UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2015
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________________ to ______________________.
Commission File Number 0-16075
SEQUENTIAL BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 86-0449546 | |
(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
organization) |
5 Bryant Park, 30
th
Floor
New York, New York 10018
(Address of principal executive offices) (Zip Code)
(646) 564-2577
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer x
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 1, 2015, the registrant had 39,702,120 shares of common stock, par value $.001 per share, outstanding.
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page | ||
PART I FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | 4 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28 |
Item 4. | Controls and Procedures | 28 |
PART II OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 28 |
Item 1A. | Risk Factors | 28 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 29 |
Item 3. | Defaults Upon Senior Securities | 29 |
Item 4. | Mine Safety Disclosures | 29 |
Item 5. | Other Information | 29 |
Item 6. | Exhibits | 30 |
2 |
Forward-Looking Statements
In addition to historical information, this quarterly report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may appear throughout this Quarterly Report, including, without limitation, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to the risks identified in our Annual Report on Form 10-K for the year ended December 31, 2014.
Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statement. We are not under any obligation, and we expressly disclaim any obligation, to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to such or other forward-looking statements.
Where You Can Find Other Information
Our corporate website address is www.sequentialbrandsgroup.com . The information contained on our website is not part of this Quarterly Report. We file our annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC”). These reports, any amendments thereto and other information are made available for download, free of charge, on our corporate website as soon as reasonably practicable after such reports and other information are filed with or furnished to the SEC. The public may read and copy any materials filed with the SEC at the SEC’s public reference room located at 100 F Street, NE, Washington, D.C. 20549. The public may also obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website that contains annual, quarterly and current reports, proxy and registration statements and other information regarding issuers like us, that file electronically with the SEC, which is available at www.sec.gov.
3 |
PART I - FINANCIAL INFORMATION
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
(Unaudited) | (Note 2) | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | 23,029 | $ | 22,521 | ||||
Accounts receivable, net | 14,621 | 15,720 | ||||||
Prepaid expenses and other current assets | 5,946 | 5,681 | ||||||
Current assets held for disposition from discontinued operations of wholesale business | 146 | 162 | ||||||
Total current assets | 43,742 | 44,084 | ||||||
Property and equipment, net | 2,340 | 2,255 | ||||||
Intangible assets, net | 302,897 | 303,039 | ||||||
Goodwill | 169,786 | 169,786 | ||||||
Other assets | 7,496 | 7,199 | ||||||
Total assets | $ | 526,261 | $ | 526,363 | ||||
Liabilities and Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 6,079 | $ | 6,691 | ||||
Deferred license revenue | 109 | 394 | ||||||
Long-term debt, current portion | 12,000 | 13,253 | ||||||
Current liabilities held for disposition from discontinued operations of wholesale business | 144 | 236 | ||||||
Total current liabilities | 18,332 | 20,574 | ||||||
Long-Term Liabilities: | ||||||||
Long-term debt | 160,500 | 162,247 | ||||||
Deferred tax liability | 77,862 | 77,056 | ||||||
Other long-term liabilities | 568 | 886 | ||||||
Long-term liabilities held for disposition from discontinued operations of wholesale business | 700 | 700 | ||||||
Total long-term liabilities | 239,630 | 240,889 | ||||||
Total liabilities | 257,962 | 261,463 | ||||||
Commitments and Contingencies | ||||||||
Equity: | ||||||||
Preferred stock Series A, $0.001 par value, 19,400 shares authorized; none issued and outstanding at March 31, 2015 and December 31, 2014 | - | - | ||||||
Common stock, $0.001 par value, 150,000,000 shares authorized; 39,919,049 and 39,694,117 shares issued at March 31, 2015 and December 31, 2014, respectively, 39,571,345 and 39,300,580 shares outstanding at March 31, 2015 and December 31, 2014, respectively | 40 | 39 | ||||||
Additional paid-in capital | 298,321 | 295,719 | ||||||
Accumulated other comprehensive loss | (142 | ) | (36 | ) | ||||
Accumulated deficit | (34,515 | ) | (35,959 | ) | ||||
Treasury stock, at cost; 267,200 and 197,784 shares at March 31, 2015 and December 31, 2014, respectively | (2,303 | ) | (1,643 | ) | ||||
Total Sequential Brands Group, Inc. and Subsidiaries stockholders’ equity | 261,401 | 258,120 | ||||||
Noncontrolling interest | 6,898 | 6,780 | ||||||
Total equity | 268,299 | 264,900 | ||||||
Total liabilities and equity | $ | 526,261 | $ | 526,363 |
See Notes to Condensed Consolidated Financial Statements.
4 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Net revenue | $ | 13,617 | $ | 6,262 | ||||
Operating expenses | 8,676 | 3,750 | ||||||
Income from operations | 4,941 | 2,512 | ||||||
Other income | 700 | 2 | ||||||
Interest expense | 3,160 | 1,270 | ||||||
Income before income taxes | 2,481 | 1,244 | ||||||
Provision for income taxes | 919 | 397 | ||||||
Consolidated net income | 1,562 | 847 | ||||||
Net income attributable to noncontrolling interest | (118 | ) | (105 | ) | ||||
Net income attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | 1,444 | $ | 742 | ||||
Earnings per share attributable to Sequential Brands Group, Inc. and Subsidiaries: | ||||||||
Basic | $ | 0.04 | $ | 0.03 | ||||
Diluted | $ | 0.04 | $ | 0.03 | ||||
Weighted-average common shares outstanding: | ||||||||
Basic | 39,039,993 | 24,700,717 | ||||||
Diluted | 41,187,458 | 26,227,439 |
See Notes to Condensed Consolidated Financial Statements.
5 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Consolidated net income | $ | 1,562 | $ | 847 | ||||
Other comprehensive loss: | ||||||||
Unrealized loss on interest rate hedging transactions | (106 | ) | (69 | ) | ||||
Other comprehensive loss, net of tax | (106 | ) | (69 | ) | ||||
Comprehensive income | 1,456 | 778 | ||||||
Comprehensive income attributable to noncontrolling interests | (118 | ) | (105 | ) | ||||
Comprehensive income attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | 1,338 | $ | 673 |
See Notes to Condensed Consolidated Financial Statements.
6 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, except share data)
Total Sequential | ||||||||||||||||||||||||||||||||||||||||||||||||
Brands Group, | ||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Inc. and | |||||||||||||||||||||||||||||||||||||||||||||||
Additional Paid- | Other | Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||
Common Stock |
Preferred Stock |
in | Comprehensive | Accumulated |
Treasury Stock |
Stockholders' | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Shares | Amount | Equity | Interest | Equity | |||||||||||||||||||||||||||||||||||||
Balance at January 1, 2015 | 39,300,580 | $ | 39 | - | $ | - | $ | 295,719 | $ | (36 | ) | $ | (35,959 | ) | 197,784 | $ | (1,643 | ) | $ | 258,120 | $ | 6,780 | $ | 264,900 | ||||||||||||||||||||||||
Issuance of common stock in connection with stock option exercises | 4,432 | - | - | - | 13 | - | - | - | - | 13 | - | 13 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | 256,333 | - | - | - | 2,531 | - | - | - | - | 2,531 | - | 2,531 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with warrant exercise | 10,000 | - | - | - | 58 | - | - | - | - | 58 | - | 58 | ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate hedging transactions | - | - | - | - | - | (106 | ) | - | - | - | (106 | ) | - | (106 | ) | |||||||||||||||||||||||||||||||||
Repurchase of common stock | - | - | - | - | - | - | - | 69,416 | (660 | ) | (660 | ) | - | (660 | ) | |||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interest | - | - | - | - | - | - | - | - | - | - | 118 | 118 | ||||||||||||||||||||||||||||||||||||
Net income attributable to common stockholders | - | - | - | - | - | - | 1,444 | - | - | 1,444 | - | 1,444 | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2015 | 39,571,345 | $ | 40 | - | $ | - | $ | 298,321 | $ | (142 | ) | $ | (34,515 | ) | 267,200 | $ | (2,303 | ) | $ | 261,401 | $ | 6,898 | $ | 268,299 |
See Notes to Condensed Consolidated Financial Statements.
7 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Consolidated net income | $ | 1,562 | $ | 847 | ||||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | ||||||||
Provision for bad debts | 63 | - | ||||||
Depreciation and amortization | 377 | 205 | ||||||
Stock-based compensation | 2,531 | 464 | ||||||
Amortization of debt discount and deferred financing costs | 303 | 167 | ||||||
Gain on sale of trademark | (700 | ) | - | |||||
Deferred income taxes | 806 | 397 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | 776 | 82 | ||||||
Prepaid expenses and other assets | (45 | ) | (5 | ) | ||||
Accounts payable and accrued expenses | (612 | ) | (1,441 | ) | ||||
Deferred license revenue | (285 | ) | 312 | |||||
Other liabilities | (424 | ) | (98 | ) | ||||
CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS | 4,352 | 930 | ||||||
CASH USED IN OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS | (75 | ) | (522 | ) | ||||
CASH PROVIDED BY OPERATING ACTIVITIES | 4,277 | 408 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of intangible assets | (113 | ) | (191 | ) | ||||
Acquisition of property and equipment | (207 | ) | (485 | ) | ||||
Proceeds from sale of trademark | 140 | - | ||||||
CASH USED IN INVESTING ACTIVITIES | (180 | ) | (676 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from options exercised | 13 | 72 | ||||||
Proceeds from warrants exercised | 58 | - | ||||||
Repayment of note payable | (3,000 | ) | (2,000 | ) | ||||
Deferred financing costs | - | (23 | ) | |||||
Repurchase of common stock | (660 | ) | - | |||||
CASH USED IN FINANCING ACTIVITIES | (3,589 | ) | (1,951 | ) | ||||
NET INCREASE (DECREASE) IN CASH | 508 | (2,219 | ) | |||||
CASH — Beginning of period | 22,521 | 25,125 | ||||||
CASH — End of period | $ | 23,029 | $ | 22,906 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the periods for: | ||||||||
Interest | $ | 2,932 | $ | 1,073 | ||||
Taxes | $ | 542 | $ | 41 |
See Notes to Condensed Consolidated Financial Statements.
8 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
1. | Organization and Nature of Operations |
Overview
Sequential Brands Group, Inc. (the “Company”), through its wholly-owned and majority-owned subsidiaries, owns a portfolio of consumer brands in the fashion, active and lifestyle categories. The Company promotes, markets and licenses these brands and intends to pursue acquisitions of additional brands or rights to brands. The Company has licensed and intends to license its brands in a variety of categories to retailers, wholesalers and distributors in the United States and in certain international territories. In its license agreements, the Company’s licensing partners are responsible for designing, manufacturing and distributing the Company’s licensed products. As of March 31, 2015, the Company had more than 75 licensees, almost all of which are wholesale licensees. In a wholesale license, a wholesale supplier is granted rights (typically on an exclusive basis) to a single or small group of related product categories for sale to multiple accounts within an approved channel of distribution and territory. Also, as part of the Company’s business strategy, the Company has previously entered into (and expects in the future to enter into) direct-to-retail licenses. In a direct-to-retail license, a single retailer is granted the right (typically on an exclusive basis) to sell branded products in a broad range of product categories through its brick and mortar stores and e-commerce sites.
2. | Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations or cash flows. It is the Company’s opinion, however, that the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 16, 2015, which contains the audited consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the years ended December 31, 2014, 2013 and 2012. The financial information as of December 31, 2014 is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The interim results for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any future interim periods.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.
9 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Discontinued Operations
The Company accounted for the decisions to close down its wholesale operations as discontinued operations in accordance with the guidance provided in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360, Accounting for Impairment or Disposal of Long-Lived Assets , which requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations. In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the statements of operations. Assets and liabilities are also reclassified into separate line items on the related balance sheets for the periods presented. The statements of cash flows for the periods presented are also reclassified to reflect the results of discontinued operations as separate line items.
In April 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-08, “Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which provides a narrower definition of discontinued operations than under existing GAAP. ASU 2014-08 requires that only a disposal of a component of an entity, or a group of components of an entity, that represents a strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the financial statements as discontinued operations. ASU 2014-08 also provides guidance on the financial statement presentations and disclosures of discontinued operations. The amendments in ASU 2014-08 are effective for all disposals of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015, with early application permitted.
Reportable Segment
An operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Operating segments may be aggregated only to a limited extent. The Company’s chief operating decision maker, the Chief Executive Officer, reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues for purposes of making operating decisions and assessing financial performance. Accordingly, the Company has only a single operating and reportable segment. In addition, the Company has no foreign operations or any assets in foreign locations. All of the Company’s domestic operations consist of a single revenue stream, which is the licensing of its trademark portfolio.
Revenue Recognition
The Company has entered into various license agreements that provide revenues based on guaranteed minimum royalty payments and advertising/marketing fees and additional revenues based on a percentage of defined sales. Guaranteed minimum royalty payments and advertising/marketing revenue are recognized on a straight-line basis over the term of each contract year, as defined in each license agreement. Royalty payments exceeding the guaranteed minimum royalty payments are recognized as income during the period corresponding to the licensee’s sales. Payments received as consideration of the grant of a license are recorded as deferred revenue at the time payment is received and recognized ratably as revenue over the term of the license agreement. Advanced royalty payments are recorded as deferred revenue at the time payment is received and recognized as revenue as earned. Revenue is not recognized unless collectability is reasonably assured.
If license agreements are terminated prior to the original licensing period, the Company will recognize revenue for any contractual termination fees, unless such amounts are deemed non-recoverable.
Accounts Receivable
Accounts receivable are recorded net of allowances for doubtful accounts, based on the Company’s ongoing discussions with its licensees, and its evaluation of each licensee’s creditworthiness, payment history and account aging. Accounts receivable balances deemed to be uncollectible are charged to the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was approximately $0.2 million at March 31, 2015 and December 31, 2014.
The Company’s accounts receivable amounted to approximately $14.6 million and $15.7 million as of March 31, 2015 and December 31, 2014, respectively. Two licensees accounted for approximately 42% (23% and 19%) of the Company’s total consolidated accounts receivable balance as of March 31, 2015 and three licensees accounted for approximately 54% (23%, 21% and 10%) of the Company’s total consolidated accounts receivable balance as of December 31, 2014. The Company does not believe the accounts receivable balance from these licensees represents a significant collection risk based on past collection experience.
10 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Treasury Stock
Treasury stock is recorded at cost as a reduction of equity in the accompanying condensed consolidated balance sheets.
Stock-Based Compensation
Compensation cost for restricted stock is measured using the quoted market price of the Company’s common stock at the date the common stock is granted. For restricted stock, for which restrictions lapse with the passage of time (“time-based restricted stock”), compensation cost is recognized on a straight-line basis, reduced for estimated forfeitures, over the period between the issue date and the date that restrictions lapse. Time-based restricted stock is included in total shares of common stock outstanding upon the lapse of applicable restrictions. For restricted stock, for which restrictions are based on performance measures (“performance-based restricted stock”), restrictions lapse when those performance measures have been deemed achieved. Compensation cost for performance-based restricted stock is recognized on a straight-line basis, reduced for estimated forfeitures, during the period from the date on which the likelihood of the performance-based restricted stock being earned is deemed probable and (x) the end of the fiscal year during which such performance-based restricted stock was granted or (y) the date on which awards of such performance-based restricted stock may be approved by the compensation committee of the Company’s board of directors (the “Compensation Committee”) on a discretionary basis, as applicable. Performance-based restricted stock is included in total shares of common stock outstanding upon the lapse of applicable restrictions. Performance-based restricted stock is included in total diluted shares of common stock outstanding when the performance measures have been deemed achieved but the performance-based restricted stock has not yet been issued.
Compensation cost for stock options and warrants, in accordance with accounting for stock-based payment under GAAP, is calculated using the Black-Scholes valuation model based on awards ultimately expected to vest, reduced for estimated forfeitures, and expensed on a straight-line basis over the requisite service period of the grant. Forfeitures are estimated at the time of grant based on the Company’s historical forfeiture experience and are revised in subsequent periods if actual forfeitures differ from those estimates.
Compensation costs for restricted stock granted to consultants are marked-to-market to the Company’s stock price for each reporting period.
Income Taxes
Current income taxes are based on the respective periods’ taxable income for federal, foreign and state income tax reporting purposes. Deferred tax liabilities and assets are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is required if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company applies the FASB guidance on accounting for uncertainty in income taxes. The guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with other authoritative GAAP and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also addresses derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At March 31, 2015 and December 31, 2014, the Company had $0.6 million of certain unrecognized tax benefits, included as a component of long-term liabilities held for disposition from discontinued operations of wholesale operations subsidiary, and does not expect a material change in the twelve months following March 31, 2015. Interest and penalties related to uncertain tax positions, if any, are recorded in income tax expense. Tax years that remain open for assessment for federal and state tax purposes include the years ended December 31, 2011 through 2014.
Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the reporting period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the reporting period, including stock options and warrants, using the treasury stock method, and convertible debt, using the if-converted method. Diluted EPS excludes all potentially dilutive shares of common stock if their effect is anti-dilutive. The shares used to calculate basic and diluted EPS consist of the following:
11 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Basic weighted average common shares outstanding | 39,039,993 | 24,700,717 | ||||||
Acquisition hold back shares | 1,375,000 | - | ||||||
Warrants | 488,826 | 742,899 | ||||||
Stock options | 143,425 | 163,004 | ||||||
Unvested restricted stock | 140,214 | 620,819 | ||||||
Diluted weighted average common shares outstanding | 41,187,458 | 26,227,439 |
The computation of diluted EPS for the three months ended March 31, 2015 and 2014 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Warrants | - | 125,000 | ||||||
Stock options | 41,000 | 79,666 | ||||||
41,000 | 204,666 | |||||||
Concentration of Credit Risk
Financial instruments which potentially expose the Company to credit risk consist primarily of cash and accounts receivable. Cash is held for use for working capital needs and/or future acquisitions. Substantially all of the Company’s cash is deposited with high quality financial institutions. At times, however, such cash may be in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit. The Company has not experienced any losses in such accounts as of March 31, 2015.
Concentration of credit risk with respect to accounts receivable is minimal due to the collection history and the nature of the Company’s royalty revenues.
Customer Concentrations
The Company recorded net revenues of approximately $13.6 million and $6.3 million during the three months ended March 31, 2015 and 2014, respectively. During the three months ended March 31, 2015, two licensees represented at least 10% of net revenue, accounting for 25% and 20% of the Company’s net revenue. During the three months ended March 31, 2014, two licensees represented at least 10% of net revenue, accounting for 20% and 17% of the Company’s net revenue.
Loss Contingencies
The Company recognizes contingent losses that are both probable and estimable. In this context, probability is defined as circumstances under which events are likely to occur. The Company records legal costs pertaining to contingencies as incurred.
Contingent Consideration
The Company recognizes the acquisition-date fair value of contingent consideration as part of the consideration transferred in exchange for the acquiree or assets of the acquiree in a business combination. The contingent consideration is classified as either a liability or equity in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity . If classified as a liability, the liability is remeasured to fair value at each subsequent reporting date until the contingency is resolved. Increases in fair value are recorded as losses, while decreases are recorded as gains. If classified as equity, contingent consideration is not remeasured and subsequent settlement is accounted for within equity.
12 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Noncontrolling Interest
Noncontrolling interest from continuing operations recorded for the three months ended March 31, 2015 and 2014 represents income allocations to Elan Polo International, Inc., a member of DVS Footwear International, LLC (“DVS LLC”). In connection with the strategic investment in FUL IP Holdings, LLC (“FUL IP”) in November 2014, the Company recorded a noncontrolling interest of $4.4 million in the consolidated statement of equity at December 31, 2014.
3. | Fair Value Measurement of Financial Instruments |
ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), defines fair value, establishes a framework for measuring fair value in GAAP and provides for expanded disclosure about fair value measurements. ASC 820-10 applies to all other accounting pronouncements that require or permit fair value measurements.
The Company determines or calculates the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments while estimating for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads and estimates of future cash flow.
Assets and liabilities typically recorded at fair value on a non-recurring basis to which ASC 820-10 applies include:
• | non-financial assets and liabilities initially measured at fair value in an acquisition or business combination, and | |
• | long-lived assets measured at fair value due to an impairment assessment under ASC 360-10-15, Impairment or Disposal of Long-Lived Assets . |
This topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820-10 requires that assets and liabilities recorded at fair value be classified and disclosed in one of the following three categories:
• | Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. | |
• | Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals. | |
• | Level 3 inputs are unobservable and are typically based on the Company’s own assumptions, including situations where there is little, if any, market activity. Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 classification. As a result, the unrealized gains and losses for assets within the Level 3 classification may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in historical company data) inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company classifies such financial assets or liabilities based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
As of March 31, 2015 and December 31, 2014, there were no assets or liabilities that are required to be measured at fair value on a recurring basis, except for the Company’s interest rate swap (see Note 7) and the contingent earn outs relating to the Linens ‘N Things brand and FUL IP. The following table sets forth the carrying value and the fair value of the Company’s financial assets and liabilities required to be disclosed at March 31, 2015 and December 31, 2014:
13 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Carrying Value | Fair Value | |||||||||||||||||
Financial Instrument | Level | 3/31/2015 | 12/31/2014 | 3/31/2015 | 12/31/2014 | |||||||||||||
(in thousands) | ||||||||||||||||||
Interest rate swap | 2 | $ | 142 | $ | 36 | $ | 142 | $ | 36 | |||||||||
New Term Loans | 3 | $ | 157,500 | $ | 160,500 | $ | 146,535 | $ | 148,571 | |||||||||
Revolving Loan | 3 | $ | 15,000 | $ | 15,000 | $ | 11,241 | $ | 11,059 | |||||||||
Contingent earn outs | 3 | $ | - | $ | - | $ | - | $ | - |
The carrying amounts of the Company’s cash, accounts receivable and accounts payable approximate fair value due to their short-term maturities.
The Company records its interest rate swap on the condensed consolidated balance sheet at fair value (Level 2). The valuation technique used to determine the fair value of the interest rate swap approximates the net present value of future cash flows which is the estimated amount that a bank would receive or pay to terminate the Swap Agreements (as defined below) at the reporting date, taking into account current interest rates.
For purposes of this fair value disclosure, the Company based its fair value estimate for the New Term Loans and Revolving Loan (each, as defined below) on its internal valuation whereby the Company applied the discounted cash flow method to its expected cash flow payments due under the Loan Agreements (as defined below) based on market interest rate quotes as of March 31, 2015 and December 31, 2014 for debt with similar risk characteristics and maturities.
On the date of acquisitions, no value was assigned to the contingent earn outs based on the remote probability that the Linens ‘N Things brand and FUL IP will achieve the performance measurements. The Company continues to evaluate these performance measurements at each reporting period and determines their fair values if/when the achievement of the performance measurements becomes probable. At March 31, 2015, the contingent earn outs had no value.
4. | Discontinued Operations of Wholesale Business |
The Company did not record any additional costs relating to discontinued operations of the Heelys, Inc. legacy operations during the three months ended March 31, 2015 and 2014.
A summary of the Company’s assets and liabilities from discontinued operations of its wholesale business as of March 31, 2015 and December 31, 2014 is as follows:
Assets and liabilities of discontinued operations:
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Prepaid expenses and other current assets | $ | 146 | $ | 162 | ||||
Accounts payable and accrued expenses | $ | 144 | $ | 236 | ||||
Long-term liabilities | $ | 700 | $ | 700 |
14 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
5. | Goodwill |
Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit's goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the unaudited condensed consolidated statements of operations. No events or circumstances indicate an impairment has been identified subsequent to the Company’s December 31, 2014 impairment testing.
6. | Intangible Assets |
Intangible assets are summarized as follows:
March 31, 2015 |
Useful Lives (Years) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
||||||||||||
(in thousands, except years data) | ||||||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Trademarks | 15 | $ | 4,846 | $ | (984 | ) | $ | 3,862 | ||||||||
Customer agreements | 4 | 1,599 | (617 | ) | 982 | |||||||||||
Favorable lease | 2 | 537 | (146 | ) | 391 | |||||||||||
Patents | 10 | 665 | (114 | ) | 551 | |||||||||||
$ | 7,647 | $ | (1,861 | ) | 5,786 | |||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trademarks | $ | 297,111 | ||||||||||||||
Intangible assets, net | $ | 302,897 |
December 31, 2014 |
Useful Lives (Years) |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
||||||||||||
(in thousands, except years data) | ||||||||||||||||
Long-lived intangible assets: | ||||||||||||||||
Trademarks | 15 | $ | 4,812 | $ | (903 | ) | $ | 3,909 | ||||||||
Customer agreements | 4 | 1,599 | (517 | ) | 1,082 | |||||||||||
Favorable lease | 2 | 537 | (88 | ) | 449 | |||||||||||
Patents | 10 | 665 | (98 | ) | 567 | |||||||||||
$ | 7,613 | $ | (1,606 | ) | 6,007 | |||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||
Trademarks | $ | 297,032 | ||||||||||||||
Intangible assets, net | $ | 303,039 |
15 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Future annual estimated amortization expense is summarized as follows:
Years ending December 31, | (in thousands) | |||||
2015 (nine months) | $ | 768 | ||||
2016 | 1,004 | |||||
2017 | 597 | |||||
2018 | 464 | |||||
2019 | 390 | |||||
Thereafter | 2,563 | |||||
$ | 5,786 |
Amortization expense amounted to approximately $0.3 million and $0.2 million for the three months ended March 31, 2015 and 2014, respectively.
Intangible assets represent trademarks, customer agreements, a favorable lease and patents related to the Company’s brands. Long-lived assets are amortized on a straight-line basis over the estimated useful lives of the assets. Indefinite-lived intangible assets are not amortized, but instead are subject to impairment evaluation. The carrying value of intangible assets and other long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are tested for impairment on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that indicate that the carrying amount of the indefinite-lived intangible asset may not be recoverable. When conducting its annual indefinite-lived intangible asset impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that the asset is impaired. If it is determined by a qualitative evaluation that it is more likely than not that the asset is impaired, the Company then tests the asset for recoverability. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No events or circumstances indicate an impairment has been identified subsequent to the Company’s December 31, 2014 impairment testing.
7. | Long-Term Debt |
The components of long-term debt are as follows:
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
New Term Loans | $ | 157,500 | $ | 160,500 | ||||
Revolving Loan | 15,000 | 15,000 | ||||||
Total long-term debt | 172,500 | 175,500 | ||||||
Less: current portion of long-term debt | 12,000 | 13,253 | ||||||
Long-term debt | $ | 160,500 | $ | 162,247 |
New Term Loans and Revolving Loan
On August 15, 2014, in connection with the acquisition of Galaxy Brand Holdings, Inc., the Company entered into (i) an Amended and Restated First Lien Credit Agreement, 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 provided for a term loan of up to $75.0 million, a revolving credit facility of up to $25.0 million and a swing line sub-facility of up to $10.0 million and (ii) a Second Lien Credit Agreement with GSO Capital Partners LP, 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 provided for a term loan of up to $90.0 million. In addition, the First Lien Credit Agreement provided for incremental borrowings of up to $60.0 million, to be allocated pro rata between the term loan and the revolving credit facility, and the Second Lien Credit Agreement provided for incremental borrowings of up to $70.0 million for the purpose of consummating permitted acquisitions, in each case, subject to certain customary conditions.
16 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
On August 15, 2014, $75.0 million was drawn as a term loan under the First Lien Credit Agreement and $90.0 million was drawn as a term loan under the Second Lien Credit Agreement (together, the “New Term Loans”) and $15.0 million was drawn as a revolving loan under the First Lien Credit Agreement (the “Revolving Loan”). The proceeds from the New Term Loans and the Revolving Loan were primarily used to finance the Galaxy Acquisition (as defined in Note 10) pursuant to the terms of the Galaxy Merger Agreement (as defined in Note 10), to repay the Company’s existing indebtedness, including the Legacy Term Loans (as defined below), and to pay fees and expenses in connection with the foregoing. The Company expected to use the proceeds from any additional borrowings under the revolving credit facility for working capital, capital expenditures and other general corporate purposes and the proceeds from any borrowings under any incremental facilities for working capital purposes and/or for permitted acquisitions.
Term loan borrowings under the First Lien Credit Agreement were subject to amortization of principal (x) in an amount equal to $1.5 million for the first payment and (y) thereafter, quarterly, in equal amounts of $3.0 million and were scheduled to mature on August 15, 2019. Borrowings under the First Lien Credit Agreement bore interest at London Interbank Offered Rate (“LIBOR”) or a base rate, plus, in each case, an applicable margin that fluctuated 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 (3.94% at March 31, 2015).
The Second Lien Credit Agreement was not subject to amortization and was scheduled to mature on August 15, 2020. Borrowings under the Second Lien Credit Agreement bore interest at LIBOR plus 8.00% and were subject to a LIBOR floor of 1.00% (9.00% at March 31, 2015).
Loans under the First Lien Credit Agreement were voluntarily prepayable from time to time in whole or in part, and loans under the Second Lien Credit Agreement were 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 were 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 respective 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 were guaranteed jointly and severally by each domestic subsidiary of the Company (each, a “Guarantor” and, collectively, 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 (such guarantees provided by the Guarantors, the “Guarantees”). The Company’s and the Guarantors’ obligations under the Loan Agreements and the Guarantees were, in each case, 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.
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, dated as of August 15, 2014 (the “Intercreditor Agreement”), which was acknowledged by the Company and the Guarantors. The Intercreditor Agreement established 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 respective Loan Agreements without consent of the other party.
In addition, the Loan Agreements included covenants and events of default, including, in the case of the First Lien Credit Agreement, requirements that the Company satisfied a minimum positive net income test and maintained 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, maintained a total leverage ratio and a minimum loan to value ratio (as calculated pursuant to the Second Lien Credit Agreement).
On April 8, 2015, in connection with the Company’s entry into the JS Purchase Agreement (as defined in Note 12), the Company entered into (i) a second amended and restated first lien credit agreement, by and among the Company, the guarantors party thereto and Bank of America, N.A., as administrative agent and collateral agent thereunder (as so amended and restated, the “A&R First Lien Credit Agreement”) and (ii) an amended and restated second lien credit agreement with GSO Capital Partners LP, among the Company, the guarantors party thereto and Wilmington Trust, National Association, as administrative agent and collateral agent thereunder (as so amended and restated, the “A&R Second Lien Credit Agreement” and, together with the A&R First Lien Credit Agreement, the “A&R Loan Agreements”). See Note 12 for further description of the terms of the A&R Loan Agreements.
17 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Legacy Term Loans
Prior to the Company’s entry into the Loan Agreements, in connection with the acquisition of B®and Matter, LLC, on March 28, 2013, the Company entered into (i) a first lien loan agreement (the “First Lien Loan Agreement”), which provided for term loans of up to $45.0 million (the “First Lien Term Loan”) and (ii) a second lien loan agreement (the “Second Lien Loan Agreement” and, together with the First Lien Loan Agreement, the “Prior Loan Agreements”), which provided for term loans of up to $20.0 million (the “Second Lien Term Loan” and, together with the First Lien Term Loan, the “Legacy Term Loans”). The proceeds from the Legacy Term Loans were used to fund the acquisition of B®and Matter, LLC, to repay existing debt, to pay fees and expenses in connection with the foregoing, to finance capital expenditures and for general corporate purposes. The Legacy Term Loans were secured by substantially all of the assets of the Company and were further guaranteed and secured by each of the domestic subsidiaries of the Company, other than DVS LLC, SBG Revo Holdings, LLC and SBG FM, LLC, subject to certain exceptions set forth in the Prior Loan Agreements. In connection with the Second Lien Loan Agreement, the Company issued five-year warrants to purchase up to an aggregate of 285,160 shares of the Company’s common stock at an exercise price of $4.50 per share. In December 2013, the Company obtained the written consent of each of the lenders to the Prior Loan Agreements and, in connection therewith, SBG Revo Holdings, LLC agreed to become a Loan Party (as defined in the Prior Loan Agreements) under each of the Prior Loan Agreements, which transaction became effective in February 2014.
The Legacy Term Loans were drawn in full on March 28, 2013 and were scheduled to mature on March 28, 2018. The Prior Loan Agreements were repaid in full on August 15, 2014. The Company was in compliance with its covenants throughout the existence of the Legacy Term Loans.
Interest Expense
Contractual interest expense on the Loan Agreements amounted to approximately $2.9 million for the three months ended March 31, 2015, which was recorded as a component of interest expense in the accompanying unaudited condensed consolidated statements of operations. Contractual interest expense on the Legacy Term Loans amounted to approximately $1.1 million for the three months ended March 31, 2014, which was recorded as a component of interest expense in the accompanying unaudited condensed consolidated statements of operations. During the three months ended March 31, 2014, accretion of the discount on the Legacy Term Loans amounted to approximately $0.1 million, which was recorded as a component of interest expense in the accompanying unaudited condensed consolidated statements of operations.
Legal and other fees associated with the Loan Agreements have been recorded as deferred financing costs and included in other assets in the accompanying condensed consolidated balance sheets, and are being amortized as non-cash interest expense, using the effective interest method, over the term of the New Term Loans. During the three months ended March 31, 2015 and 2014, amortization of these fees amounted to approximately $0.3 million and $0.1 million, respectively, which was recorded as a component of interest expense in the accompanying unaudited condensed consolidated statement of operations.
Interest Rate Swap
The Company has exposure to variability in cash flows due to the impact of changes in interest rates for the Company’s New Term Loans. During 2015, the Company entered into an interest rate swap agreement related to $25,000 notional value of the New Term Loans (the “2015 Swap Agreement”). During 2014, the Company entered into an interest rate swap agreement related to $51,000 notional value of the New Term Loans (the “2014 Swap Agreement” and, together with the 2015 Swap Agreement, the “Swap Agreements”).
The objective of the Swap Agreements is to eliminate the variability in cash flows for the interest payments associated with the New Term Loans, which vary by a variable-rate: 1-month LIBOR. The Company has formally documented the Swap Agreements as a cash flow hedge of the Company’s exposure to 1-month LIBOR. Because the critical terms of the Swap Agreements and the hedged items coincide (e.g., notional amount, interest rate reset dates, interest rate payment dates, maturity/expiration date and underlying index), the hedge is expected to completely offset changes in expected cash flows due to fluctuations in the 1-month LIBOR rate over the term of the hedge. The effectiveness of the hedge relationship will be periodically assessed during the life of the hedge by comparing the current terms of the Swap Agreements and the New Term Loans to assure they continue to coincide and through an evaluation of the continued ability of the respective counterparties to the Swap Agreements to honor their obligations under the Swap Agreements. Should the critical terms no longer match exactly, hedge effectiveness (both prospective and retrospective) will be assessed by evaluating the cumulative dollar offset for the actual hedging instrument relative to a hypothetical derivative whose terms exactly match the terms of the hedged item.
18 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
The components of the Swap Agreements as of March 31, 2015, are as follows:
Notional Value | Derivative Asset | Derivative Liability | ||||||||||
(in thousands) | ||||||||||||
New Term Loans | $ | 76,000 | $ | 0 | $ | (142 | ) |
8. | Commitments and Contingencies |
General Legal Matters
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations. Contingent liabilities arising from potential litigation are assessed by management based on the individual analysis of these proceedings and on the opinion of the Company’s lawyers and legal consultants.
9. | Stock-based Compensation |
Stock Options
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2015:
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | |||||||||||||||
Number of | Average Exercise | Contractual Life | Aggregate | |||||||||||||
Options | Price | (in Years) | Intrinsic Value | |||||||||||||
(in thousands, except share, per share and years data) | ||||||||||||||||
Outstanding - January 1, 2015 | 373,167 | $ | 4.91 | 2.0 | $ | 3,166 | ||||||||||
Granted | - | - | ||||||||||||||
Exercised | (4,432 | ) | (3.00 | ) | ||||||||||||
Forfeited or Canceled | - | - | ||||||||||||||
Outstanding - March 31, 2015 | 368,735 | $ | 4.93 | 1.8 | $ | 2,337 | ||||||||||
Exercisable - March 31, 2015 | 335,735 | $ | 4.37 | 1.5 | $ | 2,287 |
A summary of the changes in the Company’s unvested stock options is as follows:
Weighted- | ||||||||
Number of | Average Grant | |||||||
Options | Date Fair Value | |||||||
Unvested - January 1, 2015 | 40,500 | $ | 2.74 | |||||
Granted | - | - | ||||||
Vested | (7,500 | ) | (1.82 | ) | ||||
Forfeited or Canceled | - | - | ||||||
Unvested - March 31, 2015 | 33,000 | $ | 2.95 |
The Company did not grant any stock options during the three months ended March 31, 2015.
19 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
During the three months ended March 31, 2014, the Company granted an aggregate of 17,500 stock options to employees for future services. These stock options are exercisable over a five-year term and vest over a period of one to three years. These stock options had a fair value of approximately $33,000 using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Risk-free interest rate | 1.15 | % | ||
Expected dividend yield | 0.00 | % | ||
Expected volatility | 37.67 | % | ||
Expected life | 3.5 years |
The Company recorded approximately $2,000 and $1,000 during the three months ended March 31, 2015 and 2014, respectively, as compensation expense pertaining to these grants.
Total compensation expense related to stock options for the three months ended March 31, 2015 and 2014 was approximately $14,000 and $20,000, respectively. Total unrecognized compensation expense related to unvested stock options at March 31, 2015 amounted to approximately $0.1 million and is expected to be recognized over a weighted-average period of approximately 1.4 years.
Warrants
The following table summarizes the Company’s outstanding warrants:
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | |||||||||||||||
Number of | Average Exercise | Contractual Life | Aggregate | |||||||||||||
Warrants | Price | (in Years) | Intrinsic Value | |||||||||||||
(in thousands, except share, per share and years data) | ||||||||||||||||
Outstanding - January 1, 2015 | 640,160 | $ | 6.04 | 3.1 | $ | 4,501 | ||||||||||
Granted | - | - | ||||||||||||||
Exercised | (10,000 | ) | (5.80 | ) | ||||||||||||
Forfeited or Canceled | - | - | ||||||||||||||
Outstanding - March 31, 2015 | 630,160 | $ | 6.04 | 2.9 | $ | 2,935 | ||||||||||
Exercisable - March 31, 2015 | 615,160 | $ | 6.05 | 2.9 | $ | 2,861 |
A summary of the changes in the Company’s unvested warrants is as follows:
Weighted | ||||||||
Number of | Average Grant | |||||||
Warrants | Date Fair Value | |||||||
Unvested - January 1, 2015 | 15,000 | $ | 3.05 | |||||
Granted | - | - | ||||||
Vested | - | - | ||||||
Forfeited or Canceled | - | - | ||||||
Unvested - March 31, 2015 | 15,000 | $ | 3.05 |
The Company did not issue any warrants during the three months ended March 31, 2015 and 2014.
The Company did not record any compensation expense related to warrants for the three months ended March 31, 2015. Total compensation expense related to warrants for the three months ended March 31, 2014 was approximately $8,000.
20 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Restricted Stock
Time-Based Restricted Stock
A summary of the time-based restricted stock activity for the three months ended March 31, 2015 is as follows:
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | |||||||||||||||
Number of | Average Grant | Contractual Life | Aggregate | |||||||||||||
Shares | Date Fair Value | (in Years) | Intrinsic Value | |||||||||||||
(in thousands, except share, per share and years data) | ||||||||||||||||
Unvested - January 1, 2015 | 512,586 | 6.30 | 1.9 | $ | 3,470 | |||||||||||
Granted | - | - | ||||||||||||||
Vested | (45,833 | ) | 5.84 | |||||||||||||
Unvested - March 31, 2015 | 466,753 | 6.35 | 1.6 | $ | 2,102 |
The Company did not grant any time-based restricted stock during the three months ended March 31, 2015.
During the three months ended March 31, 2014, the Company issued 100,000 shares of time-based restricted stock to an employee and 100,000 shares of time-based restricted stock to a consultant for future services. These shares of time-based restricted stock had a grant date fair value of approximately $1.1 million and vest over a period of three years. The Company marks-to-market the expense for the shares of time-based restricted stock granted to the consultant.
The Company recorded approximately $60,000 and approximately $88,000 during the three months ended March 31, 2015 and 2014, respectively, as compensation expense pertaining to these grants.
Total compensation expense related to grants of time-based restricted stock for the three months ended March 31, 2015 and 2014 was approximately $0.4 million and $0.4 million, respectively.
Performance Based Restricted Stock
On February 24, 2015, the Compensation Committee voted to approve, on a discretionary basis, an award of 198,000 performance stock units (“PSUs”) to employees and consultants under the Sequential Brands Group, Inc. 2013 Stock Incentive Compensation Plan. Included in the above award were 60,000 and 36,000 PSUs for Mr. Yehuda Shmidman, the Company’s Chief Executive Officer, and Mr. Gary Klein, the Company’s Chief Financial Officer, respectively. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s stock on the date on which the employees and consultants were communicated the modification of the performance metrics. Total compensation expense related to these PSUs in the approximate amount of $2.0 million was recorded as operating expenses in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2015.
In addition, the Compensation Committee approved, on a discretionary basis, an award of 12,500 PSUs to an employee upon the commencement of his employment with the Company. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s stock on the date on which the employee was communicated the modification of the performance metrics. Total compensation expense related to these PSUs in the approximate amount of $0.1 million was recorded as operating expenses in the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2015.
Total compensation expense related to the PSUs for the three months ended March 31, 2015 was approximately $2.1 million.
10. | Related Party Transactions |
Consulting Services Agreement with Tengram Capital Partners, L.P. (f/k/a Tengram Capital Management L.P.)
21 |
SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Pursuant to an agreement with Tengram Capital Partners, L.P., formerly known as Tengram Capital Management, L.P. (“TCP”), an affiliate of Tengram Capital Partners Gen2 Fund, L.P., which is one of the Company’s largest stockholders, the Company has engaged TCP, effective as of January 1, 2013, to provide services to the Company pertaining to (i) mergers and acquisitions, (ii) debt and equity financing and (iii) such other related areas as the Company may reasonably request from time to time (the “TCP Agreement”). TCP is entitled to receive compensation of $1.0 million, including fees and reimbursement of out-of-pocket expenses in connection with performing its services under the TCP Agreement. The TCP Agreement remains in effect for a period continuing through the earlier of five years or the date on which TCP and its affiliates cease to own in excess of 5% of the outstanding shares of common stock in the Company.
On August 15, 2014, the Company consummated transactions pursuant to the agreement and plan of merger, dated as of June 24, 2014 (the “Galaxy Merger Agreement”) with SBG Universe Brands LLC, a Delaware limited liability company and the Company’s direct wholly-owned subsidiary (“LLC Sub”), Universe Galaxy Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of LLC Sub, Galaxy Brand Holdings, Inc. and Carlyle Galaxy Holdings, L.P. (such transactions, collectively, the “Galaxy Acquisition”). In connection with the Galaxy Merger Agreement, the Company and TCP entered into an amendment to the TCP Agreement (the “Amended TCP Agreement”), pursuant to which, among other things, TCP is entitled to receive annual fees of $0.9 million beginning with fiscal year 2014. The Company paid TCP approximately $0.5 million and $0 for services under the Amended TCP Agreement and TCP Agreement, respectively, during the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015 and December 31, 2014, the Company owed $0 and approximately $0.5 million, respectively, to TCP.
Additionally, in July 2013, the Company entered into a consulting arrangement with an employee of TCP (the “TCP Employee”), pursuant to which the TCP Employee provides legal and other consulting services at the request of the Company from time to time. The TCP Employee was also issued 125,000 shares of restricted stock, vesting over a four-year period and 180,000 PSUs, vesting over three years in increments of 20% for 2014, 20% for 2015 and 60% for 2016. The Company paid the TCM Employee approximately $0.1 million for services under this consulting arrangement during each of the three months ended March 31, 2015 and 2014. At March 31, 2015 and December 31, 2014, there were no amounts owed to the TCP Employee.
Transactions with Tennman WR-T, Inc.
On May 5, 2014, the Company entered into a merger agreement (the “Tennman Merger Agreement”), with Tennman WR-T, Inc. (“Tennman WR-T”), a Delaware corporation, pursuant to which the Company acquired the remaining 18% interest in William Rast Sourcing, LLC (“Rast Sourcing”) and William Rast Licensing LLC (“Rast Licensing”). As part of the Tennman Merger Agreement, the Company is obligated to make royalty payments to Tennman Brands, LLC, subject to the William Rast brand achieving certain performance thresholds. The Company did not make any royalty payments to Tennman Brands, LLC during the three months ended March 31, 2015.
Under the prior royalty agreement among Tennman WR-T, Rast Sourcing and Rast Licensing, royalty payments made by Rast Sourcing to Tennman WR-T amounted to approximately $0.3 million for the three months ended March 31, 2014. At March 31, 2015 and December 31, 2014, there were no amounts owed to Tennman WR-T. During the three months ended March 31, 2014, the Company recorded approximately $0.3 million in royalty expense, which was included in operating expenses from continuing operations in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2014.
Transactions with E.S. Originals, Inc.
A group president of the Company maintains a passive ownership interest in one of the Company’s licensees, E.S. Originals, Inc. (“ESO”). The Company receives royalties from ESO under license agreements for certain of the Company’s brands in the footwear category. The Company recorded approximately $3.4 million of revenue for the three months ended March 31, 2015 for royalties earned from ESO license agreements. ESO was not a licensee of the Company during the three months ended March 31, 2014. At March 31, 2015 and December 31, 2014, the Company had approximately $3.4 million and $3.3 million recorded as accounts receivable in the accompanying condensed consolidated balance sheets, respectively.
11. | Sale of People’s Liberation Brand |
On February 24, 2015, the Company sold the People’s Liberation brand to a third party operating entity for (i) $0.7 million in cash (the “Sale Price”) and (ii) an earn-out of $1.0 million cash in the event that total gross sales of products under the People’s Liberation trademark equal or exceed $30.0 million during the 2015 calendar year. As a result of the sale, the Company recorded a gain of $0.7 million as the brand had no value on the Company’s condensed consolidated balance sheet, which is recorded in other income in the accompanying unaudited condensed consolidated statement of operations during the three months ended March 31, 2015. The third party operating entity agreed to pay the Company one-fifth of the Sale Price upon closing and one-fifth of the Sale Price on the anniversary of the closing for the next four years. The Company reported the short-term portion of the receivable in prepaid expenses and other current assets and the long-term portion in other assets in the accompanying condensed consolidated balance sheet as of March 31, 2015.
12. | Subsequent Event - Acquisition of Jessica Simpson ® Brand |
On April 1, 2015, the Company entered into a purchase agreement (the “JS Purchase Agreement”) with With You, Inc., a California corporation (“WYI”), Corny Dog, Inc., a California corporation (“Corny Dog” and, together with WYI, the “Sellers”), With You LLC, a Delaware limited liability company (“NewCo”), and Jessica Simpson, in her capacity as the sole stockholder of each of the Sellers. NewCo owns all assets related to (i) the worldwide business of creating, designing, developing, manufacturing, marketing, selling and licensing all consumer related lifestyle products, including, but not limited to, all categories within the fashion, home, beauty, personal care, baby, crafts, pets, holiday, seasonal, bridal, celebrations, travel, floral and food industry segments, with certain exclusions, of the Jessica Simpson ® brand, (ii) the exploitation of intellectual property and related rights associated with the celebrity and personality rights, subject to certain exceptions, of Jessica Simpson and (iii) all lines of business reasonably related or ancillary thereto (including the establishment and operation of retail stores).
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SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Pursuant to the terms of the JS Purchase Agreement, the Company purchased membership interests in NewCo for an aggregate purchase price consisting of (a) $117.5 million in cash and (b) 97,087 shares of the Company’s common stock. After giving effect to the transactions contemplated by the JS Purchase Agreement, the Company owns 62.5% of the outstanding membership interests in NewCo and WYI owns 37.5% of the outstanding membership interests in NewCo. In connection with the JS Purchase Agreement, the Company and WYI entered into an operating agreement for NewCo, pursuant to which the Company and WYI agreed to certain rights and obligations with respect to the governance of NewCo.
In connection with the JS Purchase Agreement, the Company also entered into (i) an amendment and restatement agreement, dated as of April 1, 2015 (the “First Lien Amendment and Restatement Agreement”) with Bank of America, N.A., as administrative agent and collateral agent and acting on behalf, and with the authority, of each of the lenders under the First Lien Credit Agreement and (ii) an amendment and restatement agreement, dated as of April 1, 2015 (the “Second Lien Amendment and Restatement Agreement” and, together with the First Lien Amendment and Restatement Agreement, the “Amendment and Restatement Agreements”) with GSO Capital Partners LP with Wilmington Trust, National Association, as administrative agent and collateral agent and acting on behalf, and with the authority, of each of the lenders under the Second Lien Credit Agreement. Pursuant to the Amendment and Restatement Agreements, each of the administrative agents under the Loan Agreements consented to the amendment and restatement of the Loan Agreements, subject to the satisfaction of certain conditions to effectiveness set forth therein, including delivery by the Company of a borrowing notice and confirmation of the satisfaction of the conditions to the consummation of the JS Purchase Agreement.
On April 8, 2015 and upon the satisfaction of such conditions to effectiveness set forth in the Amendment and Restatement Agreements (such date, the “Effective Date”), the Company entered into (i) the A&R First Lien Credit Agreement, which provides for a $85.0 million tranche A term loan facility, a $15.0 million tranche A-1 term loan facility, a revolving credit facility of up to $90.0 million and a swing line sub-facility of up to $10.0 million and (ii) the A&R Second Lien Credit Agreement, which provides for a term loan facility of up to $159.5 million, consisting of the existing loans in the amount of $90.0 and up to $69.5 million of new term loans. On the Effective Date, the Company had an aggregate amount outstanding of (i) $100.0 million term loans and $40.7 million revolving loans under the A&R First Lien Credit Agreement and (ii) $159.5 million term loans under the A&R Second Lien Credit Agreement. The aggregate of all loans outstanding was $300.2 million. In addition, the A&R First Lien Credit Agreement provides for incremental borrowings of up to $60.0 million following the Effective Date, to be allocated 25% to the revolving credit facility and 75% to the tranche A term loan facility, and the A&R Second Lien Credit Agreement provides for incremental borrowings of up to $40.0 million for the purpose of consummating permitted acquisitions, in each case, subject to certain customary conditions.
The proceeds from the loans under the A&R Loan Agreements were used to finance the transactions contemplated by the JS Purchase Agreement pursuant to the terms of the JS Purchase Agreement, to repay the Company’s existing indebtedness, to pay fees and expenses in connection with the foregoing and for other corporate purposes. After the Effective 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 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 A&R First Lien Credit Agreement are subject to amortization of principal quarterly beginning on June 30, 2015 in equal amounts of $4.0 million; provided, that, if the loans have not been prepaid with the proceeds of a capital raise by the Company within one year of the Effective Date and as described below, then the Company will be required to repay the loans in quarterly amounts of $5.0 million until such time as such capital raise and such prepayment occur. The term loan borrowings under the A&R First Lien Credit Agreement will mature on the fifth anniversary of the Effective Date. Borrowings under the A&R First Lien Credit Agreement bear interest at LIBOR or a base rate, plus, in each case, an applicable margin that fluctuates from (a) 3.50% to 3.75% for LIBOR loans, with respect to revolving loans and the outstanding tranche A term loan and from 1.50% to 1.75% for base rate loans, with respect to revolving loans and the outstanding tranche A term loan and (b) 4.50% to 4.75% for LIBOR loans, with respect to the outstanding tranche A-1 term loan and from 2.50% to 2.75% for base rate loans, with respect to the outstanding tranche A-1 term loan, in each case, based on the Company’s Loan to Value Ratio (as defined and further described in the A&R First Lien Credit Agreement). All voluntary and mandatory prepayments of the term loans will be applied first to prepay the tranche A-1 term loans.
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SEQUENTIAL BRANDS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
The A&R Second Lien Credit Agreement is not subject to amortization and will mature on the sixth anniversary of the Effective Date. Borrowings under the A&R Second Lien Credit Agreement bear interest at LIBOR or a base rate, plus, in each case, an applicable margin that fluctuates from (a) 10.00% to 8.00% for LIBOR loans and (b) from 9.00% to 7.00% for base rate loans, based on the Company’s Consolidated Total Leverage Ratio and Consolidated Net Leverage Ratio (each, as defined in the A&R Second Lien Credit Agreement) as at the end of the immediately preceding fiscal quarter. Specifically, the applicable margin with respect to LIBOR loans under the A&R Second Lien Credit Agreement is as set forth below:
Consolidated Total Leverage Ratio | Consolidated Net Leverage Ratio |
Applicable
Margin |
||
≥ 6.5 : 1.00 | ≥ 6.25 : 1.00 | 10.00% | ||
> 4.00 : 1.00 < 6.50 : 1.00 | > 3.75 : 1.00 < 6.25 : 1.00 | 9.00% | ||
≤ 4.00 : 1.00 | ≤ 3.75 : 1.00 | 8.00% |
Subject to the terms of the Intercreditor Agreement (as further described below), loans under the A&R First Lien Credit Agreement are voluntarily prepayable from time to time, in whole or in part, and loans under the A&R Second Lien Credit Agreement are voluntarily prepayable after the first anniversary of the Effective Date, in whole or in part, provided that the Company may, on a one-time basis, prepay up to 25% of the outstanding principal of the loans during the one year period prior to the Effective Date. Such voluntary prepayments are 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 A&R Loan Agreement. Mandatory prepayments of the loans under the A&R Loan Agreements are required (x) in the case of any dispositions of intellectual property, the then applicable LTV Percentage (as defined in the A&R First Lien Credit Agreement) of the orderly liquidation value thereof, (y) in the case of any other dispositions, 100% of the net proceeds thereof and (z) with respect to the A&R First Lien Credit Agreement, upon receipt of the aggregate net proceeds of any capital raise with proceeds in excess of $50.0 million, such amount as will cause the Company’s Loan to Value Ratio to be at least 5% less than such Loan to Value Ratio immediately prior to giving effect to such prepayment, in each case, subject to certain exceptions set forth in the A&R Loan Agreements.
The Company’s obligations under the A&R Loan Agreements are 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 A&R Loan Agreements) and certain other excluded subsidiaries and subject to certain other exceptions set forth in the A&R Loan Agreements and the related loan documents (such guarantees provided by the Guarantors, the “Guarantees”). The Company’s and the Guarantors’ obligations under the A&R Loan Agreements and the Guarantees are, in each case, secured by first priority liens (subject, in the case of the A&R Second Lien Credit Agreement, to the liens under the A&R 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 Effective Date, borrowings of loans under the revolving credit facility of the A&R First Lien Credit Agreement and incremental borrowings under the A&R 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 A&R 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 A&R 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 A&R Loan Agreements also include customary covenants and events of default, including, in the case of the A&R 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 A&R First Lien Credit Agreement), and, in the case of the A&R Second Lien Credit Agreement, requirements that the Company satisfy a minimum positive net income test, maintain a total leverage ratio and maintain a minimum Loan to Value Ratio (as calculated pursuant to the A&R Second Lien Credit Agreement). Covenants in the A&R 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 A&R Loan Agreements.
In connection with the A&R First Lien Credit Agreement and the A&R Second Lien Credit Agreement, Bank of America, N.A., as the administrative agent under the A&R First Lien Credit Agreement, and Wilmington Trust, National Association, as the administrative agent under the A&R Second Lien Credit Agreement, entered into a first amendment to intercreditor agreement, dated as of the Effective Date (the “First Amendment to Intercreditor Agreement”), which was acknowledged by the Company and the Guarantors and amended the Intercreditor Agreement. The Intercreditor Agreement, as amended by the First Amendment to 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 A&R Loan Agreements without consent of the other party.
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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and related notes. See the cautionary statement regarding forward-looking statements on page 3 of this Quarterly Report for a description of important factors that could cause actual results to differ from expected results.
Overview
We own a portfolio of consumer brands in the fashion, active and lifestyle categories. We promote, market and license these brands and intend to pursue acquisitions of additional brands or rights to brands. We have licensed and intend to license our brands in a variety of categories to retailers, wholesalers and distributors in the United States and in certain international territories. As of March 31, 2015, we had more than 75 licensees, almost all of which are wholesale licensees. In a wholesale license, a wholesale supplier is granted rights (typically on an exclusive basis) to a single or small group of related product categories for sale to multiple accounts within an approved channel of distribution and territory. Also, as part of our business strategy, we have previously entered into (and expect in the future to enter into) direct-to-retail licenses. In a direct-to-retail license, a single retailer is granted the right (typically on an exclusive basis) to sell branded products in a broad range of product categories through its brick and mortar stores and e-commerce sites.
Our objective is to build a diversified portfolio of consumer brands in various categories by growing our existing portfolio and by acquiring new brands. We build brands by partnering with leading manufacturers and retailers to drive incremental value and maximize brand equity. To achieve this objective, we intend to:
· | Increase licensing of existing brands by adding additional product categories, expanding the brands’ distribution and retail presence and optimizing sales through innovative marketing that increases consumer awareness and loyalty; |
· | Develop international expansion through additional licenses, partnerships and other arrangements with leading retailers and wholesalers outside the United States; and |
· | Acquire consumer brands or the rights to such brands with high consumer awareness, broad appeal, applicability to a range of product categories and an ability to diversify our portfolio. In assessing potential acquisitions or investments, we primarily evaluate the strength of the targeted brand as well as the expected viability and sustainability of future royalty streams. |
Our license agreements typically require the licensee to pay royalties based upon net sales with guaranteed minimum royalty payments in the event that net sales do not reach certain specified targets. Our license agreements also typically require the licensees to pay certain minimum amounts for the marketing and advertising of the respective licensed brands.
We believe our business model enables us to use our brand management expertise to continue to grow our portfolio of brands and to generate new revenue streams without significantly changing our infrastructure. The benefits of this business model provide, among other things:
· | Financial upside without the typical risks associated with traditional wholesale operating companies; |
· | Diversification by appealing to a broad demographic and distribution through a range of distribution channels; |
· | Growth potential by expanding our existing brands into new categories and geographic areas and through accretive acquisitions; and |
· | Limited or no operational risks as inventory and other typical wholesale operating risks are the responsibilities of our licensees. |
Fiscal Year
Our fiscal year ends on December 31. Each quarter of each fiscal year ends on March 31, June 30, September 30 and December 31.
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires management to exercise its judgment. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates and judgments on a variety of factors, including our historical experience, knowledge of our business and industry and current and expected economic conditions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Because the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
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Please refer to our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015, for a discussion of our critical accounting policies. During the three months ended March 31, 2015, there were no material changes to these policies.
Results of Operations
Comparison of the Three Months Ended March 31, 2015 to the Three Months Ended March 31, 2014
The following table sets forth, for the periods indicated, results of operations information from our unaudited condensed consolidated financial statements:
Three Months Ended March 31, | Change | Change | ||||||||||||||
2015 | 2014 | (Dollars) | (Percentage) | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Net revenue | $ | 13,617 | $ | 6,262 | $ | 7,355 | 117.5 | % | ||||||||
Operating expenses | 8,676 | 3,750 | 4,926 | 131.4 | % | |||||||||||
Income from operations | 4,941 | 2,512 | 2,429 | 96.7 | % | |||||||||||
Other income | 700 | 2 | 698 | 34900.0 | % | |||||||||||
Interest expense | 3,160 | 1,270 | 1,890 | 148.8 | % | |||||||||||
Income before income taxes | 2,481 | 1,244 | 1,237 | 99.4 | % | |||||||||||
Provision for income taxes | 919 | 397 | 522 | 131.5 | % | |||||||||||
Consolidated net income | 1,562 | 847 | 715 | 84.4 | % | |||||||||||
Net income attributable to noncontrolling interest | (118 | ) | (105 | ) | (13 | ) | 12.4 | % | ||||||||
Net income attributable to Sequential Brands Group, Inc. and Subsidiaries | $ | 1,444 | $ | 742 | $ | 702 | 94.6 | % |
The increase in net revenue for the three months ended March 31, 2015 as compared to the three months ended March 31, 2014 is primarily attributable to the acquisition of the Avia and AND1 brands on August 15, 2014. This increase and increases in net revenue from our other brands were partially offset by royalty revenue recognized from the license agreement with J.C. Penney Corporation in the three months ended March 31, 2014 which will no longer be received as a result of the termination of the license agreement as of June 30, 2014. Net revenue for the three months ended March 31, 2015 consists primarily of licensing revenue earned from our license agreements relating to the Avia , AND1 , Ellen Tracy , Revo and DVS brands. Net revenue for the three months ended March 31, 2014 consists of licensing revenue earned primarily from our license agreements related to our Ellen Tracy , William Rast and Revo brands.
Operating expenses increased approximately $4.9 million for the three months ended March 31, 2015 as compared to the three months ended March 31, 2014. The primary drivers for this increase included stock-based compensation expense, advertising expenses, payroll expenses and professional fees. Stock-based compensation expense increased approximately $2.1 million in connection with the grant of 210,500 performance stock units with immediate vesting awarded by the Compensation Committee, on a discretionary basis, to our employees and consultants (see Note 9 to our accompanying unaudited condensed consolidated financial statements). With the acquisition of new brands in the second half of 2014 and new initiatives, advertising expenses increased approximately $1.5 million over the comparable period in the prior year. Our headcount has also increased over the comparable period in the prior year, which led to an increase in payroll expense of approximately $0.7 million. Professional fees increased approximately $0.2 million over the comparable period in the prior year primarily due to additional business development and consulting fees.
Other income during the three months ended March 31, 2015 consists of the Company’s gain on the sale of the People’s Liberation brand.
Interest expense during the three months ended March 31, 2015 includes interest incurred under our Loan Agreements and interest rate swaps of approximately $2.9 million and non-cash interest related to the amortization of deferred financing costs and annual fees of approximately $0.3 million. Interest expense during the three months ended March 31, 2014 includes interest incurred under our Legacy Term Loans (as defined in Note 7 to our accompanying unaudited condensed consolidated financial statements) and interest rate swaps of approximately $1.1 million, non-cash interest related to the amortization of deferred financing costs and annual fees of approximately $0.1 million and the accretion of the discount recorded associated with the warrants issued with the Legacy Term Loans of approximately $0.1 million.
The provision for income taxes for the three months ended March 31, 2015 and 2014 represents the non-cash deferred tax expense created by the amortization of certain acquired trademarks for tax but not book purposes and taxes for state, local and foreign jurisdictions.
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Noncontrolling interest from continuing operations for the three months ended March 31, 2015 and 2014 represents net income allocations to Elan Polo International, Inc., a member of DVS LLC.
Liquidity and Capital Resources
As of March 31, 2015, our continuing operations had cash of approximately $23.0 million, a working capital balance of approximately $25.4 million and outstanding debt obligations under the Loan Agreements of approximately $172.5 million. As of December 31, 2014, our continuing operations had cash of approximately $22.5 million, a working capital balance of approximately $23.6 million and outstanding debt obligations under the Loan Agreements of approximately $175.5 million. Working capital is defined as current assets minus current liabilities, excluding restricted cash and discontinued operations. We believe that cash from operations and our currently available cash will be sufficient to satisfy our anticipated working capital requirements for the foreseeable future. We intend to continue financing future brand acquisitions through a combination of cash from operations, bank financing and the issuance of additional equity and/or debt securities, which is how we have historically financed our acquisitions. See Note 7 to our accompanying unaudited condensed consolidated financial statements for a description of certain prior financing transactions consummated by us.
Cash Flows from Continuing Operations
Cash flows from continuing operations for operating, financing and investing activities for the three months ended March 31, 2015 and 2014 are summarized in the following table:
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
(in thousands) | ||||||||
Operating activities | $ | 4,352 | $ | 930 | ||||
Investing activities | (180 | ) | (676 | ) | ||||
Financing activities | (3,589 | ) | (1,951 | ) | ||||
Net increase (decrease) in cash from continuing operations | $ | 583 | $ | (1,697 | ) |
Operating Activities
Net cash provided by operating activities from continuing operations was approximately $4.4 million for the three months ended March 31, 2015 as compared to approximately $0.9 million for the three months ended March 31, 2014. The primary drivers for the increase were an increase in non-cash stock based compensation of approximately $2.0 million, an increase in non-cash taxes of approximately $0.4 million and a $0.6 million increase in changes in balance sheet items.
Investing Activities
Net cash used in investing activities from continuing operations was approximately $0.2 million and $0.7 million for the three months ended March 31, 2015 and 2014, respectively, primarily consisting of the acquisition of intangible assets and property and equipment.
Financing Activities
Net cash used in financing activities from continuing operations for the three months ended March 31, 2015 amounted to approximately $3.6 million as compared to approximately $2.0 million for the three months ended March 31, 2014. We made approximately $3.0 million of repayments under the Loan Agreements for the three months ended March 31, 2015 as compared to approximately $2.0 million of repayments under the Legacy Term Loans during the three months ended March 31, 2014. During the three months ended March 31, 2015, we also repurchased 69,416 shares of common stock from employees for approximately $0.7 million for tax withholding purposes related to the vesting of restricted stock.
Future Capital Requirements
We believe cash on hand and cash from operations will be sufficient to meet our capital requirements for the twelve months following March 31, 2015, as they relate to our current operations. We intend to continue financing future brand acquisitions through a combination of cash from operations, bank financing and the issuance of additional equity and/or debt securities. The extent of our future capital requirements will depend on many factors, including our results of operations and growth through the acquisition of additional brands, and we cannot be certain that we will be able to obtain additional financing in sufficient amounts and/or on acceptable terms in the near future, if at all.
27 |
Off-Balance Sheet Arrangements
At March 31, 2015 and December 31, 2014, we did not have any relationships with unconsolidated entities or financial partnerships, such entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
We limit exposure to foreign currency fluctuations by requiring the majority of our license agreements to be denominated in U.S. dollars. One of our license agreements is denominated in Canadian dollars. If there were an adverse change in the exchange rate from Canadian to U.S. dollars of less than 10%, the expected effect on net income would have been immaterial during the three months ended March 31, 2015.
Our earnings may also be affected by changes in LIBOR interest rates as a result of our borrowings under the Loan Agreements, which bear interest at a LIBOR rate plus an applicable margin. An increase of less than 2% in LIBOR interest rates affecting the Loan Agreements would not have had a material effect on our results of operations during the three months ended March 31, 2015 and 2014. As further discussed in Note 7 to our accompanying unaudited condensed consolidated financial statements, we have entered into the Swap Agreements to mitigate the effects of a change in LIBOR interest rates with respect to borrowings under the Loan Agreements.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2015, the end of the period covered by this report. Based on, and as of the date of such evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2015 such that the information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have not been any significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
Item 1. | Legal Proceedings |
We are subject to certain legal proceedings and claims arising in connection with the normal course of our business. In the opinion of management, there are currently no claims that could have a material adverse effect on our consolidated financial position, results of operations or cash flows. See Note 8 to our accompanying unaudited condensed consolidated financial statements, which is incorporated herein by reference.
Item 1A. | Risk Factors |
Cautionary Statements and Risk Factors
This Quarterly Report contains forward-looking statements, which are subject to a variety of risks and uncertainties. Our actual results could differ materially from those anticipated in those forward-looking statements as a result of various factors, including those set forth in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015. There have been no material changes to such risk factors during the three months ended March 31, 2015.
28 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
There have been no unregistered sales of equity securities during the three months ended March 31, 2015.
During the three months ended March 31, 2015, we repurchased 69,416 shares of our common stock from employees for tax withholding purposes related to the vesting of restricted stock. We do not currently have in place a repurchase program with respect to our common stock.
Period |
(a)
Total Number of Shares
(or Units) Purchased (1) |
(b)
Average Price Paid per
Share (or Unit) |
(c)
Total Number of Shares
(or Units) Purchased as Part of Publicly Announced Plans or Programs |
(d)
Maximum Number (or
Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
||||||||||||
January 1 - 31 | - | - | N/A | N/A | ||||||||||||
February 1 - 28 | - | - | N/A | N/A | ||||||||||||
March 1 - 31 | 69,416 | $ | 9.50 | N/A | N/A | |||||||||||
Total | 69,416 | - | - |
(1) Represents 69,416 shares repurchased from employees for tax withholding purposes related to the vesting of restricted stock.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
29 |
The following exhibits are filed as part of this report:
Exhibit Number |
Exhibit Title |
|
2.1*/*** | Purchase Agreement, dated as of April 1, 2015, by and among Sequential Brands Group, Inc., With You, Inc., Corny Dog, Inc., With You LLC and Jessica Simpson. | |
10.1*** | Amendment and Restatement Agreement, dated as of April 1, 2015, by and between Sequential Brands Group, Inc. and Bank of America, N.A. to the Amended and Restated First Lien Credit Agreement, dated as of August 15, 2014. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 7, 2015. | |
10.2*** | Amendment and Restatement Agreement, dated as of April 1, 2015, by and between Sequential Brands Group, Inc. and Wilmington Trust, National Association to the Second Lien Credit Agreement, dated as of August 15, 2014. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 7, 2015. | |
10.3* / *** | Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015, by and among Sequential Brands Group, Inc., the guarantors party thereto, the lenders party thereto from time to time and Bank of America, N.A., as administrative and collateral agent thereunder. | |
10.4* / *** | Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015, by and among Sequential Brands Group, Inc., the guarantors party thereto, the lenders party thereto from time to time and Wilmington Trust, National Association, as administrative and collateral agent thereunder. | |
10.5* | First Amendment to Intercreditor Agreement, dated April 8, 2015, by and between Bank of America, N.A. and Wilmington Trust, National Association. | |
10.6* / † | Amended and Restated Employment Agreement, dated as of April 14, 2015, by and between Sequential Brands Group, Inc. and Yehuda Shmidman. | |
10.7* / † | Restricted Stock Unit Award Agreement, dated as of April 14, 2015, by and between Sequential Brands Group, Inc. and Yehuda Shmidman. | |
31.1* | Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS* | XBRL Instance Document | |
101.SCH * | XBRL Taxonomy Extension Schema Document | |
101.CAL * | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF * | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB * | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE * | XBRL Taxonomy Extension Presentation Linkbase Document |
*Filed herewith.
**Furnished herewith.
*** Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this agreement have been omitted. The Registrant undertakes to supplementally furnish a copy of the omitted schedules to the Securities and Exchange Commission upon request.
† Management contract or compensatory plan, contract or arrangement.
30 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SEQUENTIAL BRANDS GROUP, INC. | |
Date: May 6, 2015 | /s/ Gary Klein |
By: Gary Klein | |
Title: Chief Financial Officer (Principal Financial Officer) |
31 |
Exhibit 2.1
EXECUTION VERSION
PURCHASE AGREEMENT
among
SEQUENTIAL BRANDS GROUP, INC.,
WITH YOU, INC.,
CORNY DOG, INC.,
WITH YOU LLC,
and
JESSICA SIMPSON
Dated as of April 1, 2015
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS | 2 |
Section 1.1 Certain Defined Terms | 2 |
Section 1.2 Table of Definitions | 6 |
ARTICLE II PURCHASE AND SALE | 7 |
Section 2.1 Purchase and Sale of the Membership Interests | 7 |
Section 2.2 Closing | 8 |
Section 2.3 Withholding Rights | 9 |
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS | 9 |
Section 3.1 Organization and Qualification | 9 |
Section 3.2 Authority | 9 |
Section 3.3 No Conflict; Required Filings and Consents | 10 |
Section 3.4 Membership Interests | 11 |
Section 3.5 Capitalization | 11 |
Section 3.6 Equity Interests | 11 |
Section 3.7 Financial Statements; No Undisclosed Liabilities | 11 |
Section 3.8 Absence of Certain Changes or Events | 12 |
Section 3.9 Compliance with Law; Permits | 12 |
Section 3.10 Litigation | 12 |
Section 3.11 Employee Benefit Plans | 13 |
Section 3.12 Labor and Employment Matters | 13 |
Section 3.13 Title to, Sufficiency and Condition of Assets | 13 |
Section 3.14 Key Customers | 14 |
Section 3.15 Intellectual Property | 14 |
Section 3.16 Tax | 16 |
Section 3.17 Revenue | 16 |
Section 3.18 Material Contracts | 16 |
Section 3.19 Affiliate Interests and Transactions | 18 |
Section 3.20 Brokers | 18 |
Section 3.21 Securities Matters | 18 |
Section 3.22 Exclusivity of Representations | 19 |
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER | 19 |
Section 4.1 Organization | 19 |
Section 4.2 Authority | 19 |
Section 4.3 No Conflict; Required Filings and Consents | 20 |
Section 4.4 Financing | 20 |
Section 4.5 Securities Issuance | 20 |
Section 4.6 Brokers | 21 |
Section 4.7 Investment Intent | 21 |
i |
ARTICLE V COVENANTS | 21 |
Section 5.1 Conduct of Business Prior to the Closing | 21 |
Section 5.2 Covenants Regarding Information | 22 |
Section 5.3 Exclusivity | 22 |
Section 5.4 Notification of Certain Matters | 22 |
Section 5.5 Intercompany Arrangements | 23 |
Section 5.6 Confidentiality | 23 |
Section 5.7 Consents and Filings; Further Assurances | 23 |
Section 5.8 Public Announcements | 25 |
Section 5.9 Contribution | 25 |
Section 5.10 Financing Cooperation | 25 |
Section 5.11 Tax Filings; 754 Election | 25 |
Section 5.12 Registration Rights | 25 |
ARTICLE VI CONDITIONS TO CLOSING | 26 |
Section 6.1 General Conditions | 26 |
Section 6.2 Conditions to Obligations of the Sellers, the Company and JS | 26 |
Section 6.3 Conditions to Obligations of the Buyer | 27 |
ARTICLE VII INDEMNIFICATION | 28 |
Section 7.1 Survival | 28 |
Section 7.2 Indemnification by the Sellers | 28 |
Section 7.3 Indemnification by the Buyer | 29 |
Section 7.4 Procedures | 29 |
Section 7.5 Limits on Indemnification | 31 |
Section 7.6 Remedies Not Affected by Investigation, Disclosure or Knowledge | 31 |
Section 7.7 Exclusive Remedy | 31 |
Section 7.8 Setoff | 32 |
ARTICLE VIII TERMINATION | 32 |
Section 8.1 Termination | 32 |
Section 8.2 Effect of Termination | 33 |
ii |
ARTICLE IX GENERAL PROVISIONS | 33 |
Section 9.1 Fees and Expenses | 33 |
Section 9.2 Amendment and Modification | 33 |
Section 9.3 Waiver | 33 |
Section 9.4 Notices | 33 |
Section 9.5 Interpretation | 34 |
Section 9.6 Entire Agreement | 35 |
Section 9.7 No Third-Party Beneficiaries | 35 |
Section 9.8 Governing Law | 35 |
Section 9.9 Submission to Jurisdiction | 35 |
Section 9.10 Assignment; Successors | 36 |
Section 9.11 Enforcement | 36 |
Section 9.12 Currency | 36 |
Section 9.13 Severability | 36 |
Section 9.14 Waiver of Jury Trial | 37 |
Section 9.15 Counterparts | 37 |
Section 9.16 Time of Essence | 37 |
Section 9.17 No Presumption Against Drafting Party | 37 |
Exhibit A Form of Contribution Agreement
Exhibit B Form of Operating Agreement
iii |
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of April 1, 2015 (this “ Agreement ” ), by and among Sequential Brands Group, Inc., a Delaware corporation (the “ Buyer ”), With You, Inc., a California corporation (“ WYI ”), Corny Dog, Inc., a California corporation (“ Corny Dog ” and, together with WYI, sometimes collectively referred to herein as the “ Sellers ”), With You LLC, a Delaware limited liability company (the “ Company ”), and Jessica Simpson, in her capacity as the sole stockholder of each of the Sellers (“ JS ”).
RECITALS
WHEREAS, WYI and Corny Dog formed the Company, and the Sellers collectively own 100% of the issued and outstanding membership interests of the Company (the “ Membership Interests ” ), of which 87.37% is owned by WYI (the “ WYI Membership Interests ”) and 12.63% is owned by Corny Dog (the “ Corny Dog Membership Interests ”);
WHEREAS, immediately prior to the execution and delivery of this Agreement, (i) WYI contributed the Included IP and the Excluded IP and (ii) Corny Dog contributed the Endorsement Rights to the Company pursuant to the Contribution Agreement (collectively, the “ Contribution ” );
WHEREAS, (i) Corny Dog wishes to sell to the Buyer, and the Buyer wishes to purchase from Corny Dog, one hundred percent (100%) of the Corny Dog Membership Interests (the “ Corny Dog Transferred Interests ” ) and (ii) WYI wishes to sell to the Buyer, and the Buyer wishes to purchase from WYI, 49.87% of the issued and outstanding Membership Interests, representing 57.08% of the WYI Membership Interests (the “ WYI Transferred Interests ” and, together with the Corny Dog Transferred Interests, the “ Transferred Interests ”), such that after giving effect to such purchase of the Transferred Interests, the Buyer shall own 62.5% of the Membership Interests and WYI shall own 37.5% of the Membership Interests;
WHEREAS, as a result of the Contribution undertaken pursuant to the Contribution Agreement, the Company owns all assets related to (i) the worldwide business of creating, designing, developing, manufacturing, marketing, selling and licensing of all consumer related lifestyle products including but not limited to all categories within the Fashion, Home, Beauty, Personal Care, Baby, Crafts, Pets, Holiday, Seasonal, Bridal, Celebrations, Travel, Floral, and Food industry segments, but specifically only excluding the Retained Assets (as defined in the Contribution Agreement), (ii) the exploitation of the Endorsement Rights; and (iii) all lines of business reasonably related or ancillary thereto (including the establishment and operation of retail stores) (the “ Business ” ); and
WHEREAS, in connection with the transactions contemplated in this Agreement, at the Closing the Buyer and WYI will execute and deliver the Operating Agreement.
AGREEMENT
In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE
I
DEFINITIONS
Section 1.1 Certain Defined Terms . For purposes of this Agreement:
“ Action ” means any claim, action, suit, inquiry, proceeding, audit or investigation by or before any Governmental Authority, or any other arbitration, mediation or similar proceeding.
“ Affiliate ” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.
“ Ancillary Agreements ” means the Operating Agreement (and the Inducement Agreement attached thereto), the Contribution Agreement, the Camuto License Agreement, and all other agreements, documents and instruments required to be delivered by any party pursuant to this Agreement, and any other agreements, documents or instruments entered into at or prior to the Closing in connection with this Agreement or the transactions contemplated hereby.
“ 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.
“ Camuto ” means, collectively, Camuto Consulting Group, Inc., a Connecticut corporation, and VCJS, LLC, a Connecticut limited liability company.
“ Camuto License Agreement ” means that certain license agreement between WYI and VCJS, LLC to be assigned to the Company at or prior to the Closing, in form and substance reasonably satisfactory to the Sellers and the Buyer.
“ Code ” means the United States Internal Revenue Code of 1986, as amended, together with all regulations promulgated and the rulings issued thereunder.
“ Conduct of the Business ” means the conduct of the Business to the extent, but only to the extent, actually conducted by the Sellers, including, but not limited to, any conduct of the Business related to Camuto or any current or former sublicensee of Camuto or the Sellers; provided , however , that all representations and warranties of the Sellers contained herein (in Articles III ) with respect to the Business conducted by Camuto or any current or former sublicensee of Camuto or the Sellers shall in all instances be qualified in their entirety by the knowledge (as such term is defined herein) of the Sellers.
“ Contract ” means any contract, agreement, arrangement or understanding, whether written or oral and whether express or implied, and any amendments thereto.
“ Contribution Agreement ” means that certain Contribution Agreement, dated March 31, 2015, by and between each of the Sellers and the Company, pursuant to which the Sellers contributed the Included IP, the Excluded IP and the Endorsement Rights to the Company, in the form of Exhibit A .
2 |
“ control ,” including the terms “ controlled by ” and “ under common control with ,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by Contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.
“ Encumbrance ” means any charge, claim, limitation, condition, equitable interest, mortgage, lien, option, pledge, security interest, easement, encroachment, right of first refusal, adverse claim or restriction of any kind, including any restriction on or transfer or other assignment, as security or otherwise, of or relating to use, quiet enjoyment, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“ Endorsement Rights ” shall have the meaning ascribed to it in the Operating Agreement.
“ Excluded IP ” shall have the meaning ascribed to it in the Operating Agreement.
“ GAAP ” means United States generally accepted accounting principles and practices, consistently applied.
“ Governmental Authority ” means any United States or non-United States federal, national, supranational, state, provincial, local or similar government, governmental, regulatory or administrative authority, branch, agency or commission or any court, tribunal, or arbitral or judicial body (including any grand jury of competent jurisdiction properly exercising executive, legislative, judicial or administration functions of the government).
“ Immediate Family ” means, with respect to any specified Person, such Person’s spouse, parents, children, grandparents, grandchildren and siblings, including adoptive relationships and relationships through marriage, or any other relative of such Person that shares such Person’s home.
“ Included IP ” shall have the meaning ascribed to it in the Operating Agreement.
“ Indebtedness ” means, as to any Person or the Business: (i) all obligations for the payment of principal, interest, penalties, fees (including loan management fees) or other liabilities for borrowed money (including guarantees) and collection costs thereof, incurred or assumed; (ii) any liability relating to any capitalized lease obligation; (iii) any obligations to reimburse the issuer of any letter of credit, surety bond, debentures, promissory notes, performance bond or other guarantee of contractual performance; (iv) all obligations under conditional sale or other title retention agreements relating to the property or assets of such Person or the Business; (v) all Indebtedness of third parties secured by a lien on property owned or acquired by such Person or the Business; (vi) all net payments that such Person or the Business will be required to make at Closing in the event of any early termination in respect of outstanding interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging agreements; (vii) any obligation of such Person or the Business that, in accordance with GAAP, would be required to be reflected as Indebtedness on the balance sheet of such Person or the Business; (viii) all obligations for the deferred purchase price of assets, property or services, including, without limitation, any royalty or earn-out payments; and (ix) any payments, fines, fees, penalties, expenses or other amounts applicable to or otherwise incurred in connection with or as a result of any prepayment or early satisfaction of any obligation described above.
3 |
“ Intellectual Property ” means all intellectual property rights arising from or associated with the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (i) trade names, trademarks, service marks, symbols, brand names, logos, domain names and other Internet addresses or identifiers, trade dress and indicia of origin, registrations and applications for each of the foregoing and goodwill associated therewith to register any of the foregoing; (ii) patents and patent applications; (iii) published and unpublished works of authorship, copyrights therein and thereto and registrations and applications for each of the foregoing; (iv) trade secrets, know-how, inventions, methods, processes and processing instructions, technical data, specifications, research and development information, technology including rights and licenses, product roadmaps, customer lists and any other information, in each case to the extent any of the foregoing derives economic value (actual or potential) from not being generally known to other persons who can obtain economic value from its disclosure or use, excluding any copyrights or patents that may cover or protect any of the foregoing (collectively, “ Trade Secrets ” ); and (v) moral rights, publicity rights, data base rights and any other proprietary or intellectual property rights of any kind or nature that do not comprise or are not protected by any of the foregoing.
“ knowledge ,” with respect to a party, means the actual knowledge of such party, in the case of an individual, or any officer or director of such party, in the case of an entity.
“ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or order of any Governmental Authority.
“ Liability ” means any and all Indebtedness, liabilities and obligations, whether accrued or fixed, known or unknown, absolute or contingent, matured or unmatured or determined or determinable.
“ Licensed Intellectual Property ” means Intellectual Property that the Company has licensed on a non-exclusive basis or is otherwise permitted by other Persons to use.
“ Material Adverse Effect ” means, as to any Person, any event, change, circumstance, occurrence, effect, result or state of facts that (i) is or would reasonably be expected to be materially adverse to the business, operations, assets, liabilities, condition (financial or otherwise), or results of operations of the Person, taken as a whole or (ii) materially impairs the ability of the Person to consummate, or prevents or materially delays, any of the transactions contemplated by this Agreement or the Ancillary Agreements or would reasonably be expected to do so; provided, however, that a “Material Adverse Effect” shall not be deemed to have occurred based upon events, occurrences, facts, conditions or changes to the extent arising out of or attributable to: (i) general economic or political conditions; (ii) any changes in Law or GAAP or interpretations thereof; (iii) conditions generally affecting the industries in which the Company or the Business operates; and (iv) any changes in financial, banking or securities markets in general, including any disruption thereof; except in each such case for such events, occurrences, facts, conditions or changes that have a materially disproportionate effect on the Company or the Business relative to other participants in the industry in which the Company or the Business operate.
4 |
“ Operating Agreement ” means that certain Amended and Restated Limited Liability Company Operating Agreement of the Company, substantially in the form of Exhibit B .
“ Original Camuto License Agreement ” means that certain Master License Agreement, by and among WYI, JS and Camuto, dated as of September 1, 2004 (as amended to date).
“ Owned Intellectual Property ” means Intellectual Property owned by or exclusively licensed to the Company.
“ Person ” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, joint venture, organization or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.
“ Registered ” shall mean issued by, registered, recorded or filed with, renewed by or the subject of a pending application before any Governmental Authority or internet domain name registrar.
“ Related Party ,” with respect to any specified Person, means: (i) any Affiliate of such specified Person, or any director, executive officer, general partner or managing member of such Affiliate; (ii) any Person who serves or within the past five years has served as a director, executive officer, general partner, managing member or in a similar capacity of such specified Person; (iii) any Immediate Family member of a Person described in clause (ii); or (iv) any other Person who holds, individually or together with any Affiliate of such other Person and any member(s) of such Person’s Immediate Family, more than 5% of the outstanding voting equity or ownership interests of such specified Person.
“ Representatives ” means, with respect to any Person, the officers, directors, principals, employees, counsel, accountants, agents, auditors, advisors, bankers and other representatives of such Person.
“ Return ” means any return, declaration, report, statement, information statement, claim for refund and other document filed or required to be filed with respect to any Tax (including any elections, declarations, schedules, amendments or attachments thereto), including, if applicable, any combined or consolidated return for any group of entities that includes a party to this Agreement.
“ Securities Act ” means the Securities Act of 1933, as amended.
“ Subsidiary ” means, with respect to any Person, another Person in which such first Person owns, directly or indirectly, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of such Person).
5 |
“ Tax ” means: (i) all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, registration, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever (including any amounts resulting from the failure to file any Return), together with any interest and any penalties, additions to tax or additional amounts with respect thereto; (ii) any liability for payment of amounts described in clause (i) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period or otherwise through operation of Law; and (iii) any liability for the payment of amounts described in clauses (i) or (ii) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other Person.
“ Transaction Expenses ” means, with respect to any Person, the aggregate amount of any and all fees and expenses incurred by or on behalf of, or paid or to be paid directly by, such Person or any other Person that the Person pays or reimburses or is otherwise legally obligated to pay or reimburse (including any such fees and expenses incurred by or on behalf of such Person’s Affiliates) in connection with the process of selling or purchasing of the Transferred Interests or any other interest in the Company or the Business or the negotiation, preparation or execution of this Agreement or the Ancillary Agreements or the performance or consummation of the transactions contemplated hereby or thereby, including (i) all fees and expenses of such Person’s counsel, advisors, consultants, investment bankers, accountants, auditors and any other experts in connection with the transactions contemplated hereby; (ii) any fees and expenses associated with obtaining necessary or appropriate waivers, consents, or approvals of any Governmental Authority or third parties on behalf of such Person in connection with the transactions contemplated hereby; (iii) all of such Person’s brokers’, finders’ or similar fees in connection with the transactions contemplated hereby; and (iv) except as set forth in this Agreement or the Ancillary Agreements, any change of control payments, bonuses, severance, termination, or retention obligations or similar amounts payable for which the Company becomes liable in connection with the transactions contemplated hereby, including any Taxes payable in connection therewith. By way of clarification, “Transaction Expenses” of the Sellers or JS or any of their Affiliates shall not include the termination fee to be paid to Camuto pursuant to Section 6.3(g) or any fees or expenses expressly assumed by the Buyer in this Agreement or the Ancillary Agreements.
Section 1.2 Table of Definitions . The following terms have the meanings set forth in the Sections referenced below:
6 |
Definition | Location |
Agreement | Preamble |
Business | Recitals |
Buyer | Preamble |
Camuto Master License Statements | 3.7(a) |
Cash Consideration | 2.1 |
Claim Notice | 7.4(a) |
Closing | 2.2(a) |
Closing Date | 2.2(a) |
Company | Recitals |
Confidentiality Agreement | 5.6 |
Contribution | Recitals |
Corny Dog | Preamble |
Corny Dog Membership Interests | Recitals |
Corny Dog Transferred Interests | Recitals |
Direct Claim | 7.4(c) |
Disclosure Schedules | Article III |
Earnest Money | 2.2(b)(i) |
Financial Statements | 3.7(a) |
Financing | 5.10 |
Fundamental Representations | 7.1(a)(i) |
HSR Act | 3.3(b) |
Indemnified Party | 7.4(a) |
Indemnifying Party | 7.4(a) |
JS | Preamble |
Key Customers | 3.14 |
Losses | 7.2 |
Material Contracts | 3.18(a) |
Membership Interests | Recitals |
Permits | 3.9(b) |
Permitted Encumbrances | 3.13(a) |
Purchase Price | 2.1 |
Sellers | Preamble |
Stock Consideration | 2.1 |
Third Party Claim | 7.4(a) |
Threshold Amount | 7.5 |
Trade Secrets | 1.1 |
Transferred Interests | Recitals |
WYI | Preamble |
WYI Membership Interests | Recitals |
WYI Transferred Interests | Recitals |
ARTICLE
II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of the Membership Interests . Upon the terms and subject to the conditions of this Agreement, at the Closing, the Sellers shall sell, assign, transfer, convey and deliver the Transferred Interests to the Buyer, free and clear of all Encumbrances, and the Buyer, in reliance on the representations, warranties and covenants of the Sellers contained herein, shall purchase the Transferred Interests from the Sellers for an aggregate purchase price of U.S One Hundred Eighteen Million Seven Hundred and Fifty Thousand Dollars ($118,750,000) consisting of: (a) U.S. One Hundred Seventeen Million Five Hundred Thousand Dollars ($117,500,000) payable to the Sellers in immediately available funds (the “ Cash Consideration ” ), and (b) 97,087 shares of common stock, par value $0.001 per share, of the Buyer to be issued to WYI (the “ Stock Consideration ” and, together with the Cash Consideration, the “ Purchase Price ”). The Purchase Price shall be apportioned between the Sellers pro rata based on the Transferred Interests sold hereunder and paid as directed by the Sellers to the Buyer in writing no later than two (2) Business Days prior to the Closing Date. The Purchase Price shall be allocated among the Company’s assets as set forth in Schedule 2.1 of the Disclosure Schedules.
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Section 2.2 Closing .
(a) The sale and purchase of the Transferred Interests shall take place at a closing (the “ Closing ”) to be held at the offices of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York 10166, at 10:00 a.m., local time on the second Business Day following the satisfaction or, to the extent permitted by applicable Law, waiver of all conditions to the obligations of the parties set forth in Article VI (other than such conditions as may, by their terms, only be satisfied at the Closing or on the Closing Date), or at such other place or at such other time or on such other date as the Sellers and the Buyer mutually may agree in writing. The day on which the Closing takes place is referred to as the “ Closing Date .”
(b) At the Closing:
(i) the Buyer shall deliver, or cause to be delivered, to the Sellers (or such other Persons as the Sellers may direct in writing at least two (2) Business Days prior to the Closing Date) by wire transfer in immediately available funds an amount equal to the Cash Consideration less the $250,000 earnest money deposit previously deposited by the Buyer to Grimes LLP, the Sellers’ counsel (the “ Earnest Money ”), which shall be released to WYI at the Closing;
(ii) the Buyer shall deliver, or cause to be delivered, to WYI evidence of the issuance of the Stock Consideration;
(iii) the Sellers shall sell, convey, assign, transfer and deliver to the Buyer the Transferred Interests and will deliver or caused to be delivered to the Buyer certificates representing the Transferred Interests, duly endorsed in blank or accompanied by powers duly endorsed in blank in proper form for transfer, with appropriate transfer stamps, if any, affixed; and
(iv) each Seller shall deliver to the Buyer (x) certified copies of resolutions of its respective board of directors and sole stockholder necessary and sufficient to authorize, adopt and approve this Agreement and the Ancillary Agreements in accordance with such Seller’s organizational documents and applicable Law, (y) certificates as to the incumbency of the Persons executing this Agreement on behalf of such Seller and the genuineness of their signatures in accordance with such Seller’s organizational documents and applicable Law, and (z) such other documents relating to the transactions contemplated in this Agreement and/or the Ancillary Agreements as the Buyer may reasonably request.
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Section 2.3 Withholding Rights . The Buyer shall be entitled to deduct and withhold from any consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable Tax Law. All such withheld amounts shall be timely paid over to the appropriate Governmental Authority and shall be treated for all purposes of this Agreement as having been paid to the applicable Person in respect to which such deduction and withholding was made.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
Except as set forth in the corresponding sections or subsections of the Disclosure Schedules of the Sellers attached hereto (collectively, the “ Disclosure Schedules ” ) (each of which shall qualify the specifically identified Sections or subsections hereof to which such Disclosure Schedule relates and shall be deemed to be disclosed and incorporated by reference in any other Disclosure Schedule for which applicability of such information and disclosure is readily apparent on its face), the Sellers hereby, jointly and severally, represent and warrant to the Buyer as follows:
Section 3.1 Organization and Qualification .
(a) Each Seller is a corporation duly organized, validly existing and in good standing under the laws of California and has full corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. Except as set forth in Schedule 3.1(a) of the Disclosure Schedules, the Company is (i) a limited liability company duly organized, validly existing and in good standing under the laws of Delaware, the jurisdiction of its formation, and has full limited liability company power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted and as currently proposed to be conducted and (ii) duly qualified or licensed as a foreign limited liability company to do business, and is in good standing, in each jurisdiction where the character of the properties and assets occupied, owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary.
(b) The Company was formed solely for the purpose of engaging in the transactions contemplated hereby and has engaged in no business other than in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.
Section 3.2 Authority . Each of JS, the Sellers and the Company have full power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by each of JS, the Sellers and the Company of this Agreement and each of the Ancillary Agreements to which it is or will be a party and the consummation by JS, the Sellers and the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action. This Agreement has been, and upon their execution each of the Ancillary Agreements to which JS, the Sellers or the Company will be a party will have been, duly executed and delivered by JS, the Sellers or the Company, as applicable, and, assuming due execution and delivery by each of the other parties hereto and thereto, this Agreement constitutes, and upon their execution each of the Ancillary Agreements to which the Sellers or the Company will be a party will constitute, the legal, valid and binding obligations of the Sellers or the Company, enforceable against the Sellers or the Company, as applicable, in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar Laws affecting the enforcement of creditors’ rights generally, and general equitable principles.
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Section 3.3 No Conflict; Required Filings and Consents .
(a) The execution, delivery and performance by the Sellers and the Company of this Agreement and each of the Ancillary Agreements to which the Sellers or the Company will be a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or violate the certificate of incorporation or bylaws or equivalent organizational documents of the Sellers or the Company; (ii) assuming compliance with the HSR Act, conflict with or violate any Law applicable to the Sellers or the Company or by which any property or asset of the Seller or the Company is bound or affected; or (iii) except as set forth in Schedule 3.3(a) of the Disclosure Schedules, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, require any consent of or notice to any Person pursuant to, give to others any right of termination, amendment, modification, acceleration or cancellation of, allow the imposition of any fees or penalties, require the offering or making of any payment or redemption, give rise to any increased, guaranteed, accelerated or additional rights or entitlements of any Person or otherwise adversely affect any rights of the Sellers or the Company under, or result in the creation of any Encumbrance on any property, asset or right of the Sellers or the Company pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other Contract to which the Sellers or the Company is a party or by which the Sellers or the Company or any of their respective properties, assets or rights are bound or affected.
(b) Neither the Sellers or the Company is required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by the Sellers or the Company of this Agreement and each of the Ancillary Agreements to which the Sellers or the Company will be a party or the consummation of the transactions contemplated hereby or thereby, or in order to prevent the termination of any right, privilege, license or qualification of the Company, except for (i) any filings, notices, authorizations, approvals, orders, permits and consents required to be made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”); (ii) such filings, notices, authorizations, approvals, orders, permits and consents as may be required by any applicable state securities or “blue sky” laws; and (iii) such filings, notices, authorizations, approvals, orders, permits and consents as specifically contemplated or required by this Agreement and the Ancillary Agreements.
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Section 3.4 Membership Interests . The Membership Interests have been duly authorized, validly issued and are fully paid and nonassessable, and not subject to any Encumbrance, except as set forth herein or in the Operating Agreement.
Section 3.5 Capitalization . The Sellers are the sole legal and beneficial owners of all of the issued and outstanding Membership Interests. Immediately following the Closing, the capitalization of the Company will be as set forth in Schedule 3.5 of the Disclosure Schedules, subject to the terms of the Operating Agreement. Except as set forth in the Operating Agreement, there are no outstanding options, warrants, convertible securities, subscriptions or other rights obligating the Company to issue any additional Membership Interests.
Section 3.6 Equity Interests . The Company does not directly or indirectly own any equity, partnership, membership or similar interest in, or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity, partnership, membership or similar interest, and is not under any current or prospective obligation to form or participate in, provide funds to, make any loan, capital contribution or other investment in any Person.
Section 3.7 Financial Statements; No Undisclosed Liabilities .
(a) True, complete and correct copies of the unaudited balance sheet of each of the Sellers as of December 31, 2014 and December 31, 2013, and the related unaudited statements of income of each of the Sellers (collectively referred to as the “ Financial Statements ”) and the Jessica Simpson Master License Historical Profit and Loss statement in connection with the Camuto License Agreement for each of the years 2009–2014 and pro forma for 2015 (collectively referred to as the “ Camuto Master License Statements ”), are attached hereto as Schedule 3.7(a) of the Disclosure Schedules. Except as set forth on Schedule 3.7(a) of the Disclosure Schedules, the Financial Statements were prepared on a cash tax basis and each of the Financial Statements and the Camuto Master License Statements (i) are correct and complete in all material respects and have been prepared in accordance with the books and records of the Sellers and/or the Business, (ii) have been prepared in accordance with sound accounting practices applied on a consistent basis throughout the periods indicated, and (iii) fairly present in all material respects the financial position and results of operations of the Sellers and/or the Business, as applicable, as of the respective dates thereof and for the respective periods indicated therein; provided , however , that the Financial Statements do not have any footnotes and may be subject to year-end audit adjustments. The books of account and financial records of the Sellers and the Business, as applicable, are true and correct in all material respects and have been prepared and are maintained in accordance with sound accounting practice.
(b) Neither the Company nor the Business has any Indebtedness, Liability or obligation of any kind or nature, whether accrued, absolute, contingent or otherwise, whether known or unknown and whether or not required by GAAP to be reflected in a balance sheet of the Company or disclosed in the notes thereto, except: (i) post-Closing Liabilities under Contracts disclosed in the Disclosure Schedules; and (ii) Liabilities specifically disclosed in Schedule 3.7(b) of the Disclosure Schedules. As of the Closing, except as set forth in the Operating Agreement, the Company will have no, and the Buyer will not become subject to any, Liabilities, primary or secondary, direct or indirect, liquidated, absolute, determined, determinable, accrued, contingent or otherwise, arising out of, relating to, or in connection with the Contribution or the purchase and sale of the Transferred Interests.
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(c) None of the Sellers, the Company or the Business has engaged independent auditors to perform review or attestation services in respect of the Financial Statements.
Section 3.8 Absence of Certain Changes or Events . Since December 31, 2014, except in connection with the execution and delivery of this Agreement and each of the Ancillary Agreements and the transactions contemplated hereby and thereby, (a) the Sellers and/or the Company, as applicable, has conducted the Business only in the ordinary course consistent with past practice; (b) except as set forth on Schedule 3.8(b) of the Disclosure Schedules, there has not been any change, event or development or prospective change, event or development that, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect with respect to the Sellers, the Company and/or the Business; (c) the Business has not suffered any loss, damage, destruction or other casualty affecting any of its material properties or assets, whether or not covered by insurance; and (d) neither the Company nor the Business has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 5.1.
Section 3.9 Compliance with Law; Permits .
(a) The Business is and has been in compliance in all material respects with all Laws applicable to it. To the knowledge of the Sellers, none of the Sellers, the Company, the Business or any of its employees has received during the past five years, nor is has there been threatened, any notice, order, complaint or other communication from any Governmental Authority or any other Person that the Company or the Business is not in compliance in any material respect with any Law applicable to it.
(b) Except as set forth in Schedule 3.9(b) of the Disclosure Schedules, the Company or the Business is in possession of all permits, licenses, franchises, approvals, certificates, consents, waivers, concessions, exemptions, orders, registrations, notices or other authorizations of any Governmental Authority sufficient and adequate for it to carry on the Business in all material respects as currently conducted (the “ Permits ”). The Company and the Business are and have been in compliance in all material respects with all such Permits. No suspension, cancellation, modification, revocation or nonrenewal of any Permit is pending or, to the knowledge of the Seller, threatened. The Company or the Business will continue to have the use and benefit of all Permits, in all material respects, following consummation of the transactions contemplated hereby. Except as set forth in Schedule 3.9(b) of the Disclosure Schedules, no Permit is held in the name of any employee, officer, director, stockholder, agent or otherwise on behalf of the Company or the Business.
Section 3.10 Litigation . Except as set forth on Schedule 3.10 of the Disclosure Schedules, there is no Action pending or, to the knowledge of the Sellers, threatened against the Company, the Business, or any material property or asset of the Company or the Business, or any of the executive officers of the Company in regards to their actions as such. Except with respect to any approvals required under the HSR Act, there is no Action pending or, to the knowledge of the Sellers, threatened seeking to prevent, hinder, modify, delay or challenge the transactions contemplated by this Agreement or the Ancillary Agreements. There is no outstanding order, writ, judgment, injunction, decree, determination or award of, or pending or, except as with respect to any approvals required under the HSR Act, to the knowledge of the Seller, threatened investigation by, any Governmental Authority relating to the Company, the Business, any of their respective properties or assets, any of its respective officers or directors, or the transactions contemplated by this Agreement or the Ancillary Agreements. Except as set forth on Schedule 3.10 of the Disclosure Schedules, there is no Action by the Company pending, or which the Company has commenced preparations to initiate, against any other Person.
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Section 3.11 Employee Benefit Plans . Except as set forth on Schedule 3.11 of the Disclosure Schedules, the Sellers sponsor no, and have no direct or contingent Liability with respect to, any employee benefit, plan, program or arrangement (including, without limitation, any employee benefit plan as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended). Except as set forth on Schedule 3.11 of the Disclosure Schedules, there are no Contracts between either of the Sellers and any employee, officer or director of such Seller, including any Contracts relating in any way to a sale of the Transferred Interests or the other transactions contemplated hereby or pursuant to the Ancillary Agreements. Except as set forth in Schedule 3.11 of the Disclosure Schedules, each plan, agreement or arrangement subject to Section 409A of the Code has materially complied in form and operation with the requirements of Section 409A of the Code as in effect from time-to-time. Except as set forth in Schedule 3.11 of the Disclosure Schedules, neither of the Sellers is a party to any Contract, agreement or arrangement that could, to the knowledge of the Sellers, directly or in combination with other events, result, separately or in the aggregate, in the payment, acceleration or enhancement of any benefit as a result of the transactions contemplated by this Agreement, including, without limitation, the payment of any “excess parachute payments” within the meaning of Section 280G of the Code.
Section 3.12 Labor and Employment Matters . The Company is not a party to any labor or collective bargaining contract that pertains to employees of the Company. There are no pending or, to the knowledge of the Company, threatened Actions concerning labor matters with respect to the Company.
Section 3.13 Title to, Sufficiency and Condition of Assets .
(a) The Company has good and valid title to or a valid leasehold interest in, a valid license for or valid right to use all of its assets, including all of the assets reflected in the Financial Statements and contributed to the Company pursuant to the Contribution or acquired in the ordinary course of business since the date of the Financial Statements, except those sold or otherwise disposed of for fair value since the date of the Financial Statements in the ordinary course of business consistent with past practice. None of the assets owned, leased, licensed or used by the Company or the Business are subject to any Encumbrance, other than: (i) liens for Tax not yet due and payable or not yet past due and for which adequate reserves have been established in accordance with sound accounting practices; (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s and carriers’ liens arising in the ordinary course of business of the Sellers, the Company or the Business consistent with past practice; (iii) any such matters of record, Encumbrances and other imperfections of title that do not, individually or in the aggregate, materially impair the value, or the continued ownership, use and operation of the assets to which they relate by the Company or the Business as currently conducted; (iv) Encumbrances set forth in the Operating Agreement; and (v) those Encumbrances set forth on Schedule 3.13(a) of the Disclosure Schedules (collectively, “ Permitted Encumbrances ”).
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(b) After giving effect to the Contribution, the assets owned, leased, licensed or used by the Company constitute all of the assets necessary in all material respects for the Company to carry on the Business as currently conducted and proposed to be conducted.
(c) All tangible assets owned, leased, licensed or used by the Company or the Business have been maintained in all material respects in accordance with generally accepted industry practice, are in all material respects in good operating condition and repair, ordinary wear and tear excepted, and are adequate for the uses to which they are being put.
(d) Neither the Company nor the Sellers owns or leases, or has ever owned a fee interest in or leased, any real property.
Section 3.14 Key Customers . Schedule 3.14 of the Disclosure Schedules sets forth a true, correct and complete list of the Business’s top 10 licensees or sub-licensees by revenue for the fiscal year ending December 31, 2014 (collectively, the “ Key Customers ” ). Except as set forth on Schedule 3.14 of the Disclosure Schedules, since January 1, 2014, none of the Key Customers (i) has cancelled or otherwise terminated, or threatened to cancel or otherwise terminate, its relationship with the Business or (ii) has taken any action or, to the knowledge of the Sellers, threatened to take any action, that would reasonably be expected to reduce the Business’s revenue on account of such Key Customer by 10% or more on a year-over-year basis.
Section 3.15 Intellectual Property .
(a) Schedule 3.15(a) of the Disclosure Schedules sets forth a true and complete list of all Owned Intellectual Property that is Registered and all material Owned Intellectual Property that is not Registered, identifying for each whether it is owned by or exclusively licensed to the Company. Notwithstanding anything contained in this Agreement to the contrary, the Buyer expressly acknowledges that no assignments of Owned Intellectual Property from the Sellers to the Company have been filed with the United States Patent and Trademark Office or any similar Governmental Authority and it shall be the Company’s obligation, at the Company’s cost and expense to make such filings after the Closing.
(b) Except as set forth in Schedule 3.15(b) of the Disclosure Schedules, no Owned Intellectual Property has been or is now involved in any opposition, cancellation, public protest, domain name dispute resolution, interference, reissue, reexamination, mediation or arbitration proceeding and, to the knowledge of the Sellers, no such proceeding is or has been threatened with respect to any of the Owned Intellectual Property.
(c) The Company owns or otherwise holds valid rights to use all Intellectual Property used in the operation of the Business as currently conducted. The Company exclusively owns, free and clear of any and all Encumbrances other than Permitted Encumbrances, all Owned Intellectual Property. The Company has not received any notice or claim challenging the Company’s ownership of any of the Owned Intellectual Property, nor to the knowledge of the Sellers is there a reasonable basis for any such claim.
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(d) Except as set forth in Schedule 3.15(d) of the Disclosure Schedules, except as would not, individually or in the aggregate, be material to the Company or the Business, taken as a whole, the Company and the Business has taken all reasonable steps in accordance with standard industry practices to protect its rights in its Owned Intellectual Property and at all times has maintained the confidentiality of all information that constitutes or constituted a Trade Secret of the Company. To the knowledge of the Sellers, no unauthorized disclosure of any such Trade Secrets has occurred. Except as set forth on Schedule 3.15(d) of the Disclosure Schedules, all current and former employees, consultants and contractors of the Sellers carrying out the Business have executed and delivered proprietary information, confidentiality and assignment agreements substantially in the Sellers’ standard forms. All Intellectual Property developed by or for the Company was conceived, invented, reduced to practice, authored or otherwise created solely by either employees of the Business acting within the scope of their employment, or independent contractors of the Business.
(e) All Owned Intellectual Property is valid and subsisting and, to the knowledge of the Sellers, enforceable, except to the extent Sellers or the Company have determined to abandon the Intellectual Property set forth on Schedule 3.15(e) of the Disclosure Schedules in the exercise of their reasonable business judgment. Neither the Company nor any of the Sellers has received any notice or claim challenging the validity or enforceability of any Owned Intellectual Property or Licensed Intellectual Property or alleging any misuse of the Owned Intellectual Property or Licensed Intellectual Property. Except with respect to the abandoned Intellectual Property set forth on Schedule 3.15(e) of the Disclosure Schedules, the Company or the Business has not taken any action or failed to take any action that could reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the Owned Intellectual Property (including the failure to pay any filing, examination, issuance, post registration and maintenance fees, annuities and the like and the failure to disclose any known material prior art in connection with the prosecution of patent applications).
(f) To the knowledge of the Sellers, the development, manufacture, sale, distribution or other commercial exploitation of products and the provision of any services by the Company, if any, and all of the other activities or operations of the Company, in each case in connection with the Business, have not infringed upon, misappropriated, violated, diluted or constituted the unauthorized use of, any Intellectual Property of any third party, and the Company or the Business has not received any notice or claim asserting or suggesting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring or has or may have occurred, nor to the knowledge of the Sellers, is there a reasonable basis therefor. Except as set forth in Schedule 3.15(a) of the Disclosure Schedules, no Owned Intellectual Property is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use or licensing thereof by the Company or the Business. Except as set forth in Schedule 3.15(a) of the Disclosure Schedules, to the knowledge of the Sellers, no third party is misappropriating, infringing, diluting or violating any Owned Intellectual Property.
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(g) Except as set forth in Schedule 3.15(a) of the Disclosure Schedules, the Company or the Business has not transferred ownership of, or granted any exclusive license with respect to, any Owned Intellectual Property. Upon the consummation of the Closing, the Company shall continue to own all of the Owned Intellectual Property rights reasonably necessary for the conduct of the Business as it is currently conducted and all of such rights shall be exercisable by the Company to the same extent as prior to the Closing. No loss or expiration of any of the Owned Intellectual Property used by the Business as currently conducted is threatened, or, to the knowledge of the Sellers, pending or reasonably foreseeable.
(h) The Owned Intellectual Property and the Licensed Intellectual Property constitute all of the Intellectual Property reasonably necessary for the Company to operate the Business as currently conducted. The execution, delivery and performance by the Sellers and the Company of this Agreement and the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby, will not give rise to any right of any third party to terminate or re-price or otherwise modify any of the Company’s or the Business’s rights or obligations under any Licensed Intellectual Property.
Section 3.16 Tax . The Company has in a timely manner filed all tax Returns required to be filed by it and has paid all Taxes required to be paid by it. All such tax Returns are true, correct and complete in all material respects. There are no liens for Taxes on any assets of the Company other than for Taxes not yet due and payable. No jurisdiction in which the Company does not file tax Returns has notified the Company that it is required to file tax Returns or pay Taxes in such jurisdiction. The Company is not a party to a tax sharing agreement or similar arrangement. At all times since formation, the Company has been classified as a partnership for U.S. federal income tax purposes.
Section 3.17 Revenue . Schedule 3.17 of the Disclosure Schedules sets forth a true, correct and complete schedule of the aggregate gross revenue generated by the Sellers in connection with the Business in fiscal year 2014. During fiscal year 2014, the Business generated, properly recorded and collected no less than $20.9 million in revenue.
Section 3.18 Material Contracts .
(a) Except as set forth in Schedule 3.18(a) of the Disclosure Schedules and except with respect to this Agreement and the Ancillary Agreements, the Company is not a party to nor is the Company or the Business bound by any Contract of the following nature (such Contracts as are required to be set forth in Schedule 3.18(a) of the Disclosure Schedules being “ Material Contracts ”):
(i) any Contract materially and primarily relating in whole or in part to any Intellectual Property, including any license of any Intellectual Property and any Contracts that relate to advertising services;
(ii) any Contract relating to or evidencing Indebtedness;
(iii) any Contract pursuant to which the Business or the Company has provided funds to or made any loan, capital contribution or other investment in, or assumed any liability or obligation of, any Person, including take-or-pay contracts or keepwell agreements;
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(iv) any Contract with any Governmental Authority or relating to settlement of any administrative or judicial proceedings within the past five years;
(v) any Contract with any Related Party of the Company;
(vi) any employment or consulting Contract;
(vii) any insurance policies relating to the Company or the Business;
(viii) any Contract that limits, or purports to limit, the ability of the Company to compete in any line of business or with any Person or in any geographic area or during any period of time, or that restricts the right of the Company to sell to or purchase from any Person or to hire any Person, or that grants the other party or any third person “most favored nation” status or any type of special discount rights;
(ix) to the knowledge of the Sellers, any Contract that requires a consent to or otherwise contains a provision relating to a “change of control,” or that would prohibit or delay the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements;
(x) any Contract providing for indemnification to or from any Person with respect to Liabilities relating to any current or former business of the Company or any predecessor Person;
(xi) any joint venture or partnership, merger, asset or purchase or divestiture Contract relating to the Company;
(xii) any Contract for the purchase of any debt or equity security or other ownership interest of any Person, or for the issuance of any debt or equity security or other ownership interest, or the conversion of any obligation, instrument or security into debt or equity securities or other ownership interests of, the Company; or
(xiii) any other Contract, whether or not made in the ordinary course of business that (A) involves a future or potential liability or receivable, as the case may be, in excess of $25,000 on an annual basis or in excess of $100,000 over the current Contract term, (B) has a term greater than one year and cannot be cancelled by the Company without penalty or further payment and without more than 30 days’ notice or (C) is material to the business, operations, assets, financial condition, results of operations or prospects of the Company, taken as a whole.
(b) Except as set forth on Schedule 3.18(a) of the Disclosure Schedules, each Material Contract is a legal, valid, binding and enforceable agreement against the Company and, to the Sellers’ knowledge, the other parties thereto, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally, and general equitable principles, and is in full force and effect and will continue to be in full force and effect on identical terms immediately following the Closing Date. None of the Company or, to the knowledge of the Sellers, any other party is in material breach or violation of, or (with or without notice or lapse of time or both) default under, any Material Contract, nor has the Company received any claim of any such breach, violation or default. To the knowledge of the Sellers, no facts or circumstances exist that would give rise to any claim of any such breach, violation or default. The Sellers have delivered or made available to the Buyer true and complete copies of all Material Contracts, including any amendments thereto.
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Section 3.19 Affiliate Interests and Transactions . Except as set forth in Schedule 3.19 of the Disclosure Schedules:
(a) No Related Party of the Sellers or the Company: (i) owns, directly or indirectly, any equity or other financial or voting interest in any competitor, supplier, licensor, lessor, distributor, independent contractor or customer of the Company or the Business (other than equity or voting interests that do not exceed 5% of the outstanding equity or voting interests of a publicly traded company); (ii) owns or has owned, directly or indirectly, or has or has had any interest in any material property (real or personal, tangible or intangible) that the Company uses or has used in the Business; (iii) has any material business dealings or a material financial interest in any transaction with the Company or involving any assets or property of the Company; or (iv) is or has been employed by the Company.
(b) Except for this Agreement and the Ancillary Agreements, there are no Contracts by and between the Company, on the one hand, and any Related Party of the Sellers or the Company, on the other hand, pursuant to which such Related Party provides or receives any material information, assets, properties, support or other services to or from the Company (including Contracts relating to billing, financial, tax, accounting, data processing, human resources, administration, legal services, information technology and other corporate overhead matters).
(c) There are no outstanding notes payable to, accounts receivable from or advances by the Company to, and the Company is not otherwise a debtor or creditor of, and does not have any Liability or other obligation of any nature to, any Related Party of the Sellers or the Company. Since December 31, 2014, the Company has not incurred any obligation or Liability to, and has not entered into or agreed to enter into any transaction with or for the benefit of, any Related Party of the Sellers or the Company, other than the transactions contemplated by this Agreement and the Ancillary Agreements.
Section 3.20 Brokers . No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Sellers or the Company.
Section 3.21 Securities Matters .
(a) WYI is an “accredited investor” as such term is defined in Rule 501(a) promulgated under the Securities Act, and is financially able to hold the Stock Consideration to be received hereunder for long-term investment and to suffer a complete loss of such investment. The Stock Consideration to be received by WYI hereunder is being obtained by WYI for its own account for investment purposes, and not with a view to any distribution thereof in violation of the Securities Act. WYI has had the opportunity to ask questions of the Buyer and its officers and employees and to receive to WYI’s satisfaction such information about the business and financial condition of the Buyer as WYI considers necessary or appropriate for deciding whether to acquire the Stock Consideration, and WYI is fully capable of understanding and evaluating the risks associated with the ownership of the Stock Consideration to be received by WYI hereunder.
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(b) WYI has conducted its own diligence investigation with respect to the merits and risks associated with its investment in the Stock Consideration to be received by it hereunder. Notwithstanding that representatives of the Buyer may have provided information to WYI, WYI is not relying on, and has not relied on, any representation by the Buyer or any Affiliate or Representative of the Buyer with respect to any aspect of the business or prospects of the Buyer or its subsidiaries, other than the representations and warranties of the Buyer hereunder.
(c) WYI understands and acknowledges that the Stock Consideration to be received by it hereunder are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Buyer in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, WYI represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
Section 3.22 Exclusivity of Representations . Except as and to the extent set forth in this Agreement and the Ancillary Agreements and in the case of fraud or intentional misrepresentation, each of the Sellers, the Company and JS makes no representations or warranties, express or implied, with respect to itself, the Company, or any of their businesses, the Business, assets or Liabilities, to the Buyer or any other Person, and each of the Sellers, the Company and JS hereby disclaims all liability and responsibility for any other information, representation or warranty made, communicated or furnished to the Buyer or any of its Affiliates, Representatives or financing sources, including, without limitation, in connection with the Financing.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers, the Company and JS as follows:
Section 4.1 Organization . The Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has full corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. The Buyer is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties and assets owned, leased and operated by it or the nature of its business makes such qualification or licensing necessary.
Section 4.2 Authority . The Buyer has full corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Buyer of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by the Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action. This Agreement has been, and upon their execution each of the Ancillary Agreements to which the Buyer will be a party will have been, duly executed and delivered by the Buyer and, assuming due execution and delivery by each of the other parties hereto and thereto, this Agreement constitutes, and upon their execution each of the Ancillary Agreements to which the Buyer will be a party will constitute, the legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms.
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Section 4.3 No Conflict; Required Filings and Consents .
(a) The execution, delivery and performance by the Buyer of this Agreement and each of the Ancillary Agreements to which the Buyer will be a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or violate the certificate of incorporation or bylaws of the Buyer; (ii) conflict with or violate any Law applicable to the Buyer or by which any property or assets of the Buyer is bound or affected; or (iii) result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, require any consent of or notice to any Person pursuant to, give to others any right of termination, amendment, modification, acceleration or cancellation of, allow the imposition of any fees or penalties, require the offering or making of any payment or redemption, give rise to any increased, guaranteed, accelerated or additional rights or entitlements of any Person or otherwise adversely affect any rights of the Buyer under, or result in the creation of any Encumbrance on any property, asset or right of the Buyer pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other Contract to which the Buyer is a party, in each case in a manner that would reasonably be expected to prevent the Buyer from consummating the transactions contemplated by this Agreement and the Ancillary Agreements.
(b) The Buyer is not required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by the Buyer of this Agreement and each of the Ancillary Agreements to which it will be party or the consummation of the transactions contemplated hereby or thereby, or in order to prevent the termination of any right, privilege, license or qualification of the Buyer, except for (i) any filings required to be made under the HSR Act and (ii) such filings as may be required by any applicable federal or state securities or “blue sky” laws.
Section 4.4 Financing . The Buyer has, or shall have at the Closing, sufficient funds to permit the Buyer to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.
Section 4.5 Securities Issuance . The shares comprising the Stock Consideration being delivered by the Buyer to WYI hereunder are and shall be duly and validly issued, fully paid, nonassessable and owned of record and beneficially by WYI free of all Encumbrances and restrictions on transfer, other than restrictions on transfer contemplated by this Agreement, under applicable securities laws and as created by WYI. Assuming the accuracy of the representations and warranties as set forth in Section 3.21, the Stock Consideration will be issued in compliance with all applicable securities laws and other applicable Laws and without contravention of any other Person’s or entity’s rights therein or with respect thereto. Subject to restrictions on transfer provided in this Agreement, under applicable Law and as created by WYI, WYI will receive good and marketable title to the Stock Consideration to be received by WYI hereunder.
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Section 4.6 Brokers . No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Buyer.
Section 4.7 Investment Intent . The Buyer is acquiring the Transferred Interests for its own account for investment purposes only and not with a view to any public distribution thereof or with any intention of selling, distributing or otherwise disposing of the Transferred Interests in a manner that would violate the registration requirements of the Securities Act.
ARTICLE
V
COVENANTS
Section 5.1 Conduct of Business Prior to the Closing . Between the date of this Agreement and the Closing, unless the Buyer shall otherwise agree in writing and except as contemplated by this Agreement, the Ancillary Agreements and the Original Camuto License Agreement, the Sellers shall cause the Business to be conducted only in the ordinary course of business consistent with past practice, and shall cause the Company and the Business to use commercially reasonable efforts to (i) preserve substantially intact their business organization and assets; (ii) keep available the services of the current officers, employees and consultants of the Company and the Business; (iii) preserve the current relationships of the Company and the Business with customers, suppliers, licensees and other persons with which the Company or the Business have significant business relations; and (iv) keep and maintain their assets and properties in good repair and normal operating condition, wear and tear excepted. By way of amplification and not limitation, except as contemplated by this Agreement, the Ancillary Agreements and the Original Camuto License Agreement, between the date of this Agreement and the Closing Date, the Sellers, in respect of the Company or the Business, as applicable, shall not, do or propose to do, directly or indirectly, any of the following without the prior written consent of the Buyer:
(a) take any actions with respect to the Company’s capital structure or organizational structure, or amend or otherwise change its certificate of formation or operating agreement or equivalent organizational documents;
(b) issue, sell, pledge, transfer, dispose of or otherwise subject to any Encumbrance, except a Permitted Encumbrance (i) any Membership Interests, or any options, warrants, convertible securities or other rights of any kind to acquire any such Membership Interests, or any other equity or ownership interest in the Company or the Business or (ii) any properties or assets of the Company or the Business, other than sales of inventory or other products by licensees of the Business in the ordinary course of business;
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(c) acquire any corporation, partnership, limited liability company, other business organization or division thereof or any material amount of assets, or enter into any joint venture, strategic alliance, exclusive dealing, noncompetition or similar Contract or arrangement;
(d) incur any Indebtedness or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any Person, or make any loans or advances;
(e) enter into, amend, waive, modify or consent to the termination of any lease, any Contract in respect of any Owned Intellectual Property, any Material Contract, or materially amend, waive, modify or consent to the termination of the Company’s or the Business’ rights thereunder;
(f) permit the lapse of any right relating to Owned Intellectual Property or any other intangible asset used in the Business; or
(g) agree or commit to do any of the foregoing.
Section 5.2 Covenants Regarding Information . From the date hereof until the Closing Date, the Sellers shall, and shall cause the Company to, afford the Buyer and its Representatives complete access (including for inspection and copying) at all reasonable times to the Representatives, properties, offices, plants and other facilities, books and records of the Sellers and the Company, and shall furnish the Buyer with such financial, operating and other data and information as the Buyer may reasonably request.
Section 5.3 Exclusivity . The Sellers agree that between the date of this Agreement and the earlier of the Closing and the termination of this Agreement, the Sellers shall not, and shall take all action necessary to ensure that none of the Company or any of its respective Affiliates or Representatives shall, directly or indirectly, except as contemplated by this Agreement, the Ancillary Agreements and the Original Camuto License Agreement, (a) solicit, initiate, consider, encourage or accept any other proposals or offers from any Person relating to any direct or indirect acquisition or purchase of all or any portion of the capital stock or other equity or ownership interest of the Company or any of the assets or Owned Intellectual Property of the Company or the Business, to enter into any merger, consolidation or other business combination relating to the Company or the Business or to enter into any other business transaction involving or otherwise relating to the Company; or (b) participate in any discussions, conversations, negotiations or other communications regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any other Person to seek to do any of the foregoing. The Sellers immediately shall cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons conducted heretofore with respect to any of the foregoing. The Sellers shall notify the Buyer promptly, but in any event within 2 days, orally and in writing if any such proposal or offer, or any inquiry or other contact with any Person with respect thereto, is made.
Section 5.4 Notification of Certain Matters . The Sellers shall give prompt written notice to the Buyer of (a) the occurrence or non-occurrence of any change, condition or event the occurrence or non-occurrence of which would render any representation or warranty of the Sellers contained in this Agreement or any Ancillary Agreement, if made on or immediately following the date of such event, untrue or inaccurate, (b) the occurrence of any change, condition or event that has had or is reasonably likely to have a Material Adverse Effect, (c) any failure of the Sellers, the Company or any other Affiliate of the Sellers to comply with or satisfy any covenant or agreement to be complied with or satisfied by it hereunder or any event or condition that would otherwise result in the nonfulfillment of any of the conditions to the Buyer’s obligations hereunder, (d) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements, or (e) any Action pending or, to the Sellers’ knowledge, threatened against a party or the parties relating to the transactions contemplated by this Agreement or the Ancillary Agreements.
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Section 5.5 Intercompany Arrangements . Except as set forth in Schedule 5.5 of the Disclosure Schedules or as expressly contemplated by this Agreement or the Ancillary Agreements, all intercompany and intracompany accounts or contracts between the Company or the Business, on the one hand, and the Sellers and their Affiliates, on the other hand, shall be cancelled without any consideration or further liability to the Company or the Business and without the need for any further documentation, immediately prior to the Closing.
Section 5.6 Confidentiality . Each of the parties shall hold, and shall cause its Representatives to hold, in confidence all documents and information furnished to it by or on behalf of the other party in connection with the transactions contemplated hereby pursuant to the terms of the confidentiality agreement dated November 4, 2014 between the Buyer and WYI (the “ Confidentiality Agreement ” ), which shall continue in full force and effect until the Closing Date, at which time such Confidentiality Agreement and the obligations of the parties under this Section 5.6 shall terminate. If for any reason this Agreement is terminated prior to the Closing Date, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms.
Section 5.7 Consents and Filings; Further Assurances .
(a) The Sellers and the Buyer shall use commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as promptly as practicable, including to (i) obtain from Governmental Authorities and other Persons all consents, approvals, authorizations, qualifications and orders as are necessary for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, (ii) promptly make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under the HSR Act or any other applicable Law and (iii) have vacated, lifted, reversed or overturned any order, decree, ruling, judgment, injunction or other action (whether temporary, preliminary or permanent) that is then in effect and that enjoins, restrains, conditions, makes illegal or otherwise restricts or prohibits the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements. In furtherance and not in limitation of the foregoing, the Sellers shall permit the Buyer reasonably to participate in the defense and settlement of any claim, suit or cause of action relating to this Agreement or the transactions contemplated hereby, and the Sellers shall not settle or compromise any such claim, suit or cause of action without the Buyer’s written consent.
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(b) Notwithstanding anything herein to the contrary, the Buyer shall not be required by this Section 5.7 to take or agree to undertake any action, including entering into any consent decree, hold separate order or other arrangement, that would (A) require the divestiture of any assets of the Buyer, the Company or any of their respective Affiliates, (B) limit the Buyer’s freedom of action with respect to, or its ability to consolidate and control, the Company or any of its assets or businesses or any of the Buyer’s or its Affiliates’ other assets or businesses or (C) limit the Buyer’s ability to acquire or hold, or exercise full rights of ownership with respect to, the Transferred Interests.
(c) JS and the Sellers acknowledge and agree that, other than with respect to her Commercial Persona (as defined in the Contribution Agreement) associated with the Retained Assets, JS has, prior to the date hereof, assigned all right, title and interest in and to her Commercial Persona (i.e., other than to the extent associated with the Retained Assets), to the Sellers, and that JS’s Commercial Persona associated with the Transferred Assets (as defined in the Contribution Agreement) constitutes all such right, title and interest in and to JS’s Commercial Persona (other than to the extent associated with the Retained Assets), which have been transferred to the Company pursuant to the Contribution Agreement. Among other things, the Sellers have contributed to the Company all Owned Intellectual Property, all rights under Contracts (other than the Retained Assets), including Contracts relating to any obligation for JS to provide personal services to the Business and any rights surviving the termination of the Original Camuto License Agreement, and advances in respect of any royalties not fully earned as well as all prepaid advertising assets, in each case related to the Business. From time to time after the Closing, and for no further consideration, each of the parties shall, and shall cause its Affiliates to, execute, acknowledge and deliver such assignments, transfers, consents, assumptions and other documents and instruments and take such other actions as may be necessary or desirable to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements (including the contribution of the Intellectual Property and assets contemplated by the Contribution Agreement). The Sellers and the Buyer agree that, in the event that any consent, approval or authorization necessary or desirable to preserve for the Company any right or benefit under any lease, license, commitment, Permit or other Contract to which the Company is a party is not obtained prior to the Closing, the Sellers and the Buyer will, subsequent to the Closing, cooperate with each other or the Company in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable.
(d) In the event that any amounts otherwise payable to the Company with respect to periods following the date of this Agreement, including any royalty payments under current or former license agreements, including, without limitation, the Camuto License Agreement, are received by the Sellers or any of their respective Affiliates (other than the Company) following the date of this Agreement, such amounts shall be promptly (and in any event within 30 days) forwarded and remitted to the Company or its designee. In the event that any amounts otherwise payable to the Company or the Sellers with respect to periods prior to or on the date of this Agreement, including any royalty payments under current or former license agreements, including, without limitation, the Original Camuto License Agreement, are received by the Company or any of its Affiliates (other than the Sellers) following the date of this Agreement, such amounts shall be promptly (and in any event within 30 days) forwarded and remitted to the Sellers or their respective designee, as applicable.
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Section 5.8 Public Announcements . On and after the date hereof and through the Closing Date, the parties shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, and no party shall issue any press release or make any public statement with respect to this Agreement or the transactions contemplated hereby prior to obtaining the written approval of all other parties hereto, which approval shall not be unreasonably withheld, except that no such approval shall be necessary to the extent disclosure may be required by applicable Law or any listing agreement of any party hereto.
Section 5.9 Contribution . The Sellers shall consummate the Contribution prior to Closing upon the terms set forth in the Contribution Agreement.
Section 5.10 Financing Cooperation . The Sellers shall, and shall cause the Company to use its commercially reasonable efforts to, and to cause its Affiliates and Representatives (including legal and accounting advisors) to, cooperate in connection with the arrangement of any financing that Buyer may seek in connection with the transactions contemplated hereby (the “ Financing ” ), as may be reasonably requested by the Buyer. Such cooperation shall include (i) making senior employees of the Company or the Business available to participate in a reasonable number of due diligence and drafting sessions; (ii) assisting with the preparation of customary materials regarding the Company or the Business for any offering memorandum, bank book or similar documents reasonably required in connection with the Financing; and (iii) furnishing the Buyer with unaudited quarterly or annual financial statements, financial data and other financial information regarding the Business, the Sellers and the Company.
Section 5.11 Tax Filings; 754 Election . The Sellers shall prepare and file all Returns of the Company for all taxable periods that end on or before the Closing Date and shall pay all Taxes shown to be due thereon. For the taxable year of the Company that ends on the Closing Date, the Sellers shall cause the Company to make the election provided for in Section 754 of the Code on the Company’s U.S. federal income tax return.
Section 5.12 Registration Rights . At any time during the six months following the Closing, if the Buyer proposes to register (including, for this purpose, a registration effected by the Buyer for its existing stockholders) any of its common stock under the Securities Act in connection with the public offering of such securities solely for cash (other than (i) a registration relating to the sale of securities to employees of the Buyer or a Subsidiary pursuant to a stock option, stock purchase, or similar plan, (ii) a registration relating to a Rule 145 transaction, (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Stock Consideration; or (iv) a registration in which the only common stock being registered is common stock issuable upon conversion of debt securities that are also being registered), the Buyer shall, at such time, promptly give WYI notice of such registration. Upon the request of WYI given within ten days after such notice is given by the Buyer, the Buyer shall, subject to customary limitations and cutbacks, cause to be registered all of the shares of common stock that WYI has requested to be included in such registration. The Buyer shall have the right to terminate or withdraw any registration initiated by it under this Section 5.12 before the effective date of such registration, whether or not WYI has elected to include any shares in such registration.
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ARTICLE
VI
CONDITIONS TO CLOSING
Section 6.1 General Conditions . The respective obligations of the parties to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may, to the extent permitted by applicable Law, be waived in writing by either the Buyer or the Sellers (on behalf of themselves, the Company and JS) in its sole discretion ( provided , that such waiver shall only be effective as to the obligations of such party and, in the case of the Sellers, the Company and JS):
(a) No Injunction or Prohibition . No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is then in effect (and has not been vacated, diminished or withdrawn prior to the Closing) and that enjoins, restrains, conditions, makes illegal or otherwise prohibits the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements.
(b) HSR Act . Any waiting period (and any extension thereof) under the HSR Act applicable to the transactions contemplated by this Agreement and the Ancillary Agreements shall have expired or shall have been terminated.
Section 6.2 Conditions to Obligations of the Sellers, the Company and JS . The obligations of the Sellers, the Company and JS to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Sellers in their sole discretion:
(a) Representations and Warranties . The representations and warranties of the Buyer contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby shall be true and correct in all material respects both when made and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct as of such specified date.
(b) Covenants . The Buyer shall have performed in all material respects all obligations and agreements and complied with all covenants and conditions required by this Agreement or any Ancillary Agreement to be performed or complied with by it prior to or at the Closing.
(c) Officer’s Certificate . The Sellers shall have received from the Buyer a certificate to the effect set forth in Sections 6.2(a) and (b), signed by a duly authorized officer thereof.
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(d) Ancillary Agreements . The Sellers shall have received an executed counterpart of each of the Ancillary Agreements, signed by each party other than the Sellers.
Section 6.3 Conditions to Obligations of the Buyer . The obligations of the Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Buyer in its sole discretion:
(a) Representations and Warranties . (i) The Fundamental Representations made by the Sellers shall be true and correct in all respects both when made and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct in all respects as of such specified date, and (ii) all other representations and warranties of the Sellers or the Company contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby shall be true and correct both when made and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct as of such specified date, except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or “Material Adverse Effect” set forth therein) would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Covenants . The Sellers, the Company and JS shall have performed in all material respects all obligations and agreements and complied with all covenants and conditions required by this Agreement or any Ancillary Agreement to be performed or complied with by them prior to or at the Closing.
(c) No Material Adverse Effect . There shall not have occurred any change, event or development or prospective change, event or development that, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on the Company or the Business.
(d) Officer’s Certificate . The Buyer shall have received from each Seller a certificate to the effect set forth in Sections 2.2(b)(iv)(x) and (y) and 6.3(a), (b) and (c), signed by a duly authorized officer thereof.
(e) Consents and Approvals . All authorizations, consents, orders and approvals of all Governmental Authorities and officials and all consents as set forth on Schedule 3.3(a) of the Disclosure Schedules, shall have been received and shall be satisfactory in form and substance to the Buyer in its reasonable discretion.
(f) Ancillary Agreements . The Buyer shall have received an executed counterpart of each of the Ancillary Agreements signed by each party other than the Buyer.
(g) Termination of Original Camuto License Agreement . The Sellers or the Company shall have provided evidence, in form and substance reasonably satisfactory to the Buyer, of the termination, at no cost to the Buyer other than the payment by the Buyer to Camuto a termination fee of One Million Five Hundred Thousand Dollars ($1,500,000), and with no further Liability or obligation on the part of the Company or the Business, of the Original Camuto License Agreement, except as set forth in such related termination agreement.
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(h) Tax Certificate . Each of the Sellers shall have delivered to the Buyer a certificate of non-foreign status reasonably acceptable to Buyer, that satisfies the requirements of Treasury Regulations Section 1.1445-2(b)(2).
ARTICLE
VII
INDEMNIFICATION
Section 7.1 Survival .
(a) The representations and warranties of the Sellers and the Buyer contained in this Agreement and the Ancillary Agreements and any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby shall survive for twelve (12) months following the Closing; provided , however , that (i) the representations and warranties set forth in Sections 3.1 and 4.1 relating to organization and existence, Sections 3.2 and 4.2 relating to authority, Section 3.4 relating to the Membership Interests, Section 3.5 relating to capitalization, Section 3.6 relating to equity interests, and Sections 3.20 and 4.6 relating to broker’s fees and finder’s fees (Sections 3.1, 3.2, 3.4, 3.5, 3.6, 3.20, 4.1, 4.2 and 4.6 are collectively referred to herein as the “ Fundamental Representations ”), and any representation in the case of fraud, intentional misrepresentation or intentional breach, shall survive until the expiration of all applicable statute of limitations; and (ii) the representations and warranties set forth in Section 3.16 relating to Tax shall survive until the close of business on the 30th day following the expiration of the applicable statute of limitations with respect to the Tax liabilities in question (giving effect to any waiver, mitigation or extension thereof).
(b) The respective covenants and agreements of the parties contained in this Agreement shall survive the Closing until the expiration of the statute of limitations following the date all performance thereunder was due to be performed.
Section 7.2 Indemnification by the Sellers . The Sellers shall, jointly and severally, save, defend, indemnify and hold harmless the Buyer and its Affiliates (including the Company) and the respective Representatives, successors and assigns of each of the foregoing from and against, and shall compensate and reimburse each of the foregoing for, any and all losses, damages, liabilities, deficiencies, claims, diminution of value, interest, awards, judgments, penalties, costs and expenses (including reasonable attorneys’ fees, costs and other reasonable out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) (hereinafter collectively, “ Losses ” ), asserted against, incurred, sustained or suffered by any of the foregoing as a result of, arising out of or relating to:
(a) any breach of any representation or warranty made by the Sellers contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby;
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(b) any breach of any covenant or agreement by the Sellers, the Company or JS contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby;
(c) any Tax of the Company or relating to the assets of the Company for any period (or portions thereof) ending on or prior to the Closing Date;
(d) any Liability or obligation of any kind or nature of any of the Sellers and/or JS, and any Liability or obligation of any kind or nature of the Business as conducted by the Sellers related to any period prior to the Closing, and any Liability or claim by any Person that such Person is entitled to any equity or other interest in the Company, the Sellers and/or any of the proceeds of the transactions contemplated hereby to be paid to the Sellers; and
(e) any Transaction Expenses of the Sellers or JS charged to the Buyer, the Company or any of their Affiliates.
Section 7.3 Indemnification by the Buyer . The Buyer shall save, defend, indemnify and hold harmless the Sellers, JS and their respective Affiliates and the respective Representatives, successors and assigns of each of the foregoing from and against, and shall compensate and reimburse each of the foregoing for, any and all Losses asserted against, incurred, sustained or suffered by any of the foregoing as a result of, arising out of or relating to:
(a) any breach of any representation or warranty made by the Buyer contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby;
(b) any breach of any covenant or agreement by the Buyer contained in this Agreement or any Ancillary Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the transactions contemplated hereby or thereby; and
(c) any Transaction Expenses of the Buyer charged to the Sellers, JS or any of their Affiliates.
Section 7.4 Procedures .
(a) A Person seeking indemnification (the “ Indemnified Party ”) in respect of, arising out of or involving a Loss or a claim or demand made by any person against the Indemnified Party (a “ Third Party Claim ”) shall deliver notice containing the nature of the Loss, the dates of such Loss and the details of specific Losses, if reasonably practicable (a “ Claim Notice ”) in respect thereof to the party against whom indemnity is sought (the “ Indemnifying Party ”) with reasonable promptness after receipt by such Indemnified Party of notice of the Third Party Claim, and shall provide the Indemnifying Party with such information with respect thereto as the Indemnifying Party may reasonably request. The failure to deliver a Claim Notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent that the Indemnifying Party is materially prejudiced by such failure.
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(b) If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party against any and all Losses that may result from a Third Party Claim that is exclusively for civil monetary damages at law pursuant to the terms of this Agreement, the Indemnifying Party shall have the right, upon written notice to the Indemnified Party within 30 days of receipt of a Claim Notice from the Indemnified Party in respect of such Third Party Claim, to assume the defense thereof with counsel selected by the Indemnifying Party and satisfactory to the Indemnified Party. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim for equitable or injunctive relief, any claim that would impose criminal liability or damages or any Third Party Claim involving a customer, supplier, licensor or other partner of the Indemnified Party, and the Indemnified Party shall have the right to defend, at the expense of the Indemnifying Party, any such Third Party Claim. If the Indemnifying Party does not elect to assume the defense of such Third Party Claim in accordance with the first sentence of this Section 7.4(b), the Indemnified Party shall have the sole right to assume the defense of and to settle such Third Party Claim. If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless (i) the employment of such counsel shall have been specifically authorized in writing by the Indemnifying Party or (ii) the Indemnified Party reasonably determines that representation by counsel to the Indemnifying Party of both the Indemnifying Party and such Indemnified Party may present such counsel with a conflict of interest. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall, at the Indemnifying Party’s expense, cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any settlement or compromise or consent to the entry of any judgment with respect to such Third Party Claim, unless such settlement, compromise or judgment (i) does not involve a finding or admission of wrongdoing, (ii) includes an unconditional written release by the claimant or plaintiff of the Indemnified Party from all liability in respect of such Third Party Claim and any similar claims, (iii) does not imposes equitable remedies or any obligation on the Indemnified Party, and (iv) provides solely for the payment of money damages for which the Indemnified Party will be fully indemnified hereunder.
(c) An Indemnified Party seeking indemnification in respect of, arising out of or involving a Loss hereunder that does not involve a Third Party Claim being asserted against or sought to be collected from such Indemnified Party (a “ Direct Claim ”) shall deliver a Claim Notice in respect thereof to the Indemnifying Party with reasonable promptness after becoming aware of facts supporting such Direct Claim, and shall provide the Indemnifying Party with such information with respect thereto as the Indemnifying Party may reasonably request. The failure to deliver a Claim Notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent that the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or liability that it may have to the Indemnified Party or otherwise than pursuant to this Article VII. If the Indemnifying Party does not notify the Indemnified Party within 30 days following its receipt of a Claim Notice in respect of a Direct Claim that the Indemnifying Party disputes its liability to the Indemnified Party hereunder, such Direct Claim specified by the Indemnified Party in such Claim Notice shall be conclusively deemed a liability of the Indemnifying Party hereunder and the Indemnifying Party shall pay the amount of such liability to the Indemnified Party on demand.
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(d) The indemnification required hereunder shall be made by (i) prompt payment by the Indemnifying Party or (ii) setoff and application against any amount that may be due to the Indemnifying Party under this Agreement or any Ancillary Agreement pursuant to Section 7.8 of the amount of actual Losses in connection therewith, as and when bills are received by the Indemnifying Party or Losses incurred have been notified to the Indemnifying Party.
(e) The Indemnifying Party shall not be entitled to require that any action be made or brought against any other Person before action is brought or claim is made against it hereunder by the Indemnified Party.
Section 7.5 Limits on Indemnification . Notwithstanding anything to the contrary contained in this Agreement: (a) an Indemnifying Party shall not be liable for any claim for indemnification pursuant to Section 7.2(a) or Section 7.3(a), as the case may be, unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Party under Section 7.2(a) or Section 7.3(a), as applicable, equals or exceeds on a cumulative basis $750,000 (the “ Threshold Amount ” ), in which event the Indemnifying Party shall only be required to pay or be liable Losses above and not below the Threshold Amount, (b) the maximum aggregate amount of indemnifiable Losses which may be recovered from an Indemnifying Party arising out of or relating to claims pursuant to Section 7.2(a) or Section 7.3(a), as the case may be, shall be an amount equal to $5,000,000, provided , that the foregoing clauses (a) and (b) shall not apply to Losses arising out of or relating to the inaccuracy or breach of any Fundamental Representation, any inaccuracy or breach of Section 3.16 relating to tax matters, or to any representation or warranty in the event of fraud, willful misconduct or intentional misrepresentation.
Section 7.6 Remedies Not Affected by Investigation, Disclosure or Knowledge . If the transactions contemplated hereby are consummated, the Indemnified Parties expressly reserve the right to seek indemnity or other remedy for any Losses arising out of or relating to any breach of any representation, warranty or covenant contained herein, notwithstanding any investigation by, disclosure to, knowledge or imputed knowledge of such Indemnified Party or any of its Representatives in respect of any fact or circumstances that reveals the occurrence of any such breach, whether before or after the execution and delivery hereof.
Section 7.7 Exclusive Remedy . After the Closing, and except for claims of fraud, gross negligence, actions taken in bad faith or intentional misrepresentation and except for specific performance of covenants, where appropriate under applicable Law, the obligations to indemnify under this Article VII shall provide the exclusive remedy against a party for any breach of any representation, warranty, covenant or other claim arising out of or relating to this Agreement.
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Section 7.8 Setoff . Each party hereto shall have the right to setoff and apply against any amount that may be due hereunder against any amount that has been finally, judicially determined by a court of competent jurisdiction to be due to it under this Agreement or any Ancillary Agreement, whether in respect of an indemnification obligation, royalty payment or otherwise, subject to the terms and conditions of the Operating Agreement.
ARTICLE
VIII
TERMINATION
Section 8.1 Termination . This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Buyer and the Sellers;
(b) (i) by the Sellers, if the Buyer breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement or any Ancillary Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.2, (B) cannot be or has not been cured within 15 days following delivery to the Buyer of written notice of such breach or failure to perform and (C) has not been waived by the Sellers; provided , however , the Sellers shall have no right to terminate this Agreement pursuant to this Section 8.1(b)(i) in the event either Seller is itself in breach of this Agreement or any Ancillary Agreement; or (ii) by the Buyer, if any Seller breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement or any Ancillary Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.3, (B) cannot be or has not been cured within 15 days following delivery to such Seller of written notice of such breach or failure to perform and (C) has not been waived by the Buyer; provided , however , the Buyer shall have no right to terminate this Agreement pursuant to this Section 8.1(b)(ii) in the event the Buyer is itself in breach of this Agreement or any Ancillary Agreement;
(c) by either the Sellers or the Buyer if the Closing shall not have occurred by June 30, 2015; provided , that the right to terminate this Agreement under this Section 8.1(c) shall not be available if the failure of the party so requesting termination to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date; or
(d) by either the Sellers or the Buyer in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; provided , that the party so requesting termination shall have used its commercially reasonable efforts, in accordance with Section 5.7, to have such order, decree, ruling or other action vacated.
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The party seeking to terminate this Agreement pursuant to this Section 8.1 (other than Section 8.1(a)) shall give prompt written notice of such termination to the other party.
Section 8.2 Effect of Termination . In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party except (a) for the provisions of Sections 3.20 and 4.6 relating to broker’s fees and finder’s fees, Section 5.6 relating to confidentiality, Section 5.8 relating to public announcements, Section 9.1 relating to fees and expenses, Section 9.4 relating to notices, Section 9.7 relating to third-party beneficiaries, Section 9.8 relating to governing law, Section 9.9 relating to submission to jurisdiction and this Section 8.2 and (b) that nothing herein shall relieve either party from liability for any breach of this Agreement or any agreement made as of the date hereof or subsequent thereto pursuant to this Agreement. In the event of the termination of this Agreement pursuant to Section 8.1(b)(i), the Earnest Money shall be released to the Sellers on a non-accountable basis.
ARTICLE
IX
GENERAL PROVISIONS
Section 9.1 Fees and Expenses .
(a) Except as otherwise provided herein, all fees and expenses incurred in connection with or related to this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby shall be paid by the party incurring such fees or expenses, whether or not such transactions are consummated. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by the other.
(b) All transfer, sales, use, value added, excise, stock transfer, stamp, recording, registration and any similar Tax that become payable in connection with the transactions contemplated hereby shall be paid by the Seller.
Section 9.2 Amendment and Modification . This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each party.
Section 9.3 Waiver . 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. Any agreement on the part of any party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party.
Section 9.4 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 e-mail, upon written confirmation of receipt by 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:
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(i) | if to the Sellers, JS or (prior to Closing), the Company, to: |
DL Business Management
200 West 57th Street, #1403
New York, NY 10019
Attention: David Levin, CPA, Esq.
E-mail: davidlevin@dlbm.com
with a copy (which
shall not constitute notice) to:
Littman Krooks, LLP
655 Third Avenue, 20th Floor
New York, NY 10017
Attention: Mitchell C. Littman, Esq.
E-mail: mlittman@littmankrooks.com
and
Grimes LLC
3501 Bonita Bay Blvd.
Bonita Springs, FL 34134
Attention: Charles W. Grimes, Esq.
E-mail: grimes@gandb.com
(ii) | if to the Buyer or (following Closing), the Company, to: |
Sequential Brands Group, Inc.
1065 Avenue of the Americas, 30th Floor
New York, NY 10018
Email: yshmidman@sbg-ny.com
Attention: Yehuda Shmidman
with a copy (which shall
not constitute notice) to:
Tengram Capital Management, L.P.
15 Riverside Avenue
Westport, CT 06880
Email: atarshis@tengramcapital.com
Attention: Andrew Tarshis
Section 9.5 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 table of contents and 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.
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Section 9.6 Entire Agreement . This Agreement (including the Exhibits and Schedules hereto), the Ancillary Agreements and the Confidentiality 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. Notwithstanding any oral agreement or course of conduct of the parties or their Representatives to the contrary, no party to this Agreement shall be under any legal obligation to enter into or complete the transactions contemplated hereby unless and until this Agreement shall have been executed and delivered by each of the parties.
Section 9.7 No Third-Party Beneficiaries . Except as provided in Article VII, 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 9.8 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 New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York (other than Section 5-1401 of the New York General Obligations Law).
Section 9.9 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 the other party or its successors or assigns shall be brought and determined in any New York State or federal court sitting in the Borough of Manhattan in The City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), 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 New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York 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 New York 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.
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Section 9.10 Assignment; Successors . Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of Law or otherwise, by either party without the prior written consent of the other party, and any such assignment without such prior written consent shall be null and void; provided , however , that the Buyer may assign this Agreement to any Affiliate of the Buyer without the prior consent of the Seller; provided further , that no assignment shall limit the assignor’s obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
Section 9.11 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 any New York State or federal court sitting in the Borough of Manhattan in the City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), 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 9.12 Currency . All references to “dollars” or “$” or “US$” in this Agreement or any Ancillary Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement and any Ancillary Agreement.
Section 9.13 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.
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Section 9.14 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 9.15 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement (and all signatures need not appear on any one counterpart). In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or data file signature page were an original thereof. This Agreement shall become effective when one or more counterparts has been signed and delivered by each of the parties hereto.
Section 9.16 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 9.17 No Presumption Against Drafting Party . Each of the Buyer and the Sellers acknowledges that each party to this Agreement 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.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
SEQUENTIAL BRANDS GROUP, INC. | ||
By: | /s/ Yehuda Shmidman | |
Name: Yehuda Shmidman | ||
Title: Chief Executive Officer | ||
WITH YOU, INC. | ||
By: | /s/ Jessica Simpson | |
Name: Jessica Simpson | ||
Title: President | ||
CORNY DOG, INC. | ||
By: | /s/ Jessica Simpson | |
Name: Jessica Simpson | ||
Title: President | ||
WITH YOU LLC | ||
By: | /s/ Jessica Simpson | |
Name: Jessica Simpson | ||
Title: President of Managing Member | ||
JESSICA SIMPSON | ||
/s/ Jessica Simpson |
Signature Page to Purchase Agreement
Exhibit 10.3
Execution Version
SECOND AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT
Dated as of April 8, 2015
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
( i ) |
5.07 | No Default | 67 |
5.08 | Ownership of Property; Liens | 68 |
5.09 | Environmental Compliance. | 68 |
5.10 | Insurance | 69 |
5.11 | Taxes | 69 |
5.12 | ERISA Compliance. | 69 |
5.13 | Subsidiaries; Equity Interests | 70 |
5.14 | Margin Regulations; Investment Company Act. | 70 |
5.15 | Disclosure | 70 |
5.16 | Compliance with Laws | 70 |
5.17 | Intellectual Property; Licenses, Etc. | 71 |
5.18 | Reserved. | 71 |
5.19 | Security Documents. | 71 |
5.20 | Solvency | 71 |
5.21 | Deposit Accounts. | 72 |
5.22 | Brokers | 72 |
5.23 | Material Contracts | 72 |
ARTICLE VIAFFIRMATIVE COVENANTS | 72 | |
6.01 | Financial Statements | 72 |
6.02 | Certificates; Other Information | 73 |
6.03 | Notices | 75 |
6.04 | Payment of Obligations | 76 |
6.05 | Preservation of Existence, Etc. | 76 |
6.06 | Maintenance of Properties; Material Intellectual Property | 76 |
6.07 | Maintenance of Insurance | 77 |
6.08 | Compliance with Laws | 77 |
6.09 | Books and Records; Accountants. | 77 |
6.10 | Inspection Rights; Appraisals of Intellectual Property. | 78 |
6.11 | Additional Loan Parties | 78 |
6.12 | Cash Management. | 79 |
6.13 | Information Regarding the Collateral. | 79 |
6.14 | Environmental Laws. | 80 |
6.15 | Further Assurances. | 80 |
6.16 | Material Contracts | 81 |
6.17 | Right of First Refusal. | 81 |
6.18 | Post-Closing Items. | 81 |
ARTICLE VIINEGATIVE COVENANTS | 81 | |
7.01 | Liens | 81 |
7.02 | Investments | 81 |
7.03 | Indebtedness; Disqualified Stock; Equity Issuances | 82 |
7.04 | Fundamental Changes | 82 |
7.05 | Dispositions | 83 |
7.06 | Restricted Payments | 83 |
7.07 | Prepayments of Indebtedness | 84 |
7.08 | Change in Nature of Business | 84 |
7.09 | Transactions with Affiliates | 84 |
7.10 | Burdensome Agreements | 85 |
7.11 | Use of Proceeds | 85 |
7.12 | Amendment of Material Documents; Material Licenses. | 85 |
( ii ) |
( iii ) |
10.25 | Keepwell. | 112 |
10.26 | California Judicial Reference. | 112 |
10.27 | Second Lien Intercreditor Agreement. | 112 |
SIGNATURES | S-1 |
( 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 | Tranche A Term Note |
C-3 | Tranche A-1 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 ) |
SECOND AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT (the “ Agreement ”) is entered into as of April 8, 2015, 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, the Guarantors, the Lenders and the Agent are party to the Amended and Restated First Lien Credit Agreement dated as of August 15, 2014 (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, on August 15, 2014, Universe Galaxy Merger Sub, Inc., a Delaware corporation and an indirect wholly owned Subsidiary of the Borrower, was merged with and into Galaxy Brand Holdings, Inc. (“ GBH ”), with GBH as the surviving entity, and immediately following such merger, GBH, as a wholly owned Subsidiary of SBG Universe Brands, LLC, a Delaware limited liability company and wholly owned Subsidiary of the Borrower (“ SBG Universe ”), was merged with and into SBG Universe, with SBG Universe as the surviving entity (collectively, the “ Galaxy Brands Merger ”);
WHEREAS, the Borrower has entered into that certain Purchase Agreement dated as of April 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “ Simpson Acquisition Agreement ” by and among, among others, Sequential Brands Group, Inc., a Delaware corporation, as the Buyer (as defined therein), With You, Inc., a California corporation (“ WYI ”) and Corny Dog, Inc., a California corporation (“ Corny Dog ”), as the Sellers (as defined therein), whereby the Buyer will acquire (“ Simpson Acquisition ”) 62.5% of the membership interest in With You (as defined below);
WHEREAS, the Borrower wishes to obtain financing for the Simpson Acquisition, and to refinance the Obligations under the Existing Credit Agreement;
WHEREAS, the Lenders have agreed to extend certain credit facilities to the Borrower in an aggregate amount not to exceed $190,000,000, consisting of a $85,000,000 Tranche A Term Loan, a $15,000,000 Tranche A-1 Term Loan, and up to $90,000,000 in the 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 the Existing Credit Agreement as provided herein.
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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.
“Acquisition Representations” means such of the representations made by or on behalf of the Sellers (as defined in the Simpson Acquisition Agreement) in the Simpson Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower (or any of its Affiliates) would have the right (after giving effect to any applicable cure provisions) to terminate its obligations under the Simpson Acquisition Agreement or not consummate the Simpson Acquisition as a result of a breach of such representations in the Simpson Acquisition Agreement.
“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 July 1, 2015.
“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) .
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“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, the Tranche A Term Loan Commitments and the Tranche A-1 Term Loan Commitments. As of the Effective Date, the Aggregate Commitments are $190,000,000.
“Agreement” means this Amended and Restated First Lien Credit Agreement.
“Allocable Amount” has the meaning specified in Section 10.21(d) .
“Amended and Restated Second Lien Credit Agreement” means that certain Amended and Restated Second Lien Term Loan Agreement dated as of the date hereof 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.
“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; provided that , if the Optional Capital Raise has not been received by the Borrower on or before the one year anniversary of the Effective Date, then each of the percentages set forth below shall automatically increase by 0.50% effective as of the immediately succeeding Adjustment Date following the one year anniversary of the Effective Date; 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.
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Level |
Average
Loan to Value Ratio |
Applicable
Margin for Revolving Loans and portion of outstanding Tranche A Term Loan that are LIBOR Rate Loans |
Applicable
Margin for portion of outstanding Tranche A-1 Term Loan that is a LIBOR Rate Loan |
Applicable
Margin for Revolving Loans and portion of outstanding Tranche A Term Loan that are Base Rate Loans |
Applicable
Margin for portion of outstanding Tranche A-1 Term Loan that is a Base Rate Loan |
|||||||||||||
I | Less than 40% | 3.50 | % | 4.50 | % | 1.50 | % | 2.50 | % | |||||||||
II | Equal to or greater than 40% | 3.75 | % | 4.75 | % | 1.75 | % | 2.75 | % |
“Applicable Percentage” means, (a) with respect to the Revolving Credit Facility, the Revolving Credit Facility Applicable Percentage, (b) with respect to the Tranche A Term Loan, the Tranche A Term Loan Applicable Percentage, (c) with respect to the Tranche A-1 Term Loan, the Tranche A-1 Term Loan Applicable Percentage, and (d) 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 Loans 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.
“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, 2014, 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 .
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“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.
“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.
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“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.
“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.
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“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
(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 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; or
(e) the Borrower fails at any time to own, directly or indirectly, 60% of the Equity Interests of DVS, 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; or
(f) the Borrower fails at any time to own, directly or indirectly, 62.5% of the Equity Interests of With You, 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.
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“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, (y) the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve-month period ending on the one year anniversary of the Effective Date and (z) the Galaxy Transactions in an amount not to exceed $7,500,000 in the aggregate for the twelve-month period ending August 15, 2016, (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.
“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.
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“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.
“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, (d) one-time costs or fees in connection with the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve month period following the Simpson Acquisition and (e) one-time costs or fees in connection with the Galaxy Brands Merger in an amount not to exceed $7,500,000 in the aggregate for the twelve month period following the Galaxy Brands Merger, all as determined on a Consolidated basis in accordance with GAAP.
- 9 - |
“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.
“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).
- 10 - |
“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.
“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.
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“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.
“DVS” means DVS Footwear International LLC, a Delaware limited liability company.
“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 .
“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.
“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.
- 12 - |
“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.
“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.
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“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.
“Executive Order” has the meaning set forth in Section 10.18 .
“Existing Credit Agreement” has the meaning provided therefor in the recitals.
“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.
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“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 the letter agreement dated as of the Effective Date by and among the Borrower, the Agent 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.
“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.
“Galaxy Brands Merger” has the meaning provided therefor in the recitals.
“Galaxy Transactions” means, collectively, (a) the Galaxy Brands Merger and the related transactions pursuant to the applicable documentation relating thereto, (b) the entry into of the Loan Documents and the borrowings thereunder and (c) the refinancing of certain existing Indebtedness in connection therewith.
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“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.
“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.
- 16 - |
“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
(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.
- 17 - |
“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.
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.
- 18 - |
“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 Tranche A Term Lenders, the Tranche A-1 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 LIBOR 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 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 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
(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.
- 19 - |
“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, the Tranche A Term Loan or the Tranche A-1 Term Loan, as applicable, and collectively, means all Revolving Loans (including all Swing Line Loans) and all Term Loans.
“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, DVS and With You, as applicable, 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) .
“LTV Percentage” means as of the Effective Date, sixty (60%) percent; provided that the LTV Percentage shall decrease on the date of each required amortization payment of the Term Loans made pursuant to Section 2.06(a) and (b) hereof to a percentage equal to the Loan to Value Ratio as calculated after giving effect to each such repayment of the Term Loans; provided further that in no event shall the LTV Percentage at any time be less than fifty (50%) percent.
“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.
- 20 - |
“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, 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 April 8, 2020.
“Maximum Rate” has the meaning provided therefor in Section 10.09 .
“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)).
“Non-Consenting Lender” has the meaning provided therefor in Section 10.01 .
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“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 (unless and until such consent is obtained), including, for the avoidance of doubt, each Subsidiary set forth on Schedule 1.01 hereto (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, (b) a promissory note made by the Borrower in favor of a Tranche A Term Lender evidencing the portion of the Tranche A Term Loan made by such Tranche A Term Lender, substantially in the form of Exhibit C-2, and (c) a promissory note made by the Borrower in favor of a Tranche A-1 Term Lender evidencing the portion of the Tranche A-1 Term Loan made by such Tranche A-1 Term Lender, substantially in the form of Exhibit C-3, 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.
“Optional Capital Raise” means an equity contribution, issuance of notes by, or loan or other financing arrangement entered into by the Borrower within the twelve month period following the Effective Date with aggregate net proceeds in an amount of not less than $50,000,000.
“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).
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“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.
“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:
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(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
(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;
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(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 Galaxy Brands Merger or in connection with a Permitted Acquisition within twelve (12) months after the consummation of the Galaxy Brands Merger 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;
(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;
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(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;
(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;
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(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 Amended and Restated 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 $159,500,000 in the aggregate (as such amount may be increased by up to $40,000,000 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 Effective Date 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;
(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;
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(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;
(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;
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(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;
(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; and
(r) Indebtedness of the Borrower incurred in connection with an Optional Capital Raise (to the extent in the form of Indebtedness) in an amount up to $50,000,000.
“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;
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(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;
(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;
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(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 Simpson 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; and
(u) 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 (u): (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;
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:
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(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 $10,000,000 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.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.
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“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.
“Qualified Stock” means all Equity Interests other than Disqualified Stock.
“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 (x) one hundred percent (100%) of the appraised orderly liquidation value of the Intellectual Property of the Loan Parties; (y) prior to April 1, 2016 sixty percent (60%) of the appraised orderly liquidation value of the Intellectual Property of DVS and (ii) on and after April 1, 2016 zero percent (0%) of the appraised orderly liquidation value of the Intellectual Property of DVS; and (z) sixty-two and one half percent (62.5%) of the appraised orderly liquidation value of the Intellectual Property of With You, 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.
“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.
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“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 , 2.14 and 2.16 of this Agreement. As of the Effective Date, the aggregate Revolving Commitments total $90,000,000.
“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.
“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.
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“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) the then applicable LTV Percentage of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, minus (y) the sum of (A) $100,000,000 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 Amended and Restated 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, as the same may be amended, restated, supplemented or otherwise modified.
“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 August 15, 2014 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.
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“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.
“Simpson Acquisition Agreement” has the meaning provided therefor in the recitals.
“Simpson Acquisition” has the meaning given to such terms in the recitals.
“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 Simpson Acquisition 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.
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“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).
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“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 Lenders” means, collectively, each Tranche A Term Lender and each Tranche A-1 Term Lender.
“Term Loans” means, collectively the Tranche A Term Loan and the Tranche A-1 Term Loan.
“Term Loan Commitments” means, collectively, the Tranche A Term Loan Commitments and the Tranche A-1 Term Loan Commitments.
“Tranche A Term Lender” means each Lender that has a Tranche A Term Loan Commitment or holds a portion of the Tranche A Term Loan.
“Tranche A Term Loan” has the meaning specified in Section 2.01 .
“Tranche A Term Loan Applicable Percentage” means with respect to any Tranche A Term Lender at any time, the percentage (carried out to the ninth decimal place) of the outstanding amount of the Tranche A Term Loan held by such Term Lender.
“Tranche A Term Loan Commitment” means, as to each Tranche A Term Lender, its obligation to make the Tranche A Term Loan on the Effective Date in an aggregate principal amount equal to the amount set forth opposite such Tranche A Term Lender’s name on Schedule 2.01. As of the Effective Date, the aggregate Tranche A Term Loan Commitments total $85,000,000.
“Tranche A-1 Term Lender” means each Lender that has a Tranche A-1 Term Loan Commitment or holds a portion of the Tranche A-1 Term Loan.
“Tranche A-1 Term Loan” has the meaning specified in Section 2.01 .
“Tranche A-1 Term Loan Applicable Percentage” means with respect to any Tranche A-1 Term Lender at any time, the percentage (carried out to the ninth decimal place) of the outstanding amount of the Tranche A-1 Term Loan held by such Term Lender.
“Tranche A-1 Term Loan Commitment” means, as to each Tranche A-1 Term Lender, its obligation to make the Tranche A-1 Term Loan on the Effective Date in an aggregate principal amount equal to the amount set forth opposite such Tranche A-1 Term Lender’s name on Schedule 2.01. As of the Effective Date, the aggregate Tranche A-1 Term Loan Commitments total $15,000,000.
“Total Outstandings” means the sum of the then outstanding principal amount of the Term Loans and the Total Revolving Outstandings.
“Total Revolving Outstandings” means the aggregate Outstanding Amount of all Revolving Loans and Swing Line Loans.
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“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 .
“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) .
“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) .
“With You” means With You LLC, a Delaware limited liability company.
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.
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(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.
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.
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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 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 Tranche A Term Lender severally agrees to make a loan (collectively, the “ Tranche A Term Loan ”) to the Borrower on the Effective Date in an aggregate principal amount equal to such Tranche A Term Lender’s Tranche A Term Loan Commitment in immediately available funds in accordance with instructions provided by the Borrower. The aggregate amount of the Tranche A Term Loan shall not exceed the aggregate Tranche A Term Loan Commitments. The Tranche A Term Loan made on the Effective Date shall be a LIBOR Rate Loan with an initial Interest Period of one month.
(c) Subject to the terms and conditions set forth herein, each Tranche A-1 Term Lender severally agrees to make a loan (collectively, the “ Tranche A-1 Term Loan ”) to the Borrower on the Effective Date in an aggregate principal amount equal to such Tranche A-1 Term Lender’s Tranche A-1 Term Loan Commitment in immediately available funds in accordance with instructions provided by the Borrower. The aggregate amount of the Tranche A-1 Term Loan shall not exceed the aggregate Tranche A-1 Term Loan Commitments. The Tranche A-1 Term Loan made on the Effective Date shall be a LIBOR Rate Loan with an initial Interest Period of one month.
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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 , 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.
(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.
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(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.
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(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.
(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.
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(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.
(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.
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(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 (x) 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; (y) 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; and (z) no portion of the Tranche A Term Loan shall be prepaid unless and until the Tranche A-1 Term Loan has been paid in full. Each such notice shall specify the date and amount of such prepayment, whether the Tranche A Term Loan, Tranche A-1 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 Tranche A Term Loan or Tranche A-1 Term Loan, as applicable, 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.
(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 the then applicable LTV Percentage 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.
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(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) Upon receipt of the aggregate net proceeds of the Optional Capital Raise, the Borrower shall prepay the Loans in such amount as will cause the Loan to Value Ratio to be at least five (5%) percent less than such Loan to Value Ratio immediately prior to giving effect to such prepayment.
(e) The Borrower shall prepay the Term Loans to the extent required pursuant to Section 2.16 hereof.
(f) The Borrower shall prepay the Loans to the extent required pursuant to the provisions of Section 6.12 hereof.
(g) Prepayments made to the Tranche A Term Loan pursuant to this Section 2.04 shall be applied ratably to the remaining scheduled installments of principal due in respect of the Tranche A Term Loan in the inverse order of maturity. Prepayments made to the Tranche A-1 Term Loan pursuant to this Section 2.04 above shall be applied ratably to the remaining scheduled installments of principal due in respect of the Tranche A-1 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 Tranche A-1 Term Loan in the inverse order of maturity, second , shall be applied ratably to the remaining scheduled installments under Section 2.06(a) of principal due in respect of the Tranche A Term Loan in the inverse order of maturity, third , shall be applied to any outstanding Swing Line Loans, and fourth , shall be applied ratably to the outstanding Revolving Loans. Prepayments made pursuant to Section 2.04(a)(ii) and (f) above first , shall be applied to any outstanding Swing Line Loans, second , shall be applied ratably to the outstanding Revolving Loans, 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 Tranche A-1 Term Loan in the inverse order of maturity, and fourth , 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 Tranche A 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.
(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.
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(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, upon payment in full of the Tranche A-1 Term Loan, repay the Tranche A Term Loan in an amount equal to, on March 31, June 30, September 30 and December 31 of each year, $4,000,000; provided that , if the Optional Capital Raise has not been received by the Borrower on or before the first anniversary of the Effective Date, then the Borrower shall, upon payment in fully of the Tranche A-1 Term Loan, thereafter repay the Tranche A Term Loan in an amount equal to $5,000,000, in each case on March 31, June 30, September 30 and December 31 of each year. Once repaid or prepaid, no portion of the Tranche A Term Loan may be reborrowed.
(b) In addition to the mandatory prepayment provisions set forth in Section 2.05 above, the Borrower shall repay the Tranche A-1 Term Loan in an amount equal to, on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 2015, $4,000,000 until such time as the Tranche A-1 Term Loan is paid in full; provided that , if the Optional Capital Raise has not been received by the Borrower on or before first anniversary of the Effective Date, then the Borrower shall thereafter repay the Tranche A-1 Term Loan in an amount equal to $5,000,000 on March 31, June 30, September 30 and December 31 of each year until such time as the Tranche A-1 Term Loan is paid in full. Once repaid or prepaid, no portion of the Tranche A-1 Term Loan may be reborrowed.
(c) 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.
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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 Loans 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.
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(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.
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(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
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(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).
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 Tranche A 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 25% to the Revolving Credit Facility and 75% to the Tranche A 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).
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(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 Tranche A 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 Tranche A Term Loan, as applicable.
(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 Tranche A Term Loan, as applicable, or decline to increase their respective Revolving Commitment and outstanding portion of the Tranche A 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 Tranche A 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 Tranche A 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 Tranche A 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 Tranche A 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.
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(f) Conflicting Provisions . This Section shall supersede any provisions in Sections 2.12 or 10.01 to the contrary.
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.
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(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).
(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.
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2.16 Increase in Revolving Commitments.
In addition to any increases to the aggregate Revolving Commitments pursuant to Section 2.14 hereof, in the event that the Optional Capital Raise results in aggregate net proceeds to the Borrower in an amount equal to $100,000,000 or more, (i) if the Borrower so elects, in addition to the prepayment of the Loans required pursuant to Section 2.04(d) , the Borrower may prepay the Tranche A-1 Term Loan until paid in full, and thereafter prepay the Tranche A Term Loan, in an aggregate amount up to $50,000,000, (ii) if the Borrower so elects, in connection with such prepayment of the Term Loans, the aggregate Revolving Commitments under, and for all purposes of, this Agreement shall be increased by $50,000,000, and (iii) upon any such increase, Schedule 2.01 shall be deemed modified, without further action, to reflect the revised Aggregate Commitments and Applicable Percentages of the Lenders. This Section shall supersede any provisions in Sections 2.12 or 10.01 to the contrary.
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 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.
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(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).
(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.
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(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 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;
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(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. For purposes of determining withholding Taxes imposed under FATCA, from and after the Effective Date, the Borrower and the Agent shall treat (and the Lenders hereby authorize the Agent to treat) this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
(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.
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(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.
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.
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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.
(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).
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(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.
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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.
ARTICLE IV
CONDITIONS PRECEDENT TO LOANS
4.01 Conditions of Initial Loans. The obligation of each Lender to make any initial Revolving Credit Extension or its portion of the Tranche A Term Loan or Tranche A-1 Term Loan 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;
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(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, or a certification stating that such Organization Documents have not been changed since the date of the Existing Credit Agreement;
(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) a confirmation and ratification of the Security Documents executed by the applicable Loan Parties;
(viii) 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
(ix) 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.
(b) 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.
(c) The Borrower shall have made the term loan amortization payment required under Section 2.06(a) of the Existing Credit Agreement for the Fiscal Quarter ending March 31, 2015.
(d) The Agent shall have received and be reasonably satisfied with an updated appraisal with respect to the Intellectual Property of the Loan Parties, DVS and With You.
(e) The Agent shall have received the Amended and Restated Second Lien Credit Agreement and an amendment to the Second Lien Intercreditor Agreement in form and substance reasonably satisfactory to the Agent.
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(f) [Reserved].
(g) Since December 31, 2014, there shall not have been any event or effect that has had or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Borrower and its Subsidiaries (other than With You).
(h) Each of the Acquisition Representations and the Specified Representations shall be true and correct in all material respects, except that any Acquisition 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 Simpson Acquisition 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 “Material Adverse Effect” (as defined in the Simpson Acquisition Agreement, without giving effect to any amendment or modification of such definition after the date of the Simpson Acquisition Agreement unless approved by the Agent in its reasonable discretion) shall have occurred.
(j) The Borrower shall have delivered to the Agent an initial notice of borrowing.
(k) Prior to or contemporaneously with the initial funding of the Loans, the Borrower shall consummate the Simpson Acquisition substantially in accordance with the terms and conditions set forth in the Simpson Acquisition 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).
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.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Credit Parties 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):
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.
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5.05 Financial Statements; No Material Adverse Effect .
(a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the 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 Simpson Acquisition) dated September 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.
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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.
(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.
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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.
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.
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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 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.
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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 .
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.
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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.
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, 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;
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(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) March 31, 2015 with respect to the Borrower and its Subsidiaries other than those Subsidiaries acquired pursuant to the Simpson Acquisition, and (y) June 30, 2015 with respect to the Borrower and its Subsidiaries after giving effect to the Simpson 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;
(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;
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(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;
(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 Amended and Restated 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.
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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
(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.
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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.
(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.
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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.
(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.
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(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.
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 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) 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.
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6.12 Cash Management .
(a) 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.
(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.
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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.
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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 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) On or before April 1, 2016, the Borrower shall obtain all consents necessary to cause, and shall cause, DVS to become a Guarantor hereunder and to grant a security interest in all of its assets, including all Intellectual Property, pursuant to the terms of Section 6.11 hereof; provided that the failure to obtain such consents and to cause DVS to become a Guarantor and grant a security in its assets as provided above shall not constitute an Event of Default hereunder but shall result in the appraised orderly liquidation value of registered Trademarks owned by DVS not being taken into account in connection with any appraisal conducted by or on behalf of the Agent pursuant to Section 6.10(b) after April 1, 2016 or in any calculation of the financial covenant set forth in Section 7.15(b) hereof.
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.
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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 (1) the Borrower or the direct or indirect Subsidiary of the Borrower which is to own such Equity Interests or (2) 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 Galaxy Transactions, the Simpson Acquisition 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 Simpson Acquisition 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.
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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 declare or pay any cash Dividend, or redeem, repurchase or otherwise acquire for value any outstanding Equity Interests in an amount not to exceed $10,000,000 in the aggregate if, after giving effect thereto, the Loan to Value Ratio is less than 35%;
(f) 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;
(g) 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(g), no Default or Event of Default shall then exist or result therefrom; and
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(h) the Borrower may pay (x) all costs, fees and expenses in connection with (i) the Galaxy Transactions in an amount not to exceed $7,500,000 in the aggregate, (ii) the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate, and (iii) 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.
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;
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(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) all costs, fees and expenses in connection with (i) the Galaxy Transactions in an amount not to exceed $7,500,000 in the aggregate, (ii) the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate, and (iii) 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.
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 Galaxy Brands Merger and the Simpson 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 Amended and Restated 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.
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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, 2015 ( provided that , for the Fiscal Quarter ending June 30, 2015, Consolidated Positive Net Income shall be calculated without giving effect to the Simpson Acquisition), to be equal to or less than $0.
(b) Loan to Value Ratio . Permit the Total Outstandings to be greater than the applicable LTV Percentage multiplied by the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, DVS and With You, as applicable, 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
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(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
(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
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(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
(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
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(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:
(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;
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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;
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 the then applicable LTV Percentage of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, DVS and With You, as applicable, 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).
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(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.
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
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(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.
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.
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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.
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
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(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.
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.
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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;
(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.
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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.
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;
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(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;
(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.
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(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.
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.
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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 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.
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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 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.
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(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.
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(b), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(b) (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 Tranche A Term Loan or Tranche A-1 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
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(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 Tranche A Term Loan or Tranche A-1 Term Loan, as applicable, 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) 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 Tranche A Term Loan or Tranche A-1 Term Loan, as applicable, assigned (and for the avoidance of doubt, no Lender hereunder may assign (x) any portion of the Tranche A Term Loan or Tranche A-1 Term Loan, as applicable, 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 Tranche A Term Loan or Tranche A-1 Term Loan, as applicable, 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.
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(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.
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(a)(i)(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.
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(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.
(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.
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(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.
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.
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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.
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.
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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) ;
(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 .
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(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.
(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.
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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.
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.
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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.
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.
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(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.
(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.
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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.
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.
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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 |
|
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 |
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 |
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 |
bank of america, n.a. , as Agent and as a Lender | ||
By: |
/s/ Andrew Cerussi |
|
Name: |
Andrew Cerussi |
|
Title: |
Director |
ISRAEL DISCOUNT BANK OF NEW YORK , as a Lender | ||
By: |
/s/ James M. Morton |
|
Name: | James M. Morton | |
Title: |
Senior Vice President |
|
By: |
/s/ Michael Paul |
|
Name: | Michael Paul | |
Title: |
Senior Vice President |
BANK HAPOALIM , as a Lender | ||
By: | /s/ Mitchell Barnett | |
Name: |
Mitchell Barnett |
|
Title: | SVP | |
By: |
/s/ Lavea Eisenberg |
|
Name: | Lavea Eisenberg | |
Title: | FVP |
fifth third bank , as a Lender | ||
By: |
/s/ Todd S. Robinson |
|
Name: | Todd S. Robinson | |
Title: |
Vice President |
EXHIBIT A
Form of Loan Notice
Date: ___________, 20___
To: | Bank of America, N.A., as Administrative Agent |
Ladies and Gentlemen:
Reference is made to the Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
The Borrower hereby requests a [Revolving Borrowing][continuation of LIBOR Rate Loans] 1 :
1. On (a Business Day) 2
2. In the principal amount of $_____________________ 3
3. With an Interest Period of ____ months 4
The Borrower hereby represents and warrants that [(a)] the [Revolving Borrowing] [continuation of LIBOR Rate Loans] requested herein complies with the provisions of Section 2.02 of the Credit Agreement and [(b) the conditions specified in Sections 4.01 , 4.02(a) and 4.02(b) of the Credit Agreement have been satisfied on and as of the date of the applicable Revolving Borrowing] 5 .
[signature page follows]
1 A Borrowing must be a borrowing or continuation consisting of Revolving Loans on a single date and, in the case of LIBOR Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01 of the Credit Agreement.
2 Each notice of a Revolving Borrowing must be received by the Administrative 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.
3 Each Revolving Borrowing or continuation of LIBOR Rate Loans must be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
4 The Borrower may request a Revolving Borrowing of LIBOR Rate Loans with an Interest Period of one, two, three or six months, as selected by the Borrower. If no election of Interest Period is specified, then the Borrower will be deemed to have specified an Interest Period of one month.
5 Only include for Loan Notice for a request for a Revolving Borrowing. Not required for a Loan Notice requesting only a continuation of Revolving Loans.
Dated as of the date above first written.
SEQUENTIAL BRANDS GROUP, INC., as Borrower |
By: | ||
Name: | ||
Title: |
Signature Page to Loan Notice
EXHIBIT B
FORM OF SWING LINE LOAN NOTICE
Date: ____________, 20___
To: |
Bank of America, N.A., as Swing Line Lender
Bank of America, N.A., as Administrative Agent |
Ladies and Gentlemen:
Reference is made to the Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
The Lead Borrower hereby requests a Swing Line Borrowing:
1. On (a Business Day) 1
2. In the amount of $______________________ 2
The Borrower hereby represents and warrants that (a) Swing Line Borrowing requested herein complies with the provisions of Section 2.03 of the Credit Agreement and (b) the conditions specified in Sections 4.01 , 4.02(a) and 4.02(b) of the Credit Agreement have been satisfied on and as of the date of the requested Swing Line Borrowing.
[signature page follows]
1 Each notice of a Swing Line Borrowing must be received by the Swing Line Lender and the Agent not later than 1:00 p.m. on the requested date of any Swing Line Borrowing.
2 Each Swing Line Borrowing must be in a minimum amount of $100,000.
Dated as of the date above first written.
SEQUENTIAL BRANDS GROUP, INC., as Borrower |
By: | ||
Name: | ||
Title: |
Signature Page to Swing Line Loan Notice
Exhibit C-1
Form of REVOLVING Note
REVOLVING NOTE
$________________ | ______________, 20___ |
FOR VALUE RECEIVED, the undersigned (the “ Borrower ”), promises to pay to the order of _________________________________ (hereinafter, with any subsequent holders, the “ Lender ”), c/o Bank of America, N.A., 100 Federal Street, 9 th Floor, Boston, Massachusetts 02110, the principal sum of _____________________________ DOLLARS ($_____________), or, if less, the aggregate unpaid principal balance of Revolving Loans made by the Lender to or for the account of the Borrower pursuant to the Second Amended and Restated First Lien Credit Agreement dated as of April 8, 2015 as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by and among (i) the Borrower, (ii) the Guarantors from time to time party thereto, (iii) the lenders from time to time party thereto (individually, a “ Lender ” and, collectively, the “ Lenders ”), and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein, with interest at the rate and payable in the manner stated therein.
This “Revolving Note” is a “Note” to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. The principal of, and interest on, this Revolving Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The Agent’s books and records concerning the Revolving Loans, the accrual of interest thereon, and the repayment of such Revolving Loans, shall be conclusive evidence of the indebtedness to the Lender hereunder, absent manifest error.
No delay or omission by the Agent or the Lender in exercising or enforcing any of the Agent’s or such Lender’s powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver of any such Event of Default.
The Borrower, and each endorser and guarantor of this Revolving Note, waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by the Agent and/or the Lender with respect to this Revolving Note and/or any Collateral or any extension or other indulgence with respect to any other liability or any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Revolving Note.
This Revolving Note shall be binding upon the Borrower, and each endorser and guarantor hereof, and upon their respective successors, assigns and representatives, and shall inure to the benefit of the Lender and its successors, endorsees, and assigns.
The liabilities of the Borrower, and of any endorser or guarantor of this Revolving Note, are joint and several, provided , however , the release by the Agent or the Lender of any one or more such Persons shall not release any other Person obligated on account of this Revolving Note. Each reference in this Revolving Note to the Borrower, any endorser, and any guarantor, is to such Person individually and also to all such Persons jointly.
THIS REVOLVING NOTE 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 REVOLVING NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE Borrower 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 REVOLVING NOTE 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 THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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. THE BORROWER 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.
THE Borrower 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 REVOLVING NOTE OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE. THE BORROWER 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.
THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN the MANNER PROVIDED FOR NOTICES IN SECTION 10.02 OF the CREDIT AGREEMENT. NOTHING IN THIS REVOLVING NOTE WILL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Agent and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Revolving Note, are each relying thereon. THE BORROWER, AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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 REVOLVING NOTE OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, (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 HAS BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS REVOLVING NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
[ SIGNATURE PAGE FOLLOWS ]
IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be duly executed as of the date set forth above.
SEQUENTIAL BRANDS GROUP, INC. |
By: | ||
Name: | ||
Title: |
Exhibit C-2
Form of TRANCHE a TERM Note
TRANCHE A TERM NOTE
$________________ | _______________, 20___ |
FOR VALUE RECEIVED, the undersigned (the “ Borrower ”), promises to pay to the order of _________________________________ (hereinafter, with any subsequent holders, the “ Lender ”), c/o Bank of America, N.A., 100 Federal Street, 9 th Floor, Boston, Massachusetts 02110, the principal sum of _____________________________ DOLLARS ($_____________), or, if less, the aggregate unpaid principal balance of Tranche A Term Loan made by the Lender to or for the account of the Borrower pursuant to the Second Amended and Restated First Lien Credit Agreement dated as of April 8, 2015 as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by and among (i) the Borrower, (ii) the Guarantors from time to time party thereto, (iii) the lenders from time to time party thereto (individually, a “ Lender ” and, collectively, the “ Lenders ”), and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein, with interest at the rate and payable in the manner stated therein.
This “Tranche A Term Note” is a “Note” to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. The principal of, and interest on, this Tranche A Term Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The Agent’s books and records concerning the Tranche A Term Loan, the accrual of interest thereon, and the repayment of such Tranche A Term Loan, shall be conclusive evidence of the indebtedness to the Lender hereunder, absent manifest error.
No delay or omission by the Agent or the Lender in exercising or enforcing any of the Agent’s or such Lender’s powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver of any such Event of Default.
The Borrower, and each endorser and guarantor of this Tranche A Term Note, waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by the Agent and/or the Lender with respect to this Tranche A Term Note and/or any Collateral or any extension or other indulgence with respect to any other liability or any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Tranche A Term Note.
This Tranche A Term Note shall be binding upon the Borrower, and each endorser and guarantor hereof, and upon their respective successors, assigns and representatives, and shall inure to the benefit of the Lender and its successors, endorsees, and assigns.
The liabilities of the Borrower, and of any endorser or guarantor of this Tranche A Term Note, are joint and several, provided , however , the release by the Agent or the Lender of any one or more such Persons shall not release any other Person obligated on account of this Tranche A Term Note. Each reference in this Tranche A Term Note to the Borrower, any endorser, and any guarantor, is to such Person individually and also to all such Persons jointly.
THIS TRANCHE A TERM NOTE 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 TRANCHE A TERM NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE Borrower 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 TRANCHE A TERM NOTE 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 THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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. THE BORROWER 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.
THE Borrower 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 TRANCHE A TERM NOTE OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE. THE BORROWER 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.
THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN the MANNER PROVIDED FOR NOTICES IN SECTION 10.02 OF the CREDIT AGREEMENT. NOTHING IN THIS TRANCHE A TERM NOTE WILL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Agent and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Tranche A Term Note, are each relying thereon. THE BORROWER, AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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 TRANCHE A TERM NOTE OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, (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 HAS BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS TRANCHE A TERM NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
[ SIGNATURE PAGE FOLLOWS ]
IN WITNESS WHEREOF, the Borrower has caused this Tranche A Term Note to be duly executed as of the date set forth above.
SEQUENTIAL BRANDS GROUP, INC. |
By: | ||
Name: | ||
Title: |
Exhibit C-3
Form of TRANCHE A-1 TERM Note
TRANCHE A-1 TERM NOTE
$________________ | _______________, 20___ |
FOR VALUE RECEIVED, the undersigned (the “ Borrower ”), promises to pay to the order of _________________________________ (hereinafter, with any subsequent holders, the “ Lender ”), c/o Bank of America, N.A., 100 Federal Street, 9 th Floor, Boston, Massachusetts 02110, the principal sum of _____________________________ DOLLARS ($_____________), or, if less, the aggregate unpaid principal balance of Tranche A-1 Term Loan made by the Lender to or for the account of the Borrower pursuant to the Second Amended and Restated First Lien Credit Agreement dated as of April 8, 2015 as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by and among (i) the Borrower, (ii) the Guarantors from time to time party thereto, (iii) the lenders from time to time party thereto (individually, a “ Lender ” and, collectively, the “ Lenders ”), and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein, with interest at the rate and payable in the manner stated therein.
This “Tranche A-1 Term Note” is a “Note” to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. The principal of, and interest on, this Tranche A-1 Term Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The Agent’s books and records concerning the Tranche A-1 Term Loan, the accrual of interest thereon, and the repayment of such Tranche A-1 Term Loan, shall be conclusive evidence of the indebtedness to the Lender hereunder, absent manifest error.
No delay or omission by the Agent or the Lender in exercising or enforcing any of the Agent’s or such Lender’s powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver of any such Event of Default.
The Borrower, and each endorser and guarantor of this Tranche A-1 Term Note, waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by the Agent and/or the Lender with respect to this Tranche A-1 Term Note and/or any Collateral or any extension or other indulgence with respect to any other liability or any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Tranche A-1 Term Note.
This Tranche A-1 Term Note shall be binding upon the Borrower, and each endorser and guarantor hereof, and upon their respective successors, assigns and representatives, and shall inure to the benefit of the Lender and its successors, endorsees, and assigns.
The liabilities of the Borrower, and of any endorser or guarantor of this Tranche A-1 Term Note, are joint and several, provided , however , the release by the Agent or the Lender of any one or more such Persons shall not release any other Person obligated on account of this Tranche A-1 Term Note. Each reference in this Tranche A-1 Term Note to the Borrower, any endorser, and any guarantor, is to such Person individually and also to all such Persons jointly.
THIS TRANCHE A-1 TERM NOTE 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 TRANCHE A-1 TERM NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE Borrower 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 TRANCHE A-1 TERM NOTE 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 THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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. THE BORROWER 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.
THE Borrower 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 TRANCHE A-1 TERM NOTE OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE. THE BORROWER 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.
THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN the MANNER PROVIDED FOR NOTICES IN SECTION 10.02 OF the CREDIT AGREEMENT. NOTHING IN THIS TRANCHE A-1 TERM NOTE WILL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Agent and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Tranche A-1 Term Note, are each relying thereon. THE BORROWER, AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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 TRANCHE A-1 TERM NOTE OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, (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 HAS BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS TRANCHE A-1 TERM NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
[ SIGNATURE PAGE FOLLOWS ]
IN WITNESS WHEREOF, the Borrower has caused this Tranche A-1 Term Note to be duly executed as of the date set forth above.
SEQUENTIAL BRANDS GROUP, INC. |
By: | ||
Name: | ||
Title: |
Exhibit D
FORM OF COMPLIANCE CERTIFICATE
Date of Certificate: _______________, 20___
To: Bank of America, N.A., as Agent
Ladies and Gentlemen:
Reference is made to the Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
The undersigned, solely in his capacity as a duly authorized and acting Responsible Officer of the Borrower, hereby certifies on behalf of the Borrower and each of the other Loan Parties as of the date hereof the following:
1. | No Defaults or Events of Default . To his knowledge, since __________ (the date of the last Compliance Certificate delivered pursuant to Section 6.02 of the Credit Agreement, or, in the case of the first Compliance Certificate delivered after the Effective Date, the Effective Date), and except as set forth in Appendix I , no Default or Event of Default has occurred. |
2. | Financial Calculations . |
(a) | Attached hereto as Appendix IIA are reasonably detailed calculations necessary to determine the Positive Net Income for the period ending _____________. |
(b) | Attached hereto as Appendix IIB are reasonably detailed calculations necessary to determine the Loan to Value Ratio for the period ending __________. |
3. | Financial Statements . |
[ Use following paragraph (a) for Fiscal Year-end financial statements ]
(a) | Attached hereto as Appendix III are the audited Consolidated balance sheet of the Borrower and its Subsidiaries, as required by Section 6.01(a) of the Credit Agreement for the Fiscal Year ended ____________, 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, prepared in accordance with GAAP and accompanied by such materials as are required to be delivered pursuant to Section 6.01(a) of the Credit Agreement (all of the foregoing, collectively, the “ Annual Financial Statements ”). |
[ Use following paragraph (b) for Fiscal Quarter-end financial statements ]
(b) | Attached hereto as Appendix III are the Consolidated balance sheet of the Borrower and its Subsidiaries, as required by Section 6.01(b) of the Credit Agreement for the Fiscal Quarter ended ___________, 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) of the Credit Agreement, (B) the corresponding Fiscal Quarter of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail and accompanied by such materials as are required to be delivered pursuant to Section 6.01(b) of the Credit Agreement (all of the foregoing, collectively, the “ Quarterly Financial Statements ”). The Quarterly Financial Statements were prepared in accordance with GAAP and present fairly 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, subject only to normal year-end audit adjustments and the absence of footnotes. |
4. | No Material Accounting Changes, Etc . Except as set forth in Appendix IV , there has been no change in generally accepted accounting principles used in the preparation of the [Annual Financial Statements][Quarterly Financial Statements] furnished to the Agent for the [Fiscal Year/ Fiscal Quarter] ended ___________. If any such change has occurred, a statement of reconciliation conforming such financial statements to GAAP is attached hereto in Appendix IV . |
5. | Management Discussion . Attached hereto as Appendix V is a discussion and analysis prepared by management of the Borrower with respect to the [Annual Financial Statements] [Quarterly Financial Statements] delivered herewith. |
6. | New Intellectual Property . Except as set forth in Appendix VI , neither the Borrower nor any Subsidiary has acquired any new Material Intellectual Property since the date of the last Compliance Certificate delivered nor has any Intellectual Property become Material Intellectual Property since the date of the last Compliance Certificate delivered. |
7. | New Material Licenses . Except as set forth in Appendix VII , neither the Borrower nor any Subsidiary has acquired or entered into any new license agreement that would constitute a Material License since the date of the last Compliance Certificate delivered nor has any license become a Material License since the date of the last Compliance Certificate delivered. |
[signature page follows]
IN WITNESS WHEREOF, a duly authorized and acting Responsible Officer of the Borrower, on behalf of the Borrower and each of the other Loan Parties, has duly executed this Compliance Certificate as of __________________, 201_.
BORROWER: | |
SEQUENTIAL BRANDS GROUP, INC. |
By: | ||
Name: | ||
Title: |
Signature Page to Compliance Certificate
APPENDIX I
Except as set forth below, no Default or Event of Default has occurred.
Appendix I to Compliance Certificate
Appendix IIA
Positive Net Income
1. | Consolidated Positive Net Income: |
(a) | Consolidated Net Income: | ||
Plus the following, to extent deducted in calculating |
|||
Consolidated Net Income for such measurement period: | |||
(b) | depreciation and amortization expense: | ||
(c) | 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: | |||
(d) | 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: | |||
(e) | one-time costs or fees in connection with the | ||
Simpson Acquisition in an amount not to exceed | |||
$4,000,000 in the aggregate for the twelve month | |||
period following the Simpson Acquisition: | |||
(f) | one-time costs or fees in connection with the Galaxy Brands | ||
Merger in an amount not to exceed $7,500,000 in the | |||
aggregate for the twelve month period following | |||
the Galaxy Brands Merger: | |||
(g) | Sum of lines 1(a) through 1(f): |
Covenant:
The Loan Parties shall not permit Consolidated Positive Net Income, as calculated on a quarterly basis, to be equal to or less than $0.
In compliance? ________ yes __________ no
Appendix IIA to Compliance Certificate
Appendix IIB
Calculation of Loan to Value Ratio
1. | Total Outstandings (as defined in the Credit Agreement) |
as of the period ending __________________: ______________________
2. | LTV Percentage 1 : ______________________ |
multiplied by
3. | Realizable Orderly Liquidation Value of the registered |
Trademarks of the Loan Parties, DVS and With You,
as applicable, as of the date hereof: ______________________
Covenant:
The Loan Parties shall not permit the outstanding amount of the Total Outstandings to be greater than the applicable LTV Percentage multiplied by the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, DVS and With You, as applicable, 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) of the Credit Agreement.
In compliance? yes no
1 As of the Effective Date, sixty (60%) percent; provided that the LTV Percentage shall decrease on the date of each required amortization payment of the Term Loans made pursuant to Section 2.06(a) and (b) of the Credit Agreement to a percentage equal to the Loan to Value Ratio as calculated after giving effect to each such repayment of the Term Loans; provided further that in no event shall the LTV Percentage at any time be less than fifty (50%) percent.
Appendix IIB to Compliance Certificate
APPENDIX III
(Financial Statements)
[see attached]
Appendix III to Compliance Certificate
APPENDIX IV
(GAAP)
[see attached]
Appendix IV to Compliance Certificate
APPENDIX V
(MD&A)
[see attached]
Appendix V to Compliance Certificate
APPENDIX VI
(Material Intellectual Property)
[see attached]
Appendix VI to Compliance Certificate
APPENDIX VII
(Material License)
[see attached]
Appendix VII to Compliance Certificate
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (this “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] “ Assignor ”) and [the][each] 2 Assignee identified in item 2 below ([the][each, an] “ Assignee ”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given to them in the Second Amended and Restated First Lien Credit Agreement identified below (the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto (the “ Standard Terms and Conditions ”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Agent as contemplated below, (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the Loans and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “ Assigned Interest ”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.
1. | Assignor[s] : | ||
1 For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.
2 For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.
3 Select as appropriate.
4 Include bracketed language if there are either multiple Assignors or multiple Assignees.
2. | Assignee[s] : | ||
[for each Assignee, indicate if [Affiliate][Approved Fund] of [identify Lender]]
3. | Borrower : | Sequential Brands Group, Inc. |
4. | Agent : Bank of America, N.A., as the Agent under the Credit Agreement. |
5. | Credit Agreement : Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time), by and among (i) Sequential Brands Group, Inc., a Delaware corporation (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent. |
6. | Assigned Interest[s] : |
Assignor[s] 5 | Assignee[s] 6 |
Facility
Assigned 7 |
Aggregate
Amount of Loans for all Lenders 8 |
Amount of
Loans Assigned 9 |
Percentage
Assigned of Loans 10 |
|||||||||||||||||
$ | $ | % | ||||||||||||||||||||
$ | $ | % |
[7. | Trade Date : __________________] 11 |
Effective Date : __________________, 201_ [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF DELIVERY OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
5 List each Assignor, as appropriate.
6 List each Assignee, as appropriate.
7 Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Revolving Loans”, “Tranche A Term Loan”, “Tranche A-1 Term Loan”, etc.).
8 Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments of Loans made between the Trade Date and the Effective Date.
9 Subject to minimum amount requirements pursuant to Section 10.06(b)(i) of the Credit Agreement and subject to proportionate amount requirements pursuant to Section 10.06(b)(ii) of the Credit Agreement.
10 Set forth, to at least 9 decimals, as a percentage of the Loans of all Lenders.
11 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR[S] 12 | |
[NAME OF ASSIGNOR] |
By: | ||
Name: | ||
Title: |
ASSIGNEE[S] 13 | |
[NAME OF ASSIGNEE] |
By: | ||
Name: | ||
Title: |
[Consented to and] 14 Accepted: | |
BANK OF AMERICA, N.A. , | |
as Agent |
By: | |||
Name: | |||
Title: |
[Consented to:] 15 | |
SEQUENTIAL BRANDS GROUP, INC., as Borrower |
By: | |||
Name: | |||
Title: |
12 Add additional signature blocks as needed.
13 Add additional signature blocks as needed.
14 To the extent that the Agent’s consent is required under Sections 10.06(b)(i)(B) or 10.06(b)(iii)(B) of the Credit Agreement.
15 To the extent that the Borrower’s consent is required under Sections 10.06(b)(i)(B) and/or 10.06(b)(iii)(A) of the Credit Agreement.
ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
Reference is made to the Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”), by and among (i) Sequential Brands Group, Inc., a Delaware corporation (the “ Borrower ”), (ii) the Guarantors party thereto from time to time, (iii) the Lenders party thereto from time to time, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1. Assignor . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.
1.2. Assignee . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Eligible Assignee under the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Agent, [the][any] Assignor or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2. Payments . From and after the Effective Date, the Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or other electronic image scan transmission (e.g., “pdf” or “tif” via e-mail) shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.
4. Fees . Unless waived by the Agent in accordance with Section 10.06(b)(iv) of the Credit Agreement, this Assignment and Assumption shall be delivered to the Agent with a processing and recordation fee of $3,500.
EXHIBIT F-1
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 201[ ] |
EXHIBIT F-2
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF PARTICIPANT] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 201[ ] |
EXHIBIT F-3
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF PARTICIPANT] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 201[ ] |
EXHIBIT F-4
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Second Amended and Restated First Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 201[ ] |
Exhibit 10.4
Execution Version
AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT
Dated as of April 8, 2015
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 | 2 | |
1.01 | Defined Terms | 2 |
1.02 | Other Interpretive Provisions | 38 |
1.03 | Accounting Terms | 38 |
1.04 | Rounding | 39 |
1.05 | Times of Day | 39 |
ARTICLE II THE COMMITMENTS AND LOANS | 39 | |
2.01 | Loans | 39 |
2.02 | Continuations and Conversions of Loans. | 39 |
2.03 | [Reserved]. | 39 |
2.04 | Prepayments. | 39 |
2.05 | [Reserved]. | 40 |
2.06 | Repayment of Obligations. | 40 |
2.07 | Interest. | 40 |
2.08 | Fees | 40 |
2.09 | Computation of Interest and Fees | 41 |
2.10 | Evidence of Debt. | 41 |
2.11 | Payments Generally; Agent’s Clawback. | 42 |
2.12 | Sharing of Payments by Lenders | 42 |
2.13 | [Reserved]. | 43 |
2.14 | Incremental Facility. | 43 |
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY | 44 | |
3.01 | Taxes. | 44 |
3.02 | Illegality | 47 |
3.03 | Inability to Determine Rates | 48 |
3.04 | Increased Costs; Reserves on LIBOR Rate Loans. | 48 |
3.05 | Compensation for Losses | 49 |
3.06 | Mitigation Obligations; Replacement of Lenders. | 49 |
3.07 | Survival | 50 |
ARTICLE IV CONDITIONS PRECEDENT TO LOANS | 50 | |
4.01 | Conditions of New Loans. | 50 |
ARTICLE V REPRESENTATIONS AND WARRANTIES | 51 | |
5.01 | Existence, Qualification and Power | 51 |
5.02 | Authorization; No Contravention | 52 |
5.03 | Governmental Authorization; Other Consents | 52 |
5.04 | Binding Effect | 52 |
5.05 | Financial Statements; No Material Adverse Effect. | 52 |
5.06 | Litigation | 53 |
5.07 | No Default | 53 |
5.08 | Ownership of Property; Liens. | 53 |
( i ) |
5.09 | Environmental Compliance. | 53 |
5.10 | Insurance | 54 |
5.11 | Taxes | 54 |
5.12 | ERISA Compliance. | 54 |
5.13 | Subsidiaries; Equity Interests | 54 |
5.14 | Margin Regulations; Investment Company Act. | 55 |
5.15 | Disclosure | 55 |
5.16 | Compliance with Laws | 55 |
5.17 | Intellectual Property; Licenses, Etc. | 56 |
5.18 | Reserved. | 56 |
5.19 | Security Documents | 56 |
5.20 | Solvency | 56 |
5.21 | Deposit Accounts | 56 |
5.22 | Brokers | 56 |
5.23 | Material Contracts | 56 |
5.24 | OFAC | 57 |
ARTICLE VI AFFIRMATIVE COVENANTS | 57 | |
6.01 | Financial Statements | 57 |
6.02 | Certificates; Other Information | 57 |
6.03 | Notices | 58 |
6.04 | Payment of Obligations | 59 |
6.05 | Preservation of Existence, Etc. | 60 |
6.06 | Maintenance of Properties; Material Intellectual Property | 60 |
6.07 | Maintenance of Insurance | 60 |
6.08 | Compliance with Laws | 61 |
6.09 | Books and Records; Accountants. | 61 |
6.10 | Inspection Rights; Appraisals of Intellectual Property. | 61 |
6.11 | Additional Loan Parties | 62 |
6.12 | Cash Management. | 62 |
6.13 | Information Regarding the Collateral | 63 |
6.14 | Environmental Laws | 63 |
6.15 | Further Assurances | 63 |
6.16 | Material Contracts | 64 |
6.17 | Board Packages. | 64 |
6.18 | Post-Closing Items. | 64 |
ARTICLE VII NEGATIVE COVENANTS | 64 | |
7.01 | Liens. | 64 |
7.02 | Investments | 64 |
7.03 | Indebtedness; Disqualified Stock; Equity Issuances. | 64 |
7.04 | Fundamental Changes | 65 |
7.05 | Dispositions | 65 |
7.06 | Restricted Payments | 65 |
7.07 | Prepayments of Indebtedness | 66 |
7.08 | Change in Nature of Business | 66 |
7.09 | Transactions with Affiliates | 66 |
7.10 | Burdensome Agreements | 67 |
7.11 | Use of Proceeds | 67 |
7.12 | Amendment of Material Documents; Material Licenses. | 67 |
( ii ) |
7.13 | Fiscal Year | 67 |
7.14 | Deposit Accounts | 67 |
7.15 | Financial Covenants. | 67 |
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES | 68 | |
8.01 | Events of Default | 68 |
8.02 | Remedies Upon Event of Default | 70 |
8.03 | Application of Funds | 70 |
8.04 | Right to Cure. | 71 |
ARTICLE IX THE AGENT | 71 | |
9.01 | Appointment and Authority | 71 |
9.02 | Rights as a Lender | 72 |
9.03 | Exculpatory Provisions | 72 |
9.04 | Reliance by Agent | 73 |
9.05 | Delegation of Duties | 73 |
9.06 | Resignation or Replacement of Agent. | 73 |
9.07 | Non-Reliance on Agent and Other Lenders | 73 |
9.08 | Agent May File Proofs of Claim | 74 |
9.09 | Collateral and Guaranty Matters | 74 |
9.10 | Notice of Transfer | 75 |
9.11 | Reports and Financial Statements. | 75 |
9.12 | Agency for Perfection | 75 |
9.13 | Indemnification of Agent | 75 |
9.14 | Relation among Lenders | 76 |
ARTICLE X MISCELLANEOUS | 76 | |
10.01 | Amendments, Etc. | 76 |
10.02 | Notices; Effectiveness; Electronic Communications. | 77 |
10.03 | No Waiver; Cumulative Remedies | 78 |
10.04 | Expenses; Indemnity; Damage Waiver. | 78 |
10.05 | Payments Set Aside | 79 |
10.06 | Successors and Assigns. | 79 |
10.07 | Treatment of Certain Information; Confidentiality | 82 |
10.08 | Right of Setoff | 82 |
10.09 | Interest Rate Limitation | 83 |
10.10 | Counterparts; Integration; Effectiveness | 83 |
10.11 | Survival | 83 |
10.12 | Severability | 83 |
10.13 | Replacement of Lenders | 84 |
10.14 | Governing Law; Jurisdiction; Etc. | 84 |
10.15 | Waiver of Jury Trial | 85 |
10.16 | No Advisory or Fiduciary Responsibility | 85 |
10.17 | USA PATRIOT Act Notice | 86 |
10.18 | Foreign Asset Control Regulations | 86 |
10.19 | Time of the Essence | 86 |
10.20 | Press Releases. | 86 |
10.21 | Additional Waivers. | 87 |
10.22 | No Strict Construction | 87 |
( iii ) |
10.23 | Attachments | 88 |
10.24 | Electronic Execution of Assignments and Certain Other Documents | 88 |
10.25 | Keepwell | 88 |
10.26 | California Judicial Reference | 88 |
10.27 | First Lien Intercreditor Agreement | 88 |
10.28 | Amendment and Restatement.. | 88 |
SIGNATURES | S-1 |
( iv ) |
SCHEDULES
1.01 | Non-Guarantor Subsidiaries |
2.01(a) | Existing Loans |
2.01(b) | New Loan Commitments |
2.01(c) | 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 ) |
AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT
This AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT (the “ Agreement ”) is entered into as of April 8, 2015, 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 ”).
W I T N E S S E T H :
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent are party to the Second Lien Credit Agreement dated as of August 15, 2014 (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 the Agent, as “Administrative Agent” and “Collateral Agent”.
WHEREAS, on August 15, 2014 (the “ Original Closing Date ”), Universe Galaxy Merger Sub, Inc., a Delaware corporation, and an indirect wholly owned Subsidiary of the Borrower, was merged with and into Galaxy Brand Holdings, Inc. (“ GBH ”), with GBH as the surviving entity, and immediately following such merger, GBH, as a wholly owned Subsidiary of SBG Universe Brands, LLC, a Delaware limited liability company and wholly owned Subsidiary of the Borrower (“ SBG Universe ”), was merged with and into SBG Universe, with SBG Universe as the surviving entity (collectively, the “ Galaxy Brands Merger ”);
WHEREAS, on the Original Closing Date, the Lenders under the Existing Credit Agreement made the Existing Loans (as defined herein) to the Borrower, the proceeds of which, in part, were used to enable the Borrower to consummate the Galaxy Brands Merger;
WHEREAS, the Borrower has entered into that certain Purchase Agreement dated as of April 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “ Simpson Acquisition Agreement ”) by and among, among others, Sequential Brands Group, Inc., a Delaware corporation, as the Buyer (as defined therein), With You, Inc., a California corporation (“ WYI ”) and Corny Dog, Inc., a California corporation ( “Corny Dog ”), as the Sellers (as defined therein), whereby the Buyer will acquire (the “ Simpson Acquisition ”) 62.5% of the membership interest in With You (as defined below);
WHEREAS, the Borrower wishes to obtain financing for the Simpson Acquisition, and to increase the Obligations under the Existing Credit Agreement;
WHEREAS, the Lenders have agreed to continue and extend certain credit facilities, as applicable to the Borrower in an aggregate amount not to exceed $159,500,000, consisting of the Existing Loans and up to $69,500,000 of new term loans on the terms and conditions set forth herein; 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.
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:
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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.
“Acquisition Representations” means such of the representations made by or on behalf of the Sellers (as defined in the Simpson Acquisition Agreement) in the Simpson Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower (or any of its Affiliates) would have the right (after giving effect to any applicable cure provisions) to terminate its obligations under the Simpson Acquisition Agreement or not consummate the Simpson Acquisition as a result of a breach of such representations in the Simpson Acquisition Agreement.
“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, in connection with a change in the Applicable Margin resulting from a change in the Consolidated Total Leverage Ratio and/or the Consolidated Net Leverage Ratio, the second Business Day after the Borrower delivers each of the financial statements and the Compliance Certificate required hereunder.
“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.
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“Aggregate Commitments” means outstanding principal amount of each Lender’s Existing Loan on the Effective Date plus the Commitments of all Lenders. As of the Effective Date, the Aggregate Commitments are $159,500,000.
“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) prior to the Effective Date, (i) for LIBOR Rate Loans, eight percent (8.00%) and (ii) for Base Rate Loans, seven percent (7.00%);
(b) from and after the Effective Date until the first Adjustment Date and on each Adjustment Date thereafter for which (i) the Consolidated Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter is greater than 4.00:1.00 but less than 6.50:1.00 or (ii) the Consolidated Net Leverage Ratio as at the end of the immediately preceding Fiscal Quarter is greater than 3.75:1.00 but less than 6.25:1.00, then at (A) in the case of LIBOR Rate Loans, nine percent (9.00%) or (B) in the case of Base Rate Loans, eight percent (8.00%), provided , if either (x) the Consolidated Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter is equal to or greater than 6.50:1.00 or (y) the Consolidated Net Leverage Ratio as at the end of the immediately preceding Fiscal Quarter is greater than or equal to 6.25:1.00, then the “Applicable Margin” shall be as set forth in clause (d) below;
(c) from and after the first Adjustment Date and on each Adjustment Date thereafter for which (i) the Consolidated Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter is equal to or less than 4.00:1.00 and (ii) the Consolidated Net Leverage Ratio as at the end of the immediately preceding Fiscal Quarter is equal to or less than 3.75:1.00, then at (A) in the case of LIBOR Rate Loans, eight percent (8.00%) or (B) in the case of Base Rate Loans, seven percent (7.00%);
(d) from and after the first Adjustment Date and on each Adjustment Date thereafter for which the Consolidated Total Leverage Ratio as of the end of the immediately preceding Fiscal Quarter is equal to or greater than 6.50:1.00 or (ii) the Consolidated Net Leverage Ratio as at the end of the immediately preceding Fiscal Quarter is equal to or greater than 6.25:1.00, then at (A) in the case of LIBOR Rate Loans, ten percent (10.00%) or (B) in the case of Base Rate Loans, nine percent (9.00%); and
(e) in connection with the foregoing, (i) if at any time the Borrower shall have failed to deliver financial statements and Compliance Certificates when so required, the Applicable Margin shall be at the rate set forth in clause (d) above until such time as such financial statements and Compliance Certificate are delivered, at which time the Applicable Margin shall be determined as provided above and (ii) if any financial statements or Compliance Certificates used to calculate the Consolidated Total Leverage Ratio or the Consolidated Net Leverage 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 Compliance Certificate 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.
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“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 aggregate Loans held by such Lender at such time. Prior to the making of the New Loans, the Applicable Percentage of each Lender is as set forth opposite the name of such Lender in Part I of Schedule 2.01(c) , and after the making of the New Loans, the Applicable Percentage of each Lender is as set forth opposite the name of such Lender on Part II of Schedule 2.01(c) or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
“Approved Fund” means any (a) GSO Entity, or (b) Fund or account that is administered, managed, advised or sub-advised by (i) a Lender, (ii) an Affiliate of a Lender (iii) an entity or an Affiliate of an entity that administers, manages, advises or sub-advises a Lender, or (iv) the same investment advisor or an advisor under common control with such Lender, Affiliate or advisor, as applicable.
“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, 2014, 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.
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“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 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.
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“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
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(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 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; or
(e) the Borrower fails at any time to own, directly or indirectly, 60% of the Equity Interests of DVS, 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; or
(f) the Borrower fails at any time to own, directly or indirectly, 62.5% of the Equity Interests of With You, 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 New 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(b) . As of the Effective Date, the aggregate Commitments total $69,500,000.
“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.
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“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 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, (y) the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve-month period ending on the one year anniversary of the Effective Date and (z) one-time costs or fees in connection with the Galaxy Transactions in an amount not to exceed $7,500,000 in the aggregate for the twelve-month period following the Original Closing 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 calculating the Consolidated Total Leverage Ratio and the Consolidated Net Leverage Ratio (a) with respect to any Fiscal Quarter which ends prior to the second anniversary of the Original Closing Date, Consolidated EBITDA with respect to GBH for each applicable Fiscal Quarter occurring prior to the first anniversary of Original Closing Date shall be calculated as 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 Galaxy Brands Merger), and (b) with respect to any Fiscal Quarter which ends prior to the second anniversary of the Effective Date, Consolidated EBITDA with respect to With You for each applicable Fiscal Quarter occurring prior to the first anniversary of Effective Date shall be calculated as the greater of (x) $3,500,000 and (y) Consolidated EBITDA for With You for such Fiscal Quarter (on a standalone basis without giving effect to the Simpson Acquisition). For purposes of determining Consolidated EBITDA as a whole for each applicable Fiscal Quarter identified in clauses (a) and (b) above, such amounts determined for GBH and With You in clauses (a) and (b), as applicable, shall then be added to the calculation of Consolidated EBITDA for such applicable Fiscal Quarter for Sequential Brands Group Inc. (on a standalone basis without giving effect to the Galaxy Brands Merger and/or the Simpson Acquisition, as applicable).
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Notwithstanding anything to the contrary contained above, any calculation of Consolidated EBITDA shall exclude the Consolidated EBITDA attributable to any non-wholly owned Subsidiary of the Borrower, except to the extent that any such Consolidated EBITDA is actually received by the Loan Parties in the form of cash dividends or distributions or will be received within 30 days (and is identified to the GSO Entities in the applicable Compliance Certificate).
“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.
“Consolidated Net Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Total Indebtedness (less unrestricted cash on the balance sheet) on such date to (b) Consolidated EBITDA for the trailing twelve months then ending.
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“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 (d) one-time costs or fees in connection with the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve-month period ending on the Effective Date and (e) one-time costs or fees in connection with the Galaxy Brands Merger in an amount not to exceed $7,500,000 in the aggregate for the twelve month period following the Original Closing 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.
“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 Original 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.
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“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.
“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.
“Discounted Value” means, with respect to the Prepaid Principal of the Loan, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Prepaid Principal from their respective scheduled due dates to the Settlement Date with respect to such Prepaid Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Loans is payable) equal to the Reinvestment Yield with respect to the Prepaid Principal.
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“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.
“DVS” means DVS Footwear International LLC, a Delaware limited liability company.
“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 .
“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.
“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.
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“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.
“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.
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“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 pursuant to a law in effect on the date on which (i) such Lender acquires such interest in a 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” has the meaning provided therefor in the recitals.
“Existing Loan” means, for any Lender, each loan made by such Lender as described in Section 2.01(a) in an original aggregate principal amount as set forth on Schedule 2.01(a) .
“Facility Guaranty” means any Guarantee made by the Guarantors in favor of the Agent and the other Credit Parties, in form reasonably satisfactory to the GSO Entities.
“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.
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“Fee Letter” means, collectively, (i) the letter agreement dated as of the Effective Date, between the Borrower and the Agent, (ii) the letter agreement dated as of the Original Closing Date, between the Borrower and the Arranger and (iii) the letter agreement dated as of the Effective Date between the Borrower and the applicable GSO Entities.
“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.
“First Lien Credit Agreement” means that certain Second Amended and Restated First Lien Term Loan Agreement, dated as of the Effective Date, 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 replacement, 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 of the Original Closing Date, among the Agent and the First Lien Agent, as the same may be amended, restated, supplemented or otherwise modified.
“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.
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“Galaxy Brands Merger” has the meaning provided therefor in the recitals.
“Galaxy Transactions” means, collectively, (a) the Galaxy Brands Merger and the related transactions pursuant to the applicable documentation relating thereto, (b) the entry into of the Loan Documents and the borrowings thereunder and (c) the refinancing of certain existing Indebtedness in connection therewith.
“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).
“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.
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“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
(h) all Guarantees of such Person in respect of any of the foregoing.
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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, for the New Loans, the period commencing on the date such LIBOR Rate Loan is disbursed or converted to a LIBOR Rate Loan and ending on the date to be determined by the GSO Entities in their reasonable discretion to “sync up” the initial Interest Period(s) of the New Loans with the immediately succeeding Interest Period for the Existing Loans; and
(b) initially, for the Existing Loans, and after the period(s) described in clause (a) above, for the New Loans, 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;
(ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;
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(iii) no Interest Period shall extend beyond the Maturity Date; and
(iv) notwithstanding the provisions of clause (iii), no Interest Period shall have a duration of less than one (1) month, and if any Interest Period applicable to a LIBOR Rate Loan 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.
“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
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(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” means any Existing Loans and/or any New Loans (and, for the avoidance of doubt, includes increases by Lenders and Additional Commitment Lenders pursuant to Section 2.14 ), as the context may require. “ Loans ” means the aggregate amount of such Loans made by all Lenders.
“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 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, DVS and With You, as applicable, 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) .
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“Make-Whole Amount” means, with respect to the Prepaid Principal of the Loans, an amount equal to the Discounted Value of the Remaining Scheduled Payments with respect to the Prepaid Principal of the Loans.
“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, 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.
“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 April 8, 2021.
“Maximum Rate” has the meaning provided therefor in Section 10.09 .
“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.
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“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)).
“New Loan” means, for any Lender, each loan made by such Lender under Section 2.01(b) in an original aggregate principal amount not to exceed such Lender’s Commitment as set forth on Schedule 2.01(b) .
“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 (unless and until such consent is obtained), including, for the avoidance of doubt, each Subsidiary set forth on Schedule 1.01 , (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 Loans 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.
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“Original Closing Date” has the meaning provided therefor in the recitals.
“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 Original 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.
“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:
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(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.
“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;
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(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 Galaxy Brands Merger or in connection with a Permitted Acquisition within twelve (12) months after the consummation of the Galaxy Brands Merger 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;
(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;
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(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;
(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;
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(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 $190,000,000 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 Effective Date 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 $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;
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(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 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;
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(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 $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;
(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;
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(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 and such additional Investments by any Loan Party in any Non-Guarantor Subsidiary shall not exceed $11,500,000 in the aggregate 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;
(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);
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(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 Simpson 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) [reserved]; 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;
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 No-Call Prepayment” has the meaning specified in Section 2.14 .
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“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.
“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.
“Prepaid Principal” means, the principal of the Loans prepaid, repaid or refinanced during the “no call period” set forth in Section 2.04(a) or which has been declared to be immediately due and payable pursuant to Section 8.02 during such “no call period”, but excluding such principal constituting the Permitted No-Call Prepayment or any mandatory prepayment pursuant to Section 2.04(b) or (c) .
“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.
“Qualified Stock” means all Equity Interests other than Disqualified Stock.
“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 (x) one hundred percent (100%) of the appraised orderly liquidation value of the Intellectual Property of the Loan Parties; (y) prior to April 1, 2016 sixty percent (60%) of the appraised orderly liquidation value of the Intellectual Property of DVS and (ii) on and after April 1, 2016 zero percent (0%) of the appraised orderly liquidation value of the Intellectual Property of DVS; and (z) sixty-two and one half percent (62.5%) of the appraised orderly liquidation value of the Intellectual Property of With You, 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.
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“Register” has the meaning specified in Section 10.06(c) .
“Registered Public Accounting Firm” has the meaning specified by the Securities Laws and shall be independent of the Borrower and its Subsidiaries as prescribed by the Securities Laws.
“Reinvestment Yield” means, with respect to the Prepaid Principal of the Loans, 0.75% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to the outstanding principal amount of the Loans, on the display designated as “Page 678” on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Prepaid Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Prepaid Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Prepaid Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (i) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average Life and (ii) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the Loans.
“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.
“Remaining Average Life” shall mean, with respect to the Prepaid Principal of the Loans, the number of months (calculated to the nearest month) obtained by dividing (a) such Prepaid Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to the Prepaid Principal by (ii) the number of months (calculated to the nearest month) that will elapse between the Settlement Date with respect to such Prepaid Principal and the scheduled due date of such Remaining Scheduled Payment.
“Remaining Scheduled Payments” means, with respect to the Prepaid Principal of the Loans, all payments of interest thereon on such Prepaid Principal thereon that would be due after the Settlement Date with respect to such Prepaid Principal if no payment of such Prepaid Principal were made prior to its scheduled due date; provided , that for the purposes of determining the Remaining Scheduled Payments of any Loan, it will be assumed that such Loan became due on the second anniversary of the Effective Date; provided , further , that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Loans, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date.
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“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 Loans.
“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.
“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.
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“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.
“Security Agreement” means the Security Agreement dated as of the Original Closing 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.
“Settlement Date” means, with respect to the Prepaid Principal of the Loans, the date on which such Prepaid Principal is prepaid, repaid or refinanced, whether during the “no call period” set forth in Section 2.04(a) or on account of acceleration of the Loans pursuant to Section 8.02 during such “no call period”.
“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.
“Simpson Acquisition Agreement” has the meaning provided therefor in the recitals.
“Simpson Acquisition” has the meaning given to such terms in the recitals.
“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 Simpson Acquisition 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).
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“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.
“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).
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“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 Loans 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 Loans (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 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 Original Closing Date among certain Loan Parties and the Agent.
“Trading with the Enemy Act” has the meaning set forth in Section 10.18 .
“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.
“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.
“With You” means With You LLC, a Delaware limited liability company.
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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.
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).
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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 .
(a) As of the Effective Date, the outstanding principal amount of term loans made by the Existing Lenders to the Borrower prior to the Effective Date in accordance with the Existing Credit Agreement (the “ Existing Loans ”) is $90,000,000, which is owing by the Borrower, without defense, offset, recoupment or deduction.
(b) Subject to the terms and conditions set forth herein, each Lender severally agrees to make a term loan (collectively, the “ New Loans ”) 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 New Loan shall not exceed the aggregate Commitments. The New Loans shall be LIBOR Rate Loans unless converted pursuant to Section 3.02 or 3.03 with an initial Interest Period(s) to be determined by the GSO Entities in their reasonable discretion to “sync up” the initial Interest Period with the immediately succeeding new Interest Period for the Existing Loans.
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 the Loans 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 Loans, 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) The Borrower may not optionally prepay, repay or refinance the Loans on or prior to the first anniversary of the Effective Date; provided , however , that the Borrower may, on a one-time basis, prepay up to twenty-five percent (25%) of the outstanding principal of the Loans during the period commencing on the Effective Date and ending on the first anniversary of the Effective Date (the “ Permitted No-Call Prepayment ”), subject to the conditions to optional prepayments set forth in the following sentences of this Section 2.04(a) and subject to payment of the Early Termination Fee set forth in Section 2.08(b) related to the Permitted No-Call Prepayment. 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 Loans in whole or in part without premium or penalty except the Early Termination Fee set forth in Section 2.08(b) ; 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 Loans held by, as applicable, the Lenders in accordance with their respective Applicable Percentages.
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(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 the then applicable LTV Percentage (as defined in the First Lien Credit Agreement as in effect on the Effective Date) 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 Loans 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 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 180 days and, if so committed to be reinvested, so long as such reinvestment is actually completed within 180 days thereafter.
(d) [Reserved].
(e) Subject to the First Lien Intercreditor Agreement, the Borrower shall prepay the Loans 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 Loans 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 Loans in the amount of any such prepayment waived by the First Lien Agent.
2.05 [Reserved].
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 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 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.
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2.08 Fees.
(a) Make-Whole Amount . On or prior to the first anniversary of the Effective Date, in the event that the Borrower prepays or repays all or part of the Loans (including, for the avoidance of doubt, as a result of an acceleration of the Loans pursuant to Section 8.02 ), unless such prepayment or repayment is the Permitted No-Call Prepayment or is required (and not otherwise waived by the Required Lenders) pursuant to Section 2.04(b) or (c) , the Borrower shall pay to the Agent, for the ratable benefit of the Lenders, the Make-Whole Amount plus three percent (3%) on all Prepaid Principal which does not constitute the Permitted No-Call Prepayment plus the Early Termination Fee associated with the Permitted No-Call Prepayment (as set forth in Section 2.08(b) ). All parties to this Agreement agree and acknowledge that the Lenders will have suffered damages on account of the prepayment of the Loans during such timeframe set forth in this Section 2.08(a) and that, in view of the difficulty in ascertaining the amount of such damages, the Make-Whole Amount constitutes reasonable compensation and liquidated damages to compensate the Lenders on account thereof.
(b) Early Termination Fee . If the Borrower makes the Permitted No-Call Prepayment or, after the first anniversary of the Effective Date, in the event that the Borrower prepays or repays all or part of the Loans pursuant to Section 2.04 or as a result of an acceleration of the Loan pursuant to Section 8.02 , unless such prepayment or repayment is required (and not otherwise waived by the Required Lenders) pursuant to Section 2.04(b) or (c) , 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 or repayment is the Permitted No-Call Prepayment, three percent (3%) of the outstanding principal amount of the Loans prepaid or repaid at such time or (ii) if such prepayment or repayment is not the Permitted No-Call Prepayment, (A) if such prepayment or repayment occurs after the first anniversary of the Effective Date and prior to the second anniversary of the Effective Date, three percent (3%) of the outstanding principal amount of the Loans prepaid or repaid at such time and (B) if such prepayment or repayment 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 outstanding principal amount of the Loan prepaid or repaid at such time; 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 Loans during such timeframe set forth in this Section 2.08(b) 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.
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 such Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which such 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 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 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.
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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.
(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 Loans resulting in such Lender’s receiving payment of a proportion of the aggregate amount of the 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 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).
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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 Loans by an amount (for all such requests in the aggregate) not exceeding $40,000,000; 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 Loans, 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 Loans.
(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 Loans, as applicable, or decline to increase their respective outstanding portion of the Loans 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 Loans 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.
(d) Effective Date and Allocations . If the Loans are 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 Loans under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such increase, and (ii) Schedules 2.01(a) , (b) and (c) shall be deemed supplemented or 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.
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(f) Conflicting Provisions . This Section shall supersede any provisions in Sections 2.12 or 10.01 to the contrary.
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.
(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).
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(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:
(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;
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(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
(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.
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(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.
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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);
(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 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.
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(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:
(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 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.
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(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 New Loans. The obligation of each Lender to make its portion of the New Loans 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;
(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, or a certification stating that such Organization Documents have not been changed since the date of the Existing Credit Agreement;
(v) an opinion of each of White & Case LLP, counsel to the Loan Parties, Kolesar & Leatham, special Nevada counsel, and DLA Piper LLP, special Texas counsel, in each case, 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) a confirmation and ratification of the Security Documents and the Facility Guaranty, executed by the applicable Loan Parties;
(viii) 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
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(ix) 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.
(b) 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.
(c) The Lenders shall have received and be reasonably satisfied with an updated appraisal with respect to the Intellectual Property of the Loan Parties, DVS and With You.
(d) The Agent and the Lenders shall have received the First Lien Credit Agreement (as amended and restated on the Effective Date) and an amendment to the First Lien Intercreditor Agreement in form and substance reasonably satisfactory to the GSO Entities.
(e) Since December 31, 2014, there shall not have been any event or effect that has had or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Borrower and its Subsidiaries (other than With You).
(f) Each of the Acquisition Representations and the Specified Representations shall be true and correct in all material respects, except that any Acquisition Representations or Specified Representations subject to “materiality”, “Material Adverse Effect” or similar materiality qualifiers shall be true and correct in all respects.
(g) Since the date of the Simpson Acquisition 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 “Material Adverse Effect” (as defined in the Simpson Acquisition Agreement, without giving effect to any amendment or modification of such definition after the date of the Simpson Acquisition Agreement unless approved by the GSO Entities in their reasonable discretion) shall have occurred.
(h) The Borrower shall have delivered to the Agent an initial notice of borrowing.
(i) Prior to or contemporaneously with the initial funding of the New Loans, the Borrower shall consummate the Simpson Acquisition substantially in accordance with the terms and conditions set forth in the Simpson Acquisition 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).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Credit Parties 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):
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.
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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 Simpson Acquisition) dated September 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.
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(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.
(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.
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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.
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.
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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.
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.
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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 .
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.
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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.
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, 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) March 31, 2015 with respect to the Borrower and its Subsidiaries other than those Subsidiaries acquired pursuant to the Simpson Acquisition and (y) June 30, 2015 with respect to the Borrower and its Subsidiaries after giving effect to the Simpson 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;
(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.
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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;
(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
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(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.
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.
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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 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.
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(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.
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.
(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.
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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) 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) 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.
(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).
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(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.
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.
(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.
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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.
On or before April 1, 2016, the Borrower shall obtain all consents necessary to cause, and shall cause, DVS to become a Guarantor hereunder and to grant a security interest in all of its assets, including all Intellectual Property, pursuant to the terms of Section 6.11 ; provided that the failure to obtain such consents and to cause DVS to become a Guarantor and grant a security in its assets as provided above shall not constitute an Event of Default hereunder but shall result in the appraised orderly liquidation value of registered Trademarks owned by DVS not being taken into account in connection with any appraisal conducted by or on behalf of the Agent pursuant to Section 6.10(b) after April 1, 2016 or in any calculation of the financial covenant set forth in Section 7.15(b) .
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 (1) the Borrower or the direct or indirect Subsidiary of the Borrower which is to own such Equity Interests or (2) 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 Galaxy Transactions, the Simpson Acquisition 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
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(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:
(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 Simpson Acquisition 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);
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(e) the Borrower may declare or pay any cash Dividend, or redeem, repurchase or otherwise acquire for value any outstanding Equity Interests in an amount not to exceed $11,500,000 in the aggregate if, after giving effect thereto, the Loan to Value Ratio is less than 35%;
(f) 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;
(g) 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(g) , no Default or Event of Default shall then exist or result therefrom; and
(h) the Borrower may pay (x) all costs, fees and expenses in connection with (i) the Galaxy Transactions in an amount not to exceed $8,625,000 in the aggregate, (ii) the Simpson Acquisition in an amount not to exceed $4,600,000 and (iii) 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:
(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;
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(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) all costs, fees and expenses in connection with (i) the Galaxy Transaction in an amount not to exceed $8,625,000 in the aggregate, (ii) the Simpson Acquisition in an amount not to exceed $4,600,000 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 Galaxy Brands Merger and the Simpson Acquisition, (ii) to refinance the Indebtedness of the Borrower under the First Lien Credit Agreement on the Initial Funding Date (as defined therein), (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 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, 2015 (provided that, for the Fiscal Quarter ending June 30, 2015, Consolidated Positive Net Income shall be calculated without giving effect to the Simpson Acquisition), to be equal to or less than $0.
(b) Loan to Value Ratio . Permit the Total Outstandings to be greater than 128% of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, DVS and With You, as applicable, 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) .
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(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 September 30, 2015, to exceed the ratio of 7.00 to 1.00.
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
(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
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(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
(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
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8.02 Remedies Upon Event of Default . If any Event of Default occurs and is continuing, the Agent, 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 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 unpaid principal amount of the 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 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;
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;
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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 outstanding principal amount of the Loans exceed the LTV Percentage (as defined in the First Lien Credit Agreement as in effect on the Effective Date) of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, DVS and With You, as applicable, 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) .
(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.
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.
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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
(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.
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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 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.
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.
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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 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.
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 .
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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;
(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.
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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;
(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.
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(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 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.
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.
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(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.
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.
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(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 or removal of the Agent, the assignment of any portion 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.
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.
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(b) Assignments by Lenders . Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement, or its portion of the Loans, 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 Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the 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
(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.
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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 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; 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 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 the 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.
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(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 each Credit Party’s Affiliates, Approved Funds, 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, (h) to a trustee, collateral manager, servicer, backup servicer, noteholder or secured party in connection with the administration, servicing and reporting on the assets serving as collateral for securities issued by a GSO Entity, or (i) 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.
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.
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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.
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.
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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 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 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.
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(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.
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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 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, 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.
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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 the 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.
(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.
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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.
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 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.
10.28 Amendment and Restatement. Effective upon satisfaction of the conditions set forth in Section 4.01, this Agreement amends, restates, supersedes and replaces the Existing Credit Agreement in its entirety. This Agreement constitutes an amendment and restatement of the Existing Credit Agreement and is not, and is not intended by the parties to be, a novation of the Existing Credit Agreement. The Loan and other Obligations (as defined in the Existing Credit Agreement) shall continue to be Loans and Obligations under this Agreement until repaid in cash by the Borrower. All rights and obligations of the parties shall continue in effect, except as otherwise expressly set forth herein. Without limiting the foregoing, no Default or Event of Default existing under the Existing Credit Agreement as of the Effective Date shall be deemed waived or cured by this amendment and restatement thereof, except to the extent such Default or Event of Default would not otherwise be a Default or Event of Default hereunder after giving effect to the provisions hereof. All references in the other Loan Documents (other than the First Lien Intercreditor Agreement) to the “Credit Agreement” shall be deemed to refer to and mean this Agreement, as the same may be further amended, supplemented, and restated from time to time.
[signature pages follow]
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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 | |
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 |
|
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 | |
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 |
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 |
WILMINGTON TRUST, NATIONAL ASSOCIATION , as Agent | ||
By: | /s/ Cora Holland-Koller | |
Name: | Cora Holland-Koller | |
Title: |
Banking Officer |
lenders : | ||
LOCUST STREET FUNDING LLC | ||
By: | FS Investment Corporation, as Sole Member | |
By: | GSO / Blackstone Debt Funds Management LLC, | |
as Sub-Adviser | ||
DARBY CREEK LLC | ||
By: | FS Investment Corporation II, as Sole Member | |
By: | GSO / Blackstone Debt Funds Management LLC, | |
as Sub-Adviser | ||
GREEN CREEK LLC | ||
By: | FS Investment Corporation II, as Sole Member | |
By: | GSO / Blackstone Debt Funds Management LLC, | |
as Sub-Adviser | ||
LEHIGH RIVER LLC | ||
By: | FS Investment Corporation II, as Sole Member | |
By: | GSO / Blackstone Debt Funds Management LLC, | |
as Sub-Adviser | ||
JUNIATA RIVER LLC | ||
By: | FS Investment Corporation II, as Sole Member | |
By: | GSO / Blackstone Debt Funds Management LLC, | |
as Sub-Adviser | ||
DUNLAP FUNDING LLC | ||
By: | FS Investment Corporation III, as Sole Member | |
By: | GSO / Blackstone Debt Funds Management LLC, | |
as Sub-Adviser | ||
By: | /s/ Marisa Beeney | |
Name: |
Marisa Beeney |
|
Title: |
Authorized Signatory |
EXHIBIT A
Form of Loan Notice
Date: ____________, ______
To: | Wilmington Trust, National Association, as Administrative Agent |
Ladies and Gentlemen:
Reference is made to the Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
The Borrower hereby requests a [conversion to LIBOR Rate Loans][continuation of LIBOR Rate Loans]:
1. On (a Business Day) 1
2. In the principal amount of $_____________________ 2 .
The Borrower hereby represents and warrants that the [conversion to LIBOR Rate Loans] [continuation of LIBOR Rate Loans] requested herein complies with the provisions of Section 2.02 of the Credit Agreement.
[signature page follows]
1 Each notice of a must be received by the Administrative Agent not later than 11:00 a.m. three Business Days prior to the requested date of any conversion or continuation of LIBOR Rate Loans.
2 Each conversion or continuation of LIBOR Rate Loans must be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
Dated as of the date above first written.
SEQUENTIAL BRANDS GROUP, INC., as Borrower | ||
By: | ||
Name: | ||
Title: |
Signature Page to Loan Notice
Exhibit B
Form of TERM Note
TERM NOTE
$____________________ | ________________, 20___ |
FOR VALUE RECEIVED, the undersigned (the “ Borrower ”), promises to pay to the order of _________________________________ (hereinafter, with any subsequent holders, the “ Lender ”), c/o Wilmington Trust, National Association, 50 South Sixth Street, Suite 1290, Minneapolis, MN 55402, the principal sum of _____________________________ DOLLARS ($_____________), or, if less, the aggregate unpaid principal balance of the Loans made by the Lender to or for the account of the Borrower pursuant to the Amended and Restated Second Lien Credit Agreement dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by and among (i) the Borrower, (ii) the Guarantors from time to time party thereto, (iii) the lenders from time to time party thereto (individually, a “ Lender ” and, collectively, the “ Lenders ”), and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein, with interest at the rate and payable in the manner stated therein.
This “Term Note” is a “Note” to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. The principal of, and interest on, this Term Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The Agent’s books and records concerning the Loans, the accrual of interest thereon, and the repayment of such Loans, shall be conclusive evidence of the indebtedness to the Lender hereunder, absent manifest error.
No delay or omission by the Agent or the Lender in exercising or enforcing any of the Agent’s or such Lender’s powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver of any such Event of Default.
The Borrower, and each endorser and guarantor of this Term Note, waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by the Agent and/or the Lender with respect to this Term Note and/or any Collateral or any extension or other indulgence with respect to any other liability or any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Term Note.
This Term Note shall be binding upon the Borrower, and each endorser and guarantor hereof, and upon their respective successors, assigns and representatives, and shall inure to the benefit of the Lender and its successors, endorsees, and assigns.
The liabilities of the Borrower, and of any endorser or guarantor of this Term Note, are joint and several, provided , however , the release by the Agent or the Lender of any one or more such Persons shall not release any other Person obligated on account of this Term Note. Each reference in this Term Note to the Borrower, any endorser, and any guarantor, is to such Person individually and also to all such Persons jointly.
THIS TERM NOTE 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 TERM NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE Borrower 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 TERM NOTE 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 THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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. THE BORROWER 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.
THE Borrower 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 TERM NOTE OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE. THE BORROWER 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.
THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN the MANNER PROVIDED FOR NOTICES IN SECTION 10.02 OF the CREDIT AGREEMENT. NOTHING IN THIS TERM NOTE WILL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Agent and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Term Note, are each relying thereon. THE BORROWER, AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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 TERM NOTE OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER AND THE LENDER, BY ITS ACCEPTANCE HEREOF, (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 HAS BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS TERM NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
[ SIGNATURE PAGE FOLLOWS ]
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be duly executed as of the date set forth above.
SEQUENTIAL BRANDS GROUP, INC. | ||
By: | ________________________________ | |
Name: | ||
Title: |
Exhibit C
FORM OF COMPLIANCE CERTIFICATE
Date of Certificate: ______________
To: | Wilmington Trust, National Association, as Agent |
Ladies and Gentlemen:
Reference is made to the Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
The undersigned, solely in his capacity as a duly authorized and acting Responsible Officer of the Borrower, hereby certifies on behalf of the Borrower and each of the other Loan Parties as of the date hereof the following:
1. | No Defaults or Events of Default . To his knowledge, since __________ (the date of the last Compliance Certificate delivered pursuant to Section 6.02 of the Credit Agreement, or, in the case of the first Compliance Certificate delivered after the Effective Date, the Effective Date), and except as set forth in Appendix I , no Default or Event of Default has occurred. |
2. | Financial Calculations . 1 |
(a) | Attached hereto as Appendix IIA are reasonably detailed calculations necessary to determine the Positive Net Income for the period ending _____________. |
(b) | Attached hereto as Appendix IIB are reasonably detailed calculations necessary to determine the Loan to Value Ratio for the period ending __________. |
(c) | Attached hereto as Appendix IIC are reasonably detailed calculations necessary to determine the Consolidated Total Leverage Ratio for the period ending ________. |
(d) | Attached hereto as Appendix IID are reasonably detailed calculations necessary to determine the Consolidated Net Leverage Ratio for the period ending ________. |
1 Calculations for (a) through (d) of this Section should be provided even if financial covenant compliance pursuant to Section 7.15 of the Credit Agreement for the corresponding Fiscal Quarter has been waived or is not required under such Section.
3. | Financial Statements . |
[ Use following paragraph (a) for Fiscal Year-end financial statements ]
(a) | Attached hereto as Appendix III are the audited Consolidated balance sheet of the Borrower and its Subsidiaries, as required by Section 6.01(a) of the Credit Agreement for the Fiscal Year ended ____________, 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, prepared in accordance with GAAP and accompanied by such materials as are required to be delivered pursuant to Section 6.01(a) of the Credit Agreement (all of the foregoing, collectively, the “ Annual Financial Statements ”). |
[ Use following paragraph (b) for Fiscal Quarter-end financial statements ]
(b) | Attached hereto as Appendix III are the Consolidated balance sheet of the Borrower and its Subsidiaries, as required by Section 6.01(b) of the Credit Agreement for the Fiscal Quarter ended ___________, 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) of the Credit Agreement, (B) the corresponding Fiscal Quarter of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail and accompanied by such materials as are required to be delivered pursuant to Section 6.01(b) of the Credit Agreement (all of the foregoing, collectively, the “ Quarterly Financial Statements ”). The Quarterly Financial Statements were prepared in accordance with GAAP and present fairly 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, subject only to normal year-end audit adjustments and the absence of footnotes. |
4. | No Material Accounting Changes, Etc . Except as set forth in Appendix IV , there has been no change in generally accepted accounting principles used in the preparation of the [Annual Financial Statements][Quarterly Financial Statements] furnished to the Agent for the [Fiscal Year/ Fiscal Quarter] ended ___________. If any such change has occurred, a statement of reconciliation conforming such financial statements to GAAP is attached hereto in Appendix IV . |
5. | Management Discussion . Attached hereto as Appendix V is a discussion and analysis prepared by management of the Borrower with respect to the [Annual Financial Statements] [Quarterly Financial Statements] delivered herewith. |
6. | New Intellectual Property . Except as set forth in Appendix VI , neither the Borrower nor any Subsidiary has acquired any new Material Intellectual Property since the date of the last Compliance Certificate delivered nor has any Intellectual Property become Material Intellectual Property since the date of the last Compliance Certificate delivered. |
7. | New Material Licenses . Except as set forth in Appendix VII , neither the Borrower nor any Subsidiary has acquired or entered into any new license agreement that would constitute a Material License since the date of the last Compliance Certificate delivered nor has any license become a Material License since the date of the last Compliance Certificate delivered. |
[signature page follows]
IN WITNESS WHEREOF, a duly authorized and acting Responsible Officer of the Borrower, on behalf of the Borrower and each of the other Loan Parties, has duly executed this Compliance Certificate as of __________________, 20__.
BORROWER: | ||
SEQUENTIAL BRANDS GROUP, INC. | ||
By: | ||
Name: | ||
Title: |
Signature Page to Compliance Certificate
APPENDIX I
Except as set forth below, no Default or Event of Default has occurred.
Appendix I to Compliance Certificate
Appendix IIA
Positive Net Income
1. | Consolidated Positive Net Income: | ||
(a) | Consolidated Net Income: | ||
Plus the following, to the extent deducted in calculating Consolidated Net Income for such measurement period: | |||
(b) | depreciation and amortization expense: | ||
(c) | 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: | ||
(d) | 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: | ||
(e) | one-time costs or fees in connection with the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve-month period ending on the Effective Date | ||
(f) | one-time costs or fees in connection with the Galaxy Brands Merger in an amount not to exceed $7,500,000 in the aggregate for the twelve month period following the Original Closing Date: | ||
(g) | Sum of lines 1(a) through 1(f): |
Covenant:
The Loan Parties shall not permit Consolidated Positive Net Income, as calculated on a quarterly basis to be equal to or less than $0.
In compliance? | yes | no | N/A |
Appendix IIA to Compliance Certificate
Appendix IIB
Calculation of Loan to Value Ratio
1. | Total Outstandings (as defined in the Credit Agreement) as of the period ending __________________: | |
2. | Realizable Orderly Liquidation Value of the registered Trademarks of the Loan Parties, DVS and With You, as of the date hereof: |
Covenant:
The Loan Parties shall not permit the outstanding amount of the Total Outstandings to be greater than one hundred twenty-eight percent (128%) of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan Parties, DVS and With You, as applicable, 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) of the Credit Agreement.
In compliance? | yes | no | N/A |
Appendix IIB to Compliance Certificate
Appendix IIC
Consolidated Total Leverage Ratio
1. | Consolidated Total Indebtedness: | ||
(a) | the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations under the Credit Agreement) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments: | ||
(b) | all purchase money Indebtedness: | ||
(c) | all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, 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: | ||
(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 venture, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary: | ||
(h) | Sum of lines 1(a) through 1(g): |
Appendix IIC to Compliance Certificate
2. | Consolidated EBITDA: 2 | ||
(a) | Consolidated Net Income: | ||
Plus , the following, to the extent deducted in calculating Consolidated Net Income for such measurement period: | |||
(b) | Consolidated Interest Charges: | ||
(c) | the provision for Federal, state, local and foreign income Taxes: | ||
(d) | depreciation and amortization expense: | ||
(e) | the sum of 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 | ||
(y) the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve-month period ending on the Effective Date | ||
(z ) one-time costs or fees in connection with the Galaxy Transactions in an amount not to exceed $7,500,000 in the aggregate for the twelve-month period following the Original Closing Date |
(f) | non-cash compensation: |
2 Notwithstanding anything to the contrary contained above, for purposes of determining Consolidated EBITDA hereof (a) with respect to any Fiscal Quarter which ends prior to the second anniversary of the Original Closing Date, Consolidated EBITDA with respect to GBH for each applicable Fiscal Quarter occurring prior to the first anniversary of Original Closing Date shall be calculated as 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 Galaxy Brands Merger), and (b) with respect to any Fiscal Quarter which ends prior to the second anniversary of the Effective Date, Consolidated EBITDA with respect to With You for each applicable Fiscal Quarter occurring prior to the first anniversary of Effective Date shall be calculated as the greater of (x) $3,500,000 and (y) Consolidated EBITDA for With You for such Fiscal Quarter (on a standalone basis without giving effect to the Simpson Acquisition). For purposes of determining Consolidated EBITDA as a whole for each applicable Fiscal Quarter identified in clauses (a) and (b) above, such amounts determined for GBH and With You in clauses (a) and (b), as applicable, shall then be added to the calculation of Consolidated EBITDA for such applicable Fiscal Quarter for Sequential Brands Group Inc. (on a standalone basis without giving effect to the Galaxy Brands Merger and/or the Simpson Acquisition, as applicable).
Appendix IIC to Compliance Certificate
(g) | 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: | ||
(h) | 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 , the following, to the extent included in calculating such Consolidated Net Income for such measurement period: | |||
(i) | Federal, state, local and foreign income tax credits: | ||
(j) | all non-cash items increasing Consolidated Net Income (in each case of or by the Borrower and its Subsidiaries for such period): | ||
(k) | Sum of lines 2(a) through 2(j): |
3. | Consolidated Total Leverage Ratio: | |
Ratio of line 1(h) to line 2(k) | ___________:______ |
In compliance? | yes | no | N/A |
Appendix IIC to Compliance Certificate
Appendix IID
Consolidated Net Leverage Ratio
1. | Consolidated Total Indebtedness (less unrestricted cash on the balance sheet): | ||
(a) | the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations under the Credit Agreement) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments: | ||
(b) | all purchase money Indebtedness: | ||
(c) | all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, 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: | ||
(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 venture, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary: | ||
(h) | Sum of lines 1(a) through 1(g): | ||
(i) | Unrestricted cash on the balance sheet: | ||
(j) | Difference of line 1(i) from 1(h): |
Appendix IID to Compliance Certificate
2. | Consolidated EBITDA: 3 | ||
(a) | Consolidated Net Income: | ||
Plus , the following, to the extent deducted in calculating Consolidated Net Income for such measurement period: | |||
(b) | Consolidated Interest Charges: | ||
(c) | the provision for Federal, state, local and foreign income Taxes: | ||
(d) | depreciation and amortization expense: | ||
(e) | the sum of 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 | ||
(y) the Simpson Acquisition in an amount not to exceed $4,000,000 in the aggregate for the twelve-month period ending on the Effective Date | ||
(z ) one-time costs or fees in connection with the Galaxy Transactions in an amount not to exceed |
3 Notwithstanding anything to the contrary contained above, for purposes of determining Consolidated EBITDA hereof (a) with respect to any Fiscal Quarter which ends prior to the second anniversary of the Original Closing Date, Consolidated EBITDA with respect to GBH for each applicable Fiscal Quarter occurring prior to the first anniversary of Original Closing Date shall be calculated as 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 Galaxy Brands Merger), and (b) with respect to any Fiscal Quarter which ends prior to the second anniversary of the Effective Date, Consolidated EBITDA with respect to With You for each applicable Fiscal Quarter occurring prior to the first anniversary of Effective Date shall be calculated as the greater of (x) $3,500,000 and (y) Consolidated EBITDA for With You for such Fiscal Quarter (on a standalone basis without giving effect to the Simpson Acquisition). For purposes of determining Consolidated EBITDA as a whole for each applicable Fiscal Quarter identified in clauses (a) and (b) above, such amounts determined for GBH and With You in clauses (a) and (b), as applicable, shall then be added to the calculation of Consolidated EBITDA for such applicable Fiscal Quarter for Sequential Brands Group Inc. (on a standalone basis without giving effect to the Galaxy Brands Merger and/or the Simpson Acquisition, as applicable).
Appendix IID to Compliance Certificate
$7,500,000 in the aggregate for the twelve-month period following the Original Closing Date | |||
(f) | non-cash compensation: | ||
(g) | 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: | ||
(h) | 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 , the following, to the extent included in calculating such Consolidated Net Income for such measurement period: | |||
(i) | Federal, state, local and foreign income tax credits: | ||
(j) | all non-cash items increasing Consolidated Net Income (in each case of or by the Borrower and its Subsidiaries for such period): | ||
(k) | Sum of lines 2(a) through 2(j): | ||
3. | Consolidated Net Leverage Ratio: | ||
Ratio of line 1(j) to line 2(k) | ___________:______ |
Appendix IID to Compliance Certificate
APPENDIX III
(Financial Statements)
[see attached]
Appendix III to Compliance Certificate
APPENDIX IV
(GAAP)
[see attached]
Appendix IV to Compliance Certificate
APPENDIX V
(MD&A)
[see attached]
Appendix V to Compliance Certificate
APPENDIX VI
(Material Intellectual Property)
[see attached]
Appendix VI to Compliance Certificate
APPENDIX VII
(Material License)
[see attached]
Appendix VII to Compliance Certificate
EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (this “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] “ Assignor ”) and [the][each] 2 Assignee identified in item 2 below ([the][each, an] “ Assignee ”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] 3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given to them in the Amended and Restated Second Lien Credit Agreement identified below (the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto (the “ Standard Terms and Conditions ”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Agent as contemplated below, (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the Loans and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “ Assigned Interest ”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.
1. Assignor[s] : ______________________________
______________________________
2. Assignee[s] : ______________________________
______________________________
[for each Assignee, indicate if [Affiliate][Approved Fund] of [identify Lender]]
3. Borrower : Sequential Brands Group, Inc.
1 For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.
2 For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.
3 Select as appropriate.
4 Include bracketed language if there are either multiple Assignors or multiple Assignees.
4. | Agent : Wilmington Trust, National Association, as the Agent under the Credit Agreement. |
5. | Credit Agreement : Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time), by and among (i) Sequential Brands Group, Inc., a Delaware corporation (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent. |
6. Assigned Interest[s] :
Assignor[s] 5 |
Assignee[s] 6 |
Aggregate Amount of Loans for all Lenders 7 |
Amount of Loans Assigned 8 |
Percentage Assigned of Loans 9 |
||||||||||
$ | $ | % | ||||||||||||
$ | $ | % |
[7. Trade Date : __________________] 10
Effective Date : __________________, 20__ [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF DELIVERY OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
5 List each Assignor, as appropriate.
6 List each Assignee, as appropriate.
7 Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments of Loans made between the Trade Date and the Effective Date.
8 Subject to minimum amount requirements pursuant to Section 10.06(b)(i) of the Credit Agreement and subject to proportionate amount requirements pursuant to Section 10.06(b)(ii) of the Credit Agreement.
9 Set forth, to at least 9 decimals, as a percentage of the Loans of all Lenders.
10 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR[S] 11 | ||
[NAME OF ASSIGNOR] | ||
By: | ||
Name: | ||
Title: | ||
ASSIGNEE[S] 12 | ||
[NAME OF ASSIGNEE] | ||
By: | ||
Name: | ||
Title: |
[Consented to and] 13 Accepted:
WILMINGTON TRUST, NATIONAL
ASSOCIATION
,
as Agent
By: | ||
Name: | ||
Title: |
[Consented to:] 14
SEQUENTIAL BRANDS GROUP, INC., as Borrower
By: | ||
Name: | ||
Title: |
11 Add additional signature blocks as needed.
12 Add additional signature blocks as needed.
13 To the extent that the Agent’s consent is required under Sections 10.06(b)(i)(B) or 10.06(b)(iii)(B) of the Credit Agreement.
14 To the extent that the Borrower’s consent is required under Sections 10.06(b)(i)(B) and/or 10.06(b)(iii)(A) of the Credit Agreement.
ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
Reference is made to the Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”), by and among (i) Sequential Brands Group, Inc., a Delaware corporation (the “ Borrower ”), (ii) the Guarantors party thereto from time to time, (iii) the Lenders party thereto from time to time, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1. Assignor . [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.
1.2. Assignee . [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Eligible Assignee under the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Agent, [the][any] Assignor or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2. Payments . From and after the Effective Date, the Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or other electronic image scan transmission (e.g., “pdf” or “tif” via e-mail) shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.
4. Fees . Unless waived by the Agent in accordance with Section 10.06(b)(iv) of the Credit Agreement, this Assignment and Assumption shall be delivered to the Agent with a processing and recordation fee of $3,500.
EXHIBIT E-1
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 20[ ] |
EXHIBIT E-2
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF PARTICIPANT] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 20[ ] |
EXHIBIT E-3
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF PARTICIPANT] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 20[ ] |
EXHIBIT E-4
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Amended and Restated Second Lien Credit Agreement, dated as of April 8, 2015 (as amended, amended and restated, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”) by, among others, (i) Sequential Brands Group, Inc., a Delaware corporation, as the borrower (the “ Borrower ”), (ii) the Guarantors from time to time party thereto, (iii) the Lenders from time to time party thereto, and (iv) Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “ Agent ”) for its own benefit and the benefit of the other Credit Parties referred to therein. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.
Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a 10 percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER] | ||||
By: | ||||
Name: | ||||
Title: | ||||
Date: ________ __, 20[ ] |
Exhibit 10.5
Execution Version
FIRST AMENDMENT To INTERcreditor agreement
THIS FIRST AMENDMENT TO INTERCREDITOR AGREEMENT (this “ Amendment ”) is entered into this 8 th day of April, 2015, among 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 ”), and WILMINGTON TRUST, NATIONAL ASSOCIATION , in its capacity as administrative agent and collateral agent (together with its successors and assigns in such capacities, the “ Second Lien Agent ”).
Recitals
A. Pursuant to that certain Amended and Restated First Lien Credit Agreement dated as of August 15, 2014, by and among Sequential Brands Group, Inc., a Delaware corporation (the “ Borrower ”), the Guarantors party thereto, the First Lien Agent and the First Lien Lenders (as amended prior to the date hereof and in effect, the “ Existing First Lien Credit Agreement ”), the First Lien Lenders have agreed to make certain loans and provide other financial accommodations to or for the benefit of the Borrower.
B. Pursuant to a certain Guaranty dated as of March 28, 2013 by the Guarantors in favor of the First Lien Agent for the benefit of the First Lien Secured Parties, the Guarantors have guaranteed the payment and performance of the Borrower’s Obligations under the First Lien Loan Documents.
C. Pursuant to a certain Amended and Restated Security Agreement dated as of August 15, 2014 by the Borrower and the Guarantors (collectively, the “ First Lien Loan Parties ”) in favor of the First Lien Agent for the benefit of the First Lien Secured Parties, the First Lien Loan Parties have granted a security interest and lien in substantially all of their assets to secure the respective obligations of each of the First Lien Loan Parties under the First Lien Loan Documents.
D. Pursuant to that certain Second Lien Credit Agreement dated as of August 15, 2014, by and among the Borrower, the Guarantors party thereto, the Second Lien Lenders and the Second Lien Agent (as amended prior to the date hereof and in effect, the “ Existing S econd Lien Credit Agreement ”), the Second Lien Lenders have made certain loans to the Second Lien Loan Parties.
E. Pursuant to a certain Guaranty dated as of August 15, 2014 by the Guarantors in favor of the Second Lien Agent for the benefit of the Second Lien Secured Parties, the Guarantors have guaranteed the payment and performance of the Borrower’s Obligations under the Second Lien Loan Documents.
F. Pursuant to a certain Security Agreement dated as of August 15, 2014 by the Borrower and the Guarantors (collectively, the “ Second Lien Loan Parties ”) in favor of the Second Lien Agent for the benefit of the Second Lien Secured Parties, the Second Lien Loan Parties have granted a security interest and lien in substantially all of their assets to secure the respective obligations of each of the Second Lien Loan Parties under the Second Lien Loan Documents.
G. The First Lien Agent and the Second Lien Agent have entered into that certain Intercreditor Agreement dated as of August 15, 2014 (as amended and in effect, the “ Intercreditor Agreement ”), which provides, among other things, the respective rights and remedies of the First Lien Agent and the Second Lien Agent with respect to the Collateral and certain other matters.
H. Contemporaneously herewith, the Borrower, the Guarantors, the First Lien Lenders and the First Lien Agent are entering into that certain Second Amended and Restated First Lien Credit Agreement to amend and restate the terms of the Existing First Lien Credit Agreement (the “ Restated First Lien Credit Agreement ”).
I. Contemporaneously herewith, the Borrower, the Guarantors, the Second Lien Lenders and the Second Lien Agent are entering into that certain Amended and Restated Second Lien Credit Agreement to amend and restate the terms of the Existing Second Lien Credit Agreement (the “ Restated Second Lien Credit Agreement ”).
J. The First Lien Agent and the Second Lien Agent have agreed to amend certain provisions of the Intercreditor Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.
Agreement
Now, Therefore , in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions . Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Intercreditor Agreement.
2. Amendments to Intercreditor Agreement .
(a) Section 1.2 of the Intercreditor Agreement is hereby amended by deleting the definition of “Maximum First Lien Facility Amount” in its entirety and by substituting the following in its stead:
“ Maximum First Lien Facility Amount ” shall mean, on any date of determination thereof, a principal amount equal to (a) $210,000,000, 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 Indebtedness that may be incurred under Section 2.16 and Section 2.04(d) of the First Lien Credit Agreement, plus (d) 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 (d) that would cause the Loan to Value Ratio (as defined in the First Lien Credit Agreement as in effect on the First Amendment Effective 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 (e) First Lien Obligations under Bank Product Agreements and Cash Management Services Agreement, plus (f) any additional principal amount extended pursuant to a DIP Financing permitted pursuant to Section 6.1(a) hereof, minus (g) 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.
(b) Section 1.2 of the Intercreditor Agreement is hereby amended by deleting the definition of “Maximum Second Lien Facility Amount” in its entirety and by substituting the following in its stead:
“ Maximum Second Lien Facility Amount ” shall mean (a) the principal amount of $180,000,000 plus (b) the aggregate principal amount of Indebtedness that may be incurred under Section 2.14 of the Second Lien Credit Agreement.
(c) Section 1.2 of the Intercreditor Agreement is hereby amended by adding the following new defined term in appropriate alphabetical order therein:
“ First Amendment Effective Date ” shall mean April 8, 2015.
(d) Section 6.1(a) of the Intercreditor Agreement is hereby amended by deleting “$10,000,000” where it appears therein and by substituting “the greater of (i) $10,000,000 and (ii) an amount which would cause the Loan to Value Ratio to be increased by not more than five (5%) percent from the then existing Loan to Value Ratio”.
(e) Section 8.18 of the Intercreditor Agreement is hereby deleted in its entirety and the following is substituted in its stead:
“ 8.18 Initial Loan to Value . The Parties acknowledge that, as of the First Amendment Effective Date, the Loan to Value Ratio (as defined in the Restated First Lien Credit Agreement) is greater than fifty percent (50%) and shall remain in excess of fifty percent (50%) until such date as the scheduled amortization of principal under the Restated First Lien Credit Agreement is received by the First Lien Agent in such amounts as to reduce the Loan to Value Ratio to or below fifty percent (50%). The foregoing shall not give rise to any claim by any Party against the other or affect the rights of any Party hereunder.”
3. Consent to Restated First Lien Credit Agreement . The Second Lien Agent, on behalf of itself and the other Second Lien Secured Parties, hereby consents to the terms and conditions of the Restated First Lien Credit Agreement, and acknowledges and agrees that, on and after the First Amendment Effective Date, all references in the Intercreditor Agreement to the “First Lien Credit Agreement” shall mean and refer to the Restated First Lien Credit Agreement.
4. Consent to Restated Second Lien Credit Agreement . The First Lien Agent, on behalf of itself and the other First Lien Secured Parties, hereby consents to the terms and conditions of the Restated Second Lien Credit Agreement, and acknowledges and agrees that, on and after the First Amendment Effective Date, all references in the Intercreditor Agreement to the “Second Lien Credit Agreement” shall mean and refer to the Restated Second Lien Credit Agreement.
5. Representations and Warranties . Each of the parties hereto hereby represents and warrants to the other party as follows:
5.1 Each party hereto has the power and authority to execute and deliver this Amendment and perform its obligations under the Intercreditor Agreement (as amended by this Amendment);
5.2 The execution and delivery by each party hereto of this Amendment and the performance by such parties of its obligations under the Intercreditor Agreement (as amended by this Amendment) has been duly authorized; and
5.3 This Amendment has been duly executed and delivered by each party hereto and is the binding obligation of the First Lien Agent and the Second Lien Agent, enforceable against each such party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.
6. Miscellaneous .
6.1 This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy or electronic mail shall be as effective as delivery of a manually executed counterpart of this Amendment.
6.2 This Amendment expresses the entire understanding of the parties hereto with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
6.3 Any determination that any provision of this Amendment or any application hereof is invalid, illegal, or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality, or enforceability of any other provision of this Amendment.
6.4 Except as expressly amended hereby, all terms and provisions of the Intercreditor Agreement remain in full force and effect.
6.5 THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE CHOICE OF LAW AND VENUE PROVISIONS SET FORTH IN THE INTERCREDITOR AGREEMENT, AND SHALL BE SUBJECT TO THE JURY TRIAL WAIVER AND NOTICE PROVISIONS OF THE INTERCREDITOR AGREEMENT.
6.6 This Amendment shall become effective on and as of the date when the parties hereto execute and deliver to one another signature pages to this Amendment.
[Signature page follows]
In Witness Whereof , the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.
BANK OF AMERICA, N.A. , | ||
as First Lien Agent | ||
By: |
/s/ Andrew Cerussi |
|
Name: |
Andrew Cerussi |
|
Title: |
Director |
|
WILMINGTON TRUST, NATIONAL ASSOCIATION, | ||
as Second Lien Agent | ||
By: |
/s/ Cora Holland-Koller |
|
Name: | Cora Holland-Koller | |
Title: |
Banking Officer |
ACKNOWLEDGMENT
The Borrower and each Guarantor hereby acknowledges that it has received a copy of this Amendment 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 Amendment. The Borrower and each Guarantor further acknowledges and agrees that it is not an intended beneficiary or third party beneficiary under this Amendment 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.
SEQUENTIAL BRANDS GROUP, INC. | ||
By: |
/s/ Gary Klein |
|
Name: |
Gary Klein |
|
Title: |
Chief Financial Officer |
|
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 |
Acknowledgement to First Amendment to Intercreditor Agreement
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 |
|
Heeling Management Corp. | ||
By: |
/s/ Gary Klein |
|
Name: |
Gary Klein |
|
Title: |
Chief Financial Officer |
Acknowledgement to First Amendment to Intercreditor Agreement
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 |
B®AND MATTER, LLC | ||
By: |
/s/ Gary Klein |
|
Name: |
Gary Klein |
|
Title: |
Chief Financial Officer |
Acknowledgement to First Amendment to Intercreditor Agreement
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 |
Acknowledgement to First Amendment to Intercreditor Agreement
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 |
Exhibit 10.6
EXECUTION VERSION
AMENDED & RESTATED EMPLOYMENT AGREEMENT
AMENDED & RESTATED EMPLOYMENT AGREEMENT, dated as of April 14,2015, by and between Sequential Brands Group, Inc., a Delaware corporation (the “ Company ”), and Yehuda Shmidman (the “ Executive ”).
WITNESSETH
WHEREAS, the Executive is currently employed as the Chief Executive Officer of the Company pursuant to an employment agreement between the Company and the Executive dated as of November 19, 2012 (the “ Prior Agreement ”); and
WHEREAS, the Company and the Executive desire to amend and restate the Prior Agreement effective as of the date hereof..
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Executive hereby agree as follows:
1. Engagement of Executive; Duties; Board . During the Term (as hereinafter defined in Section 3 below), the Executive shall have the title of Chief Executive Officer of the Company reporting solely to the Company’s Board of Directors (the “ Board ”). Executive will have such responsibilities, duties and authority customarily associated with the position of Chief Executive Officer. All areas of the Company will report to Executive including, but not limited to, licensing, brand management, finance, and legal. In connection with his employment by the Company, the Executive shall be based in the greater New York metropolitan area.
2. Time. The Executive shall devote substantially all of his working hours to his duties hereunder and towards the overall success of the business of the Company, including but not limited to, strategic direction, execution and implementation of business plans, developing and achieving budget targets, and overall business growth of the Company, provided that nothing contained herein shall be deemed to restrict the Executive from engaging in charitable, religious, civic or community activities, or from serving on the boards of directors of non-profit organizations and, with the consent of the Board (such consent not to be unreasonably withheld, delayed or conditioned), other for-profit companies which do not compete with the Company, provided that such activities do not materially interfere with Executive’s duties and responsibilities under this Agreement.
3. Term. The term of this Agreement shall commence on April 14, 2015 (the “ Effective Date ”) and shall continue until December 31, 2018 (the “ Term ”) unless otherwise terminated as provided herein. In the event that the Executive remains an employee of the Company following expiration of the Term and this Agreement is not extended, he shall be an employee “at will” and shall not be (i) at any during or following such “at will” employment, entitled to any of the benefits under this Agreement, or (ii) at any time following such “at will employment”, subject to any of the restrictions contained in this Agreement (including, but not limited to, the noncompetition and non-solicitation provisions contained in Section 7) , other than the undertakings contained in Section 6 and the provisions of Section 10 , each of which shall survive any termination or non-renewal of this Agreement.
4. Compensation.
(a) Base Salary . During the Term, Executive’s base salary will be at a rate of not less than $600,000 per annum paid in accordance with the Company’s payroll practices and policies then in effect, with such increases (but not decreases) as determined by the Board or the Compensation Committee of the Board (the “ Compensation Committee ”) from time to time (such salary, as increased from time to time, the “ Base Salary ”).
(b) Bonus . During the Term, the Executive shall be entitled to receive an annual bonus for each fiscal year (the “ Annual Bonus ”) based upon the adjusted EBITDA target to be agreed to by the Company and Executive and set forth in the Board-approved budget for the applicable year (which target shall be adjusted for the effect of the disposition of any assets prior to the end of the applicable year). The parties shall use commercially reasonable efforts to define such target prior to the start of each applicable fiscal year. The target Annual Bonus amount shall be one hundred fifty percent (150%) of the Base Salary and shall be paid if the adjusted EBITDA target for the year is attained. If performance for any year is 80% or more but less than 90% of the adjusted EBITDA target for that year, 50% on the target Annual Bonus will be paid and if performance for any year is 90% or more but less than 100% of the adjusted EBITDA target for that year, 75% on the target Annual Bonus will be paid. In the event of a sale or other disposition of assets, the adjusted EBITDA target for the year in which such sale or other disposition occurs shall be reduced by the amount of EBITDA included in the budget for that year that was attributable to those assets. Annual Bonuses, if applicable, shall be due and payable by the Company to the Executive annually, commencing with the fiscal year ended December 31, 2015, payable in the year following the year for which such Annual Bonus was earned on the earlier of the date the Company files its 10-K or April 1st of such year. In the event that following fiscal year 2015, the Company adopts an annual incentive plan designed to grant performance-basedcompensation in accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”), the EBITDA targets and bonus amounts will be subject to (x) approval by the Compensation Committee in accordance with Section 162(m) of the Code and (y) any other requirements for performance-based compensation under 162(m) of the Code.
(c) Equity Compensation .
(i) Prior Awards . The Executive has received (A) an equity grant (the “ Restricted Stock Award ”) in the form of 396,196 restricted shares of the Company’s common stock (the “ Restricted Stock ”), of which 297,147 shares of the Restricted Stock have vested and the remaining 99,049 shares of Restricted Stock Award will vest on November 19, 2015 and (B) a grant of performance-based restricted stock units (the “ PSUs ”) in respect of 300,000 shares of the Company’s common stock as of January 1, 2014 of which 60,000 shares have vested and the remaining 240,000 shares will vest based on the attainment of the performance goals set forth in the PSU award agreement; provided , however , that upon a “Change in Control,” (i) all unvested shares of Restricted Stock will immediately vest and (ii) all performance goals applicable to the PSUs shall be deemed to have been satisfied and the PSUs that would have vested on the last day of each remaining performance period had all of the performance goals been satisfied shall vest on each such day provided the Executive remains employed as of such day. For purposes of this Agreement, a Change in Control shall mean any of the following:
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(1) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “ Person ”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding shares of common stock of the Company (the “ Outstanding Company Common Stock ”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided , however , that, for purposes of this Section 4(c)(1), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by an Excluded Person (as defined below) (ii) any acquisition directly from the Company, (iii) any acquisition by the Company, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate or (v) any acquisition by any corporation pursuant to a transaction that complies with Sections 4(c)(2)(A) or 4(c)(2)(B) below;
(2) Consummation of (i) a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any affiliate, (ii) a sale or other disposition of all or substantially all of the assets of the Company, or (iii) the acquisition of assets or stock of another entity by the Company or any affiliate (each, a “ Business Combination ”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be or (B) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the incumbent board at the time of the execution of the initial agreement or of the action of the board providing for such Business Combination; or
(3) A complete liquidation or dissolution of the Company.
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For purposes hereof, the “ Excluded Persons ” shall mean William Sweedler, Tengram Capital Partners Gen2 Fund, L.P. and each of their respective Related Parties. For purposes of hereof, “ Related Party ” shall mean with respect to any person or entity, any other person or entity which (i) directly or indirectly, is controlling, controlled by or under common control with such person or entity, or (ii) directly or indirectly, is advised, managed, administered by such person or entity or any person or entity described in the immediately preceding clause (i). For purposes of this definition, “control” of a person or entity (including the terms “controlled by” and “under common control with”) means the power, directly or indirectly, to direct or cause the direction of the management or policies of such person or entity, whether through ownership of voting securities, the ability to exercise voting power, or by contract or otherwise.
Except as provided in this Agreement, Executive must be in the employ of the Company at the time of the vesting dates. The Restricted Stock was granted pursuant to a stock purchase agreement dated as of November 19, 2012 (the “ Restricted Stock Agreement ”). At any time during the thirty (30) day period following the applicable vesting date of the Restricted Stock, Executive shall have the right to “put” any vested Restricted Stock vesting on such date to the Company at a per-share price equal to the average closing price per share of the Company’s common stock on NASDAQ or such other registered national securities exchange on which the Company’s common stock is then-listed over the five (5) day period preceding such purchase date (or if such stock is not then listed on any registered national securities exchange, the fair market value of such stock as reasonably determined by the Board) for purposes of assisting the Executive in paying all applicable taxes related to the vesting of such Restricted Stock; provided , however , that if the Company is restricted pursuant to any contractual agreement to which it is a party or applicable law from redeeming such Restricted Stock pursuant to the provisions hereof, the obligation to purchase any such Restricted Stock shall be suspended until the earlier to occur of April 1 st of the following calendar year and the date on which such redemption is not prohibited by any contractual agreement to which the Company is a party or applicable law.
(ii) Restricted Stock Units . As of the Effective Date, the Company shall grant to the Executive restricted stock units in respect of 300,000 shares of the Company’s common stock, 100,000 of which shall be time-vested and 200,000 of which shall vest based on the attainment of certain share price targets (the “ RSU/PSU Award ”). The RSU/PSU Award shall be made pursuant to an award agreement in the form attached hereto as Exhibit B (the “ RSU/PSU Agreement ”).
(d) Benefits . Executive shall receive the employee and fringe benefits generally made available to other executive officers of the Company from time to time, including health and dental coverage. Executive shall also be added or continued, as the case may be, as an insured under the Company’s officers and directors insurance and all other polices which pertain to officers of the Company. The Company shall pay Executive a car allowance of $1,500 per month during the Term.
(e) Reimbursement of Expenses . The Company shall pay to Executive the reasonable expenses incurred by him in the performance of his duties hereunder, including, without limitation, expenses related to cell phones, blackberrys and laptop computers and such other expenses incurred in connection with business related travel or entertainment in accordance with the Company’s policy, or, if such expenses are paid directly by the Executive, the Company shall promptly reimburse the Executive for such payments in accordance with the Company’s policy, provided that the Executive properly accounts for such expenses in accordance with the Company’s policy.
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(f) Jewish Holidays/Vacation . Executive shall be entitled to three weeks of paid vacation per year plus all observable Jewish holidays. The Executive shall use his vacation in the calendar year in which it is accrued.
(g) Legal Fees . The Company agrees to pay or reimburse the Executive for all reasonable attorney’s fees and related expenses incurred by the Executive in connection with the negotiation and execution of this Employment Agreement.
5. Termination of Employment.
(a) General . The Executive’s employment under this Agreement may be terminated prior to the expiration of the Term without any breach of this Agreement only on the following circumstances:
(b) Death . The Executive’s employment under this Agreement shall terminate upon his death.
(c) Disability . If the Executive suffers a Disability (as defined below in this sub-section (2)), the Company may terminate the Executive’s employment under this Agreement upon thirty (30) days prior written notice; provided that the Executive has not returned to full time performance of his duties during such thirty (30) day period. For purposes hereof, “Disability” shall mean the Executive’s inability to perform his duties and responsibilities hereunder, with or without reasonable accommodation, due to any physical or mental illness or incapacity, which condition either (i) has continued for a period of 180 days (including weekends and holidays) in any consecutive 365-day period, or (ii) is projected by the Board in good faith after consulting with a doctor selected by the Company and consented to by the Executive (or, in the event of the Executive’s incapacity, his legal representative), such consent not to be unreasonably withheld, that the condition is likely to continue for a period of at least six (6) consecutive months from its commencement; provided , however , that in no event shall Executive have a Disability for purposes of this clause (c) unless Executive has become disabled within the meaning of the Company’s long term disability plan then in effect and is entitled to receive benefits thereunder.
(d) Good Reason . The Executive may terminate his employment under this Agreement for Good Reason after the occurrence of any of the Good Reason events set forth in the following sentence. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events without the Executive’s prior written consent:
(i) the failure by the Company to timely comply with its material obligations and agreements contained in this Agreement;
(ii) a material diminution of the authorities, duties or responsibilities of the Executive set forth in Section 1 above (other than temporarily while the Executive is physically or mentally incapacitated and unable to properly perform such duties, as determined by the Board in good faith) or the assignment to Executive of duties materially inconsistent with his position as Chief Executive Officer;
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(iii) the loss of the title of Chief Executive Officer of the Company or if, upon or following a Change in Control the Company is not the surviving entity or survives as a subsidiary of another corporation or entity, the Executive is not the chief executive officer of the ultimate parent corporation or entity (the “ Parent ”);
(iv) the involuntary re-location of the Executive to an office outside of the New York, New York metropolitan area; or
(v) a change in the reporting structure so that the Executive reports to someone other than the Board or, if applicable, the board of directors of the Parent;
provided , however , that, within ninety (90) days of any such events having occurred, the Executive shall have provided the Company with written notice that such events have occurred and afforded the Company thirty (30) days to cure and if the Company does not cure to Executive’s reasonable satisfaction then Executive terminates his employment within one hundred twenty (120) days following the expiration of such cure period. For purposes of this Agreement, upon any reduction or diminution in authorities, duties, responsibilities, etc. the basis for determining whether such reduction or diminution was material shall be deemed to be the greatest authorities, duties, responsibilities held by Executive and not the authorities, duties, responsibilities held by Executive immediately prior to the most recent diminution or reduction (e.g., if the Company were to reduce Executive’s duties and then at a subsequent time were to reduce his duties further, for purposes of determining whether the second event constitutes a Good Reason event, his duties would be compared to those he held prior to the initial reduction).
(e) Without Good Reason . The Executive may voluntarily terminate his employment under this Agreement without Good Reason upon written notice by the Executive to the Company at least thirty (30) days prior to the effective date of such termination (which termination the Company may, in its sole discretion, make effective earlier than the date set forth in the Notice of Termination (as hereinafter defined in sub-section (h) below)).
(f) Cause . The Company may terminate the Executive’s employment under this Agreement for Cause. Termination for “Cause” shall mean termination of the Executive’s employment because of the occurrence of any of the following as determined by the Board:
(i) any gross negligence or the willful and continued failure by the Executive to substantially perform his obligations under this Agreement (other than any such failure resulting from the Executive’s incapacity due to a Disability);
(ii) the indictment of the Executive for, or his conviction of or plea of guilty or nolo contendere to, a felony;
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(iii) the Executive’s willfully engaging in misconduct (which shall include theft, fraud, or embezzlement) in the performance of his duties for the Company which is injurious to the Company (monetarily or otherwise);
(iv) the Executive’s trading of securities or willful disclosure of non-public information in each case constituting a violation of insider trading laws which is injurious to the Company, monetarily or otherwise;
(v) any chemical dependence of the Executive which materially and adversely affects the performance of his duties and responsibilities to the Company or any of its subsidiaries; provided , however , that the taking of prescribed prescription medication shall not constitute a chemical dependence of the Executive hereunder; or
(vi) a material breach by the Executive of this Agreement.
provided , however , that in each case (other than (ii), or (iv)), the Company shall have provided the Executive with written notice within ninety (90) days of the event(s) alleged to constitute Cause, the Executive has been afforded at least thirty (30) days to cure same and has failed to cure the event(s) within such 30 day period; provided , further , that in the case of willful misconduct under clause (iii), in order to cure, the Executive shall have to cure such willful misconduct to the reasonable satisfaction of the Board.
(g) Without Cause . The Company may terminate the Executive’s employment under this Agreement without Cause immediately upon written notice by the Company to the Executive.
(h) Notice of Termination . Any termination of the Executive’s employment by the Company or by the Executive (other than termination by reason of the Executive’s death) shall be communicated by written Notice of Termination to the other party of this Agreement. For purposes of this Agreement, a “ Notice of Termination ” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.
(i) Date of Termination . The “ Date of Termination ” shall mean (a) if the Executive’s employment is terminated by his death, the date of his death, (b) if the Executive’s employment is terminated pursuant to subsection 5(c) above, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), (c) if the Executive’s employment is terminated pursuant to subsections 5(d) or 5(f) above, the date specified in the Notice of Termination after the expiration of any applicable cure periods, (d) if the Executive’s employment is terminated pursuant to subsection 5(e) above, the date specified in the Notice of Termination which shall be at least thirty (30) days after Notice of Termination is given, or such earlier date as the Company shall determine, in its sole discretion, (e) if the Executive’s employment is terminated pursuant to subsection 5(g), the date on which a Notice of Termination is given and (f) if Executive is terminated upon expiration of the Term, the date of the expiration of the Term.
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(j) Compensation Upon Termination .
(i) Termination for Cause, without Good Reason or Expiration of Term . If the Executive’s employment shall be terminated upon the expiration of the Term, by the Company for Cause or by the Executive without Good Reason, the Executive shall receive from the Company: (1) any earned but unpaid Base Salary through the Date of Termination, paid in accordance with the Company’s standard payroll practices; (2) reimbursement for any unreimbursed expenses properly incurred and paid in accordance with Section 4(e) through the Date of Termination; (3) payment for any accrued but unused vacation time in accordance with Company policy; and (4) such benefits, and other payments, if any, as to which the Executive (and his eligible dependents) may be entitled under, and in accordance with the terms and conditions of, the employee benefit arrangements, plans and programs of the Company as of the Date of Termination, other than any severance pay plan ((1) though (4), (the “ Amounts and Benefits ”), and the Company shall have no further obligation with respect to this Agreement other than as provided in Section 8 of this Agreement. In addition, any portion of the Restricted Stock Award or any other outstanding equity or incentive award that remains unvested on the Date of Termination shall be forfeited as of the Date of Termination.
(ii) Termination without Cause or for Good Reason . If prior to the expiration of the Term, the Executive resigns from his employment hereunder for Good Reason or the Company terminates the Executive’s employment hereunder without Cause (other than a termination by reason of death or Disability), then the Company shall pay or provide the Executive the Amounts and Benefits and the following:
(1) an amount equal to 2.0 times the sum of (x) the then-current Base Salary and (y) the greater of (i) the actual Annual Bonus for the year immediately preceding the year in which the Date of Termination occurs or (ii) 150% of Executive’s then-current Base Salary. The amount payable pursuant to this Section 5(j)(ii)(1) shall be paid in full in a lump sum cash payment to be made to the Executive on the date that is thirty (30) days following the Date of Termination;
(2) any Annual Bonus earned but unpaid for a prior year (the “ Prior Year Bonus ”), which shall be payable in full in a lump sum cash payment to be made to the Executive on the date that is thirty (30) days following the Date of Termination or the date such bonus would be paid if Executive had remained an employee of the Company, if later;
(3) in the event such resignation or termination occurs following the Company’s first fiscal quarter of any year, a pro-rata portion of the Executive’s Annual Bonus for the fiscal year in which the Executive’s termination occurs based on actual results for such year (determined by multiplying the amount of such Annual Bonus which would be due for the full fiscal year by a fraction, the numerator of which is the number of days during the fiscal year of termination that the Executive is employed by the Company and the denominator of which is 365), paid in accordance with Section 4(b) (“ Pro Rata Bonus ”). The Pro Rata Bonus shall be payable at the time the Annual Bonus would have been paid if Executive’s employment had not terminated;
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(4) subject to the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), with respect to the Company’s group health insurance plans in which the Executive participated immediately prior to the Date of Termination (“COBRA Continuation Coverage”), the Company shall pay the cost of COBRA Continuation Coverage for the Executive and his eligible dependents until the earliest of (a) the Executive or his eligible dependents, as the case may be, ceasing to be eligible under COBRA (or any COBRA-like benefits provided under applicable state law) and (b) eighteen (18) months following the Date of Termination, (the benefits provided under this sub-section (4), the “ Medical Continuation Benefits ”);
(5) any unvested portion of the Restricted Stock Award and the RSU/PSU Award shall accelerate and become fully vested on the Date of Termination and the shares covered by the Restricted Stock Award and the RSU/PSU Award shall be distributed to the Executive on the date that is thirty (30) days following the Date of Termination (subject to any securities law restrictions); and
(6) if such termination occurs after a Change in Control (or after the execution of a definitive agreement the consummation of which would constitute a Change in Control), any unvested PSUs shall accelerate and become fully vested on the Date of Termination and the shares covered by the PSUs shall be distributed to the Executive on the date that is thirty (30) days following the Date of Termination (subject to any securities law restrictions).
(iii) Termination upon Death . In the event of the Executive’s death, the Company shall pay or provide to the Executive’s estate: (1) continued payment of the Executive’s Base Salary for the remainder of the year in which the termination for reason of death occurs, (2) the Amounts and Benefits, (3) the Prior Year Bonus, and (4) the Pro Rata Bonus. In addition, the Restricted Stock Award shall vest with respect to the portion of such award that was scheduled to vest in the year in which the termination for reason of death occurs and the RSU/PSU Award shall vest in full, and such shares covered by the Restricted Stock Award and the RSU/PSU Award shall be distributed to the Executive within thirty (30) days of the Date of Termination (subject to any securities law restrictions).
(iv) Termination upon Disability . In the event the Company terminates the Executive’s employment hereunder for reason of Disability, the Company shall pay or provide to the Executive: (1) the Amounts and Benefits, (2) the Prior Year Bonus, (3) a Pro Rata Bonus and (4) the Medical Continuation Benefits. In addition, the Restricted Stock Award shall vest with respect to the portion of such award that was scheduled to vest in the year in which the termination for reason of Disability occurs and the RSU/PSU Award shall vest in full, and such shares covered by the Restricted Stock Award and the RSU/PSU Award shall be distributed to the Executive within thirty (30) days of the Date of Termination (subject to any securities law restrictions). Any other unvested portion of the Restricted Stock Award will be forfeited on the Date of Termination.
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(v) Payments of Compensation Upon Termination . For the avoidance of doubt, in the event the Executive shall be entitled to receive payments and benefits pursuant to any one of sub-sections 5(a), (b), (c) or (d) above, he shall be entitled to no payments or benefits under any other of such sub-sections.
(vi) Release of Claims . Notwithstanding anything in this Agreement to the contrary, as a condition of receiving any payment or benefits under Section 5(j)(ii) (other than the Amounts and Benefits), the Executive agrees to execute, deliver and not revoke a general release and covenant not to sue in favor of the Company and its subsidiaries and their respective affiliates in substantially the form attached here to as Exhibit A (the “ Release ”), before the date that is thirty (30) days following the Date of Termination. In the event the Release is not executed and non-revocable prior to the date that is thirty (30) days following the Date of Termination, all payments and benefits under Section 5(j)(ii) (other than the Amounts and Benefits) shall be forfeited.
(vii) No Duty to Mitigate . The Executive shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 5 be reduced by any compensation earned by Executive as the result of Executive’s employment by another employer or business or by profits earned by Executive from any other source at any time before and after the Executive’s date of termination (other than as provided in Section 5(j)(ii)(4)).
6. Confidentiality.
(a) The Executive acknowledges that all customer lists and information, vendor or supplier lists and information, inventions, trade secrets, software and computer code (whether in object code or source code format), databases, know-how or other non-public, confidential or proprietary knowledge, information or data with respect to the products, prices, marketing, services, operations, finances, business or affairs of the Company or its subsidiaries and affiliates or with respect to confidential, proprietary or secret processes, methods, inventions, services, research, techniques, customers (including, without limitation, the identity of the customers of the Company or its subsidiaries and affiliates and the specific nature of the services provided by the Company or its subsidiaries and affiliates), employees (including, without limitation, the matters subject to this Agreement) or plans of or with respect to the Company or its subsidiaries and affiliates or the terms of this Agreement (all of the foregoing collectively hereinafter referred to as, “ Confidential Information ”) are property of the Company or its applicable subsidiaries or affiliates. The Executive further acknowledges that the Company and its subsidiaries and affiliates intend, and make reasonable good faith efforts, to protect the Confidential Information from public disclosure. Therefore, the Executive agrees that, except as (a) required by law or regulation or as legally compelled by court order ( provided that in such case, the Executive shall promptly notify the Company of such order, shall cooperate with the Company in attempting to obtain a protective order or to otherwise restrict such disclosure, and shall only disclose Confidential Information to the minimum extent necessary to comply with any such law, regulation or order) or (b) required in order to enforce his rights under this Agreement or any other agreement with the Company and/or its affiliates, during the Term and at all times thereafter, the Executive shall not, directly or indirectly, divulge, transmit, publish, copy, distribute, furnish or otherwise disclose or make accessible any Confidential Information, or use any Confidential Information for the benefit of anyone other than the Company and its subsidiaries and affiliates, unless and to the extent that the Confidential Information becomes generally known to and available for use by the general public by lawful means and other than as a result of the Executive’s acts or omissions or such disclosure is necessary in the course of the Executive’s proper performance of his duties under this Agreement.
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(b) The Company and its subsidiaries and affiliates do not wish to incorporate any unlicensed or unauthorized material into their products or services. Therefore, the Executive agrees that he will not disclose to the Company, use in the Company's business, or cause the Company to use, any information or material which is a trade secret, or confidential or proprietary information, of any third party, including, but not limited to, any former employer, competitor or client, unless the Company has a right to receive and use such information or material. The Executive will not incorporate into his work any material or information which is subject to the copyrights of any third party unless the Company has a written agreement with such third party or otherwise has the right to receive and use such material or information.
(c) Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 6 shall survive any termination or non-renewal of this Agreement.
7. Noncompetition; Non-solicitation.
(a) Noncompetition . The Executive hereby agrees that while he is employed by the Company and for the “Restricted Period” (as defined below), he shall not, directly or indirectly, in any location in which the Company, its subsidiaries or affiliates or a licensee thereof operates or sells its products (the “ Territory ”), engage, have an interest in or render any services to any business (whether as owner, manager, operator, licensor, licensee, lender, partner, stockholder, joint venturer, employee, consultant or otherwise) competitive with the business activities conducted by the Company, its subsidiaries or affiliates or any material business activities of which Executive was aware that the Company or its direct or indirect subsidiaries had plans to conduct during the time of Executive’s employment or at the time of his Date of Termination (each such case, a “ Competing Business ”). Notwithstanding the foregoing, nothing herein shall prevent the Executive from owning stock in a publicly traded corporation whose activities compete with those of the Company, its subsidiaries and affiliates, provided that such stock holdings are not greater than five percent (5%) of such corporation. For purposes of this Agreement, the “Restricted Period” shall mean the following: (i) in the event of a termination of employment by the Company for Cause or a resignation by the Executive without Good Reason, a period of twelve (12) months following the Executive’s termination of employment or (ii) in the event of a termination by the Company without Cause or a resignation by the Executive for Good Reason, a period of six (6) months following the Executive’s termination of employment.
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(b) Non-solicitation .
(i) Employees . The Executive shall not, while he is employed by the Company and during the period of eighteen (18) months following the Executive’s termination of employment for any reason, directly or indirectly, (1) employ, cause to be employed or hired, recruit, solicit for employment or otherwise contract for the services of, any individual who was or is an employee of the Company or any of its subsidiaries or affiliates; (2) otherwise induce or attempt to induce any employee of the Company or any of its subsidiaries or affiliates to terminate such individual’s employment with the Company or such subsidiary or affiliate, or in any way interfere with the relationship between the Company or any such subsidiary or affiliate and any such employee.
(ii) Customers . The Executive shall not, while he is employed by the Company and during the period of twelve (12) months following the Executive’s termination of employment for any reason, solicit, contact, call upon, communicate with, or attempt to solicit, contact, call upon, communicate with any Protected Customer (as hereinafter defined) to directly discourage such Protected Customer from doing business with the Company or any of its subsidiaries or affiliates. For purposes of this Section 7, “ Protected Customer ” means any individual or entity to whom the Company or any subsidiary or affiliate thereof has sold products or services or solicited to sell products or services during the final twelve (12) months of Executive’s employment by the Company.
(c) Company IP; Work Product.
(i) “ Intellectual Property ” means all intellectual property and industrial property recognized by applicable requirements of law and all physical or tangible embodiments thereof, including all of the following, whether domestic or foreign: (1) patents and patent applications, patent disclosures and inventions (whether or not patentable), as well as any reissues, continuations, continuations in part, divisions, revisions, renewals, extensions or reexaminations thereof; (2) registered and unregistered trademarks, service marks, trade names, trade dress, logos, slogans and corporate names, and other indicia of origin, pending trademark and service mark registration applications, and intent-to-use registrations or similar reservations of marks; (3) registered and unregistered copyrights and mask works, and applications for registration of either; (4) Internet domain names, applications and reservations therefor, uniform resource locators and the corresponding Internet websites (including any content and other materials accessible and/or displayed thereon); (5) Confidential Information; and (6) intellectual property and proprietary information not otherwise listed in (1) through (6) above, including unpatented inventions, invention disclosures, rights of publicity, rights of privacy, moral and economic rights of authors and inventors (however denominated), methods, artistic works, works of authorship, industrial and other designs, methods, processes, technology, patterns, techniques, data, plant variety rights and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded; and (7) any goodwill associated with any of the foregoing, damages and payments for past or future infringements and misappropriations thereof, and all rights to sue for past, present and future infringements or misappropriations thereof.
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(ii) Work Product . The Executive agrees to promptly disclose to the Company any and all work product, including Intellectual Property relating to the business of the Company and any of its affiliates, that is created, developed, acquired, authored, modified, composed, invented, discovered, performed, reduced to practice, perfected, or learned by the Executive (either solely or jointly with others) directly relating to the Company’s and its affiliates’ business or within the scope of Executive’s employment during the Term (collectively, “ Work Product ,” and together with such Intellectual Property as may be owned, used, held for use, or acquired by the Company and its affiliates, the “ Company IP ”). The Company IP, including the Work Product, is and shall be the sole and exclusive property of the Company and its affiliates, as applicable. All Work Product that is copyrightable subject matter shall be considered a “work made for hire” to the extent permitted under applicable copyright law (including within the meaning of Title 17 of the United States Code) and will be considered the sole property of the Company. To the extent such Work Product is not considered a “work made for hire,” Executive hereby grants, transfers, assigns, conveys and relinquishes, without any requirement of further consideration, all right, title, and interest to the Work Product (whether now or hereafter existing, including all associated goodwill, damages and payments for past or future infringements and misappropriations thereof and rights to sue for past and future infringements and misappropriates thereof) to the Company in perpetuity or for the longest period permitted under applicable law. The Executive agrees, at the Company’s expense, to execute any documents requested by the Company or any of its affiliates at any time to give full and proper effect to such assignment. The Executive acknowledges and agrees that the Company is and will be the sole and absolute owner of all Intellectual Property, including all Company IP. The Executive will cooperate with the Company and any of its affiliates, at no additional cost to such parties (whether during or after the Term), in the confirmation, registration, protection and enforcement of the rights and property of the Company and its affiliates in such intellectual property, materials and assets, including, without limitation, the Company IP. The Executive hereby waives any so-called “moral rights of authors” in connection with the Work Product and acknowledges and agrees that the Company may use, exploit, distribute, reproduce, advertise, promote, publicize, alter, modify or edit the Work Product or combine the Work Product with other works including other Company IP, at the Company’s sole discretion, in any format or medium hereafter devised. The Executive further waives any and all rights to seek or obtain any injunctive or equitable relief in connection with the Work Product. Notwithstanding the above, the Executive shall have the right, subject to Section 6 hereof, to author or collaborate on one or more books or other similar works (in whatever form, including written, electronic or otherwise) on any topic(s) whatsoever (including discussion of his experiences as an employee of the Company) (each, a “ Book ”), and any such Book shall not be deemed Work Product or Company IP, and the Company shall have no claim to any rights, title or interest in any such Book.
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(d) Company Property . All Confidential Information, Company IP, files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company and its subsidiaries and affiliates, whether prepared by the Executive or otherwise coming into his possession or control in the course of the performance of his services under this Agreement, shall be the exclusive property of the Company and shall be delivered to the Company, and not retained by the Executive (including, without limitation, any copies thereof), promptly upon request by the Company and, in any event, promptly upon termination of Executive’s employment hereunder. Upon termination of Executive’s employment hereunder, the Executive shall have no rights to and shall make no further use of any Company IP, including Work Product. The Executive acknowledges and agrees that he has no expectation of privacy with respect to the Company’s telecommunications, networking or information processing systems (including, without limitation, stored computer files, email messages and voice messages), and that the Executive’s activity and any files or messages on or using any of those systems may be monitored at any time without notice. Nothing in this Section 7 shall require the Executive to return to the Company any computers or telecommunication equipment or tangible property which he owns, including, but not limited to, personal computers, phones and tablet devices; provided , however , that Executive shall identify each such device to the Company prior to termination of employment and either afford the Company a reasonable opportunity to remove from all such devices any confidential or proprietary information of the Company stored thereon or provide reasonable satisfaction to the Company that such confidential or proprietary information was removed from such devices.
(e) Enforcement . The Executive acknowledges that a breach of his covenants and agreements contained in Sections 6 and 7 would cause irreparable damage to the Company and its subsidiaries and affiliates, the exact amount of which would be difficult to ascertain, and that the remedies at law for any such breach or threatened breach would be inadequate. Accordingly, the Executive agrees that if he breaches or threatens to breach any of the covenants or agreements contained in Sections 6 and 7 , in addition to any other remedy which may be available at law or in equity, the Company and its subsidiaries and affiliates shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction for specific performance and injunctive and other equitable relief to prevent the breach or any threatened breach thereof without bond or other security or a showing of irreparable harm or lack of an adequate remedy at law. Additionally, upon a material breach by Executive of Section 6 or Section 7 , the unvested Restricted Stock (and any other stock-based awards held by the Executive) shall be automatically canceled and forfeited without any further action. The Company and the Executive further acknowledge that the time, scope, geographic area and other provisions of Sections 6 and 7 have been specifically negotiated by sophisticated commercial parties and agree that they consider the restrictions and covenants contained in Sections 6 and 7 to be reasonable and necessary for the protection of the interests of the Company and its subsidiaries and affiliates, but if any such restriction or covenant shall be held by any court of competent jurisdiction to be void but would be valid if deleted in part or reduced in application, such restriction or covenant shall apply in such jurisdiction with such deletion or modification as may be necessary to make it valid and enforceable. The Executive acknowledges and agrees that the restrictions and covenants contained in Sections 6 and 7 shall be construed for all purposes to be separate and independent from any other covenant, whether in this Agreement or otherwise, and shall each be capable of being reduced in application or severed without prejudice to the other restrictions and covenants or to the remaining provisions of this Agreement. The existence of any claim or cause of action by the Executive against the Company or any of its subsidiaries and affiliates, whether predicated upon this Agreement or otherwise, shall not excuse the Executive’s breach of any covenant, agreement or obligation contained in Section 6 or Section 7 and shall not constitute a defense to the enforcement by the Company or any of its subsidiaries of such covenant, agreement or obligation; provided , howeve r, that if upon termination of this Agreement by the Company without “Cause” or by Executive for “Good Reason”, the Company defaults on any obligation to pay Executive any amount due and owing Executive under Section 5(j)(ii)(1) or Section 5(j)(ii)(5) , then Executive shall not be required to comply with the undertakings set forth in Section 7(a) and Section 7(b) .
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8. Indemnification. The Company shall indemnify the Executive for actions taken by the Executive as an officer or director of the Company pursuant to the fullest extent permitted by law; provided , however , that the Company shall not indemnify the Executive for any losses incurred by the Executive as a result of or in connection with (a) acts or omissions described in Section 5(f), or (b) a cause of action by Executive against the Company or its affiliates or their respective directors, officers, agents, representatives or employees. If the Executive has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which the Executive may request indemnity under this provision, the Executive shall give the Company prompt written notice thereof. The Company shall be entitled to assume the defense of any such proceeding, and the Executive shall cooperate with such defense.
9. Section 409A of the Code.
(a) It is intended that the provisions of this Agreement comply with Section 409A of Code and the regulations and guidance promulgated thereunder (collectively “ Code Section 409A ”), and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Executive to incur any additional tax or interest under Code Section 409A, the Company shall, upon the specific request of the Executive, use its reasonable business efforts to in good faith reform such provision to comply with Code Section 409A; provided , that to the maximum extent practicable, the original intent and economic benefit to the Executive and the Company of the applicable provision shall be maintained, but the Company shall have no obligation to make any changes that could create any additional economic cost or loss of benefit to the Company. Notwithstanding the foregoing, the Company shall have no liability with regard to any failure to comply with Code Section 409A so long as it has acted in good faith with regard to compliance therewith.
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(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment” or like terms shall mean Separation from Service. Any provision of this Agreement to the contrary notwithstanding, if at the time of the Executive’s Separation from Service, the Company determines that the Executive is a “Specified Employee,” within the meaning of Code Section 409A, based on an identification date of December 31, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of such separation from service would be considered nonqualified deferred compensation under Code Section 409A, such payment or benefit shall be paid or provided at the date which is the earlier of (i) six (6) months and one day after such separation from service, and (ii) the date of the Executive’s death (the “ Delay Period ”). Within five days of the end of the Delay Period, all payments and benefits delayed pursuant to this Section 10(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or provided to the Executive in a lump-sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(c) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.
(d) Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Code Section 409A.
10. Miscellaneous.
(a) This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with those laws. The Company and Executive unconditionally consent to submit to the exclusive jurisdiction of the New York State Supreme Court, County of New York or the United States District Court for the Southern District of New York for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby (and agree not to commence any action, suit or proceeding relating thereto except in such courts), and further agree that service of any process, summons, notice or document by registered mail to the address set forth below shall be effective service of process for any action, suit or proceeding brought against the Company or the Executive, as the case may be, in any such court.
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(b) Executive may not delegate his duties or assign his rights hereunder. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company other than pursuant to a merger or consolidation in which the Company is not the continuing entity, or a sale, liquidation or other disposition of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets or businesses of the Company and assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or by operation of law. For the purposes of this Agreement, the term “Company” shall include the Company and, subject to the foregoing, any of its successors and assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, legal representatives, successors and permitted assigns.
(c) The invalidity or unenforceability of any provision hereof shall not in any way affect the validity or enforceability of any other provision. This Agreement reflects the entire understanding between the parties.
(d) This Agreement, the Restricted Stock Agreement and the RSU Agreement represent the entire understanding of the Executive and the Company with respect to the employment of the Executive by the Company and contain all of the covenants and agreements between the parties with respect to such employment. Any modification or termination of this Agreement will be effective only if it is in writing signed by the party to be charged.
(e) This Agreement may be executed by the parties in one or more counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto.
(f) All amounts payable hereunder shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.
11. Notices. All notices relating to this Agreement shall be in writing and shall be either personally delivered, sent by telecopy (receipt confirmed) or mailed by certified mail, return receipt requested, to be delivered at such address as is indicated below, or at such other address or to the attention of such other person as the recipient has specified by prior written notice to the sending party. Notice shall be effective when so personally delivered, one business day after being sent by telecopy or five days after being mailed.
To the Company:
Sequential Brands Group, Inc.
c/o Tengram Capital Management, LLC
15 Riverside Avenue
Westport, CT 06880
Attention: Bill Sweedler
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With a copy to:
Sequential Brands Group, Inc.
5 Bryant Park
30th Floor
New York, NY 10018
Attention: Bill Sweedler
To the Executive:
Mr. Yehuda Shmidman
376 West 245th Street
Bronx, NY 10471
With a copy to:
Donald P. Carleen
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004
Fax: (212) 859-4000
[ signature page follows ]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 14th day of April, 2015.
SEQUENTIAL BRANDS GROUP, INC. | |||
By: |
/s/ William Sweedler |
||
Name: | William Sweedler | ||
Title: |
Chairman of the Board of Directors |
||
EXECUTIVE | |||
/s/ Yehuda Shmidman | |||
Yehuda Shmidman |
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EXHIBIT A
EXECUTIVE RELEASE AND COVENANT NOT TO SUE
Except as otherwise provided herein, in consideration of the severance payments and/or benefits I am eligible to receive pursuant to the employment agreement between Sequential Brands Group, Inc., a Delaware corporation (the “ Company ”), and me, dated ____________, 2015 (the “ Employment Agreement ”), I, Yehuda Shmidman, on behalf of myself, and on behalf of my heirs, successors and assigns, hereby knowingly and voluntarily release and discharge, to the fullest extent permitted by law, the Company. and all of their respective past and present subsidiaries, affiliates, predecessors, successors and assigns (“Company Entities”) and, with respect to each and all of the Company Entities, all of their respective directors, officers, employees, agents, each individually and in their representative capacities (“Company Entity Officials”) (Company Entities and Company Entity Officials collectively referred to herein as “ Released Parties ”) from any and all claims, demands, agreements, obligations, expenses, actions, judgments and liabilities of any kind whatsoever, in law, equity or otherwise, whether known or unknown, suspected or claimed, specifically mentioned herein or not, which I had, have or may have against any of the Released Parties by reason of any actual or alleged act, event, occurrence, omission, practice or other matter whatsoever from the beginning of time up to and including the date that I sign this Separation and General Release Agreement (this “Claims”), including that but not limited to Claims arising out of or in any way relating to: (i) my employment with any and all of the Company Entities, including the termination of that employment; (ii) any common law, public policy, company policy, contract (whether oral or written, express or implied) or tort law having any bearing whatsoever on the terms and conditions of my employment; and/or (iii) any federal, state or local law, ordinance or regulation including, but not limited to, the following (each as amended, if applicable): Age Discrimination in Employment Act (including Older Workers Benefit Protection Act); Americans with Disabilities Act; Civil Rights Act of 1866; Civil Rights Act of 1991; Equal Pay Act; Family and Medical Leave Act of 1993; National Labor Relations Act; Title VII of the Civil Rights Act of 1964; Worker Adjustment and Retraining Notification Act; New York State and New York City Human Rights Laws; New York State Labor Law; New York State Worker Adjustment and Retraining Notification Act; and any other law, ordinance or regulation regarding discrimination or harassment or terms or conditions of employment.
I agree that I have entered into this Release as a compromise and in full and final settlement of all Claims, if any, that I have or may have against any and all of the Released Parties up to and including the date that I sign this Release (except as otherwise expressly set forth below). I also agree that, although I may hereafter discover Claims presently unknown or unsuspected, or new or additional facts from those which I now knows or believe to be true, I intend to provide a complete waiver of all Claims based on any facts and circumstances, whether known or unknown, up to and including the date that I sign this Agreement (except as otherwise expressly set forth below) .
However, notwithstanding the foregoing, I am not releasing, and for the avoidance of doubt Claims do not include, my rights, if any, (i) to indemnification by the Company or any of its affiliates, to the maximum extent permitted by law, for all claims or proceedings, or threatened claims or proceedings, arising out of or relating to my service as an officer, director or employee, as the case may be, of the Company or any of its subsidiaries, (ii) to payment of any authorized but unreimbursed business expenses incurred prior to the termination of my employment with the Company or any of its subsidiaries in accordance with Section 4(e) of my Employment Agreement, (iii) under any employee pension or welfare plan or program in which I participate or participated, (iv) to receive payments, severance and benefits under Section 5(j) of the Employment Agreement, (v) to be indemnified pursuant to Section 8 of the Employment Agreement or pursuant to other agreements to which I may be entitled to indemnification, and (vi) to any equity awards I have received prior to the date of termination of my employment, including the Restricted Stock Award, the RSU/PSU Award and the PSUs. Furthermore, I am not releasing any rights or claims that may arise after the date on which I sign this Release or that cannot be released by a private settlement agreement (such as statutory claims for worker’s compensation/disability insurance benefits and unemployment compensation).
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I represent that I have not assigned or transferred my rights with respect to any Claims covered by this Release and that I have not filed, directly or indirectly any legal proceeding against the Released Parties regarding any such Claims. If I commence (or commenced) or participate in any action or proceeding (including as a member of a class of persons) regarding Claims covered by this Release, I acknowledge and agree that this Release shall be a complete defense in such action or proceeding and, to the maximum extent permitted by law, I and my heirs, successors and assigns will have no right to obtain or receive, and will not seek or accept, any damages, settlement or relief of any kind (including attorneys’ fees and costs) as a result of such action or proceeding.
In addition, I acknowledge and agree that I am and will continue to be bound by the terms and conditions set forth in the Employment Agreement (including the restrictive covenants) (the “ Continuing Obligations ”),all of which continue to remain in full force and effect for the periods set forth therein notwithstanding the termination of my employment and are hereby incorporated herein by reference.
In further consideration of the payment and/or benefits I am eligible to receive pursuant to the Employment Agreement, I agree to reasonably cooperate with the Company Entities, their legal counsel and designees regarding any current or future claim, investigation (internal or otherwise), inquiry or litigation relating to any matter with which I was involved or had knowledge or which occurred during my employment, with such assistance including, but not limited to, meetings and other consultations, signing affidavits and documents that are factually accurate, attending depositions and providing truthful testimony (in each case, without requiring a subpoena); provided , however , that the Company will reimburse me for my reasonable expenses (including attorneys’ fees and travel expenses) actually incurred by me in connection with such cooperation (it being understood that if any such expenses are expected to exceed $5,000, Executive shall inform the Company prior to incurring such expenses to provide the Company with an opportunity to either agree to reimburse Executive for such expenses or advise Executive not to provide such cooperation necessitating the incurrence of such expenses).
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I acknowledge and agree that:
1. The payment and/or benefits I am receiving under the Employment Agreement constitute consideration over and above any payments and/or benefits that I might be entitled to receive without executing this Release.
2. The Company advised me to consult with an attorney prior to executing this Release.
3. I was given a period of at least 21 days within which to consider this Release and that I must sign and return this Release no later than __________, 201_.
4. The Company has advised me of my statutory right to revoke my acceptance of the terms of this Release at any time within seven (7) days of my signing of this Release.
5. I warrant and represent that my decision to accept this Release was (a) entirely voluntary on my part; (b) not made in reliance on any inducement, promise or representation, whether express or implied, other than the inducements, representations and promises expressly set forth in the Employment Agreement or in the Release; and (c) did not result from any threats or other coercive activities to induce acceptance of this Release.
In the event I decide to exercise my right to revoke within seven (7) days of my acceptance of this Release, I warrant and represent that I will do the following: (1) notify the Company in writing of my intent to revoke my agreement, and (2) simultaneously return in full the consideration, if any, received from the Company Entities pursuant to the Employment Agreement and which consideration was expressly subject to my signing this Release.
Upon its effectiveness, this Release, the Employment Agreement and the Continuing Obligations, together with any applicable equity award agreements and equity plans, contains the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes and replaces all prior and contemporaneous agreements, representations and understandings (whether oral or written) regarding the subject matter hereof. Once executed by me, this Release may be modified only in a document signed by me and the Company and referring specifically hereto, and no handwritten changes to this Release will be binding unless initialed by me and the Company. If any portion of this Release is held to be unenforceable by any court of competent jurisdiction, the parties intend that such portion be modified to make it enforceable to the maximum extent permitted by law. If any such portion (other than the general release provisions) cannot be modified to be enforceable, such portion shall become null and void leaving the remainder of this Release in full force and effect.
This Release shall be binding upon and inure to the benefit of (i) the Released Parties, including the successors and assigns of the Released Parties, all of which are intended third-party beneficiaries, and (ii) me and my heirs, successors and assigns. This Release is not an admission of liability or wrongdoing by me or any of the Released Parties, and such wrongdoing or liability is expressly denied.
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I further warrant and represent that I fully understand and appreciate the consequence of my signing this Release and that I am signing it voluntarily.
IN WITNESS WHEREOF, I hereby acknowledge receipt of consideration and execute the foregoing agreement at , this day of , 20 .
Yehuda Shmidman |
Witnessed by on this day of , 20 .
WITNESS |
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Exhibit 10.7
SEQUENTIAL BRANDS GROUP, INC.
2015 Restricted Stock Unit Award Agreement
THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (the “ Award Agreement ”) is made and entered into as of April 14, 2015 (“ Grant Date ”) by and between Sequential Brands Group, Inc., a Delaware corporation (the “ Company ”), and Yehuda Shmidman (the “ Participant ”). Defined terms not explicitly defined in this Award Agreement shall have the same definitions ascribed to such terms in the Plan.
WHEREAS , the Company has adopted the Sequential Brands Group, Inc., 2013 Stock Incentive Compensation Plan, as may be amended from time to time (the “ Plan ”), pursuant to which an Award of Restricted Stock Units may be granted; and
WHEREAS , the Committee has determined that it is in the best interests of the Company and its shareholders to grant the restricted stock units, subject to the terms and conditions of the Plan and this Award Agreement.
NOW, THEREFORE , in consideration of the terms and conditions set forth herein, the parties agree as follows:
1. Grant of RSUs and PSUs . Subject to the terms and conditions of the Plan and this Award Agreement, the Company hereby grants the Participant 300,000 RSUs and PSUs. Each RSU and PSU that vests as provided herein represents the right to receive one Share. 100,000 of the Restricted Stock Units shall be subject to time-based vesting (the “ RSUs ”) and 200,000 of the Restricted Stock Units shall be subject to performance-based vesting (the “ PSUs ”).
2. Vesting Period . For purposes of the Plan and this Award Agreement, “ Vesting Period ” shall mean each of the calendar years 2016, 2017 and 2018, and the last day of each such year is herein referred to as a “ Vesting Date ”.
3. Vesting
(a) Vesting of RSUs . 33,333 of the RSUs shall vest on each of the first two (2) Vesting Dates and 33,334 of the RSUs shall vest on the final Vesting Date.
(b) Vesting of PSUs .
(i) 66,666 of the PSUs shall vest on the first (1 st ) Vesting Date provided that the 2016 Performance Target (as defined below) is met on or prior to that date.
(ii) 133,332 of the PSUs, less the PSUs, if any, that vested pursuant to Section 3(b)(i), shall vest on the second (2 nd ) Vesting Date provided that the 2017 Performance Target (as defined below) is met on or prior to that date.
(iii) 200,000 of the PSUs, less the PSUs, if any, that vested pursuant to either of Sections 3(b)(i) or 3(b)(ii), shall vest on the third (3 rd ) Vesting Date provided that the 2018 Performance Target (as defined below) is met on or prior to that date.
(c) Performance Targets . For purposes of this Award Agreement,
(i) “ 2016 Performance Target ” means the Fair Market Value of a Share for any ten (10) trading days in 2016 being at least $20.
(ii) “ 2017 Performance Target ” means the Fair Market Value of a Share for any ten (10) trading days in 2017 being at least $22.
(iii) “ 2018 Performance Target ” means the Fair Market Value of a Share for any ten (10) trading days in 2018 being at least $24.
5. Adjustments . If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the number of RSUs and PSUs and the 2016, 2017 and 2018 Performance Targets shall be adjusted as contemplated by Section 4(c) of the Plan.
6. Shareholder Rights . The Participant shall have no rights as a shareholder with respect to any RSUs or PSUs until Shares underlying the RSUs or PSUs, if any, shall have been actually issued to the Participant.
7. Treatment upon a Termination of Service . Except as provided in the employment agreement between the Company and the Participant dated as of April 14, 2015 (the “ Employment Agreement ”), in the event of the Participant’s Termination of Service, the vesting or forfeiture of his or her RSUs and PSUs will be subject to the terms and conditions of Section 8(h) of the Plan.
8. Treatment upon a Change in Control . Upon the occurrence of a Change in Control, (a) the RSUs will become fully vested, and (b) each of the 2016 Performance Target, the 2017 Performance Target and the 2018 Performance Target shall be deemed to have been met and the PSUs that would have vested pursuant to Section 3(b) on each Vesting Date that occurs following the Change in Control had the applicable Performance Target been met shall vest on such Vesting Date provided the Executive remains employed as of such date.
9. Payment of RSUs and PSUs . As promptly as practicable following any date that the RSUs or PSUs vest pursuant to Section 3 or Section 8 hereof, or pursuant to the Employment Agreement, but in no event no later than sixty (60) days following the applicable date, the Company will deliver one (1) Share for each RSU and PSU that becomes vested on such date.
10. General Terms .
(a) Transferability . Except as otherwise provided in the Plan, this Award Agreement, may not be sold, transferred, pledged, assigned, encumbered, alienated, hypothecated, or otherwise disposed of without the prior consent of the Committee, in its sole discretion.
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(b) Award Not a Service Contract . Neither this Award Agreement nor the Award granted hereunder is an employment or service contract, and nothing in this Award Agreement shall be deemed to create in any way whatsoever any obligation on the part of the Participant to continue in the employ of the Company, or of the Company to continue the Participant’s employment.
(c) Tax Withholding Obligations . Pursuant to the terms and conditions of the Plan, the Company and any Affiliates are authorized to withhold from the RSUs and PSUs or any payment due under the Plan the amount of all federal, state, local and non-United States taxes due in respect of the RSUs and PSUs, or require the Participant, prior to delivery of any Shares underlying the RSUs and PSUs to remit to the Company, an amount sufficient to satisfy any applicable tax withholding requirements with respect to the RSUs and PSUs. The Participant may satisfy any applicable payroll taxes arising upon the payment of the RSUs and PSUs by having the Company withhold Shares or by the Participant tendering Shares, in each case in an amount sufficient to satisfy any such tax obligations. Shares withheld or tendered will be valued using the Fair Market Value of the Shares on the date the Shares are paid.
(d) Plan Document Controls . In the event of any conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control.
(e) Applicable Law . This Award Agreement shall be subject to the laws of the State of New York and to all applicable laws and to the approvals by any governmental or regulatory agency as may be required.
(f) Committee Decisions Final . Any dispute or disagreement that arises under, or as a result of, or pursuant to, or in connection with, the interpretation or construction of the terms of this Award Agreement or the Award granted hereunder shall be determined by the Committee in its sole discretion. Any interpretation by the Committee of the terms of the Award shall be final and binding on all persons affected thereby.
(g) Amendments . The Committee may unilaterally amend or alter the terms of the RSUs, including this Award Agreement, retroactively or otherwise, in any manner consistent with the provisions of Section 15 of the Plan; provided, however, that no such alteration or amendment may, without the consent of the Participant, impair the previously accrued rights of the Participant with respect to the RSUs and PSUs. Notwithstanding any provision herein to the contrary, the Committee shall have broad authority to amend this Award Agreement to take into account changes in applicable tax laws, accounting rules, stock exchange rules and other applicable state and federal laws, including without limitation, any amendments made pursuant to Section 409A of the Code.
(h) Entire Agreement; Headings . This Award Agreement and the other related documents expressly referred to herein set forth the entire agreement and understanding between the parties hereto. The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of this Award Agreement.
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(i) Successors . All obligations of the Company under the Plan with respect to the RSUs and PSUs shall be binding on any successor to the Company.
(j) Securities Laws Compliance . No Shares shall be issued or transferred under this Award Agreement unless the Committee determines that such issue or transfer is in compliance with all applicable U.S. federal, state and/or foreign securities laws and regulations,.
(k) Acceptance of Award . The Participant acknowledges that he or she has reviewed the Plan and this Award Agreement in their entirety, understands the terms and conditions of the Plan and this Award Agreement, and has had an opportunity to obtain the advice of counsel and a qualified tax advisor prior to accepting the Award. The Participant hereby agrees to comply with the terms and conditions of the Plan and this Award Agreement and accepts as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan and this Award Agreement.
Please acknowledge receipt of this Award Agreement by signing the enclosed copy of this Award Agreement as provided below and returning it promptly to Gary Klein, Chief Financial Officer of the Company.
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SEQUENTIAL BRANDS GROUP, INC. | PARTICIPANT | |||
By: |
/s/ William Sweedler |
By: | /s/ Yehuda Shmidman | |
Date: |
April 14, 2015 |
Date: | April 14, 2015 | |
Name: |
William Sweedler |
Name: | Yehuda Shmidman | |
Title: |
Chairman of the Board of Directors |
Title: |
Chief Executive Officer |
- 5 - |
EXHIBIT 31.1
Certification of Principal Executive
Officer Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Yehuda Shmidman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sequential Brands Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 6, 2015 | |
/s/ Yehuda Shmidman | |
Yehuda Shmidman | |
Chief Executive Officer |
EXHIBIT 31.2
Certification of Principal Financial
Officer Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Gary Klein, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sequential Brands Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 6, 2015 | |
/s/ Gary Klein | |
Gary Klein | |
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (the “Report”) by Sequential Brands Group, Inc. (“Registrant”), the undersigned hereby certifies that, to the best of their knowledge:
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant. |
Date: May 6, 2015 | /s/ Yehuda Shmidman |
Yehuda Shmidman | |
Chief Executive Officer | |
Date: May 6, 2015 | /s/ Gary Klein |
Gary Klein | |
Chief Financial Officer |