any transaction or series of transactions, including, without limitation, the sale, transfer or disposition of all or substantially all of the Company’s assets or the sale of capital stock of the Company or the reorganization or merger of the Company with or into, or consolidation with, any other corporation, whereby the holders of the Company’s voting securities prior to the Transaction do not hold more than 50% of the voting securities of the surviving entity following consummation of the Transaction or (ii) the sale, assignment, conveyance or other transfer to a third party of all or substantially all of the Company’s (and its subsidiaries’) rights and interests in the Linens ‘n Things Brand. In the event of (A) a sale, assignment, conveyance or other transfer to a third party of less than all or substantially all of the Company’s (and its subsidiaries’) rights and interests in the Linens ‘n Things Brand or (B) any other event that would make it impossible or substantially impractical to calculate Net Royalties as currently defined, then the Company and the Stockholder Representative shall mutually agree upon an equitable methodology for calculating the applicable target for such period. Any disagreement regarding the foregoing sentence shall be resolved pursuant to the procedures set forth in Section 2.3(d) of the Merger Agreement.

 

4.5           Notice of Vesting. Within 30 days after the final determination of Net Royalties pursuant to Section 4.2 for each of calendar year 2016 and 2017, the Company will prepare and make available at the Warrant Office for the Registered Holder a computation of the number of Vested Warrant Shares.

 

11

  

ARTICLE V

 

Miscellaneous

  

5.1           Entire Agreement. This Warrant contains the entire agreement between the Registered Holder and the Company with respect to the Warrant Shares that it can purchase upon exercise hereof and the related transactions and supersedes all prior arrangements or understanding with respect thereto.

 

5.2           Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to its conflict of law provisions.

 

5.3           Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits in any suit, action or proceeding arising out of or related to this Agreement or any of the transactions contemplated hereby to the jurisdiction of the courts of the State of Delaware, the courts of the United States of America for the District of Delaware (each, a “Delaware Court”) and any appellate courts from any thereof and irrevocably waives any immunity from the jurisdiction of such courts and any claim of improper venue, forum non conveniens or any similar objection which it might otherwise be entitled to raise in any such suit, action or proceeding. Each of the parties hereto irrevocably agrees that service of process upon such party by first-class mail to the address of such party pursuant to Section 5.7 shall be deemed, in every respect, effective service of process upon such party. The parties further agree that any suit, action or proceeding instituted by a party to this Warrant against another party to this Warrant shall be initially instituted exclusively in a Delaware Court, and each of the parties hereby voluntarily and irrevocably waives all its rights, whether granted by statutory, constitutional or common law, to seek a trial before a jury with respect to such claim.

 

5.4           Waiver and Amendment. Any term or provision of this Warrant may be waived at any time by the party which is entitled to the benefits thereof, and any term or provision of this Warrant may be amended or supplemented at any time by the written consent of the parties (it being agreed that an amendment to or waiver under any of the provisions of Article III of this Warrant shall not be considered an amendment of the number of Warrant Shares or the Exercise Price). No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.

 

5.5           Illegality. In the event that any one or more of the provisions contained in this Warrant shall be determined to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in any other respect and the remaining provisions of this Warrant shall not, at the election of the party for whom the benefit of the provision exists, be in any way impaired.

 

5.6           Copy of Warrant. A copy of this Warrant shall be filed among the records of the Company.

 

5.7           Notice. Any notice or other document required or permitted to be given or delivered to the Registered Holder shall be delivered at, or sent by certified or registered mail to such Registered Holder at, the last address shown on the books of the Company maintained at the Warrant Office for the registration of this Warrant or at any more recent address of which the Registered Holder shall have notified the Company in writing. Any notice or other document required or permitted to be given or delivered to the Company, other than such notice or documents required to be delivered to the Warrant Office, shall be delivered at, or sent by certified or registered mail to, the principal office of the Company, or any other address within the continental United States of America as shall have been designated in writing by the Company delivered to the Registered Holder.

 

12

  

5.8           Limitation of Liability; Not Stockholders. Until the exercise of this Warrant, the Registered Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company, including, without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or attend meetings of stockholders or any other proceedings of the Company. Until the exercise of this Warrant, no provision hereof, and no mere enumeration herein of the rights or privileges of the Registered Holder, shall give rise to any liability of such Registered Holder for the purchase price of any shares of Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

5.9         Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of evidence reasonably satisfactory to the Company (provided, that an affidavit of the Registered Holder shall be deemed reasonably satisfactory evidence) of the loss, theft, mutilation or destruction of this Warrant or any certificate relating to the Warrant Shares, and, in the case of any such loss, theft or destruction, upon delivery of indemnity or security in such form and amount as shall be reasonably satisfactory to the Company, or, in the event of such mutilation upon surrender and cancellation of this Warrant, the Company will make and deliver a new Warrant of like tenor, in lieu of such lost, stolen, destroyed or mutilated Warrant; provided, however, that the original Registered Holder of this Warrant shall not be required to provide any bond of indemnity and may in lieu thereof provide their agreement of indemnity. Any Warrant issued under the provisions of this Section 5.9 in lieu of any Warrant alleged to be lost, destroyed or stolen, or in lieu of any mutilated Warrant, shall constitute an original contractual obligation on the part of the Company. This Warrant shall be promptly canceled by the Company upon the surrender hereof in connection with any exchange or replacement. The Registered Holder of this Warrant shall pay all taxes (including securities transfer taxes) and all other reasonable expenses and charges payable in connection with the preparation, execution and delivery of replacement Warrant(s) pursuant to this Section5.9.

 

5.10        Headings. The Article and Section and other headings herein are for convenience only and are not a part of this Warrant and shall not affect the interpretation thereof.

 

5.11         Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Registered Holder. The provisions of this Warrant are intended to be for the benefit of all Registered Holders from time to time of this Warrant and shall be enforceable by any such Registered Holder.

 

5.12         Remedies. The parties hereto, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of their respective rights under this Warrant. Each party agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate. The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

13

 

5.13         Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

 

5.14         Further Assurances. The Company and the Registered Holder will take such actions as may be reasonably required or desirable to carry out the provisions of this Warrant.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

14

  

IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

 

Dated: August __, 2014

 

	SEQUENTIAL BRANDS GROUP, INC.
	By:
	Name:
	Title:

 

[Signature page to Warrant]

 

 

Accepted and Agreed,

 

[HOLDER]

 

Name of Holder
Signature
Street Address
City	State

 

[Signature page to Warrant]

 

  

EXHIBIT A

 

PURCHASE FORM

 

TO: Sequential Brands Group, Inc. (the “Company”)

 

1.          The undersigned hereby elects to purchase ___________ shares of the Common Stock of the Company pursuant to the terms of the attached Warrant by:

 

¨

A cash payment or cancellation of indebtedness, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any.

¨

The net exercise provisions of the attached warrant.

 

2.          Please issue a certificate(s) or statement evidencing ownership in book-entry form representing said shares of Common Stock in the name of the undersigned.

 

	Signature of Holder
	By:
	Name:
	Title:

 

  

EXHIBIT B

 

ASSIGNMENT

 

For value received, _____________________________, hereby sells, assigns and transfers unto __________________________ [all of][__________ shares of] the within Warrant, together with all right, title and interest therein and does hereby irrevocably constitute and appoint ______________________, attorney, to transfer said Warrant on the books of the Company, with full power of substitution.

 

 

Dated: ___________________, 201_

 

 

Exhibit 99.1

 

 

Sequential Brands Group Announces Closing of Galaxy Brand Holdings Acquisition

 

Transformational Acquisition Increases Sequential’s Annual Global Retail Sales from Approximately $1 Billion to Nearly $2 Billion

 

·

2014 fiscal year projected revenue increased from range of $28 to $30 million to range of $36 to $40 million

 

·

2014 fiscal year projected adjusted EBITDA margin increased from 55% to 60%

 

·

Projecting forward looking twelve month revenue run rate of $56 - $60 million

 

·

Projecting forward looking twelve month adjusted EBITDA run rate of $36 - $40 million

 

·

Two cornerstone licensees for Avia and AND1 renewed and extended before Closing

 

·

Total future contractual guaranteed royalty minimums in excess of $200 million from all twelve brands in the Company’s portfolio

 

NEW YORK, August 18, 2014 (Globe Newswire) - Sequential Brands Group, Inc. (Nasdaq: SQBG) (“Sequential” or the “Company”) announced today that it has closed on the acquisition of Galaxy Brand Holdings, Inc. (“Galaxy”), a portfolio company of The Carlyle Group, for a purchase price of approximately $100 million in cash, 13.75 million shares of common stock of the Company, and certain performance based warrants.

 

In the transaction, Sequential has acquired four well-known consumer brands including fitness brand Avia® and basketball brand AND1®.

 

Yehuda Shmidman, Chief Executive Officer of Sequential commented, “In just over two years, Sequential Brands Group has become one of the largest brand management and licensing organizations in the industry.  In addition to growing the brand portfolio from under $100 million in retail sales to nearly $2 billion globally, we have also focused on building a best-in-class platform for future growth.  All told, we believe we are incredibly well positioned to achieve our three-year goal of approximately $3.5 billion in retail sales equating to $100 million in annual revenue and $70 million in annual adjusted EBITDA.”

 

 

In connection with the transaction, The Carlyle Group has become a significant shareholder in Sequential, and Rodney Cohen, Carlyle Managing Director and Co-Head of Carlyle Equity Opportunity Fund, has joined Sequential's Board of Directors.

 

Financial Update:

 

For the Fiscal Year 2014, the Company is increasing its projected revenue from $28 - $30 million to $36 - $40 million and increasing its projected adjusted EBITDA margin from 55% to 60%.

 

On a combined basis, the Company is projecting forward 12-month royalty revenues of $56 - $60 million and $36 - $40 million of adjusted EBITDA from the total brand portfolio of 12 brands.

 

Financing for the Galaxy acquisition was provided by Bank of America (“BofA”) and GSO Capital Partners LP (“GSO”), an affiliate of Blackstone Group. The Company amended its existing debt facility with BofA and entered into a new second lien facility with GSO, totaling approximately $180 million in the aggregate. Additionally, following the issuance of the share consideration for the Galaxy transaction, the Company’s diluted share count is now approximately 40 million.

 

The Company has more than $200 million of aggregate contractual guaranteed minimum royalties under its existing licenses as of August 15, 2014, including minimums under two new 5 year renewals signed prior to the closing of the acquisition with Galaxy’s two largest licensees, ES Originals (for footwear) and High Life (for apparel).

 

Similar to the Company's 2013 results, the Company expects revenue for 2014 to be weighted to the fourth quarter due to seasonality in the businesses of many of the Company's licensees and the timing of the close of the Galaxy transaction.

 

About Sequential Brands Group, Inc.

Sequential Brands Group, Inc. (Nasdaq: SQBG) owns, promotes, markets, and licenses a portfolio of consumer brands that presently includes Avia®, AND1®, Ellen Tracy®, William Rast®, Revo®, Caribbean Joe®, Heelys®, DVS®, The Franklin Mint®, Nevados®, People's Liberation® and Linens 'N Things®. Sequential seeks to ensure that its brands continue to thrive and grow by employing strong brand management, design and marketing teams. Sequential has licensed and intends to license its brands in a variety of consumer categories to retailers, wholesalers and distributors in the United States and in certain international territories. For more information, please visit Sequential's corporate website at: www.sequentialbrandsgroup.com. To inquire about licensing opportunities, please email: [e-mail]. 

 

Non-GAAP Financial Measures:

This press release contains certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to their nearest comparable GAAP measure is included in the tables following this press release. As described more fully below, we believe the use of non-GAAP measures in addition to GAAP measures is an additional useful method of evaluating our financial condition and results of operations. The non-GAAP financial measures disclosed should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the expected results calculated in accordance with GAAP and reconciliations to those expected results should be carefully evaluated. The non-GAAP financial measures we use may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

 

 

Forward-Looking Statements

Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements ("forward-looking statements") within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements including statements as to our expected revenues, adjusted EBITDA, run rate and royalties, are made as of the date hereof and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Our actual results could differ materially from those stated or implied in forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions and other statements that are not historical in nature, including those that include the words "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," “forecasts,” “projects,” “aims,” “targets,” "may," "will," "should," "can," the negatives thereof, variations thereon and similar expressions. Such forward-looking statements reflect the Company's current views with respect to future events, based on what the Company believes are reasonable assumptions. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in the reports that the Company has filed with the Securities and Exchange Commission (the “SEC”); general economic, market, or business conditions; changes in the Company’s competitive position or competitive actions by other companies; the Company’s ability to maintain strong relationships with its licensees and retail partners; the Company’s ability to retain key personnel; the Company’s ability to achieve and/or manage growth and to meet target metrics associated with such growth; the Company’s ability to successfully attract new brands; the Company’s ability to identify suitable targets for acquisitions; the Company’s ability to obtain financing for the acquisitions on commercially reasonable terms; the Company’s substantial level of indebtedness, including the possibility that such indebtedness and related restrictive covenants may adversely affect the Company’s future cash flows, results of operations and financial condition and decrease its operating flexibility;  the Company’s ability to integrate successfully the new acquisitions into its ongoing business; and the ability to achieve the anticipated results of these and other potential acquisitions; the Company’s largest stockholders control a significant percentage of the Company’s common stock and appointed two members to the Company’s board of directors, which may enable them to exert influence over corporate transactions and matters affecting the rights of the Company’s stockholders; the Company’s ability to comply with government regulations; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond the Company’s control. Refer to section entitled "Risk Factors" set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 for a discussion of important risks, uncertainties and other factors that may affect our business, results of operations and financial condition. The Company's stockholders are urged to consider such risks, uncertainties and factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. The Company is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

Non-GAAP Financial Measure Reconciliation

(in thousands)

 

		(Unaudited)
		For the year ending December 31, 2014
		High				Low
GAAP net income		$	2,660			$	1,160
Adjustments:
interest expense excluding write off of deferred financing costs			8,279				8,279
Depreciation and amortization			1,219				1,219
Taxes			1,776				876
Estimated deal costs and other (a)			6,041				6,041
Brand Matter LLC purchase price adjustment (b)			550				550
Write-off of deferred financing costs (c)			1,615				1,615
Non-cash mark-to-market restricted stock expense (d)			361				361
Non-cash compensation (e)			1,500				1,500
			21,340				20,440
Adjusted EBITDA (1)		$	24,000			$	21,600

 

 

		(Unaudited)
		For the year ending December 31, 2014
		High				Low
GAAP net income		$	2,660			$	1,160
Adjustments:
Estimated deal costs and other (a)			6,041				6,041
Brand Matter LLC purchase price adjustment (b)			550				550
Write-off of deferred financing costs (c)			1,615				1,615
Non-cash mark-to-market restricted stock expense (d)			361				361
Tax effect of above items			(2,955	)			(2,955	)
Total non-GAAP adjustments			5,611				5,611
Non-GAAP net income (2)		$	8,271			$	6,771

 

		(Unaudited)
		For the year ending December 31, 2014
DILUTED EPS:		High				Low
GAAP earnings per share		$	0.08			$	0.04
Adjustments:
Estimated deal costs and other (a)		$	0.19			$	0.19
Brand Matter LLC purchase price adjustment (b)		$	0.02			$	0.02
Write-off of deferred financing costs (c)		$	0.05			$	0.05
Non-cash mark-to-market restricted stock expense (d)		$	0.01			$	0.01
Tax effect of above items		$	(0.09	)		$	(0.09	)
Total non-GAAP adjustments		$	0.18			$	0.18
Non-GAAP earnings per share (2)		$	0.26			$	0.21

 

(1)	Adjusted EBITDA is defined as net income, excluding interest income or expense, income taxes, depreciation and amortization, and excluding discontinued operations, deal costs, non-cash compensation and Brand Matter LLC purchase price adjustment. Management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the Company's financial condition and results of operations.  The Company believes Adjusted EBITDA provides additional information for determining its ability to meet future debt service requirements and capital expenditures.
(2)	Non-GAAP net income and non-GAAP earnings per share are non-GAAP financial measures which represent net income excluding discontinued operations, deal costs, non-cash interest and taxes, mark-to-market adjustments to non-cash stock-based compensation provided to consultants and Brand Matter LLC purchase price adjustment.  Management uses this information to measure performance over time on a consistent basis and to identify business trends relating to the Company's financial condition and results of operations.  Management believes that these non-GAAP measures provide investors with information regarding the underlying performance of the Company's core business operating results on a cash basis.  Amounts may not foot due to rounding.
(a)	Represents deal and other one-time costs related to the Company's acquisition transactions primarily related to legal, advisory and accounting that are not representative of the Company's day-to-day licensing business.
(b)	Represents the estimated settlement and legal costs related to a pre-acquisition litigation matter in which Brand Matter LLC was named as an affiliate.
(c)	Represents the write-off of deferred financing costs and debt discount related to the Company's previous second-lien facility.
(d)	Represents the mark-to-market adjustments to non-cash stock-based compensation provided to consultants.
(e)	Excludes future mark-to-market restricted stock expense adjustments and earn-out of employee performance stock based awards.

 

 

Non-GAAP Financial Measure Reconciliation

(in thousands)

 

		(Unaudited)
		Projected Next Twelve Months Post Closing (a)
		High				Low
GAAP net income		$	10,140			$	7,640
Adjustments:
Cash interest expense, net			11,498				11,498
Non-cash interest expense			872				872
Depreciation and amortization			1,700				1,700
Taxes			6,084				4,584
Estimated deal costs and other (b)			6,041				6,041
Brand Matter LLC purchase price adjustment (c)			550				550
Write-off of deferred financing costs (d)			1,615				1,615
Non-cash compensation (e)			1,500				1,500
			29,859				28,359
Adjusted EBITDA (1)		$	40,000			$	36,000

 

		(Unaudited)
		Projected Next Twelve Months Post Closing (a)
		High				Low
GAAP net income		$	10,140			$	7,640
Adjustments:
Estimated deal costs and other (b)			6,041				6,041
Brand Matter LLC purchase price adjustment (c)			550				550
Write-off of deferred financing costs (d)			1,615				1,615
Tax effect of above items			(3,077	)			(3,077	)
Total non-GAAP adjustments			5,128				5,128
Non-GAAP net income (2)		$	15,269			$	12,769

 

		(Unaudited)
		Projected Next Twelve Months Post Closing (a)
DILUTED EPS:		High				Low
GAAP earnings per share		$	0.25			$	0.19
Adjustments:
Estimated deal costs and other (b)		$	0.15			$	0.15
Brand Matter LLC purchase price adjustment (c)		$	0.01			$	0.01
Write-off of deferred financing costs (d)		$	0.04			$	0.04
Tax effect of above items		$	(0.08	)		$	(0.08	)
Total non-GAAP adjustments		$	0.13			$	0.13
Non-GAAP earnings per share (2)		$	0.38			$	0.32

 

(1)	Adjusted EBITDA is defined as net income, excluding interest income or expense, income taxes, depreciation and amortization, and excluding estimated deal costs and other, write-off of deferred financing costs and non-cash compensation. Management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the Company's financial condition and results of operations.  The Company believes Adjusted EBITDA provides additional information for determining its ability to meet future debt service requirements and capital expenditures.
(2)	Non-GAAP net income and non-GAAP net income per share are non-GAAP financial measures which represent net income excluding estimated deal costs and other and write-off of deferred financing costs.  Management uses this information to measure performance over time on a consistent basis and to identify business trends relating to the Company's financial condition and results of operations.  Management believes that these non-GAAP measures provide investors with information regarding the underlying performance of the Company's core business operating results on a cash basis.  Amounts may not foot due to rounding.
(a)	Projected next twelve months for after the transaction closes.
(b)	Represents deal and other one-time costs related to the Company's acquisition transactions primarily related to legal, advisory and accounting that are not representative of the Company's day-to-day licensing business.
(c)	Represents the estimated settlement and legal costs related to a pre-acquisition litigation matter in which Brand Matter LLC was named as an affiliate.
(d)	Represents the write-off of deferred financing costs and debt discount related to the Company's previous second-lien facility.
(e)	Excludes future mark-to-market restricted stock expense adjustments and earn-out of employee performance stock based awards.

  

 

CONTACT:

 

Media Inquiries:

Jaime Cassavechia

212-518-4771 x108

[e-mail]

 

Investor Relations Inquiries:

Gary Klein, Chief Financial Officer

646-564-2577

[e-mail]

 

Rachel Schacter/John Rouleau

203-682-8200

[e-mail]