UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 4, 2016 (March 30, 2016)

 

 

ARMSTRONG FLOORING, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-37589   47-4303305

(State or other jurisdiction

of incorporation)

 

(Commission

File No.)

 

(IRS Employer

Identification No.)

 

2500 Columbia Avenue, Building 701

P.O. Box 3025

Lancaster, Pennsylvania

  17603
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (717) 672-9611

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

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

 

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

 

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

 

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

 

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

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

Separation-Related Agreements

On April 1, 2016, Armstrong World Industries, Inc. (“AWI”) completed the previously announced plan to separate its Resilient Flooring and Wood Flooring segments into a separate and independent public company, Armstrong Flooring, Inc. (“AFI”), through the distribution of all of the then outstanding shares of AFI common stock to AWI’s shareholders.

Effective as of 11:59 p.m., Eastern time, on April 1, 2016, the distribution date, AWI distributed all of the issued and outstanding shares of AFI common stock to AWI’s shareholders of record as the close of business on March 21, 2016, the record date for the distribution, as a pro rata distribution. On the distribution date, AWI shareholders received one share of AFI common stock for every two shares of AWI common stock held as of the record date and will receive cash in lieu of any fractional shares of AFI common stock. As a result of the distribution, AWI does not beneficially own any shares of AFI common stock. The separation and distribution has resulted in AFI becoming an independent, publicly traded company, trading on the New York Stock Exchange under the symbol “AFI.”

As previously announced, on March 11, 2016, AFI entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”) with AWI that sets forth, among other things, certain agreements between AWI and AFI regarding the principal transactions necessary to effect the separation and distribution. On April 1, 2016, in connection with the completion of the separation and distribution, AFI entered into certain other agreements with AWI as contemplated by the Separation and Distribution Agreement that, together with a plan of division adopted by AWI’s board of directors, provides for the separation and allocation between AFI and AWI of the assets, employees, liabilities and obligations of AWI and its subsidiaries attributable to periods prior to, at and after AFI’s separation from AWI and govern the relationship between AFI and AWI subsequent to the completion of the separation and distribution. These agreements include:

 

    a Transition Services Agreement;

 

    a Tax Matters Agreement;

 

    an Employee Matters Agreement;

 

    a Trademark License Agreement;

 

    a Transition Trademark License Agreement; and

 

    a Campus Lease Agreement.

A description of the terms and conditions of these agreements that are material to AFI can be found in AFI’s information statement, dated March 24, 2016 (the “Information Statement”), which is included as Exhibit 99.1 to this Form 8-K, under the section entitled “Certain Relationships and Related Person Transactions.” These summaries are incorporated by reference into this Item 1.01. The description of the agreements set forth under this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the complete terms and conditions of those agreements, which are attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6.

Merger Agreement

Pursuant to the Separation and Distribution Agreement and in connection with the completion of the separation and distribution, on March 11, 2016, AWI’s board of directors adopted a Plan of Division (the “Plan of Division”), pursuant to which, on March 30, 2016, AWI engaged in a division under Pennsylvania law (the “division”), pursuant to which the assets and liabilities of AWI related primarily to AWI’s Resilient Flooring and Wood Flooring segments were allocated to a newly formed Pennsylvania corporation that resulted from the division (the “Resulting PA Corporation”).


On March 31, 2016, after the division became effective, AFI and the Resulting PA Corporation entered into an agreement and plan of merger (the “Merger Agreement”) pursuant to which the Resulting PA Corporation merged with and into AFI (the “Merger”), with AFI surviving the Merger as a Delaware corporation and the successor to the Resulting PA Corporation. The transactions contemplated by the Merger Agreement were consummated on March 31, 2016. The description of the Merger Agreement set forth under this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the complete terms and conditions of the Merger Agreement, which is attached hereto as Exhibit 2.1.

Debt Arrangements

On April 1, 2016, AFI entered into a credit agreement (the “Credit Agreement”), by and among AFI, Armstrong Hardwood Flooring Company (“Armstrong Hardwood” and, together with AFI, the “Borrowers”), the guarantors named therein, Bank of America, N.A., as administrative agent and collateral agent, the other lenders party thereto, JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc., as co-syndication agents, and Bank of America, N.A., JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc., as joint lead arrangers and joint book managers.

The Credit Agreement provides AFI with a $225 million senior secured asset-based revolving credit facility (the “Credit Facility”), which includes a $50 million sublimit for the issuance of standby letters of credit and a $25 million sublimit for swing line loans, and a borrowing base that is derived from the Borrowers’ accounts receivable, inventory and eligible cash, subject to certain reserves and other limitations. The Credit Facility is scheduled to mature on April 1, 2021. The Credit Agreement provides for an uncommitted accordion feature that allows AFI to request the existing lenders or their assignees to provide additional capacity in the form of increased revolving credit commitments or other revolving credit commitments, in an amount up to $150 million, of which up to (a) $15 million may be used to establish a first-in, last-out tranche, (b) $20 million may be used to establish a Canadian Dollar sub-facility and (c) $15 million may be used to establish an Australian Dollar sub-facility. The Credit Agreement also provides that one of AFI’s subsidiaries, Armstrong Hardwood Flooring Company, will be a co-borrower under the Credit Facility.

On April 1, 2016, the signing date of the Credit Agreement, AFI borrowed $100 million under the Credit Facility, $50 million of which was used to fund a $50 million cash dividend that was paid to AWI before the distribution.

Borrowings under the Credit Facility (other than swing line loans) will bear interest at a rate per annum equal to an applicable margin plus, at AFI’s option, a base rate or a Eurodollar rate equal to the London interbank offered rate (“LIBOR”) for the relevant interest period, plus, in each case, an applicable margin determined in accordance with the provisions of the Amended and Restated Credit Agreement. The base rate will be the highest of (a) the prime rate of Bank of America, N.A., (b) the federal funds effective rate plus 1/2 of 1.00% and (c) one month LIBOR plus 1.00%. The applicable margin for borrowings under the Credit Facility will be 0.50% with respect to base rate borrowings and 1.50% with respect to Eurodollar borrowings for the first two full fiscal quarters following April 1, 2016. Thereafter, the applicable margin will be determined based on AFI’s average excess availability under the Credit Facility. In addition to paying interest on outstanding principal under the Credit Agreement, AFI will pay a commitment fee to the lenders under the Credit Facility in respect of the unutilized commitments thereunder at a rate equal to 0.25% per annum if utilization is greater than or equal to 35% of the aggregate commitments and otherwise at a rate equal to 0.375% per annum. AFI must also pay customary letter of credit and agency fees.

If at any time the aggregate amount of outstanding revolving loans under the Credit Facility exceeds the commitment amount, AFI will be required to repay such excess on demand. AFI may voluntarily prepay outstanding loans under the Credit Facility without premium or penalty other than customary “breakage” costs with respect to Eurodollar loans.


All obligations under the Credit Agreement are guaranteed by each of AFI’s wholly owned domestic subsidiaries that individually, or together with its subsidiaries, has assets of more than $1 million. All obligations under the Credit Agreement, and guarantees of those obligations, are secured, subject to certain exceptions, by the following assets:

 

    A first-priority pledge of 100% of the capital stock and other equity interests of all material domestic subsidiaries, direct and indirect, of AFI. Material domestic subsidiaries are domestic subsidiaries that individually, or together with their respective subsidiaries on a consolidated basis, have assets of more than $1 million (other than insurance subsidiaries and securitization subsidiaries).

 

    A pledge of 65% of the capital stock and other equity interests of all excluded subsidiaries that are material first-tier foreign subsidiaries, direct and indirect, of AFI, subject to certain exceptions. Excluded subsidiaries are any subsidiary that is (i) not a domestic subsidiary, (ii) HomerWood Hardwood Flooring Company or (iii) any domestic subsidiary that is not a material domestic subsidiary, subject to certain caps and conditions. The material first-tier foreign subsidiaries include any first-tier foreign subsidiaries that individually, or together with their respective subsidiaries on a consolidated basis, have assets of more than $5 million (other than foreign subsidiaries organized under the laws of the People’s Republic of China, any insurance subsidiary and any other foreign subsidiary if a pledge of such foreign subsidiary’s capital stock would violate any law or be expected to have an adverse effect on such foreign subsidiary’s business).

 

    A grant of a security interest in substantially all personal property of AFI and material domestic subsidiaries, including all accounts, contract rights, deposit accounts, chattel paper, insurance proceeds, inventory, investments and financial assets, general intangibles, intellectual property, licenses and machinery and equipment (the security interests are limited to those which may be perfected by the filing of financing statements under the Uniform Commercial Code or, in the case of intellectual property, filings with the United States Office of Patents and Trademarks or the United States Copyright Office).

 

    All proceeds of the foregoing.

The Credit Agreement contains a number of covenants that, among other things and subject to certain significant exceptions, restrict AFI’s ability and the ability of its subsidiaries to:

 

    Incur additional indebtedness.

 

    Pay dividends on AFI’s capital stock or redeem, repurchase or retire AFI’s capital stock or indebtedness.

 

    Make investments, loans, advances and acquisitions.

 

    Create restrictions on the payment of dividends or other amounts to AFI from its subsidiaries.

 

    Engage in transactions with AFI’s affiliates.

 

    Sell assets, including capital stock of AFI’s subsidiaries.

 

    Consolidate or merge.

 

    Create liens.

 

    Enter into sale and lease back transactions.

In addition, the Credit Agreement requires AFI to comply with certain financial ratio maintenance covenants.

The credit agreement also contains customary affirmative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $30 million.


The description of the Credit Agreement set forth under this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, which is attached hereto as Exhibit 10.7.

Adoption of Equity Compensation, Incentive and Other Benefit Plans

In connection with the separation and distribution, effective as of April 1 2016, the board of directors adopted the following equity compensation, incentive and other benefit plans for AFI’s executive officers, employees and non-employee directors:

 

    Armstrong Flooring, Inc. 2016 Directors Stock Unit Plan (the “Director Plan”)

 

    Armstrong Flooring, Inc. 2016 Long-Term Incentive Plan (the “Long-Term Incentive Plan”)

 

    Armstrong Flooring, Inc. Nonqualified Deferred Compensation Plan (the “AFI NQDC Plan”)

 

    Retirement Benefit Equity Plan of Armstrong Flooring, Inc. (the “AFI RBEP”)

The Director Plan and the Long-Term Incentive Plans are each intended to foster behavior that will produce the greatest increase in value for shareholders, reinforce key company goals and objectives that help drive stockholder value, and attract, motivate and retain officers, key employees and directors. A total of 6,100,000 shares of common stock are reserved for issuance under the Director Plan and Long-Term Incentive Plan, subject to adjustment resulting from stock dividends, stock splits and similar changes. AWI, in its capacity as the sole stockholder of AFI prior to the distribution also approved the Director Plan and Long-Term Incentive Plan. The AFI NQDC Plan and AFI RBEP were each established by AFI to provide supplemental retirement benefits to select management employees, including the named executive officers of AFI and to administer the deferred compensation liabilities it has assumed pursuant to the Employee Matters Agreement. The foregoing descriptions of the Director Plan, the Long-Term Incentive Plan, the AFI NQDC Plan and the AFI RBEP do not purport to be complete and are each qualified in its entirety by reference to the complete terms and conditions of such plans attached hereto as Exhibits 10.8, 10.9, 10.10 and 10.11, respectively.

Item 2.01 Completion of Acquisition or Disposition of Assets

On March 31, 2016, AFI completed the Merger. The information set forth under Item 1.01 of this Current Report on Form 8-K with respect to the Merger is incorporated by reference into this Item 2.01.

On April 1, 2016, AFI paid a $50 million cash dividend to AWI. The information set forth under the heading “Debt Arrangements” in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information set forth under the heading “Debt Arrangements” in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 3.03. Material Modification to Rights of Security Holders.

The information set forth under Item 5.03 of this Current Report on Form 8-K is incorporated by reference into this Item 3.03.

Item 5.01. Changes in Control of Registrant.

Prior to the completion of the separation and distribution, AFI was a wholly owned subsidiary of AWI. On April 1, 2016, AWI distributed the common stock of AFI to AWI’s shareholders of record as of the close of business on March 21, 2016, the record date for the distribution. As a result of the distribution, AWI retains no ownership interest in AFI. The description of the separation and distribution set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.01.


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Board of Directors

On March 30, 2016, each of Michael F. Johnston, Kathleen S. Lane, Jeffrey Liaw, Donald R. Maier, Larry S. McWilliams, James C. Melville, James J. O’Connor and Jacob H. Welch was appointed as a director of AFI. Richard E. Wenz was previously appointed as a director of AFI and will continue to serve as a director after the distribution. Mr. McWilliams was appointed as Chair of the board of directors.

AFI’s board of directors initially will be divided into three classes, each comprised of three directors. The directors designated as Class I directors have terms expiring at the first annual meeting of stockholders following the distribution, which AFI expects to hold in 2017. The directors designated as Class II directors have terms expiring at the 2018 annual meeting of stockholders, and the directors designated as Class III directors will have terms expiring at the 2019 annual meeting of stockholders. Upon the expiration of the initial term of each class of directors, the directors of such class will thereafter stand for election annually, such that, beginning with the annual meeting in 2019, AFI’s board of directors will no longer be divided into classes and each director will stand for election annually. The Class I directors are Ms. Lane and Messrs. Welch and Wenz; the Class II directors are Messrs. Liaw, Maier and O’Connor; and the Class III directors are Messrs. Johnston, Melville and McWilliams.

Mr. Welch was appointed to AFI’s board of directors pursuant to and in accordance with an appointment and stockholder’s agreement between AFI and members of the ValueAct Group, dated February 26, 2016. Additional information on the appointment and stockholder’s agreement can be found in AFI’s Information Statement under the section entitled “Certain Relationships and Related Person Transactions,” which is incorporated by reference into this Item 5.02.

Biographical information on each of AFI’s directors can be found in AFI’s Information Statement under the section entitled “Directors—Board of Directors Following the Distribution”, which is incorporated by reference into this Item 5.02.

Effective March 30, 2016, AFI’s board of directors has the following standing committees: an Audit Committee, a Management Development and Compensation Committee (“Compensation Committee”), a Nominating and Governance Committee and a Finance Committee. Ms. Lane, and Messrs. Liaw and Wenz have been appointed as members of the Audit Committee of the board of directors, and Mr. Wenz has been appointed as the Chair of the Audit Committee. Messrs. Johnston, Melville, O’Connor and Welch have been appointed as members of the Compensation Committee of the board of directors, and Mr. Johnston has been appointed as the Chair of the Compensation Committee. Messrs. Melville, McWilliams and O’Connor have been appointed as members of the Nominating and Governance Committee of the board of directors, and Mr. Melville has been appointed as the Chair of the Nominating and Governance Committee. Messrs. Liaw, Johnston, Melville and Welch have been appointed as members of the Finance Committee of the board of directors, and Mr. Liaw has been appointed as the Chair of the Finance Committee.

In connection with their appointment to AFI’s board of directors, each of the non-employee directors will be entitled to receive cash and equity compensation as described in AFI’s Information Statement under the section entitled “Director Compensation,” which is incorporated by reference into this Item 5.02.

All persons serving as directors of AFI prior to March 30, 2016, other than Mr. Wenz, resigned effective March 30, 2016.


Officers

On March 30, 2016, the following persons were designated as officers of AFI:

 

Name    Title
Donald R. Maier    President and Chief Executive Officer
John “Jay” W. Thompson    Senior Vice President and Chief Financial Officer
Dominic C. Rice    Senior Vice President and North America Commercial
Joseph N. Bondi    Senior Vice President and North America Residential
David S. Schulz    Senior Vice President and Chief Operating Officer
Christopher S. Parisi    Senior Vice President, General Counsel, Secretary and Chief Compliance Officer
John C. Bassett    Senior Vice President, Human Resources
Kimberly Z. Boscan    Vice President and Controller

Biographical information on each, and compensation information for Messrs. Maier, Schulz, Thompson Bondi and Rice, can be found in AFI’s Information Statement under the section entitled “Management—Executive Officers Following the Distribution” and “Executive Compensation,” which are incorporated by reference into this Item 5.02.

All other persons serving as an officer of AFI prior to March 30, 2016, resigned or were removed effective March 30, 2016.

The board of directors approved the following material compensation terms for the officers listed below for 2016. The annual incentives will be payable as annual cash bonuses based on achievement of performance goals. The long-term incentive awards will be provided in the form of performance-based restricted stock awards to be granted under the Long-Term Incentive Plan.

 

Officer

   Salary      Annual Incentive
Target as a
Percentage of
Salary
    Long-Term
Incentive Target
as a Percentage of
Salary
    Total Target
Direct
Compensation
 

Donald R. Maier

   $ 630,000         100     250   $ 2,835,000   

John “Jay” W. Thompson

   $ 375,000         60     115   $ 1,031,250   

Dominic C. Rice

   $ 300,000         45     65   $ 630,000   

Joseph N. Bondi

   $ 330,000         50     75   $ 742,500   

David S. Schulz

   $ 478,400         75     150   $ 1,554,800   

In connection with their new positions with AFI, each of the foregoing officers entered into an employment letter with AFI, effective as of April 1, 2016. The employment letters provide for the salary, annual incentive targets and long-term incentive targets described above. The 2016 long-term incentive grants will include performance-based restricted stock awards that vest after three years and are tied to performance metrics for the performance period. The annual and long-term incentive programs, including targets, achievement, and payout factors, are subject to approval of the Compensation Committee. The officers are eligible for expense reimbursement for personal financial planning and income tax preparation services, up to $4,500 per year, a company-paid annual physical, and participation in the health and welfare benefit plans maintained by AFI from time to time.

Mr. Schulz’s letter agreement will continue in effect for a period of one year, until March 31, 2017, unless otherwise extended by mutual written agreement. AFI assumed Mr. Schulz’ severance agreement with AWI, dated March 9, 2015, which will be extended on its current terms through March 31, 2017. AFI also assumed the change in control severance agreement dated August 1, 2015 between Mr. Schulz and AWI and the change in control severance agreement dated November 17, 2014 between Mr. Maier and AWI.

Adoption of Equity Compensation, Incentive and Other Benefit Plans

The information regarding certain equity compensation, incentive and other benefit plans set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.02.

Spin-Off Adjustment Awards

In accordance with previously disclosed terms of the Employee Matters Agreement, certain of AFI’s executive officers were entitled to receive equity compensation awards of AFI in replacement of previously outstanding awards of restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock options granted under various AWI stock incentive plans prior to the separation. Upon completion of the separation and distribution and in accordance with the Employee Matters Agreement, AFI’s executive officers received replacement AFI RSU, PSU and stock option awards in respect of their AWI RSU, PSU and stock option awards. These replacement awards are in respect of AFI common stock and are otherwise generally subject to the same terms and conditions that applied to the AWI RSU, PSU and stock option awards prior to the distribution, as modified by the terms of the Employee Matters Agreement.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On March 30, 2016, AFI amended and restated its certificate of incorporation (the “Amended and Restated Certificate of Incorporation”) and its bylaws (the “Amended and Restated Bylaws”). A description of the material provisions of the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws can be found in AFI’s Information Statement under the section entitled “Description of Armstrong Flooring, Inc.’s Capital Stock,” which is incorporated by reference into this Item 5.03. The description set forth under this Item 5.03 is qualified in its entirety by reference to the full text of the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws, which are attached hereto as Exhibits 3.1 and 3.2, respectively.

On March 30, 2016, the board of directors set AFI’s Fiscal Year as ending on December 31.


Item 5.05 Amendments to the Registrants Code of Ethics, or Waiver of a Provision of the Code of Ethics

On March 30, 2016, AFI’s board of directors adopted a Code of Ethics for Executive and Senior Financial Officers and a Code of Ethics and Business Conduct, copies of which are available on AFI’s website at www.armstrongflooring.com .

Item 5.07 Submission of Matters to a Vote of Security Holders.

On March 30, 2016, AWI, in its capacity as the sole stockholder of AFI, adopted the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws. On March 31, 2016, AWI, in its capacity as the sole stockholder of AFI, adopted the Merger Agreement and the Merger.

Item 8.01 Other Events

On April 4, 2016, AFI issued a press release announcing the completion of the separation and distribution. A copy of the press release is attached hereto as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.

  

Description

  2.1    Agreement and Plan of Merger, dated March 31, 2016, by and between Armstrong Flooring, Inc. and AFI Intermediate Co.
  3.1    Amended and Restated Certificate of Incorporation of Armstrong Flooring, Inc., dated March 30, 2016
  3.2    Amended and Restated Bylaws of Armstrong Flooring, Inc., dated March 30, 2016
10.1    Transition Services Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.2    Tax Matters Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.3    Employee Matters Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.4    Trademark License Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.5    Transition Trademark License Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.6    Campus Lease Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.7    Credit Agreement, dated as of April 1, 2016, among Armstrong Flooring, Inc. and Armstrong Hardwood Flooring Company, as Borrowers, certain subsidiaries of Armstrong Flooring, Inc. identified therein, as the Guarantors, Bank of America, N.A., as Administrative Agent and Collateral Agent, the other lenders party thereto, JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc., as Co-Syndication Agents, and Bank of America, N.A., JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers and Joint Book Managers
10.8    Armstrong Flooring, Inc. 2016 Directors Stock Unit Plan (incorporated herein by reference to Exhibit 4.4 to the Registration Statement on Form S-8 filed by Armstrong Flooring, Inc. with the SEC on April 1, 2016)
10.9    Armstrong Flooring, Inc. 2016 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed by Armstrong Flooring, Inc. with the SEC on April 1, 2016)
10.10    Armstrong Flooring, Inc. Nonqualified Deferred Compensation Plan
10.11    Retirement Benefit Equity Plan of Armstrong Flooring, Inc.
99.1    Information Statement of Armstrong Flooring, Inc., dated March 24, 2016 (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Armstrong Flooring, Inc. with the SEC on March 24, 2016)
99.2    Press Release of Armstrong Flooring, Inc., dated April 4, 2016


SIGNATURE

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

 

ARMSTRONG FLOORING, INC.
By:  

/s/ Christopher S. Parisi

  Name:   Christopher S. Parisi
  Title:  

Senior Vice President, General

Counsel and Secretary

Date: April 4, 2016


EXHIBIT INDEX

 

Exhibit No.

  

Description

  2.1    Agreement and Plan of Merger, dated March 31, 2016, by and between Armstrong Flooring, Inc. and AFI Intermediate Co.
  3.1    Amended and Restated Certificate of Incorporation of Armstrong Flooring, Inc., dated March 30, 2016
  3.2    Amended and Restated Bylaws of Armstrong Flooring, Inc., dated March 30, 2016
10.1    Transition Services Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.2    Tax Matters Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.3    Employee Matters Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.4    Trademark License Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.5    Transition Trademark License Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.6    Campus Lease Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.
10.7    Credit Agreement, dated as of April 1, 2016, among Armstrong Flooring, Inc. and Armstrong Hardwood Flooring Company, as Borrowers, certain subsidiaries of Armstrong Flooring, Inc. identified therein, as the Guarantors, Bank of America, N.A., as Administrative Agent and Collateral Agent, the other lenders party thereto, JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc., as Co-Syndication Agents, and Bank of America, N.A., JPMorgan Chase Bank, N.A. and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers and Joint Book Managers
10.8    Armstrong Flooring, Inc. 2016 Directors Stock Unit Plan (incorporated herein by reference to Exhibit 4.4 to the Registration Statement on Form S-8 filed by Armstrong Flooring, Inc. with the SEC on April 1, 2016)
10.9    Armstrong Flooring, Inc. 2016 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed by Armstrong Flooring, Inc. with the SEC on April 1, 2016)
10.10    Armstrong Flooring, Inc. Nonqualified Deferred Compensation Plan
10.11    Retirement Benefit Equity Plan of Armstrong Flooring, Inc.
99.1    Information Statement of Armstrong Flooring, Inc., dated March 24, 2016 (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Armstrong Flooring, Inc. with the SEC on March 24, 2016)
99.2    Press Release of Armstrong Flooring, Inc., dated April 4, 2016

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “ Merger Agreement ”), dated as of March 31, 2016, made and entered into by and between AFI Intermediate Co., a Pennsylvania corporation (“ AFI Intermediate ”), and Armstrong Flooring, Inc., a Delaware corporation (“ AFI ”).

WHEREAS, AFI Intermediate and AFI are each direct, wholly-owned subsidiaries of Armstrong World Industries, Inc., a Pennsylvania corporation (“ AWI ”);

WHEREAS, the board of directors of AWI (the “ AWI Board ”) has determined that it is in the best interests of AWI to separate AWI’s flooring business from its ceilings (building products) business, creating two independent industry-leading publicly traded companies;

WHEREAS, in furtherance of the foregoing, the AWI Board adopted and approved a Plan of Division (the “ Plan of Division ”) to effect the separation by means of a division (the “ Division ”) pursuant to and in accordance with the Entity Transactions Law of the Commonwealth of Pennsylvania, 15 Pa.C.S. §311 et seq . (the “ Pennsylvania Entity Transactions Law ”);

WHEREAS, pursuant to and in accordance with the Plan of Division, AWI has filed a Statement of Division with the Department of State of the Commonwealth of Pennsylvania pursuant to Section 366 of the Pennsylvania Entity Transactions Law;

WHEREAS, effective as of the Division Effective Time (as defined in the Statement of Division), AWI divided into AWI, which was the dividing association and retained the properties and liabilities related primarily to the AWI Business (as defined in the Plan of Division), and AFI Intermediate, a Pennsylvania corporation that was created by, and resulted from, the Division, which was allocated the assets and liabilities related primarily to the AFI Business (as defined in the Plan of Division);

WHEREAS, AWI and AFI are parties to that certain Separation and Distribution Agreement, dated as of March 11, 2016 (the “ Separation and Distribution Agreement ”), which sets forth the principal corporate transactions required to effect the separation of AWI’s flooring business from its ceilings (building products) business and certain other matters, as set forth therein;


WHEREAS, pursuant to and in accordance with the Separation and Distribution Agreement, the parties desire to merge AFI Intermediate with and into AFI, with AFI surviving the merger; and

WHEREAS, pursuant to Section 252 of the General Corporation Law of the State of Delaware (the “ DGCL ”), the Board of Directors of AFI has, by resolutions duly adopted, approved and declared the advisability of the Merger and this Merger Agreement;

WHEREAS, pursuant to Sections 251(f) and 252 of the DGCL, no vote of the stockholders of AFI is necessary to authorize the Merger or the Merger Agreement;

WHEREAS, pursuant to Section 333 and Subchapter B of the Pennsylvania Entity Transactions Law, the Board of Directors of AFI Intermediate has, by resolutions duly adopted, approved and declared the advisability of the Merger and this Merger Agreement; and

WHEREAS, immediately after the execution and delivery of this Agreement by the parties, AWI, in its capacity as the sole shareholder of AFI Intermediate, will adopt this Agreement by execution and delivery of an action by written consent of the sole shareholder of AFI Intermediate.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Merger . Upon the terms and subject to the conditions set forth herein, and in accordance with Subchapter C of Chapter 3 of the Pennsylvania Entity Transactions Law and Section 252 of the DGCL, at the Effective Time (as defined below) AFI Intermediate shall be merged with and into AFI (the “ Merger ”). AFI shall be the surviving entity in the Merger and is herein referred to in such capacity as the “ Surviving Corporation .” The Merger shall become effective on the later of (a) at the time and on the date of filing of a Certificate of Merger (the “ Certificate of Merger ”) relating to the Merger with the Office of the Secretary of State of the State of Delaware or at such other time, if any, as shall be specified in such Certificate of Merger, or (b) at the time and on the date of filing of a Statement of Merger (the “ Statement of Merger ”) relating to the Merger with the Office of the Secretary of State of the Commonwealth of Pennsylvania or at such other time, if any, as shall be

 

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specified in such Statement of Merger (the effective time of the Merger, as determined in accordance with this Section 1 , being referred to herein as the “ Effective Time ”).

2. Effects of Merger . At the Effective Time, AFI Intermediate shall be merged with and into AFI and the separate existence of AFI Intermediate shall cease. The Merger shall have the effects set forth in the Pennsylvania Entity Transactions Law and the DGCL. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all the property, rights, privileges, immunities, powers and franchises, and be subject to all of the debts, liabilities, obligations, restrictions, disabilities and duties, of AFI Intermediate, all as provided under applicable law.

3. Certificate of Incorporation and Bylaws . The Certificate of Incorporation and Bylaws of AFI, each as in effect immediately prior to the Effective Time, shall continue to be the Certificate of Incorporation and Bylaws of the Surviving Corporation until amended in accordance with the terms thereof and applicable law.

4. Board of Directors . The board of directors of the Surviving Corporation shall consist of the persons serving as directors of AFI immediately prior to the Effective Time, and shall serve as directors of the Surviving Corporation until such time as their successors have been duly elected or appointed in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

5. Officers . The officers of the Surviving Corporation shall consist of the persons serving as officers of AFI immediately prior to the Effective Time, and shall serve as officers of the Surviving Corporation until such time as their successors have been duly elected or appointed in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

6. Cancellation of Shares .

(a) At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each share of capital stock of AFI Intermediate issued and outstanding immediately prior to the Effective Time shall be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) At the Effective Time, each share of any class of capital stock of AFI issued and outstanding immediately prior to the Effective Time

 

3


shall remain issued and outstanding, shall be unaffected by the Merger and shall represent an identical share of issued and outstanding capital stock of the Surviving Corporation. As a result of the Merger, all issued and outstanding capital stock of the Surviving Corporation will be held by AWI.

7. Further Assurances . From time to time, as and when required by the Surviving Corporation or by its successors and assigns, there shall be executed and delivered on behalf of AFI Intermediate, such deeds and other instruments, and there shall be taken or caused to be taken by it all such further and other action as shall be appropriate or necessary in order to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation the title to and possession of all property, interests, assets, rights, privileges, immunities, powers, franchises and authority of AFI Intermediate and otherwise to carry out the purposes of this Merger Agreement, and the officers of the Surviving Corporation are fully authorized in the name and on behalf of AFI or otherwise to take any and all such action to execute and deliver any and all such deeds and other instruments.

8. Amendment and Modification . This Merger Agreement may be amended or modified at any time by the parties hereto, but only pursuant to an instrument in writing signed by the parties and only in accordance with applicable provisions of applicable law.

9. Entire Agreement; Assignment . This Merger Agreement, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

10. Validity . The invalidity or unenforceability of any term or provision of this Merger Agreement in any situation or jurisdiction shall not affect the validity or enforceability of the other terms or provisions in any other situation or in any other jurisdiction.

11. Governing Law . This Merger Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware, except to the extent that the Pennsylvania Entity Transactions Law and the other laws of the Commonwealth of Pennsylvania are applicable hereto.

 

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12. Descriptive Headings . The descriptive headings herein are inserted for convenience of reference only and shall in no way be construed to define, limit, describe, explain, modify, amplify or add to the interpretation, construction or meaning of any provision of, or scope or intent of, this Merger Agreement or in any way affect this Merger Agreement.

13. Counterparts . This Merger Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to be signed by their respective duly authorized officers as of the date first above written.

 

AFI INTERMEDIATE CO.
By:  

/s/ Christopher S. Parisi

  Name: Christopher S. Parisi
  Title: Authorized Officer
ARMSTRONG FLOORING, INC.
By:  

/s/ John W. Thompson

  Name: John W. Thompson
  Title: Authorized Officer

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ARMSTRONG FLOORING, INC.

 

 

Pursuant to Sections 228, 242 and 245 of the

General Corporation Law of the State of Delaware

 

 

Armstrong Flooring, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “GCL”), does hereby certify as follows:

(1) The name of the Corporation is Armstrong Flooring, Inc. The Corporation was originally incorporated under the name Armstrong Flooring, Inc. The original certificate of incorporation of the Corporation was filed with the office of the Secretary of State of the State of Delaware on June 1, 2015.

(2) This Amended and Restated Certificate of Incorporation was duly adopted by the Board of the Corporation (the “Board”) and by the sole stockholder of the Corporation in accordance with Sections 228, 242 and 245 of the GCL.

(3) This Amended and Restated Certificate of Incorporation restates and integrates and further amends the certificate of incorporation of the Corporation, as heretofore amended or supplemented.

(4) Upon the filing (the “Effective Time”) of this Amended and Restated Certificate of Incorporation pursuant to the GCL, each share of the Corporation’s common stock, $0.01 par value per share, issued and outstanding immediately prior to the Effective Time (the “Old Common Stock”) shall be reclassified as and changed into Two Hundred Seventy-Seven Thousand Three Hundred


Eighty-Seven and Seventy-Nine Hundredths (277,387.79) shares of validly issued, fully paid, and non-assessable Common Stock authorized by subparagraph (a) of Article FOURTH of this Amended and Restated Certificate of Incorporation (totaling Twenty-Seven Million Seven Hundred Thirty-Eight Thousand Seven Hundred Seventy-Nine (27,738,779) shares of Common Stock), without any action by the holder thereof (the “Reclassification”). Each certificate that theretofore represented a share or shares of Old Common Stock shall thereafter represent that number of shares of Common Stock into which the share or shares of Old Common Stock represented by such certificate shall have been reclassified.

(5) The text of the Certificate of Incorporation is amended and restated in its entirety as follows:

FIRST : The name of the Corporation is Armstrong Flooring, Inc. (the “Corporation”).

SECOND : The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Rd., Suite 400, Wilmington, County of New Castle, 19808. The name of its registered agent at that address is Corporation Service Company.

THIRD : The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware (the “GCL”).

FOURTH : (a)  Authorized Capital Stock . The total number of shares of stock which the Corporation shall have authority to issue is One Hundred Fifteen Million (115,000,000) shares of capital stock, consisting of (i) One Hundred

 

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Million (100,000,000) shares of common stock, par value $0.0001 per share (the “Common Stock”), and (ii) Fifteen Million (15,000,000) shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”).

(b) Common Stock . The powers, preferences and rights, and the qualifications, limitations and restrictions, of the Common Stock are as follows:

(1) Voting . Except as otherwise expressly required by law or provided in this Amended and Restated Certificate of Incorporation, and subject to any voting rights provided to holders of Preferred Stock at any time outstanding, the holders of any outstanding shares of Common Stock shall vote together as a single class on all matters with respect to which stockholders are entitled to vote under applicable law, this Amended and Restated Certificate of Incorporation, the By-Laws of the Corporation or as otherwise duly called for by the Corporation. At each annual or special meeting of stockholders, each holder of record of shares of Common Stock on the relevant record date shall be entitled to cast one vote in person or by proxy for each share of the Common Stock standing in such holder’s name on the stock transfer records of the Corporation.

(2) No Cumulative Voting . The holders of shares of Common Stock shall not have cumulative voting rights.

(3) Dividends; Stock Splits . Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Amended and Restated Certificate of Incorporation, as it may be amended from time to time, holders of shares of Common Stock shall be entitled to receive such dividends and other

 

3


distributions in cash, stock or property of the Corporation when, as and if declared thereon by the Board from time to time out of assets or funds of the Corporation legally available therefor.

(4) Liquidation, Dissolution, etc. In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of the Corporation, the holders of shares of Common Stock shall be entitled to receive the assets and funds of the Corporation available for distribution after payments to creditors and to the holders of any Preferred Stock of the Corporation that may at the time be outstanding, in proportion to the number of shares held by them, respectively, without regard to class.

(5) No Preemptive or Subscription Rights . No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.

(c) Preferred Stock . The Board is hereby expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such class or series, including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the

 

4


dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions.

(d) Power to Sell and Purchase Shares . Subject to the requirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for such consideration, as the Board shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of another class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shall have the power to purchase any shares of any class of stock herein or hereafter authorized from such persons, and for such consideration, as the Board shall from time to time, in its discretion, determine, whether or not less consideration could be paid upon the purchase of the same number of shares of another class, and as otherwise permitted by law.

FIFTH : The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders.

(a) The business and affairs of the Corporation shall be managed by or under the direction of the Board.

 

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(b) The Board shall consist of not less than seven (7) nor more than twelve (12) members, the exact number of which shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the entire board of Directors.

(c) Classified Board .

Until the Corporation’s annual meeting of stockholders in 2019 (each annual meeting of stockholders an “Annual Meeting”), the Board shall be classified pursuant to Section 141(d) of the GCL and the directors serving thereon shall be divided into three classes, designated Class I, Class II and Class III. Following the 2019 Annual Meeting, all directors shall stand for election annually. Each class of directors serving on the Board shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board. The initial division of the Board into classes shall be made by the decision of the affirmative vote of a majority of the entire Board. The initial term of the Class I directors shall terminate on the date of the 2017 Annual Meeting; the initial term of the Class II directors shall terminate on the date of the 2018 Annual Meeting; and the initial term of the Class III directors shall terminate on the date of the 2019 Annual Meeting. At the 2017 Annual Meeting, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a one-year term expiring at the 2018 Annual Meeting; at the 2018 Annual Meeting, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a one-year term expiring at the 2019 Annual Meeting; and at the 2019 Annual Meeting and each Annual Meeting thereafter, all directors shall be elected for a one-year term expiring at

 

6


the next Annual Meeting. From and after the 2019 Annual Meeting, the Board shall no longer be classified under Section 141(d) of the GCL and directors shall no longer be divided into classes.

(d) Until the date of the 2019 Annual Meeting, if the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director.

(e) A director shall hold office until the Annual Meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.

(f) Subject to the terms of any one or more classes or series of Preferred Stock, any vacancy on the Board that results from an increase in the number of directors may be filled by a majority of the Board then in office, provided that a quorum is present, and any other vacancy occurring on the Board may be filled by a majority of the Board then in office, even if less than a quorum, or by a sole remaining director. During the period in which the Board is classified pursuant to Section 141(d) of the GCL, any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a

 

7


vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor. Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time and only by the affirmative vote of the holders of at least a majority of the voting power of the Corporation’s then outstanding capital stock entitled to vote generally in the election of directors; provided , however that until such time as the Board is no longer classified, directors may be removed from office only for cause in accordance with Section 141(k) of the GCL, following which directors may be removed from office with or without cause. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Amended and Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article FIFTH unless expressly provided by such terms.

(g) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Amended and Restated Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided , however , that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.

 

8


SIXTH : No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

SEVENTH : The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by law, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided , however , that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board. The right to indemnification conferred by this Article SEVENTH shall include the right to be paid by the Corporation the expenses incurred in defending or

 

9


otherwise participating in any proceeding in advance of its final disposition upon receipt by the Corporation of an undertaking by or on behalf of the director or officer receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under this Article SEVENTH.

The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article SEVENTH to directors and officers of the Corporation.

The rights to indemnification and to the advance of expenses conferred in this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under this Amended and Restated Certificate of Incorporation, the By-Laws of the Corporation, any statute, agreement, vote of stockholders or disinterested directors or otherwise.

Any repeal or modification of this Article SEVENTH shall not adversely affect any rights to indemnification and to the advancement of expenses of a director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.

EIGHTH : Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation, and the ability of the stockholders to consent in writing to the taking of any action is hereby specifically denied.

 

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NINTH : Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the By-Laws of the Corporation.

TENTH : Unless otherwise required by law, special meetings of stockholders, for any purpose or purposes, may be called by either (i) the Chairman of the Board, if there be one, (ii) the President, (iii) the Board or (iv) an officer authorized by the Board to do so. The ability of the stockholders to call a special meeting of stockholders is hereby specifically denied.

ELEVENTH : In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board shall have the power to adopt, amend, alter or repeal the Corporation’s By-Laws. The affirmative vote of at least a majority of the entire Board shall be required to adopt, amend, alter or repeal the Corporation’s By-Laws. The Corporation’s By-Laws also may be adopted, amended, altered or repealed by the affirmative vote of the holders of at least a majority of the voting power of the shares entitled to vote at an election of directors.

TWELFTH : The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed in this Amended and Restated Certificate of Incorporation, the Corporation’s By-Laws or the GCL, and all rights herein conferred upon stockholders are granted subject to such reservation.

 

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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed on its behalf this 30th day of March, 2016.

 

ARMSTRONG FLOORING, INC.
By:  

/s/ Christopher S. Parisi

Name:   Christopher S. Parisi
Title:   Vice President, Secretary

 

12

Exhibit 3.2

EXECUTION COPY

AMENDED AND RESTATED

BY-LAWS

OF

ARMSTRONG FLOORING, INC.

A Delaware Corporation

Effective March 30, 2016


TABLE OF CONTENTS

 

         Page  
ARTICLE I   
OFFICES   
Section 1.  

Registered Office

     1   
Section 2.  

Other Offices

     1   
ARTICLE II   
MEETINGS OF STOCKHOLDERS   
Section 1.  

Place of Meetings

     1   
Section 2.  

Annual Meetings

     1   
Section 3.  

Special Meetings

     2   
Section 4.  

Notice

     2   
Section 5.  

Nature of Business at Meetings of Stockholders

     2   
Section 6.  

Nomination of Directors

     6   
Section 7.  

Adjournments

     14   
Section 8.  

Quorum

     14   
Section 9.  

Voting

     15   
Section 10.  

Proxies

     15   
Section 11.  

List of Stockholders Entitled to Vote

     16   
Section 12.  

Record Date

     17   
Section 13.  

Stock Ledger

     18   
Section 14.  

Conduct of Meetings

     18   
Section 15.  

Inspectors of Election

     19   
ARTICLE III   
DIRECTORS   
Section 1.  

Number and Election of Directors

     19   
Section 2.  

Vacancies

     19   
Section 3.  

Duties and Powers

     20   
Section 4.  

Meetings

     20   
Section 5.  

Organization

     21   
Section 6.  

Resignations and Removals of Directors

     21   
Section 7.  

Quorum

     22   
Section 8.  

Actions of the Board by Written Consent

     22   
Section 9.  

Meetings by Means of Conference Telephone

     23   
Section 10.  

Committees

     23   
Section 11.  

Standing Committees

     24   
Section 12.  

Compensation

     28   
Section 13.  

Interested Directors

     29   

 

i


ARTICLE IV   
OFFICERS   
Section 1.  

General

     30   
Section 2.  

Election

     30   
Section 3.  

Voting Securities Owned by the Corporation

     30   
Section 4.  

Chairman of the Board

     31   
Section 5.  

President

     31   
Section 6.  

Vice Presidents; Operation or Division Presidents

     32   
Section 7.  

General Counsel

     32   
Section 8.  

Secretary

     33   
Section 9.  

Chief Financial Officer; Controller

     33   
Section 10.  

Treasurer

     34   
Section 11.  

Assistant Secretaries

     35   
Section 12.  

Assistant Treasurers

     35   
Section 13.  

Other Officers

     35   
Section 14.  

Bonded Officers

     36   
ARTICLE V   
STOCK   
Section 1.  

Shares of Stock

     36   
Section 2.  

Signatures

     36   
Section 3.  

Lost Certificates

     36   
Section 4.  

Transfers

     37   
Section 5.  

Dividend Record Date

     37   
Section 6.  

Record Owners

     38   
Section 7.  

Transfer and Registry Agents

     38   
ARTICLE VI   
NOTICES   
Section 1.  

Notices

     38   
Section 2.  

Waivers of Notice

     39   
ARTICLE VII   
GENERAL PROVISIONS   
Section 1.  

Dividends

     40   
Section 2.  

Disbursements

     40   
Section 3.  

Fiscal Year

     41   
Section 4.  

Corporate Seal

     41   

 

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ARTICLE VIII   
INDEMNIFICATION   
Section 1.  

Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation

     41   
Section 2.  

Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation

     42   
Section 3.  

Authorization of Indemnification

     42   
Section 4.  

Good Faith Defined

     43   
Section 5.  

Indemnification by a Court

     44   
Section 6.  

Expenses Payable in Advance

     44   
Section 7.  

Nonexclusivity of Indemnification and Advancement of Expenses

     45   
Section 8.  

Insurance

     45   
Section 9.  

Certain Definitions

     46   
Section 10.  

Survival of Indemnification and Advancement of Expenses

     47   
Section 11.  

Limitation on Indemnification

     47   
Section 12.  

Indemnification of Employees and Agents

     47   
ARTICLE IX   
FORUM FOR ADJUDICATION OF CERTAIN DISPUTES   
Section 1.  

Forum for Adjudication of Certain Disputes

     47   
ARTICLE X   
AMENDMENTS   
Section 1.  

Amendments

     49   
Section 2.  

Entire Board

     49   

 

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BY-LAWS

OF

ARMSTRONG FLOORING, INC.

(hereinafter called the “Corporation”)

ARTICLE I

OFFICES

Section 1. Registered Office . The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. Other Offices . The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the “Board”) may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Place of Meetings . Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board. The Board may, in its sole discretion, determine that a meeting of the stockholders shall not be held at any place, but may instead be held solely by means of remote communication in the manner authorized by the General Corporation Law of the State of Delaware (the “GCL”).

Section 2. Annual Meetings . The Annual Meeting of Stockholders (the “Annual Meeting”) for the election of directors shall be held on such date and at such time as shall be designated from time to time by the Board. Any other proper business may be transacted at the Annual Meeting.


Section 3. Special Meetings . Special Meetings of Stockholders (each a “Special Meeting”), for any purpose or purposes, may be called solely in accordance with the certificate of incorporation of the Corporation, as amended and restated from time to time (the “Certificate of Incorporation”). At a Special Meeting, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, other than nominations for election to the Board, which must comply with the provisions of Section 6 of this Article II.

Section 4. Notice . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a Special Meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to notice of and to vote at such meeting.

Section 5. Nature of Business at Meetings of Stockholders . Only such business (other than nominations for election to the Board, which must comply with the provisions of Section 6 of this Article II) may be transacted at an Annual Meeting as is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), the Chairman, the President or any officer authorized by the Board to call a Special Meeting, (b) otherwise properly brought before the

 

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Annual Meeting by or at the direction of the Board (or any duly authorized committee thereof), or (c) otherwise properly brought before the Annual Meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 5 of this Article II and on the record date for the determination of stockholders entitled to notice of and to vote at such Annual Meeting and (ii) who complies with the notice procedures set forth in this Section 5 of this Article II.

In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting; provided, however, that in the event that the Annual Meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10 th ) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an Annual Meeting, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (a) as to each matter such stockholder proposes to bring before

 

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the Annual Meeting, a brief description of the business desired to be brought before the Annual Meeting and the proposed text of any proposal regarding such business (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend these By-Laws, the text of the proposed amendment), and the reasons for conducting such business at the Annual Meeting, and (b) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is being made, (i) the name and address of such person, (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such person, or any affiliates or associates of such person, and any other person or persons (including their names) in connection

 

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with or relating to (A) the Corporation or (B) the proposal, including any material interest in, or anticipated benefit from the proposal to such person, or any affiliates or associates of such person, (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the Annual Meeting to bring such business before the meeting; and (v) any other information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before the Annual Meeting pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder.

A stockholder providing notice of business proposed to be brought before an Annual Meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 5 of this Article II shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the Annual Meeting and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of, and to vote at, the Annual Meeting.

No business shall be conducted at the Annual Meeting except business brought before the Annual Meeting in accordance with the procedures set forth in this Section 5 of this Article II; provided , however , that, once business has been properly brought before the Annual Meeting in accordance with such procedures, nothing in this Section 5 of this Article II shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an Annual Meeting determines that business was not properly brought before the Annual Meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

 

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Nothing contained in this Section 5 of this Article II shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any successor provision of law).

Section 6. Nomination of Directors .

(a) Nominations Generally . Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right, if any, of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board may be made at any Annual Meeting, or at any Special Meeting called for the purpose of electing directors, (i) by or at the direction of the Board (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (1) who is a stockholder of record on the date of the giving of the notice provided for in this Section 6 of this Article II and on the record date for the determination of stockholders entitled to notice of and to vote at such Annual Meeting or Special Meeting and (2) who complies with the notice procedures set forth in this Section 6 of this Article II.

 

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(b) Stockholder Nominations . In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

(i) To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation

(1) in the case of an Annual Meeting, not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting; provided , however , that in the event that the Annual Meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs; and

(2) in the case of a Special Meeting called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the Special Meeting was mailed or public disclosure of the date of the Special Meeting was made, whichever first occurs.

In no event shall the adjournment or postponement of an Annual Meeting or a Special Meeting called for the purpose of electing directors, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

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(ii) To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information:

(1) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person,

(2) such person’s answers to a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request),

(3) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person,

(4) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder,

(5) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation,

 

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(6) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation,

(7) such person’s written representation and agreement, in the form provided by the Secretary upon written request, that such person (A) is not and will not become a party to any agreement, arrangement or understanding (whether written or oral) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question, (B) is not and will not become a party to any agreement, arrangement or understanding (whether written or oral) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, and (C) in such person’s individual capacity, would be in compliance, if elected as a director of the Corporation, and will comply with, all applicable publicly disclosed confidentiality, corporate governance, conflict of interest, Regulation FD, code of conduct and ethics, and stock ownership and trading policies and guidelines of the Corporation,

 

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(8) such person’s written undertaking, if elected as a director of the Corporation, to submit a conditional letter of resignation upon election, the effectiveness of such resignation to be conditioned on a finding by a court of competent jurisdiction that such person, in their capacity as a director of the Corporation, intentionally disclosed confidential information to third parties in breach of such person’s confidentiality obligations to the Corporation under applicable law, any applicable agreement or any policies or guidelines of the Corporation, and

(9) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder;

(10) as to the stockholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination is being made,

(A) the name and record address of the stockholder giving the notice and the name and principal place of business of such beneficial owner;

(B) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person,

 

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(C) the name of each nominee holder of shares of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of shares of stock of the Corporation held by each such nominee holder,

(D) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation;

(E) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation;

 

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(F) a description of (xx) all agreements, arrangements, or understandings (whether written or oral) between such person, or any affiliates or associates of such person, and any proposed nominee, or any affiliates or associates of such proposed nominee, (yy) all agreements, arrangements, or understandings (whether written or oral) between such person, or any affiliates or associates of such person, and any other person or persons (including their names) pursuant to which the nomination(s) are being made by such person, or otherwise relating to the Corporation or their ownership of capital stock of the Corporation, and (zz) any material interest of such person, or any affiliates or associates of such person, in such nomination, including any anticipated benefit therefrom to such person, or any affiliates or associates of such person;

(G) a representation that the stockholder giving notice intends to appear in person or by proxy at the Annual Meeting or Special Meeting to nominate the persons named in its notice;

(H) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and

 

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(I) such other information as the Corporation may reasonably require, including such information as may be necessary or appropriate in determining the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

(c) Duty to Update Nominations and Information . A stockholder providing notice of any nomination proposed to be made at an Annual Meeting or Special Meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 6 of this Article II shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the Annual Meeting or Special Meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such Annual Meeting or Special Meeting.

(d) Eligibility of a Nominee . No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 6 of this Article II. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

 

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Section 7. Adjournments . Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than twenty-five (25) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting in accordance with the requirements of Section 4 of this Article II shall be given to each stockholder of record entitled to notice of and to vote at the meeting.

Section 8. Quorum . Unless otherwise required by applicable law or the Certificate of Incorporation, the holders of a majority of the Corporation’s capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, in the manner provided in Section 5 of this Article II, until a quorum shall be present or represented.

 

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Section 9. Voting . Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, or permitted by the rules of any stock exchange on which the Corporation’s shares are listed and traded, any question brought before any meeting of the stockholders, other than the election of directors, shall be decided by the vote of the holders of a majority of the total number of votes of the Corporation’s capital stock represented at the meeting and entitled to vote on such question, voting as a single class. Unless otherwise provided in the Certificate of Incorporation, and subject to Section 12 of this Article II, each stockholder represented at a meeting of the stockholders shall be entitled to cast one (1) vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy as provided in Section 8 of this Article II. The Board, in its discretion, or the officer of the Corporation presiding at a meeting of the stockholders, in such officer’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

Section 10. Proxies . Each stockholder entitled to vote at a meeting of the stockholders may authorize another person or persons to act for such stockholder as proxy, but no such proxy shall be voted upon after three years from its date, unless such proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, the following shall constitute a valid means by which a stockholder may grant such authority:

(i) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

 

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(ii) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information on which they relied.

Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided, however, that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

Section 11. List of Stockholders Entitled to Vote . The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at

 

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least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

Section 12. Record Date . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of the stockholders shall be at the close of business on the day

 

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next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting

Section 13. Stock Ledger . The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 11 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders.

Section 14. Conduct of Meetings . The Board of the Corporation may adopt by resolution such rules and regulations for the conduct of any meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (vi) limitations on the time allotted to questions or comments by participants.

 

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Section 15. Inspectors of Election . In advance of any meeting of the stockholders, the Board, by resolution, the Chairman or the President shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by applicable law.

ARTICLE III

DIRECTORS

Section 1. Number and Election of Directors . The number of Directors constituting the Board shall be determined in the manner set forth in the Certificate of Incorporation. Until the 2019 Annual Meeting, the Board shall be classified pursuant to Section 141(d) of the GCL and in accordance with the Certificate of Incorporation.

Section 2. Vacancies . Unless otherwise required by law or the Certificate of Incorporation, vacancies on the Board or any committee thereof arising through death, resignation, removal, an increase in the number of directors constituting the Board or such

 

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committee or otherwise may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. During the period in which the Board is classified pursuant to Section 141(d) of the GCL, any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.

Section 3. Duties and Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders.

Section 4. Meetings . The Board and any committee thereof may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board or any committee thereof may be held without notice at such time and at such place as may from time to time be determined by the Board or such committee, respectively. Special meetings of the Board may be called by the Chairman, if there be one, the President, or by a majority of the directors then in office. Special meetings of any committee of the Board may be called by the chairman of such committee, if there be one, the President, or a majority of the directors serving on such committee. Notice thereof stating the place, date and hour of the meeting shall be given to each director (or, in the case of a committee, to each member of such committee) either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, telegram or electronic means on twenty-four (24) hours’ notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.

 

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Section 5. Organization . At each meeting of the Board or any committee thereof, the Chairman of the Board or the chairman of such committee, as the case may be, or, in his or her absence or if there be none, a director chosen by a majority of the directors present, shall act as chairman. Except as provided below, the Secretary of the Corporation shall act as secretary at each meeting of the Board and of each committee thereof. In case the Secretary shall be absent from any meeting of the Board or of any committee thereof, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all the Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting. Notwithstanding the foregoing, the members of each committee of the Board may appoint any person to act as secretary of any meeting of such committee and the Secretary or any Assistant Secretary of the Corporation may, but need not if such committee so elects, serve in such capacity.

Section 6. Resignations and Removals of Directors . Any director of the Corporation may resign from the Board or any committee thereof at any time, by giving notice in writing or by electronic transmission to the Chairman of the Board, if there be one, the President or the Secretary of the Corporation and, in the case of a committee, to the chairman of such committee, if there be one. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by applicable law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director or the entire Board may be removed from office at any time and only

 

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by the affirmative vote of the holders of at least a majority in voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors; provided , however , that until such time as the Board is no longer classified, directors may be removed from office only for cause in accordance with Section 141(k) of the GCL, following which directors may be removed from office with or without cause. Any director serving on a committee of the Board may be removed from such committee at any time by the Board.

Section 7. Quorum . Except as otherwise required by law, or the Certificate of Incorporation or the rules and regulations of any securities exchange on which the Corporation’s securities are listed for trading, at all meetings of the Board or any committee thereof, a majority of the entire Board or a majority of the directors constituting such committee, as the case may be, shall constitute a quorum for the transaction of business and the act of a majority of the directors or committee members present at any meeting at which there is a quorum shall be the act of the Board or such committee, as applicable. If a quorum shall not be present at any meeting of the Board or any committee thereof, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present.

Section 8. Actions of the Board by Written Consent . Unless otherwise provided in the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all the members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

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Section 9. Meetings by Means of Conference Telephone . Unless otherwise provided in the Certificate of Incorporation or these By-Laws, members of the Board of the Corporation, or any committee thereof, may participate in a meeting of the Board or such committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting.

Section 10. Committees . The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Each member of a committee must meet the requirements for membership, if any, imposed by applicable law and the rules and regulations of any securities exchange on which the securities of the Corporation are listed for trading. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. Subject to the rules and regulations of any securities exchange on which the securities of the Corporation are listed for trading, in the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another qualified member of the Board to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the

 

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Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regular minutes and report to the Board when required. Notwithstanding anything to the contrary contained in this Article III, the resolution of the Board establishing any committee of the Board and/or the charter of any such committee may establish requirements or procedures relating to the governance and/or operation of such committee that are different from, or in addition to, those set forth in these By-Laws and, to the extent that there is any inconsistency between these By-Laws and any such resolution or charter, the terms of such resolution or charter shall be controlling.

Section 11. Standing Committees . The Board shall establish standing committees of the Board as provided by the following provisions of this Section 12.

(a) Audit Committee . The audit committee shall be composed of at least three members of the Board, each of whom shall be an Independent Director (as such term is defined in Section 12(f) of this Article III), shall not, in relation to the Corporation, be an “affiliated person” as defined in Rule 10A–3 under the Securities Exchange Act of 1934, (as amended and any successor statute, the “Exchange Act”) and shall meet such other qualifications for membership on the audit committee as are from time to time required by the listing standards of the New York Stock Exchange (“NYSE”) or Nasdaq Stock Market (“Nasdaq”) applicable to the Corporation. The audit committee shall assist the Board in overseeing the Corporation’s financial reporting and shall have such authority and responsibility as is provided in the committee’s charter (as hereinafter provided for) and, subject thereto, as is normally incident to the functioning of the audit committee of a publicly–traded company and shall perform the other functions provided to be performed by it by these By-Laws and such other functions as are from time to time assigned to it by the Board.

 

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(b) Management Development and Compensation Committee . The management development and compensation committee shall be composed of at least three members of the Board, each of whom shall be an Independent Director and shall meet such other qualifications as may be necessary to qualify as a non–employee director under Rule 16b–3 under the Exchange Act (as from time to time in effect) and as an outside director under Section 162(m) of the Internal Revenue Code of 1986, as amended (and as from time to time in effect). No member of the committee shall be eligible to participate in any compensation plan or program of the Corporation or any company controlled, directly or indirectly, by the Corporation (a “Subsidiary”) that is administered or overseen by the committee. The management development and compensation committee shall assist the Board in overseeing the compensation of the Corporation’s officers, the Corporation’s employee stock option or other equity–based compensation plans and programs and the Corporation’s management compensation policies and shall have such authority and responsibility as is provided in the committee’s charter (as hereinafter provided for) and, subject thereto and subject to other direction of the Board, as is normally incident to the functioning of the management compensation committee of a publicly–traded company and shall perform the other functions provided to be performed by it by these By-Laws and such other functions as are from time to time assigned to it by the Board. Unless reviewed and, if necessary, approved by the management development and compensation committee, the Corporation shall not cause or permit any Subsidiary of the Corporation to pay or grant any compensation to any officer or employee of the Corporation which, if paid or granted by the Corporation, would require review or approval of the management development and compensation committee.

 

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(c) Nominating and Governance Committee . The nominating and governance committee shall be composed of at least three members of the Board, each of whom shall be an Independent Director and the appointment of each of whom shall require the affirmative vote of a majority of the Independent Directors in office at the time. The nominating and governance committee:

(i) shall have authority and responsibility to recommend to the Board for approval the candidates to be recommended by the Board to the stockholders for election as directors of the Corporation or to be appointed by the Board to fill a vacancy on the Board, who shall be such as to cause, if such candidates are elected, the composition of the Board to satisfy the requirements of the Certificate of Incorporation (as applicable) regarding director independence and the requirements of this Section 12(c) of this Article III;

(ii) shall advise the Board on its policies and procedures for carrying out its responsibilities and on the Corporation’s policies and procedures respecting stockholder participation in corporate governance;

(iii) shall have such authority and responsibility as is provided in the committee’s charter (as hereinafter provided for) and, subject thereto and subject to other direction of the Board, as is normally incident to the functioning of the nominating or governance committee of a publicly–traded company; and

(iv) shall perform the other functions provided to be performed by it by these By-Laws and such other functions as are from time to time assigned to it by the Board.

 

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(d) Finance Committee . The finance committee shall be composed of at least three members of the Board. The finance committee shall have the authority and responsibility to review and recommend matters related to the Corporation’s capital structure, including the issuance of debt and equity securities; banking arrangements, including the investment of corporate cash; and management of the corporate debt structure. In addition, the finance committee shall review and approve material finance and other cash management transactions. The finance committee shall also be responsible for overseeing and advising the Board on assessing capital expenditures, operating income, cash flow, cash management and working capital; reviewing investment strategies and policies; assessing the dividend payment policy; reviewing plans to repurchase shares of stock of the Corporation; assessing adjustments to the Corporation’s capital structure; assessing annual and five-year capital plans and specific capital plan investments; assessing financial aspects of insurance and risk management; reviewing the Corporation’s actual and forecasted operating performance; reviewing the Corporation’s annual earnings guidance; and reviewing financial aspects of proposed mergers, acquisitions, divestitures, strategic investments, collaborations and joint ventures.

(e) Committee Charters . The Board, by majority vote, shall approve a charter describing the purposes, functions and responsibilities of each standing committee of the Board. Each standing committee of the Board shall prepare and recommend to the Board for its approval the committee’s charter and shall, at least annually, review and report to the Board on the adequacy thereof. In addition to and without limiting the provisions of paragraphs (a) through (c) of this Section 12 of Article III, each standing committee of the Board shall have the authority and responsibility provided by its Board–approved charter, subject to further action by the Board, and no further authorization of the Board shall be necessary for actions by a committee within

 

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the scope of its charter. Any other committee of the Board may likewise prepare and recommend to the Board a charter for the committee and shall have the authority and responsibility provided by its Board–approved charter.

(f) Committee Advisors and Resources . Each standing committee of the Board shall have the authority to retain, at the Corporation’s expense, such legal and other counsel and advisors as it determines to be necessary or appropriate to carry out its responsibilities within the scope of its charter. Each other committee of the Board shall have like authority to the extent provided by its charter or otherwise authorized by the Board. The Corporation shall pay the compensation of the independent auditor of the Corporation for all audit services, as approved by the audit committee, without need for further authorization.

(g) Independent Director Standard . “Independent Director” shall mean a director who (i) qualifies as an “independent director” within the meaning of the corporate governance listing standards from time to time adopted by the NYSE or Nasdaq, whichever market the shares of stock of the Corporation are listed for trading on at the time (or, if at any time the shares of stock of the Corporation are not listed for trading on either such market, as would be applicable if the shares of stock of the Corporation were then listed on the NYSE) with respect to the composition of the board of directors of a listed company (without regard to any independence criteria applicable under such standards only to the members of a committee of the board of directors) and (ii) also satisfies the minimum requirements of director independence of Rule 10A–3(b)(1) under the Exchange Act, whether or not such director is a member of the audit committee.

Section 12. Compensation . The directors may be paid their expenses, if any, of attendance at each meeting of the Board and may be paid a fixed sum for attendance at each

 

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meeting of the Board or a stated salary for service as director, payable in cash or securities. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for service as committee members.

Section 13. Interested Directors . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because any such director’s or officer’s vote is counted for such purpose if: (i) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

 

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ARTICLE IV

OFFICERS

Section 1. General . The officers of the Corporation shall be chosen by the Board and shall be President, one or more Vice Presidents, a Treasurer, a Secretary and a General Counsel and shall designate an officer as Chief Financial Officer and an officer as Controller and may designate such other officers, with such titles, authority and responsibility (including Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries), as the Board considers appropriate for the conduct of the business and affairs of the Corporation. The Board, in its discretion, also may choose a Chairman of the Board (who must be a director). Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board, need such officers be directors of the Corporation.

Section 2. Election . The Board, at its first meeting held after each Annual Meeting, shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board; and each officer of the Corporation shall hold office until such officer’s successor is elected and qualified, or until such officer’s earlier death, resignation or removal. Any officer elected by the Board may be removed at any time by the Board. Any vacancy occurring in any office of the Corporation shall be filled by the Board. The salaries of all officers of the Corporation shall be fixed by or at the direction of the Board or a duly authorized committee thereof.

Section 3. Voting Securities Owned by the Corporation . Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by

 

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the President or any Vice President or any other officer authorized to do so by the Board and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board may, by resolution, from time to time confer like powers upon any other person or persons.

Section 4. Chairman of the Board . The Chairman of the Board, if there be one, shall preside at all meetings of the stockholders and of the Board. Except where by law the signature of the President is required, the Chairman of the Board shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board. During the absence or disability of the President, the Chairman of the Board shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board shall also perform such other duties and may exercise such other powers as may from time to time be assigned by these By-Laws or by the Board.

Section 5. President . The President shall, subject to the control of the Board and, if there be one, the Chairman of the Board, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect. The President shall be the Chief Executive Officer of the Corporation, unless the Board designates another officer or the Chairman of the Board as the Chief Executive Officer. The President shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise

 

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signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board or the President. In the absence or disability of the Chairman of the Board, or if there be none, the President shall preside at all meetings of the stockholders and, provided the President is also a director, the Board. If there be no Chairman of the Board, or if the Board shall otherwise designate, the President shall be the Chief Executive Officer of the Corporation. The President shall also perform such other duties and may exercise such other powers as may from time to time be assigned to such officer by these By-Laws or by the Board.

Section 6. Vice Presidents; Operation or Division Presidents . The Board may elect one or more Vice Presidents, with such further titles (including designation as President of a division or operation of the Corporation) and with such authority and responsibility as the Board may determine. At the request of the President or in the President’s absence or in the event of the President’s inability or refusal to act (and if there be no Chairman of the Board), one or more of the Vice Presidents, if there are more than one (in the order designated by the Board), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board from time to time may prescribe. If there be no Chairman of the Board and no Vice President, the Board shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.

Section 7. General Counsel . The Board shall designate a General Counsel for the Corporation, who shall be the Corporation’s chief legal officer and shall have general

 

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supervision of the legal affairs of the Corporation and such other authority and responsibility as the Board may designate and, subject to the direction of the Board, the authority and responsibility customary to such office.

Section 8. Secretary . The Secretary shall attend all meetings of the Board and all meetings of the stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for committees of the Board when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the President, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board, and if there be no Assistant Secretary, then either the Board or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest to the affixing by such officer’s signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.

Section 9. Chief Financial Officer; Controller . The Board shall designate an officer as the Chief Financial Officer of the Corporation, who shall have general supervision of the financial affairs of the Corporation, such other authority and responsibility as the Board may

 

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designate and, subject to the direction of the Board, the authority and responsibility customary to such office. In the absence or disability of the Chief Financial Officer, his or her duties may be performed by any other officer designated by him or her, by the President or by the Board. The Board shall also designate an officer as the Controller of the Corporation, who shall be the chief accounting officer of the Corporation (and may be the same as or different from the Chief Financial Officer). The Controller shall have general supervision of the books and accounts of the Corporation, such other authority and responsibility as the Board may designate and, subject to the direction of the Board, the authority and responsibility customary to such office. In the absence or disability of the Controller, his or her duties may be performed by any other officer designated by him or her, by the President or by the Board.

Section 10. Treasurer . The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the Board, at its regular meetings, or when the Board so requires, an account of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of the office of the Treasurer and for the restoration to the Corporation, in case of the Treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Treasurer’s possession or under the Treasurer’s control belonging to the Corporation.

 

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Section 11. Assistant Secretaries . Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of the Secretary’s inability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

Section 12. Assistant Treasurers . Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of the Treasurer’s inability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of the office of Assistant Treasurer and for the restoration to the Corporation, in case of the Assistant Treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Assistant Treasurer’s possession or under the Assistant Treasurer’s control belonging to the Corporation.

Section 13. Other Officers . Such other officers as the Board may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board. The Board may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

 

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Section 14. Bonded Officers . In addition to the Treasurer and Assistant Treasurer, such officers and employees of the Corporation as the Board shall determine shall give bond for the faithful discharge of their duties in such form and for such amount and with such surety or sureties as the Board shall require. The expense of procuring such bonds shall be borne by the Corporation.

 

ARTICLE V

STOCK

Section 1. Shares of Stock . Except as otherwise provided in a resolution approved by the Board, all shares of capital stock of the Corporation shall be uncertificated shares.

Section 2. Signatures . Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

Section 3. Lost Certificates . The Board may direct a new certificate or uncertificated shares be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or uncertificated shares, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to advertise the same in such manner as the Board shall require and/or to give the Corporation a bond in such sum as it may direct as

 

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indemnity against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate or uncertificated shares.

Section 4. Transfers . Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation, and in the case of certificated shares of stock, only by the person named in the certificate or by such person’s attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; or, in the case of uncertificated shares of stock, upon receipt of proper transfer instructions from the registered holder of the shares or by such person’s attorney lawfully constituted in writing, and upon payment of all necessary transfer taxes and compliance with appropriate procedures for transferring shares in uncertificated form; provided, however, that such surrender and endorsement, compliance or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. With respect to certificated shares of stock, every certificate exchanged, returned or surrendered to the Corporation shall be marked “Cancelled,” with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

Section 5. Dividend Record Date . In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix

 

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a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

Section 6. Record Owners . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law.

Section 7. Transfer and Registry Agents . The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board.

ARTICLE VI

NOTICES

Section 1. Notices . Whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person’s address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders

 

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given by the Corporation under applicable law, the Certificate of Incorporation or these By-Laws shall be effective if given by a form of electronic transmission if consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed to be revoked if (i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given by electronic transmission, as described above, shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network, together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder. Notice to directors or committee members may be given personally or by telegram, telex, cable or by means of electronic transmission.

Section 2. Waivers of Notice . Whenever any notice is required by applicable law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to notice, or a waiver by electronic transmission by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice

 

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of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any Annual or Special Meeting or any regular or special meeting of the directors or members of a committee of directors need be specified in any written waiver of notice unless so required by law, the Certificate of Incorporation or these By-Laws.

ARTICLE VII

GENERAL PROVISIONS

Section 1. Dividends . Dividends upon the capital stock of the Corporation, subject to the requirements of the GCL and the provisions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special meeting of the Board (or any action by written consent in lieu thereof in accordance with Section 9 of Article III hereof), and may be paid in cash, in property, or in shares of the Corporation’s capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board may modify or abolish any such reserve.

Section 2. Disbursements . All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board may from time to time designate.

 

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Section 3. Fiscal Year . The fiscal year of the Corporation shall be fixed by resolution of the Board.

Section 4. Corporate Seal . The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VIII

INDEMNIFICATION

Section 1. Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation . Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the

 

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person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation . Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 3. Authorization of Indemnification . Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or

 

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officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.

Section 4. Good Faith Defined . For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an

 

43


independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be.

Section 5. Indemnification by a Court . Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 1 or Section 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

Section 6. Expenses Payable in Advance . Expenses (including attorneys’ fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final

 

44


disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

Section 7. Nonexclusivity of Indemnification and Advancement of Expenses . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Section 1 and Section 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or Section 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the GCL, or otherwise.

Section 8. Insurance . The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any

 

45


such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VIII.

Section 9. Certain Definitions . For purposes of this Article VIII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. The term “another enterprise” as used in this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. For purposes of this Article VIII, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VIII.

 

46


Section 10. Survival of Indemnification and Advancement of Expenses . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 11. Limitation on Indemnification . Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 of this Article VIII), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of the Corporation.

Section 12. Indemnification of Employees and Agents . The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.

ARTICLE IX

FORUM FOR ADJUDICATION OF CERTAIN DISPUTES

Section 1. Forum for Adjudication of Certain Disputes . Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the Court of Chancery of the State of Delaware shall be the sole and exclusive forum

 

47


for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation arising out of or relating to any provision of the GCL, the Certificate of Incorporation or these By-Laws, or (iv) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine of the State of Delaware; provided, however , that, in the event that the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware, in each such case, unless the Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) has dismissed a prior action by the same plaintiff asserting the same claims because such court lacked personal jurisdiction over an indispensable party named as a defendant therein. Failure to enforce the foregoing provisions would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 1 of this Article IX. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Section 1 of Article IX with respect to any current or future actions or claims.

 

48


ARTICLE X

AMENDMENTS

Section 1. Amendments . These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board; provided , however , that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such meeting of the stockholders or Board, as the case may be. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board then in office; provided , however , that any proposed alteration, amendment or repeal of, or the adoption of any By-Law inconsistent with, Article VIII, Article IX, Article X and Sections 5 and 6 of Article II of these By-Laws (in each case, as in effect on the date hereof), or the alteration, amendment or repeal of, or the adoption of any provision inconsistent with this sentence, may only be made by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the outstanding capital stock entitled to vote thereon.

Section 2. Entire Board . As used in this Article X and in these By-Laws generally, the term “entire Board” means the total number of directors which the Corporation would have if there were no vacancies.

* * *

Adopted as of: March 30, 2016

 

49

Exhibit 10.1

TRANSITION SERVICES AGREEMENT

BY AND BETWEEN

ARMSTRONG WORLD INDUSTRIES, INC.

AND

ARMSTRONG FLOORING, INC.

DATED AS OF APRIL 1, 2016


TABLE OF CONTENTS

 

Article I DEFINITIONS

     2   

Section 1.01 Definitions

     2   

Article II SERVICES

     7   

Section 2.01 Services

     7   

Section 2.02 Performance of Services

     8   

Section 2.03 Charges for Services

     9   

Section 2.04 Changes in the Performance of Services

     9   

Section 2.05 Transitional Nature of Services

     10   

Section 2.06 Subcontracting

     10   

Article III OTHER ARRANGEMENTS

     10   

Section 3.01 Access

     10   

Section 3.02 Access to SAP Database

     11   

Article IV BILLING; TAXES

     12   

Section 4.01 Procedure

     12   

Section 4.02 Late Payments

     13   

Section 4.03 Taxes

     13   

Section 4.04 No Set-Off

     13   

Article V TERM AND TERMINATION

     13   

Section 5.01 Term

     13   

Section 5.02 Early Termination

     13   

Section 5.03 Interdependencies

     14   

Section 5.04 Effect of Termination

     14   

Section 5.05 Information Transmission

     15   

Article VI CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

     15   

Section 6.01 AWI and AFI Obligations

     15   

Section 6.02 No Release; Return or Destruction

     16   

Section 6.03 Privacy and Data Protection Laws

     16   

Section 6.04 Protective Arrangements

     16   

Article VII LIMITED LIABILITY AND INDEMNIFICATION

     17   

Section 7.01 Limitations on Liability

     17   

Section 7.02 Obligation to Re-Perform; Liabilities

     17   

Section 7.03 Third-Party Claims

     18   

Section 7.04 Provider Indemnity

     18   

Section 7.05 Indemnification Procedures

     18   

Article VIII TRANSITION COMMITTEE

     18   

Section 8.01 Establishment

     18   

 

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Article IX MISCELLANEOUS

     18   

Section 9.01 Mutual Cooperation

     18   

Section 9.02 Further Assurances

     19   

Section 9.03 Audit Assistance

     19   

Section 9.04 Title to Intellectual Property

     19   

Section 9.05 Independent Contractors

     19   

Section 9.06 Counterparts; Entire Agreement; Corporate Power

     19   

Section 9.07 Governing Law

     20   

Section 9.08 Assignability

     20   

Section 9.09 Third-Party Beneficiaries

     21   

Section 9.10 Notices

     21   

Section 9.11 Severability

     22   

Section 9.12 Force Majeure

     22   

Section 9.13 Headings

     23   

Section 9.14 Survival of Covenants

     23   

Section 9.15 Waivers of Default

     23   

Section 9.16 Dispute Resolution

     23   

Section 9.17 Specific Performance

     23   

Section 9.18 Amendments

     24   

Section 9.19 Interpretation

     24   

Section 9.20 Mutual Drafting

     24   

 

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TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of April 1, 2016 (this “ Transition Services Agreement ”), is by and between Armstrong World Industries, Inc., a Pennsylvania corporation (“ AWI ”), and Armstrong Flooring, Inc., a Delaware corporation (“ AFI ”).

R E C I T A L S:

WHEREAS, the board of directors of AWI (the “ AWI Board ”) has determined that it is in the best interests of AWI to separate AWI’s flooring business from its ceilings (building products) business, creating two independent industry-leading publicly traded companies;

WHEREAS, in furtherance of the foregoing, the AWI Board has determined that it is in the best interests of AWI to separate the AFI Business from the AWI Business (the “ Separation ”) and, following the Separation, to make a distribution of all of the outstanding AFI Shares owned by AWI to holders of AWI Shares, on a pro rata basis (the “ Distribution ”);

WHEREAS, to effectuate the Separation and the Distribution, AWI and AFI have entered into a Separation and Distribution Agreement, dated as of March 11, 2016 (the “ Separation and Distribution Agreement ”);

WHEREAS, in furtherance of the foregoing, as provided in the Separation and Distribution Agreement, the AWI Board has adopted and approved a Plan of Division (the “ Plan of Division ”) to effect the separation of the AFI Business from the AWI Business by means of a division pursuant to the applicable provisions of the Pennsylvania Entity Transactions Law (the “ Division ”), pursuant to which AWI will divide into AWI, which will be the dividing association and retain the assets and liabilities related primarily to the AWI Business, and AFI Intermediate Co., a Pennsylvania corporation created by, and resulting from, the Division, which will be allocated the assets and liabilities related primarily to the AFI Business (“ AFI Division Sub ”), in each case as set forth in the Plan of Division;

WHEREAS, after the Division Effective Time, AFI Division Sub will merge with and into AFI, with AFI surviving the merger as a wholly-owned subsidiary of AWI (the “ Merger ”), on the terms and subject to the conditions set forth in that certain Agreement and Plan of Merger, to be entered into after the Division Effective Time by and between AFI and AFI Division Sub (the “ Merger Agreement ”); and

WHEREAS, to facilitate and provide for an orderly transition in connection with the Separation and the Distribution, the Parties desire to enter into this Transition Services Agreement to set forth the terms pursuant to which each of the Parties shall provide Services to the other Party for a transitional period.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Transition Services Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:


ARTICLE I

DEFINITIONS

Section 1.01 Definitions . For purposes of this Transition Services Agreement, the following terms shall have the following meanings:

Action ” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any Governmental Authority.

Additional Services ” shall have the meaning set forth in Section 2.01(b) .

Affiliate ” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, for purposes of this Transition Services Agreement, (a) no member of the AFI Group shall be deemed to be an Affiliate of any member of the AWI Group and (b) no member of the AWI Group shall be deemed to be an Affiliate of any member of the AFI Group.

AFI ” shall have the meaning set forth in the Preamble.

AFI Business ” shall mean (a) the business, operations and activities of the Resilient Flooring and the Wood Flooring segments of AWI conducted at any time prior to the Division Effective Time by either Party or any of their current or former Subsidiaries and (b) except for the Retained Legacy Matters (as defined in the Separation and Distribution Agreement)(which are expressly excluded from the AFI Business), any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to the business, operations or activities described in clause (a) as then conducted, including those set forth on Schedule 1.2 to the Separation and Distribution Agreement.

AFI Division Sub ” shall have the meaning set forth in the Recitals.

AFI Group ” shall mean AFI and each Person that is a Subsidiary of AFI.

AFI Historical Financial Data ” shall mean financial Information to the extent related to the AFI Business prior to the Distribution Effective Date and contained within the SAP Database, including internal statements of cash flows with respect to distributions, contributions or other transfers of cash or other funds, general ledger accounts, customer payment history, customer claims and audits, invoices and inventory information.

 

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AFI SAP Personnel ” shall mean those AFI personnel that AFI has identified in writing to AWI and require access to the AFI Historical Financial Data to perform their duties as it relates to the AFI Business.

AFI Shares ” shall mean the shares of common stock, par value $0.0001 per share, of AFI.

Ancillary Agreement ” shall mean all agreements (other than the Separation and Distribution Agreement) entered into by the Parties or the members of their respective Groups (but as to which no Third Party is a party) in connection with the Separation, the Distribution, or the other transactions contemplated by the Separation and Distribution Agreement, including this Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Trademark License Agreement, the Transition Trademark License Agreement, the Lease Agreement and the Transfer Documents (each as defined in the Separation and Distribution Agreement).

AWI ” shall have the meaning set forth in the Preamble.

AWI Board ” shall have the meaning set forth in the Recitals.

AWI Business ” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Distribution Effective Time by either Party or any member of its Group, other than the AFI Business.

AWI Group ” shall mean AWI and each Person that is a Subsidiary of AWI (and expressly excluding AFI and any other member of the AFI Group).

AWI Historical Financial Data ” shall mean financial Information to the extent related to the AWI Business prior to the Effective Date and contained within the SAP Database, including internal statements of cash flows with respect to distributions, contributions or other transfers of cash or other funds, general ledger accounts, customer payment history, customer claims and audits, invoices and inventory information.

AWI Shares ” shall mean the shares of common stock, par value $0.01 per share, of AWI.

Cause ” shall mean, with respect to any employee of any member of the AFI Group, and solely for purposes of Section 2.02(e) , (a) engaging by the employee in gross misconduct that is demonstrably and materially injurious to AFI or the AFI Group, (b) the employee’s commission of a felony or crime involving moral turpitude, (c) engaging by the employee in fraud, theft or misappropriation of funds with respect to AFI or the AFI Group, or (d) the employee’s material violation of the AFI code of conduct.

Charge ” and “ Charges ” have the meaning set forth in Section 2.03 .

Confidential Information ” means all Information that is either confidential or proprietary.

Dispute ” shall have the meaning set forth in Section 9.16 .

 

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Distribution ” shall have the meaning set forth in the Recitals.

Distribution Date ” shall mean the date of the consummation of the Distribution, which shall be determined by the AWI Board in its sole and absolute discretion.

Distribution Effective Time ” shall mean 11:59 p.m., New York City time, on the Distribution Date.

Division ” shall have the meaning set forth in the Recitals.

Division Effective Time ” shall mean the time of the filing of a Statement of Division with the Department of Statement of the Commonwealth of Pennsylvania pursuant to Section 366 of the Pennsylvania Entity Transactions Law and in accordance with the Plan of Division.

Force Majeure ” shall mean, with respect to a Party, an event beyond the control of such Party (or any Person acting on such Party’s behalf), which event (a) does not arise or result from the fault or negligence of such Party (or any Person acting on such Party’s behalf) and (b) by its nature would not reasonably have been foreseen by such Party (or such Person), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment.

Governmental Authority ” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

Group ” shall mean either the AFI Group or the AWI Group, as the context requires.

Information ” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

Interest Payment ” shall have the meaning set forth in Section 4.02 .

Law ” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

 

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Level of Service ” shall have the meaning set forth in Section 2.02(c) .

Liabilities ” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, settlements, sanctions, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

Losses ” shall mean actual losses, costs, taxes, damages, fines, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

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

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

Minimum Service Period ” means the period commencing on the Distribution Date and ending on the six-month anniversary of the Distribution Date.

Parties ” means the parties to this Transition Services Agreement.

Pennsylvania Entity Transactions Law ” means the Entity Transactions Law of the Commonwealth of Pennsylvania, 15 Pa.C.S. §311 et seq .

Person ” shall mean an individual, a corporation, a general or limited partnership, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

Plan of Division ” shall have the meaning set forth in the Recitals.

Prime Rate ” means the then published prime interest rate upon unsecured loans charged by JP Morgan Chase Bank (or any successor thereto) on loans of 90 days.

Provider ” means, with respect to any Service, the Party identified on Schedule 1 hereto as the “Provider” of such Service.

Provider Indemnitees ” shall have the meaning set forth in Section 7.03 .

Recipient ” means, with respect to any Service, the Party receiving such Service hereunder.

Recipient Indemnitees ” shall have the meaning set forth in Section 7.04 .

 

- 5 -


Representatives ” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

SAP Database ” shall mean the financial applications in the SAP enterprise resource planning and data management systems utilized by AWI Finance personnel in the performance of their duties as of the date hereof.

SAP Database Access Period ” means a period of one year, commencing on the Effective Date.

Separation ” shall have the meaning set forth in the Recitals.

Separation and Distribution Agreement ” shall have the meaning set forth in the Recitals.

Service Period ” means, with respect to any Service, the period commencing on the Distribution Date and ending on the earlier of (a) the date that a Party terminates the provision of such Service pursuant to Section 5.02 and (b) the date set forth on Schedule 1 with respect to such Service.

Services ” shall have the meaning set forth in Section 2.01 .

Subsidiary ” shall mean, with respect to any Person, any corporation, general or limited partnership, trust, joint venture, unincorporated organization, limited liability company or other entity of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) in the case of a partnership, is a general partner, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

Tax ” shall have the meaning set forth in the Tax Matters Agreement.

Tax Matters Agreement ” shall mean the Tax Matters Agreement entered into as of the date hereof by and between AWI and AFI and/or one or more members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement.

Taxing Authority ” shall have the meaning set forth in the Tax Matters Agreement.

Termination Charges ” shall mean, with respect to the termination of any Service pursuant to Section 5.02(a)(i) , the sum of (a) any and all costs, fees and expenses (other than any severance or retention costs) payable to a Third Party by the Provider of such Service principally because of the early termination of such Service; provided , however , that the Provider shall use commercially reasonable efforts to minimize any costs, fees or expenses payable to any Third Party in connection with such early termination of such Service and credit any such reductions against the Termination Charges payable by the Recipient; and (b) any additional severance and retention costs, if any, because of the early termination of such Service that the Provider of such

 

- 6 -


terminated Service incurs to employees who had been retained primarily to provide such terminated Service (it being agreed that the costs set forth in this clause (b) shall only be the amount, if any, in excess of the severance and retention costs that such Provider would have paid to such employees if the Service had been provided for the full period during which such Service would have been provided hereunder but for such early termination).

Third Party ” shall mean any Person other than the Parties or any of their Affiliates.

Third-Party Claim ” shall mean any Action commenced by any Third Party against any Party or any of its Affiliates.

Trademark License Agreement ” shall mean the Trademark License Agreement entered into on the date hereof by and between AWI and AFI and/or any members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement.

Transition Committee ” shall mean the transition committee established pursuant to the Separation and Distribution Agreement to be responsible for monitoring and managing all matters related to the transactions contemplated by the Separation and the Distribution Agreement, this Transition Services Agreement and the other Ancillary Agreements.

Transition Services Agreement ” shall have the meaning set forth in the Preamble.

Transition Trademark License Agreement ” shall mean the Transition Trademark License Agreement entered into on the date hereof by and between AWI and AFI and/or any members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement.

ARTICLE II

SERVICES

Section 2.01 Services .

(a) Commencing as of the Distribution Effective Time, the Provider agrees to provide, or to cause one or more members of its Group to provide, to the Recipient, or any members of the Recipient’s Group, the applicable services (the “ Services ”) set forth on Schedule 1 hereto, in each case for the applicable Service Period set forth on Schedule 1 hereto.

(b) At any time after the Distribution Effective Time and during the term of this Transition Services Agreement, either Party may request that the other Party provide or cause its Group to provide additional services hereunder (the “ Additional Services ”) by providing written notice of such request, it being understood that, unless such Additional Services are included on Schedule 1 hereto as pre-approved Additional Services, the Party that receives such request may in its sole discretion decline to provide such requested Additional Services. If a Provider undertakes to provide the Additional Services, upon the mutual written agreement as to the nature, cost, duration and scope of such Additional Services, AWI and AFI shall supplement in writing the Services set forth on Schedule 1 hereto to include such Additional Services. Except where the context otherwise indicates or requires, any such Additional Services shall be deemed to be “Services” under this Agreement.

 

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Section 2.02 Performance of Services .

(a) The Provider shall perform, or shall cause one or more members of its Group to perform, all Services to be provided by the Provider in a manner that is based on its past practice and that is substantially similar in all material respects to the analogous services provided by or on behalf of AWI or any of its Subsidiaries to AWI or its applicable functional group or Subsidiary prior to the Distribution Effective Time.

(b) Nothing in this Transition Services Agreement shall require the Provider to perform or cause to be performed any Service to the extent that the manner of such performance would constitute a violation of any applicable Law or any existing contract or agreement with a Third Party. If the Provider is or becomes aware of any potential violation on the part of the Provider, the Provider shall use commercially reasonable efforts to promptly advise the Recipient of such potential violation, and the Provider and the Recipient will mutually seek an alternative that addresses such potential violation. The Parties agree to cooperate in good faith and use commercially reasonable efforts to obtain any necessary Third Party consents required under any existing contract or agreement with a Third Party to allow the Provider to perform, or cause to be performed, all Services to be provided by the Provider hereunder in accordance with the standards set forth in this Section 2.02 . Unless otherwise agreed in writing by the Parties, all reasonable and documented out-of-pocket costs and expenses (if any) incurred by any Party or any member of its Group in connection with obtaining any such Third Party consent that is required to allow the Provider to perform or cause to be performed such Services shall be divided proportionately between the Provider and the Recipient in accordance with such Parties’ respective utilization of such Services at such time. If, with respect to a Service, the Parties, despite the use of such commercially reasonable efforts, are unable to obtain a required Third Party consent, or the performance of such Service by the Provider would constitute a violation of any applicable Law, the Provider shall have no obligation whatsoever to perform or cause to be performed such Service.

(c) The Provider shall not be obligated to perform or to cause to be performed any Service in a manner that is materially more burdensome (with respect to service quality or quantity) than analogous services provided to AWI or its applicable functional group or Subsidiary during the 12-month period immediately before the date of this Transition Services Agreement (collectively referred to as the “ Level of Service ”). Without limiting the generality of the foregoing, but subject to Section 2.02(e) , the Provider shall not be required to maintain the employment of any specific employee(s), hire additional employees or third-party service providers or purchase, or purchase, lease or license any additional equipment, software or other assets or properties in order the provide the Services hereunder. If the Recipient requests that the Provider perform or cause to be performed any Service in a manner that exceeds the Level of Service, then the Parties shall cooperate and act in good faith to determine whether the Provider will be required to provide such requested higher Level of Service. If the Parties determine that the Provider shall provide the requested higher Level of Service, then such higher Level of Service shall be documented in a written agreement signed by the Parties, which may be an amendment or addendum to this Transition Services Agreement. Each amended section of

 

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Schedule 1 hereto, as agreed to in writing by the Parties, shall be deemed part of this Transition Services Agreement as of the date of such written agreement and the Level of Service increases set forth in such written agreement shall be deemed a part of the “Services” provided under this Transition Services Agreement, in each case subject to the terms and conditions of this Transition Services Agreement.

(d) (i) Neither the Provider nor any member of its Group shall be required to perform or to cause to be performed any of the Services for the benefit of any Third Party or any other Person other than the Recipient and the members of its Group, and (ii) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 2.02 OR SECTION 7.04 , EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL SERVICES ARE PROVIDED ON AN “AS-IS” BASIS, THAT THE RECIPIENT ASSUMES ALL RISK AND LIABILITY ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES, AND THAT THE PROVIDER MAKES NO OTHER REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, WITH RESPECT TO THE SERVICES. EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

(e) AFI shall not, and shall cause each member of the AFI Group not to, terminate the employment of any employee of any member of the AFI Group to be included on a list of employees to be agreed to by the Parties, other than for Cause, in each case during the term of the applicable Service Period set forth on Schedule 1 hereto for which such employee is providing Services hereunder.

(f) Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Transition Services Agreement. No Party shall knowingly take any action in violation of any such applicable Law.

Section 2.03 Charges for Services . The Recipient shall pay the Provider of the Services a fee (either one-time or recurring) for such Services (or category of Services, as applicable) (each fee constituting a “ Charge ” and, collectively, “ Charges ”), which Charges shall be agreed to by the Parties from time to time. During the term of this Transition Services Agreement, the amount of a Charge for any Service may be modified to the extent of (a) any adjustments mutually agreed to by the Parties, (b) any adjustments due to a change in Level of Service requested by the Recipient and agreed upon by the Provider, and (c) any adjustment in the rates or charges imposed by any Third Party provider that is providing Services (proportional to the respective use of such Services by each Party). Together with any invoice for Charges, the Provider shall provide the Recipient with reasonable documentation, including any additional documentation reasonably requested by the Recipient to the extent that such documentation is in the Provider’s or its Group’s possession or control, to support the calculation of such Charges.

Section 2.04 Changes in the Performance of Services . Subject to the performance standards for Services set forth in Sections 2.02(a) , 2.02(b) and 2.02(c) , the Provider may make

 

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changes from time to time in the manner of performing the Services if the Provider is making similar changes in performing analogous services for itself and if the Provider furnishes to the Recipient reasonable prior written notice (in content and timing) of such changes. No such change shall materially adversely affect the timeliness or quality of the applicable Service. If any such change by the Provider reasonably requires the Recipient to incur an increase in costs and expenses of at least five percent (5%), in the aggregate, in order to continue to receive and utilize the applicable Services in the same manner as the Recipient was receiving and utilizing such Service prior to such change, the Provider shall be required to reimburse the Recipient for all such reasonable increase in costs and expenses. Upon request, the Recipient shall provide the Provider with reasonable documentation, including any additional documentation reasonably requested by the Provider to the extent such documentation is in the Recipient’s or its Group’s possession or control, to support the calculation of such increase in costs and expenses.

Section 2.05 Transitional Nature of Services . The Parties acknowledge the transitional nature of the Services and agree to cooperate in good faith and to use commercially reasonable efforts to effectuate a smooth transition of the Services from the Provider to the Recipient (or its designee).

Section 2.06 Subcontracting . A Provider may hire or engage one or more Third Parties to perform any or all of its obligations under this Transition Services Agreement; provided , however , that (a) such Provider shall use the same degree of care (but at least reasonable care) in selecting each such Third Party as it would if such Third Party was being retained to provide similar services to the Provider and (b) such Provider shall in all cases remain primarily responsible for all of its obligations under this Transition Services Agreement with respect to the scope of the Services, the performance standard for Services set forth in Sections  2.02(a) , 2.02(b) and 2.02(c) and the content of the Services provided to the Recipient. Subject to the confidentiality provisions set forth in Article VI , each Party shall, and shall cause their respective Affiliates to, provide, upon thirty (30) days’ prior written notice from the other Party, any Information within such Party’s or its Affiliates’ possession that the requesting Party reasonably requests in connection with any Services being provided to such requesting Party by a Third Party, including any applicable invoices, agreements documenting the arrangements between such Third Party and the Provider and other supporting documentation; provided , further , that each Party shall make no more than one such request during any calendar quarter.

ARTICLE III

OTHER ARRANGEMENTS

Section 3.01 Access .

(a) AFI shall, and shall cause the members of the AFI Group to, allow AWI and the members of the AWI Group and their respective Representatives reasonable access to the facilities of the AFI Group that is necessary for the AWI Group to fulfill their obligations under this Transition Services Agreement. In addition to the foregoing right of access, AFI shall, and shall cause the AFI Group to, afford AWI, the members of the AWI Group and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and personnel of AFI and the members of the AFI Group as reasonably necessary for AWI to verify the adequacy of internal

 

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controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by AFI or the members of the AFI Group, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided that (i) such access shall not unreasonably interfere with any of the business or operations of AFI or any member of the AFI Group and (ii) in the event that AFI determines that providing such access could be commercially detrimental, violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids each of such harm and consequence. AWI agrees that all of its and the AWI Group’s employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of AFI or a member of the AFI Group, or when given access to any facilities, Information, systems, infrastructure or personnel of AFI or a member of the AFI Group, conform to the policies and procedures of AFI and the members of the AFI Group, as applicable, concerning health, safety, conduct and security which are made known or provided to AWI from time to time.

(b) AWI shall, and shall cause the members of the AWI Group to, allow AFI and the AFI Group and their respective Representatives reasonable access to the facilities of AWI and the members of the AWI Group that is necessary for AFI and the AFI Group to fulfill their obligations under this Transition Services Agreement. In addition to the foregoing right of access, AWI shall, and shall cause the members of the AWI Group to, afford AFI, the AFI Group and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the facilities, Information, systems, infrastructure and personnel of AWI and the members of the AWI Group as reasonably necessary for AFI to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services being provided by AWI or the members of the AWI Group, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided that (i) such access shall not unreasonably interfere with any of the business or operations of AWI or any of the members of the AWI Group and (ii) in the event that AWI determines that providing such access could be commercially detrimental, violate any applicable Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit such access in a manner that avoids each of such harm and consequence. AFI agrees that all of its and the members of the AFI Group’s employees shall, and that it shall use commercially reasonable efforts to cause its Representatives’ employees to, when on the property of AWI or the property of the member of the AWI Group, or when given access to any facilities, Information, systems, infrastructure or personnel of AWI or a member of the AWI Group, conform to the policies and procedures of AWI and the members of the AWI Group, as applicable, concerning health, safety, conduct and security which are made known or provided to AFI from time to time.

Section 3.02 Access to SAP Database .

(a) Access . AWI shall provide AFI SAP Personnel reasonable access (subject to restrictions set forth in Section 3.02(b) ), to the SAP Database during the SAP Database Access Period, insofar as such access is reasonably required by AFI to access and use the AFI Historical Financial Data solely as it relates to the conduct of the AFI Business (including any searches for specific AFI Historical Financial Data and the making of copies thereof).

 

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(b) Access Requirements . Without limiting the confidentiality provisions set forth in Article VI below and any other restrictions contained in this Agreement, AFI shall, and shall cause the AFI SAP Personnel, to (i) use the SAP Database with reasonable care and only in the ordinary course of business and in the manner and for the purposes for which it is intended, (ii) establish commercially reasonable internal controls to prevent unauthorized access, use, modification or dissemination of the SAP Database and AWI Historical Financial Information, (iii) not use any AWI Historical Financial Data for any reason without prior written consent of AWI, (iv) not alter, change or add data or entries that would impact AWI or the AWI Historical Financial Data in any way, and (v) not grant any Third Party access to the SAP Database or AWI Historical Financial Data contained therein without prior written consent from AWI. AFI shall, and shall cause the AFI Group to, afford AWI, the members of the AWI Group and their respective Representatives, upon reasonable advance written notice, reasonable access during normal business hours to the AFI SAP Personnel, facilities, systems, infrastructure and other personnel of AFI and the members of the AFI Group as reasonably necessary for AWI to verify the adequacy of internal controls over the SAP Database and AWI Historical Financial Data. AFI shall follow any reasonable guidelines or directions provided by AWI with respect to the access and use of the SAP Database.

(c) Ownership . AWI Historical Financial Data shall remain the property of AWI, and AFI Historical Financial Data shall remain the property of AFI. Each Party acknowledges that the SAP Database may include Information owned by another Party or a member of another Party’s Group and not related to it or its Business, including sensitive financial information. Each Party agrees, subject to requirements of applicable Law that any such Information is to be treated as Confidential Information of the Party or Parties to which it relates and handled in accordance with Article VI . AWI, in its capacity as operator of the SAP Database, shall take commercially reasonable measures in connection with such access and related activities to preserve the integrity and confidentiality of the SAP Database and the Information contained therein, including the AFI Historical Financial Data.

(d) Destruction . Notwithstanding the obligations set forth in Section 6.02 , both Parties acknowledge and agree that following the end of the SAP Database Access Period and in accordance with AWI’s records management policies and procedures, AWI shall use commercially reasonable efforts to (i) purge the AFI Historical Financial Data from the SAP Database, or (ii) if such purging is not practicable, encrypt or otherwise make unreadable or inaccessible such AFI Historical Financial Data.

ARTICLE IV

BILLING; TAXES

Section 4.01 Procedure . Charges for the Services shall be charged to and payable by the Recipient. Amounts payable pursuant to this Transition Services Agreement shall be paid by wire transfer (or such other method of payment as may be agreed between the Parties from time to time) to the Provider (as directed by the Provider), on a monthly basis, which amounts shall be due within thirty (30) days after the Recipient’s receipt of each such invoice, including reasonable documentation pursuant to Section 2.03 . All amounts due and payable hereunder shall be invoiced and paid in U.S. dollars.

 

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Section 4.02 Late Payments . Charges not paid when due pursuant to this Transition Services Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of the receipt of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus one percent (1%) or the maximum rate under applicable Law, whichever is lower (the “ Interest Payment ”).

Section 4.03 Taxes . Without limiting any provisions of this Transition Services Agreement, the Recipient shall bear any and all Taxes and other similar charges (and any related interest and penalties) imposed on, or payable with respect to, any fees or charges, including any Charges, payable by it pursuant to this Transition Services Agreement, including all sales, use, value-added, and similar Taxes, but excluding Taxes based on the Provider’s net income. Notwithstanding anything to the contrary in the previous sentence or elsewhere in this Transition Services Agreement, the Recipient shall be entitled to withhold from any payments to the Provider any such Taxes that the Recipient is required by applicable Law to withhold and shall pay such Taxes to the applicable Taxing Authority.

Section 4.04 No Set-Off . Except as mutually agreed to in writing by AWI and AFI, no Party or any member of its Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Transition Services Agreement or (b) any other amounts claimed to be owed to the other Party or any of member of its Group arising out of this Transition Services Agreement.

ARTICLE V

TERM AND TERMINATION

Section 5.01 Term . This Transition Services Agreement shall commence at the Distribution Effective Time and shall terminate upon the earlier to occur of: (a) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Transition Services Agreement; (b) the mutual written agreement of the Parties to terminate this Transition Services Agreement in its entirety; and (c) 11:59 p.m., New York City time on December 31, 2017. Unless otherwise terminated pursuant to Section 5.02 , this Transition Services Agreement shall terminate with respect to each Service as of the close of business on the last day of the Service Period for such Service. To the extent that the Provider’s ability to provide a Service is dependent on the continuation of a specified Service, the Provider’s obligation to provide such dependent Service shall terminate automatically with the termination of such supporting Service.

Section 5.02 Early Termination .

(a) Without prejudice to the Recipient’s rights with respect to Force Majeure, the Recipient may from time to time terminate this Transition Services Agreement with respect to the entirety of any individual Service:

(i) for any reason or no reason, upon the giving of at least thirty (30) days prior written notice to the Provider of such Service; provided , however , that, unless otherwise set forth on Schedule 1 with respect to such Service, such notice may not be delivered prior to the end of the Minimum Service Period; provided , further , that any

 

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such termination (x) may only be effective as of the last day of a month and (y) shall be subject to the obligation to pay any applicable Termination Charges pursuant to Section 5.04 ; or

(ii) if the Provider of such Service has failed to perform any of its material obligations under this Transition Services Agreement with respect to such Service, and such failure shall continue to be uncured for a period of at least thirty (30) days after receipt by the Provider of written notice of such failure from the Recipient; provided , however , that any such termination may only be effective as of the last day of a month; provided , further , that the Recipient shall not be entitled to terminate this Transition Services Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties (undertaken in accordance with the terms of Section 9.16 ) as to whether the Provider has cured the applicable breach.

(b) The Provider may terminate this Transition Services Agreement with respect to any individual Service, but not a portion thereof, at any time upon prior written notice to the Recipient if the Recipient has failed to perform any of its material obligations under this Transition Services Agreement relating to such Service, including making payment of Charges for such Service when due, and such failure shall continue to be uncured for a period of at least thirty (30) days after receipt by the Recipient of a written notice of such failure from the Provider; provided , however , that any such termination may only be effective as of the last day of a month; provided , further , that the Provider shall not be entitled to terminate this Transition Services Agreement with respect to the applicable Service if, as of the end of such period, there remains a good-faith Dispute between the Parties (undertaken in accordance with the terms of Section 9.16 ) as to whether the Recipient has cured the applicable breach. Schedule 1 hereto shall be updated to reflect any terminated Service.

Section 5.03 Interdependencies . The Parties acknowledge and agree that: (a) there may be interdependencies among the Services being provided under this Transition Services Agreement; (b) upon the request of either Party, the Parties shall cooperate and act in good faith to determine whether (i) any such interdependencies exist with respect to the particular Service that a Party is seeking to terminate pursuant to Section 5.02 and (ii) in the case of such termination, the Provider’s ability to provide a particular Service in accordance with this Transition Services Agreement would be materially and adversely affected by such termination of another Service; and (c) in the event that the Parties have determined that such interdependencies exist (and, in the case of such termination that the Provider’s ability to provide a particular Service in accordance with this Transition Services Agreement would be materially and adversely affected by such termination), the Parties shall negotiate in good faith to amend Schedule 1 hereto with respect to such termination of such impacted Service, which amendment shall be consistent with the terms of comparable Services.

Section 5.04 Effect of Termination . Upon the termination of any Service pursuant to this Transition Services Agreement, the Provider of the terminated Service shall have no further obligation to provide the terminated Service, and the Recipient of such Service shall have no obligation to pay any future Charges relating to such Service; provided , however , that the Recipient shall remain obligated to the Provider for (a) the Charges owed and payable in respect

 

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of Services provided prior to the effective date of termination for such Service, and (b) any applicable Termination Charges (which, in the case of each of clauses (a) and (b), shall be payable only in the event that the Recipient terminates any Service pursuant to Section 5.02(a)(i) ). In connection with the termination of any Service, the provisions of this Transition Services Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Transition Services Agreement, Article I , this Article V , Article VII and Article IX , all confidentiality obligations under this Transition Services Agreement and Liability for all due and unpaid Charges and Termination Charges shall continue to survive indefinitely.

Section 5.05 Information Transmission . The Provider, on behalf of itself and the members of its Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the Recipient, in accordance with Section 6.1 of the Separation and Distribution Agreement, any Information received or computed by the Provider for the benefit of the Recipient concerning the relevant Service during the Service Period; provided , however , that, except as otherwise agreed to in writing by the Parties (a) the Provider shall not have any obligation to provide, or cause to be provided, Information in any nonstandard format, (b) the Provider and the members of its Group shall be reimbursed for their reasonable costs in accordance with Section 6.3 of the Separation and Distribution Agreement for creating, gathering, copying, transporting and otherwise providing such Information, and (c) the Provider shall use commercially reasonable efforts to maintain any such Information in accordance with Section 6.4 of the Separation and Distribution Agreement.

ARTICLE VI

CONFIDENTIALITY; PROTECTIVE ARRANGEMENTS

Section 6.01 AWI and AFI Obligations . Subject to Section 6.04 , until the five (5)-year anniversary of the Distribution Date, each of AWI and AFI, on behalf of itself and each member of its Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to AWI’s Confidential Information pursuant to policies in effect as of the Distribution Effective Time, all Confidential Information concerning the other Party or the members of its Group or their respective businesses that is either in its possession (including Confidential Information in its possession prior to the date hereof) or furnished by such other Party or such other Party’s Group members or their respective Representatives at any time pursuant to this Transition Services Agreement, and shall not use any such Confidential Information other than for such purposes as may be expressly permitted hereunder, except, in each case, to the extent that such Confidential Information has been (a) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of its Group or any of their respective Representatives in violation of this Transition Services Agreement; (b) later lawfully acquired from other sources by such Party or any of member of its Group, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such Confidential Information; or (c) independently developed or generated without reference to or use of the Confidential Information of the other Party or any member of its Group. If any Confidential Information of a Party or any member of its Group is disclosed to the other Party or any member of its Group in connection with providing the Services, then such disclosed Confidential Information shall be used only as required to perform such Services.

 

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Section 6.02 No Release; Return or Destruction . Each Party agrees (a) not to release or disclose, or permit to be released or disclosed, any Confidential Information of the other Party addressed in Section 6.01 to any other Person, except its Representatives who need to know such Confidential Information in their capacities as such (whom shall be advised of their obligations hereunder with respect to such Confidential Information) and except in compliance with Section 6.04 , and (b) to use commercially reasonable efforts to maintain such Confidential Information in accordance with Section 6.4 of the Separation and Distribution Agreement. Without limiting the foregoing, when any such Confidential Information is no longer needed for the purposes contemplated by the Separation and Distribution Agreement, this Transition Services Agreement or any other Ancillary Agreements, each Party will promptly after request of the other Party either return to the other Party all such Confidential Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon).

Section 6.03 Privacy and Data Protection Laws . Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of the Services under this Transition Services Agreement.

Section 6.04 Protective Arrangements . In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any member of its Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

 

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ARTICLE VII

LIMITED LIABILITY AND INDEMNIFICATION

Section 7.01 Limitations on Liability .

(a) SUBJECT TO SECTION 7.02 , THE LIABILITIES OF THE PROVIDER AND ITS GROUP MEMBERS AND THEIR RESPECTIVE REPRESENTATIVES, COLLECTIVELY, UNDER THIS TRANSITION SERVICES AGREEMENT FOR ANY ACT OR FAILURE TO ACT IN CONNECTION HEREWITH (INCLUDING THE PERFORMANCE OR BREACH OF THIS TRANSITION SERVICES AGREEMENT), OR FROM THE SALE, DELIVERY, PROVISION OR USE OF ANY SERVICES PROVIDED UNDER OR CONTEMPLATED BY THIS TRANSITION SERVICES AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, SHALL NOT EXCEED THE AGGREGATE CHARGES PAID AND PAYABLE TO SUCH PROVIDER BY THE RECIPIENT PURSUANT TO THIS TRANSITION SERVICES AGREEMENT FOR FULL SERVICE PERIOD FOR SUCH SERVICE.

(b) IN NO EVENT SHALL EITHER PARTY, THE MEMBERS OF ITS GROUP OR THEIR RESPECTIVE REPRESENTATIVES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER PARTY IN CONNECTION WITH THE PERFORMANCE OF THIS TRANSITION SERVICES AGREEMENT (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM), AND EACH PARTY HEREBY WAIVES ON BEHALF OF ITSELF, THE MEMBERS OF ITS GROUP AND ITS REPRESENTATIVES ANY CLAIM FOR SUCH DAMAGES, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.

(c) The limitations in Section 7.01(a) and Section 7.01(b) shall not apply in respect of any Liability arising out of or in connection with (i) either Party’s Liability for breaches of confidentiality under Article VI , (ii) either Party’s obligations under Section 7.03 or 7.04 , or (iii) the gross negligence, willful misconduct or fraud of or by the Party to be charged.

Section 7.02 Obligation to Re-Perform; Liabilities . In the event of any breach of this Transition Services Agreement by the Provider with respect to the provision of any Services which the Provider can reasonably be expected to re-perform in a commercially reasonable manner, the Provider shall (a) promptly correct in all material respects such error, defect or breach or re-perform in all material respects such Services at the request of the Recipient and at the sole cost and expense of the Provider and (b) subject to the limitations set forth in Section 7.01 , reimburse the Recipient and the members of its Group and Representatives for Liabilities attributable to such breach by the Provider. Any request for re-performance in accordance with this Section 7.02 by the Recipient must be in writing and specify in reasonable detail the particular error, defect or breach, and such request must be made no more than one month from the later of (x) the date on which such breach occurred and (y) the date on which such breach was reasonably discovered by the Recipient.

 

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Section 7.03 Third-Party Claims . In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation and Distribution Agreement, this Transition Services Agreement or any other Ancillary Agreement, the Recipient shall indemnify, defend and hold harmless the Provider, the members of the Provider’s Group and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Provider Indemnitees ”), from and against any and all claims of Third Parties relating to, arising out of or resulting from the Provider’s furnishing or failing to furnish the Services provided for in this Transition Services Agreement, other than (a) Third Party Claims arising out of the gross negligence, willful misconduct or fraud of any Provider Indemnitee and (b) as set forth in Section 2.02(b) .

Section 7.04 Provider Indemnity . In addition to (but not in duplication of) its other indemnification obligations (if any) under the Separation and Distribution Agreement, this Transition Services Agreement or any other Ancillary Agreement, but subject to the limitations set forth in Section 7.01 of this Transition Services Agreement, the Provider shall indemnify, defend and hold harmless the Recipient, the members of the Recipient’s Group and each of their respective Representatives, and each of the successors and assigns of any of the foregoing (collectively, the “ Recipient Indemnitees ”), from and against any and all Liabilities relating to, arising out of or resulting from the sale, delivery, provision or use of any Services provided by such Provider hereunder, but only to the extent that such Liability relates to, arises out of or results from the Provider’s gross negligence, willful misconduct or fraud.

Section 7.05 Indemnification Procedures . The procedures for indemnification set forth in Sections 4.5, 4.6 and 4.7 of the Separation and Distribution Agreement shall govern claims for indemnification under this Transition Services Agreement.

ARTICLE VIII

TRANSITION COMMITTEE

Section 8.01 Establishment . Pursuant to the Separation and Distribution Agreement, a Transition Committee is to be established by AWI and AFI to, among other things, monitor and manage matters arising out of or resulting from this Transition Services Agreement. Without limiting the generality of the foregoing, each Party shall cause each member of the Transition Committee who is an employee, agent or other Representative of such Party to work in good faith to resolve any Dispute arising out of or relating in any way to this Transition Services Agreement.

ARTICLE IX

MISCELLANEOUS

Section 9.01 Mutual Cooperation . Each Party shall, and shall cause the members of its Group to, cooperate with the other Party and the members of its Group in connection with the performance of the Services hereunder; provided , however , that such cooperation shall not unreasonably disrupt the normal operations of such Party or the members of its Group, and, provided, further, that this Section 9.01 shall not require such Party to incur any out-of-pocket costs or expenses unless and except as expressly provided in this Transition Services Agreement or otherwise agreed to in writing by the Parties.

 

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Section 9.02 Further Assurances . Each Party shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party may reasonably request in order to effect the intent and purpose of this Transition Services Agreement and the transactions contemplated hereby.

Section 9.03 Audit Assistance . Each of the Parties and the members of their respective Groups are or may be subject to regulation and audit by a Governmental Authority (including a Taxing Authority), standards organizations, customers or other parties to contracts with such Parties or the members of their Groups under applicable Law, standards or contract provisions. If a Governmental Authority, standards organization, customer or other party to a contract with a Party or a member of its Group exercises its right to examine or audit such Party’s or a member of its Group’s books, records, documents or accounting practices and procedures pursuant to such applicable Law, standards or contract provisions, and such examination or audit relates to the Services, then the other Party shall provide, at the sole cost and expense of the requesting Party, all assistance reasonably requested by the Party that is subject to the examination or audit in responding to such examination or audits or requests for Information, to the extent that such assistance or Information is within the reasonable control of the cooperating Party and is related to the Services.

Section 9.04 Title to Intellectual Property . Except as expressly provided for under the terms of this Transition Services Agreement, the Separation and Distribution Agreement, the Trademark License Agreement or the Transition Trademark License Agreement, the Recipient acknowledges that it shall acquire no right, title or interest (including any license rights or rights of use) in any intellectual property which is owned or licensed by the Provider, by reason of the provision of the Services hereunder. The Recipient shall not remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any intellectual property owned or licensed by the Provider, and the Recipient shall reproduce any such notices on any and all copies thereof. The Recipient shall not attempt to decompile, translate, reverse engineer or make excessive copies of any intellectual property owned or licensed by the Provider, and the Recipient shall promptly notify the Provider of any such attempt, regardless of whether by the Recipient or any Third Party, of which the Recipient becomes aware.

Section 9.05 Independent Contractors . The Parties each acknowledge and agree that they are separate entities, each of which has entered into this Transition Services Agreement for independent business reasons. The relationships of the Parties hereunder are those of independent contractors and nothing contained herein shall be deemed to create a joint venture, partnership or any other relationship between the Parties. Employees performing services hereunder do so on behalf of, under the direction of, and as employees of, the Provider, and the Recipient shall have no right, power or authority to direct such employees.

Section 9.06 Counterparts; Entire Agreement; Corporate Power .

(a) This Transition Services Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

 

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(b) This Transition Services Agreement, the Separation and Distribution Agreement and the Ancillary Agreements and the Exhibits, Schedules and appendices hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c) AWI represents on behalf of itself and, to the extent applicable, each of the members of the AWI Group, and AFI represents on behalf of itself and, to the extent applicable, each of the members of the AFI Group, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Transition Services Agreement and to consummate the transactions contemplated hereby; and

(ii) this Transition Services Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.

(d) Each Party acknowledges and agrees that delivery of an executed counterpart of a signature page to this Transition Services Agreement (whether executed by manual, stamp or mechanical signature) by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Transition Services Agreement. Each Party expressly adopts and confirms each such stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Transition Services Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

Section 9.07 Governing Law . This Transition Services Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of Laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 9.08 Assignability . This Transition Services Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , however , that neither Party may assign its rights or delegate its obligations under this Transition Services Agreement without the express prior written consent of the other Party, such consent not to be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and

 

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obligations under the Separation and Distribution Agreement, this Transition Services Agreement or any of the other Ancillary Agreements in whole (i.e., the assignment of a Party’s rights and obligations under the Separation and Distribution Agreement, this Transition Services Agreement or any such other Ancillary Agreements all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any member of its Group from being party to or undertaking a change of control.

Section 9.09 Third-Party Beneficiaries . Except as provided in Article VII with respect to the Provider Indemnitees in their capacities as such, (a) the provisions of this Transition Services Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder; and (b) there are no other third-party beneficiaries of this Transition Services Agreement and this Transition Services Agreement shall not provide any other Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Transition Services Agreement.

Section 9.10 Notices . All notices, requests, claims, demands or other communications under this Transition Services Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.10 ):

If to AWI (prior to the Distribution Effective Time), to:

Armstrong World Industries, Inc.

P.O. Box 3001

Lancaster PA 17604

Email: MAHershey@armstrong.com

Attention: General Counsel

and

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Email: Peter.Atkins@skadden.com

   Eric.Cochran@skadden.com

Attention: Peter A. Atkins

    Eric L. Cochran

and

Skadden, Arps, Slate, Meagher & Flom LLP

One Rodney Square

920 N. King Street

Wilmington, DE 19801

Email: Steven.Daniels@skadden.com

Attention: Steven J. Daniels

 

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If to AFI, to:
  Armstrong Flooring, Inc.
  P.O. Box 3025
  Lancaster, PA 17604
  Email: Csparisi@armstrongflooring.com
  Attention: General Counsel
with a copy (prior to the Distribution Effective Time) to:
  Skadden, Arps, Slate, Meagher & Flom LLP
  Four Times Square
  New York, New York 10036
  Email:    Peter.Atkins@skadden.com
     Eric.Cochran@skadden.com
  Attention:    Peter A. Atkins
     Eric L. Cochran
  and   
  Skadden, Arps, Slate, Meagher & Flom LLP
  One Rodney Square
  920 N. King Street
  Wilmington, DE 19801
  Email: Steven.Daniels@skadden.com
  Attention: Steven J. Daniels

Any Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 9.11 Severability . If any provision of this Transition Services Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

Section 9.12 Force Majeure . No Party shall be deemed in default of this Transition Services Agreement for any delay or failure to fulfill any obligation hereunder (other than the obligation to pay money) so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of

 

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circumstances of Force Majeure. In the event of any such excused delay, the time for performance (other than the obligation to pay money) shall be extended for a period equal to the time lost by reason of the delay unless this Transition Services Agreement has previously been terminated under Article V or under this Section 9.12 . A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such Force Majeure, (a) provide written notice to the other Party of the nature and extent of such Force Majeure; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Transition Services Agreement as soon as reasonably practicable (and in no event later than the date that the affected Party resumes providing analogous services to, or otherwise resumes analogous performance under any other agreement for, itself, its Affiliates or any Third Party) unless this Transition Services Agreement has previously been terminated under Article V or this Section 9.12 . The Recipient shall be (i) relieved of the obligation to pay Charges for the affected Service(s) throughout the duration of such Force Majeure and (ii) entitled to permanently terminate such Service(s) if the delay or failure in providing such Services because of a Force Majeure shall continue to exist for more than thirty (30) consecutive days (it being understood that the Recipient shall not be required to provide any advance notice of such termination to the Provider).

Section 9.13 Headings . The Article, Section and Paragraph headings contained in this Transition Services Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Transition Services Agreement.

Section 9.14 Survival of Covenants . Except as expressly set forth in this Transition Services Agreement, the covenants, representations and warranties and other agreements contained in this Transition Services Agreement, and Liability for the breach of any obligations contained herein, shall survive the Distribution Effective Time and shall remain in full force and effect thereafter.

Section 9.15 Waivers of Default . Waiver by any Party of any default by the other Party of any provision of this Transition Services Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. No failure or delay by any Party in exercising any right, power or privilege under this Transition Services Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 9.16 Dispute Resolution . In the event of any controversy, dispute or claim (a “ Dispute ”) (i) arising out of or relating to any Party’s rights or obligations under this Transition Services Agreement (whether arising in contract, tort or otherwise), calculation or allocation of the costs of any Service or otherwise arising out of or relating in any way to this Transition Services Agreement (including the interpretation or validity of this Transition Services Agreement) and (ii) that is not resolved by the Transition Committee after a reasonable period of time, such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article VII of the Separation and Distribution Agreement.

Section 9.17 Specific Performance . Subject to Section 9.16 , in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this

 

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Transition Services Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Transition Services Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties. Unless otherwise agreed in writing, the Parties shall continue to provide Services and honor all other commitments under this Transition Services Agreement during the course of dispute resolution pursuant to the provisions of Section 9.16 and this Section 9.17 with respect to all matters not subject to such Dispute; provided , however , that this obligation shall only exist during the term of this Transition Services Agreement.

Section 9.18 Amendments . No provisions of this Transition Services Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 9.19 Interpretation . In this Transition Services Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Transition Services Agreement as a whole (including all of the Schedules, Annexes and Exhibits hereto) and not to any particular provision of this Transition Services Agreement; (c) Article, Section, Exhibit, Annex and Schedule references are to the Articles, Sections, Exhibits, Annexes and Schedules to this Transition Services Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Transition Services Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or Lancaster, Pennsylvania; (i) references herein to this Transition Services Agreement or any other agreement contemplated herein shall be deemed to refer to this Transition Services Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Transition Services Agreement, all references to “the date hereof,” “the date of this Transition Services Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to April 1, 2016.

Section 9.20 Mutual Drafting . This Transition Services Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Transition Services Agreement.

[Signature page follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Transition Services Agreement to be executed by their duly authorized representatives.

 

ARMSTRONG WORLD INDUSTRIES, INC.
By:  

/s/ Brian L. MacNeal

  Name:   Brian L. MacNeal
  Title:   Authorized Officer
ARMSTRONG FLOORING, INC.
By:  

/s/ John W. Thompson

  Name:   John W. Thompson
  Title:   Authorized Officer

 

[Signature Page to Transition Services Agreement]


Schedule 1

Transition Services

See attached


TSA - Schedule 1

Service Provider: Armstrong World Industries, Inc.

Service Recipient: Armstrong Flooring, Inc.

 

UNITED STATES & CANADA SERVICES

Finance

12 months

  

•    BPO Outsource Provider Support

•    Reconciliation of Misallocated Accounts Receivable and Accounts Payable

•    Accounts Receivable Export Support

•    Tax Support

Manufacturing

12 months

  

•    Sample Testing Support

Digital Marketing

9 months

  

•    Website Support

•    Lead Generation Support

•    User Experience Support

Information Technology

6-12 months, varies by area (unless noted)

   General   

•    SAP Ecosystem Application Access and Usage

•    Non-SAP Application Access and Usage

•    Project Support

•    IT Outsource Provider Support

  

Finance

  

•    SAP Ecosystem Application Support

•    Non-SAP Application Support

•    Consultation Services / Support

  

Procurement/

Plant Maintenance

  

•    SAP Procurement / Plant Maintenance Security

  

Human Resources

  

•    SAP Ecosystem Application Support

•    Consultation Services / Support

  

Plant Manufacturing Systems

  

•    SAP Ecosystem Application Support

•    Non-SAP Application Support

•    Consultation Services / Support

  

Business Analytics

  

•    Analytics Application Support

  

CRM and Workgroup App

  

•    IT Management Systems Application Development and Support

•    Sales Application Development and Support

•    Consultation Services / Support – Workgroup Apps

  

Supply Chain

  

•    Consultation Services / Support – Supply Chain

  

Sales and Distribution

  

•    Consultation Services / Support – Sales and Distribution

•    SAP Sales and Distribution Programs, Configuration, and Interfaces

  

Integration

  

•    Consultation Services / Support - Integration

  

Web

21 months

  

•    Legacy Website Support & Maintenance

•    Website Project Technical Support

•    Other Web Application Support and Maintenance

  

Vendor Management

  

•    Vendor Management and Contract Separation Support

  

Asset Management

  

•    Software/Hardware Maintenance Processing Support

•    Asset Discovery Support

•    Hardware Refresh Process Support (for PCs)

•    Mobile Device Management Support

  

Client Computing

  

•    Infrastructure Client – Desktop Support and Client Management


UNITED STATES & CANADA SERVICES (continued)

Information Technology

(continued)

  

Infrastructure

21 months

  

•    Storage, Backup

•    Database

•    Network – LAN, WAN, Internet, Security

•    SAP Basis, Security

   Cyber Security   

•    Tools / Threat Management

•    Network Security

 

CHINA SERVICES

Information Technology

15 months

  

•    Travel Management Application Usage and Support

•    IT Project Support & Management Service


Service Provider: Armstrong Flooring, Inc.

Service Recipient: Armstrong World Industries, Inc.

 

UNITED STATES & CANADA SERVICES

Finance

12 months

  

•    BPO Outsource Provider Support

•    Tax Support

•    Payroll Services

•    Time & Labor Processing Access, Application Support and Configuration

•    SAP Access – Payroll Processing, Benefits Administration Services for Payroll Processing

Digital Marketing

6 months

  

•    Website Support

•    Digital Marketing Tool & Analytics Support

Information Technology

6-12 months, varies by area (unless noted)

  

General

  

•    Project Support

  

 

Finance

  

 

•    Consultation Services / Support

  

Procurement/

Plant Maintenance

  

•    SAP Procurement/ Programs, Configurations, Interfaces

•    Consultation Services / Support

  

Human Resources

  

•    SAP Ecosystem Application Support

•    Non-SAP Application Support

•    Consultation Services / Support

  

Plant Manufacturing Systems

  

•    Non-SAP Application Support

•    Consultation Services / Support

  

Business Analytics

  

•    Analytics Application Support

•    SAP Analytics Platform

  

CRM and Workgroup App

  

•    IT Management Systems Application Development and Support

•    Consultation Services / Support – Workgroup Apps

  

Supply Chain

  

•    Consultation Services / Support – Warehouse Management

  

Sales and Distribution

  

•    Consultation Services / Support – Sales and Distribution

•    SAP Sales and Distribution Programs, Configuration, and Interfaces

  

Integration

  

•    Consultation Services / Support - Integration

  

Web

21 months

  

•    Content Management System Support and Maintenance

•    Web Database Architecture and Maintenance

  

Asset Management

  

•    Asset Discovery Support

  

Infrastructure

  

•    Servers, Scheduling

•    Tape Management, Storage, Backup

•    Database

•    Network – LAN

•    Telecommunications

•    SAP Basis, Security

  

Cyber Security

  

•    General Support


CHINA SERVICES

Information Technology

9 months

  

•    ERP Ecosystem Application Usage and Support

•    Engineering Design Application Usage and Support

•    Infrastructure Network – WAN, LAN and Internet

•    Website Hosting

Facilities

15 months

  

•    China Facilities Rent

AUSTRALIA SERVICES

Information Technology

12 months

  

•    ERP Ecosystems Application Usage and Vendor Support

•    IT Task, Break/Fix Support and Project Support Service

•    Infrastructure Server Hosting


                                         Web   

•    Legacy Website Support & Maintenance

•    Website Project Technical Support

•    Web Application Support and Maintenance

•    Content Management System Support and Maintenance

•    Web Database Architecture and Maintenance

•    Website Maintenance Coordination

•    Project Server Support & Maintenance

•    Web Middleware Support and Maintenance

 

Information Technology

(continued)

   Vendor Management   

•    Vendor Management and Contract Separation Support

   Asset Management   

•    Software/Hardware Maintenance Processing Support

•    Asset Discovery Support

•    Hardware Refresh Process Support (for PCs)

•    Mobile Device Management Support

   Client Computing   

•    Infrastructure Client – Desktop Support and Client Management

•    Infrastructure Client – Email and Calendar

   Infrastructure   

•    Windows Server

•    Scheduling

•    Tape Management

•    Linux Server

•    Storage, Backup

•    Database

•    Network – LAN, WAN, Internet, Security

•    Telecommunications

•    SAP Basis, Security

   Cyber Security   

•    General Support

•    Tools / Threat Management

•    Network Security

 

CHINA SERVICES
Information Technology   

•    BPCS Ecosystem Application Usage and Support

•    Concur Application Usage and Support

•    AutoCAD Application Usage and Support

•    IT Project Support & Management Service

•    Infrastructure Network – WAN, LAN and Internet

•    Website Hosting

Facilities   

•    China Facilities Rent

 

AUSTRALIA SERVICES
Information Technology   

•    BPCS & Wilcomm Ecosystems Application Usage and Vendor Support

•    IT Task, Break/Fix Support and Project Support Service

•    Infrastructure iSeries Server Hosting

Exhibit 10.2

TAX MATTERS AGREEMENT

BY AND BETWEEN

ARMSTRONG WORLD INDUSTRIES, INC.

AND

ARMSTRONG FLOORING, INC.

DATED AS OF APRIL 1, 2016


TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT, dated as of April 1, 2016 (this “ Agreement ”), is by and between Armstrong World Industries, Inc., a Pennsylvania corporation (“ AWI ”), and Armstrong Flooring, Inc., a Delaware corporation (“ AFI ”). Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to such terms in the Separation and Distribution Agreement, dated as of the date hereof, between the Parties (the “ Separation and Distribution Agreement ”).

R E C I T A L S

WHEREAS, the board of directors of AWI (the “ AWI Board ”) has determined that it is in the best interests of AWI to separate AWI’s flooring business from its ceilings (building products) business, creating two independent industry-leading publicly traded companies;

WHEREAS, in furtherance of the foregoing, the AWI Board has determined that it is in the best interests of AWI to separate the AFI Business from the AWI Business (the “ Separation ”) and, following the Separation, to make a distribution of all of the outstanding AFI Shares owned by AWI to holders of AWI Shares on the Record Date, on a pro rata basis (the “ Distribution ”);

WHEREAS, AFI has been incorporated for these purposes and has not engaged in activities except those incidental to its formation and in preparation for the Distribution;

WHEREAS, AWI will effect certain restructuring transactions described in the Separation and Distribution Agreement for the purpose of aggregating the AFI Business in the AFI Group prior to the Distribution (collectively, the “ Reorganization ”);

WHEREAS, for U.S. federal income tax purposes, the Separation and Distribution, taken together, are intended to qualify as a transaction described in Sections 368(a)(1)(D) and 355 of the Code; and

WHEREAS, the Parties desire to set forth their rights and obligations with respect to Taxes due for periods before and after the Distribution Date.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 General . As used in this Agreement, the following terms shall have the following meanings:

Active Business ” shall mean the business conducted by the ATOB Entities as of the Distribution Date.

 

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Adjustment Request ” shall mean any formal or informal claim or request filed with any Governmental Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (i) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (ii) any claim for equitable recoupment or other offset, and (iii) any claim for refund or credit of Taxes previously paid.

AFI ” shall have the meaning set forth in the preamble hereof.

AFI Business ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI Controlled Tax Contests ” shall have the meaning set forth in Article 6.3 .

AFI Group ” shall mean (a) prior to the Distribution, AFI and each Person that will be a Subsidiary of AFI as of immediately after the Distribution, even if, prior to the Distribution, such Person is not a Subsidiary of AFI; and (b) on and after the Distribution, AFI and each Person that is a Subsidiary of AFI.

AFI Indirect Tax Liability ” shall mean any liability for sales Taxes, use Taxes, value added Taxes, goods and services Taxes, or any similar indirect Taxes attributable to the AFI Business.

AFI Separate Liability ” shall mean any liability for Taxes for which AFI or any member of the AFI Group is obligated under applicable Law to (x) pay such Taxes or (y) file a Tax Return with respect to such Taxes, in each case other than a liability for the following:

(i) Separation Taxes; and

(ii) Income Taxes imposed by any Governmental Authority if and to the extent

(A) the entity on which such Income Tax is imposed was, during the relevant taxable period or portion thereof, a member of a consolidated, unitary, combined, or other similar group (as defined for purposes of such Governmental Authority’s Tax Law) and

(B) AWI or any member of the AWI Group was the “parent,” “common parent,” “principal,” “named,” “key,” or other similar company or entity with respect to such consolidated, unitary, combined, or other similar group (as determined for purposes of such Governmental Authority’s Tax Law) during such relevant taxable period or portion thereof.

AFI Shares ” shall have the meaning set forth in the Separation and Distribution Agreement.

Affiliate ” shall have the meaning set forth in the Separation and Distribution Agreement.

 

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Agreement ” shall have the meaning set forth in the preamble hereto.

Ancillary Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

ATOB Entities ” shall mean the entities listed on Schedule A.

AWI ” shall have the meaning set forth in the preamble hereto.

AWI Businesses ” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Effective Time by either Party or any member of its Group, other than the AFI Business.

AWI Controlled Tax Contests ” shall have the meaning set forth in Article 6.2 .

AWI Group ” shall mean AWI and each Person that is a Subsidiary of AWI (other than AFI and any other member of the AFI Group).

AWI Shares ” shall have the meaning set forth in the Separation and Distribution Agreement.

Controlling Party ” shall mean, with respect to a Tax Contest, the Party entitled to control such Tax Contest pursuant to Articles 6.2 and 6.3 of this Agreement.

Code ” shall mean the Internal Revenue Code of 1986, as amended.

Dispute ” shall have the meaning set forth in Article 9.1 .

Distribution ” shall have the meaning set forth in the recitals.

Distribution Date ” shall have the meaning set forth in the Separation and Distribution Agreement.

Employee Matters Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

Employment Tax ” shall mean those Liabilities (as defined in the Separation and Distribution Agreement) for Taxes that are allocable pursuant to the provisions of the Employee Matters Agreement.

Final Determination ” shall mean the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period,

(i) by an acceptance on an IRS Form 870 or 870-AD (or any successor forms thereto), or by a comparable form or agreement pursuant to the laws of a state, local, or non-United States taxing jurisdiction, except that acceptance on an IRS Form 870 or 870-AD or comparable form or agreement shall not constitute a Final Determination to the extent that such form or agreement reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for refund or the right of the Governmental Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be);

 

-4-


(ii) by a decision, judgment, decree, or other order of a court of competent jurisdiction which is or has become final and unappealable;

(iii) by a closing agreement or accepted offer in compromise pursuant to Sections 7121 or 7122 of the Code, or a comparable agreement pursuant to the laws of a state, local, or non-United States jurisdiction;

(iv) by any allowance of a refund or credit in respect of an overpayment of a Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) or, where such periods are undefined or indefinite, in accordance with ordinary course limitation periods, by the jurisdiction imposing such Tax;

(v) by a final settlement resulting from a treaty-based competent authority determination; or

(vi) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.

Governmental Authority ” shall have the meaning set forth in the Separation and Distribution Agreement.

Group ” shall mean either the AFI Group or the AWI Group, as the context requires.

Identified Tax Return ” shall mean any Tax Return reporting or otherwise relating to, addressing, or describing any Income Tax or Separation Tax, whether directly or indirectly.

Income Tax ” shall mean any federal, state, local or non-United States Tax determined by reference to income, gains, net worth, gross receipts, or any Taxes imposed in lieu of such a Tax.

Indemnifying Party ” shall have the meaning set forth in Article 5.2 .

Indemnitee ” shall have the meaning set forth in Article 5.2 .

Initial Notice ” shall have the meaning set forth in Article 9.1 .

IRS ” shall mean the United States Internal Revenue Service.

Law ” shall have the meaning set forth in the Separation and Distribution Agreement.

Non-Controlling Party ” shall mean, with respect to a Tax Contest, the Party that is not entitled to control such Tax Contest pursuant to Articles 6.2 and 6.3 of this Agreement.

Parties ” shall mean the parties to this Agreement.

 

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Past Practices ” shall have the meaning set forth in Article 3.5 .

Person ” shall have the meaning set forth in the Separation and Distribution Agreement.

Post-Distribution Period ” shall mean any taxable year or other taxable period beginning after the Distribution Date.

Pre-Distribution Period ” shall mean any taxable year or other taxable period that ends on or before the Distribution Date.

Preliminary Tax Advisor ” shall have the meaning set forth in Article 9.1 .

Prime Rate ” shall have the meaning set forth in the Separation and Distribution Agreement.

Privilege ” shall mean any privilege that may be asserted pursuant to applicable law, including any privilege arising pursuant to or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

Prohibited Acts ” shall have the meaning set forth in Article 4.2 .

Proposed Acquisition Transaction ” shall mean a transaction or series of related transactions (or any agreement, understanding, arrangement or substantial negotiations, within the meaning of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, to enter into a transaction or series of related transactions), whether such transaction is supported by AFI management or shareholders, is a hostile acquisition, or otherwise, as a result of which AFI (or any successor thereto) would merge or consolidate with any other Person or as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire (through an option or otherwise) from AFI (or any successor thereto) and/or one or more holders of AFI Shares, respectively, any amount of stock of AFI, that would, when combined with any other changes in ownership of the stock of AFI pertinent for purposes of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, constitute more than thirty-five percent (35%) of (i) the value of all outstanding shares of AFI as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the total combined voting power of all shares of voting stock of AFI as of the date of the such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by AFI of a shareholder rights plan or (ii) issuances by AFI that satisfy Safe Harbor VIII (relating to acquisition in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock (including any redemption of AFI equity pursuant to the exception in Article 4.2(a)(viii) ) shall be treated as an indirect acquisition of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and the Treasury Regulations promulgated thereunder and shall be interpreted accordingly.

 

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Reasonable Basis ” shall mean reasonable basis within the meaning of Section 6662(d)(2)(B)(ii)(II) of the Code and the Treasury Regulations promulgated thereunder (or such other level of confidence required by the Code at that time to avoid the imposition of penalties).

Record Date ” shall have the meaning set forth in the Separation and Distribution Agreement.

Refund ” shall mean any refund, reimbursement, offset, credit, or other similar benefit in respect of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied against future Taxes payable) together with any interest paid on or with respect to such refund of Taxes; provided , however , that the amount of any refund of Taxes shall be net of any Taxes imposed by any Governmental Authority on the receipt of the refund, including any Taxes imposed by way of withholding or offset.

Reorganization ” shall have the meaning set forth in the recitals.

Reporting Memorandum ” shall mean any memorandum prepared at the request of AWI by any law or accounting firm with respect to the intended tax treatment of the Reorganization and certain related transactions, as may be amended or modified from time to time.

Responsible Party ” shall mean, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return pursuant to this Agreement.

Restricted Period ” shall mean the period that begins with the Distribution Date and ends two (2) years thereafter.

Separation ” shall have the meaning set forth in the recitals.

Separation and Distribution Agreement ” shall have the meaning set forth in the preamble hereto.

Separation Taxes ” shall mean those Taxes triggered by, or arising or otherwise incurred as a result of, the Separation, the Distribution, the Reorganization or any transactions associated therewith, except for (i) any Tax resulting from a breach by any Party of any covenant in this Agreement or any Ancillary Agreement, and (ii) any Tax attributable to a Prohibited Act.

Straddle Period ” shall mean any taxable year or other taxable period that begins on or before the Distribution Date and ends after the Distribution Date.

Subsidiary ” shall have the meaning set forth in the Separation and Distribution Agreement.

Tax ” or “ Taxes ” shall mean (i) all taxes, charges, fees, duties, levies, imposts, rates or other assessments or governmental charges of any kind imposed by any federal, state, local or non-United States Governmental Authority, including, without limitation, income, gross receipts, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, custom duties, property, sales, use, license, capital stock, transfer, franchise, registration, payroll, withholding, social security, unemployment, disability, value added, alternative or add-on

 

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minimum or other taxes, whether disputed or not, and including any interest, penalties, charges or additions attributable thereto, but not including any Employment Taxes (ii) liability for the payment of any amount of the type described in clause (i) above arising as a result of being (or having been) a member of any group or being (or having been) included or required to be included in any Tax Return related thereto, and (iii) liability for the payment of any amount of the type described in clauses (i) or (ii) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person.

Tax Advisor ” shall have the meaning set forth in Article 9.1 .

Tax Attribute ” shall mean net operating losses, capital losses, investment tax credit carryovers, earnings and profits, foreign tax credit carryovers, overall foreign losses, previously taxed income, separate limitation losses and any other losses, deductions, credits or other comparable items that could affect a Tax liability for a past or future taxable period.

Tax Certificates ” shall mean any certificates of officers of AWI and AFI, provided to Skadden, Arps, Slate, Meagher & Flom LLP or any other law or accounting firm in connection with any Tax Opinion issued in connection with the Reorganization, Separation and/or Distribution.

Tax Contest ” shall have the meaning set forth in Article 6.1 .

Tax Counsel ” shall mean a tax counsel or accountant of recognized national standing reasonably acceptable to AWI.

Tax Law ” shall mean the law of any Governmental Authority or political subdivision thereof relating to any Tax.

Tax Materials ” shall have the meaning set forth in Article 4.1(a) .

Tax Opinion ” shall mean any written opinion of Skadden, Arps, Slate, Meagher & Flom LLP or any other law or accounting firm, regarding certain tax consequences of certain transactions executed as part of the Reorganization, Separation and/or Distribution.

Tax Records ” shall have the meaning set forth in Article 8.1 .

Tax-Related Losses ” shall mean (i) all accounting, legal and other professional fees, and court costs incurred in connection with such Taxes, as well as any other out-of-pocket costs incurred in connection with such Taxes; and (ii) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by AWI (or its Affiliate) or AFI (or its Affiliate) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Governmental Authority, in each case, resulting from the failure of the Distribution, the Reorganization or any transaction associated therewith to be tax-free or otherwise have the tax treatment described in any Tax Opinion.

Tax Return ” shall mean any return, report, certificate, form or similar statement or document (including any related supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) supplied

 

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to or filed with, or required to be supplied to or filed with, a Governmental Authority, or any bill for or notice related to ad valorem or other similar Taxes received from a Governmental Authority, in each case, in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

Treasury Regulations ” shall mean the regulations promulgated from time to time under the Code as in effect for the relevant tax period.

Unqualified Tax Opinion ” shall mean an unqualified “will” opinion of Tax Counsel on which AFI and AWI may rely to the effect that the Prohibited Act will not result in any incremental liability for Separation Taxes. Any such opinion must assume that the Distribution, Reorganization, and any transaction associated therewith would have been tax-free or had the tax treatment described in any applicable Tax Opinion if such transaction did not occur.

1.2 Interpretation . For all purposes of this Agreement: (i) the terms defined in this Agreement include the plural as well as the singular; (ii) all references in this Agreement to “Preamble”, “Recitals”, “Articles”, “Sections” and other subdivisions are to the designated Preamble, Recitals, Articles, Sections and other subdivisions of the body of this Agreement; (iii) pronouns of either gender or neuter include, as appropriate, the other pronoun forms; (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (v) “or” is not exclusive; (vi) “including” shall be deemed to be followed by “but not limited to”; and (vii) any definition of or reference to any statute shall be construed as referring also to any rules and regulations promulgated thereunder.

ARTICLE II

PAYMENTS AND TAX REFUNDS

2.1 AWI Liability . AWI shall pay and be responsible for:

(a) any Taxes not allocated to AFI pursuant to Article 2.2 ; and

(b) any Separation Taxes.

2.2 AFI Liability . AFI shall pay and be responsible for:

(a) any AFI Indirect Tax Liability;

(b) any AFI Separate Tax Liability; and

(c) any Taxes for which AFI is required to indemnify AWI pursuant to Article 5.1(b) or (c) .

2.3 Allocation of Employment Taxes . Liability for Employment Taxes shall be determined pursuant to the Employee Matters Agreement.

 

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2.4 Tax Refunds .

(a) AWI shall be entitled to all Refunds related to Taxes the liability for which is allocated to AWI pursuant to this Agreement.

(b) AFI shall pay to AWI any Refund received by AFI or any member of the AFI Group that is allocable to AWI pursuant to this Article 2.4 no later than five (5) Business Days after the receipt of such Refund. For purposes of this Article 2.4(b) , any Refund that arises as a result of an offset, credit, or other similar benefit in respect of Taxes other than a receipt of cash shall be deemed to be received on the earlier of (i) the date on which a Tax Return is filed claiming such offset, credit, or other similar benefit and (ii) the date on which payment of the Tax which would have otherwise been paid absent such offset, credit, or other similar benefit is due (determined without taking into account any applicable extensions).

2.5 Prior Agreements . Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement, any and all prior Tax sharing or allocation agreements or practices between any member of the AWI Group and any member of the AFI Group shall be terminated with respect to the AFI Group and the AWI Group as of the Distribution Date. No member of either the AFI Group or the AWI Group shall have any continuing rights or obligations under any such agreement.

ARTICLE III

PREPARATION AND FILING OF TAX RETURNS

3.1 AWI’s Responsibility . AWI shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all Tax Returns that AWI or any member of the AWI Group is obligated to file pursuant to applicable Tax Law.

3.2 AFI’s Responsibility . AFI shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared and filed, all Tax Returns that AFI or any member of the AFI Group is obligated to file pursuant to applicable Tax Law, other than those which AWI is responsible for filing pursuant to Article 3.1 .

3.3 Right To Review Tax Returns . With respect to any Identified Tax Return relating to any Pre-Distribution Period or Straddle Period for which AFI is the Responsible Party, AFI shall deliver such Identified Tax Return and related workpapers to AWI for approval twenty (20) Business Days prior to the due date of the relevant Identified Tax Return. AFI shall provide AWI at least ten (10) Business Days to analyze and comment on such Identified Tax Return and shall modify such Identified Tax Return before filing to include AWI’s reasonable comments. AFI shall not, and shall not permit any member of the AFI Group to, file any such Identified Tax Return without the prior written consent of AWI, such consent to be exercised in AWI’s sole discretion.

3.4 Cooperation . The Parties shall provide, and shall cause their Affiliates to provide, assistance and cooperation to one another in accordance with Article VII with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Article VIII .

 

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3.5 Tax Reporting Practices . Except as provided in Article 3.6 , with respect to any Tax Return for any taxable period that begins on or before the second anniversary of the Distribution Date with respect to which AFI is the Responsible Party, such Tax Return shall be prepared in a manner (i) consistent with past practices, accounting methods, elections and conventions (“ Past Practices ”) used with respect to the Tax Returns in question (unless there is no Reasonable Basis for the use of such Past Practices), and to the extent any items are not covered by Past Practices (or in the event that there is no Reasonable Basis for the use of such Past Practices), in accordance with reasonable Tax accounting practices selected by AFI; and (ii) that, to the extent consistent with clause (i), minimizes the overall amount of Taxes due and payable on such Tax Return for all of the Parties by cooperating in making such elections or applications for group or other relief or allowances available in the taxing jurisdiction in which such Tax Return is filed. AFI shall not take any action inconsistent with the assumptions (including items of income, gain, deduction, loss and credit) made in determining all estimated or advance payments of Taxes on or prior to the Distribution Date. In addition, AFI shall not be permitted, and shall not permit any member of the AFI Group, to make a change in any of its methods of accounting for tax purposes until all applicable statutes of limitations for all Pre-Distribution Periods and Straddle Periods have expired.

3.6 Reporting of Reorganization . The Tax treatment of any step in or portion of the Reorganization shall be reported on each applicable Tax Return consistently with the treatment thereof in any Tax Opinion or the Reporting Memorandum, taking into account the jurisdiction in which such Tax Returns are filed, unless there is no Reasonable Basis for such Tax treatment. In the event that a Party shall determine that there is no Reasonable Basis for such Tax treatment, such Party shall notify the other Party no later than twenty (20) Business Days prior to filing the relevant Tax Return and the Parties shall attempt in good faith to agree on the manner in which the relevant portion of the Reorganization shall be reported.

3.7 Payment of Taxes .

(a) With respect to any Tax Return required to be filed pursuant to this Agreement, the Responsible Party shall remit or cause to be remitted to the applicable Governmental Authority in a timely manner any Taxes due in respect of any such Tax Return.

(b) In the case of any Tax Return for which the Party that is not the Responsible Party is obligated pursuant to this Agreement to pay all or a portion of the Taxes reported as due on such Tax Return, the Responsible Party shall notify the other Party, in writing, of its obligation to pay such Taxes and, in reasonably sufficient detail, its calculation of the amount due by such other Party and the Party receiving such notice shall pay such amount to the Responsible Party upon the later of five (5) Business Days prior to the date on which such payment is due and fifteen (15) Business Days after the receipt of such notice.

3.8 Amended Returns and Carrybacks .

(a) AFI shall not, and shall not permit any member of the AFI Group to, file or allow to be filed any Adjustment Request for any Pre-Distribution Period or Straddle Period with respect to any Tax the liability for which is not allocated to AFI pursuant to this Agreement without the prior written consent of AWI, such consent to be exercised in AWI’s sole discretion.

 

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(b) AFI shall, and shall cause each member of the AFI Group to, make any available elections to waive the right to carry back any Tax Attribute from a taxable period or portion thereof ending after the Distribution Date to a taxable period or portion thereof ending on or before the Distribution Date.

(c) AFI shall not, and shall cause each member of the AFI Group not to, without the prior written consent of AWI, make any affirmative election to carry back any Tax Attribute from a taxable period or portion thereof ending after the Distribution Date to a taxable period or portion thereof ending on or before the Distribution Date, such consent to be exercised in AWI’s sole discretion.

(d) Receipt of consent by AFI or a member of the AFI Group from AWI pursuant to the provisions of this Article 3.8 shall not limit or modify AFI’s continuing indemnification obligation pursuant to Article V .

3.9 Tax Attributes .

(a) AFI shall make its own determination as to the existence and the amount of the Tax Attributes to which it is entitled after the Distribution Date; provided , however , that such determination shall be made in a manner that is (a) consistent with Past Practices; (b) in accordance with the rules prescribed by applicable Law, including the Code and the Treasury Regulations; (c) consistent with the Tax Certifications, the Tax Opinions and the Reporting Memorandum; (d) reasonably determined by AFI to minimize the aggregate cash Tax liability of the Parties for all Pre-Distribution Tax Periods and the portion of all Straddle Periods ending on the Distribution Date; and (e) with respect to any determination relating to the existence or availability of net operating losses, consented to in writing by AWI, such consent to be exercised in AWI’s sole and absolute discretion.

(b) Upon the reasonable request of AFI, AWI shall provide AFI with any reasonably available Tax Records relating to the determination of Tax Attributes if and only to the extent such Tax Records exist on the Distribution Date. Nothing in this Agreement, including this Article 3.9(b) , shall require AWI to make any determinations or otherwise create any Tax Records with respect to Tax Attributes or the determination thereof.

ARTICLE IV

REPRESENTATIONS AND COVENANTS

4.1 Compliance with Tax Opinions .

(a) AWI, on behalf of itself and all other members of the AWI Group, hereby represents and warrants that (i) it has examined the Tax Opinions, the Tax Certificates, the Reporting Memorandum, and any other materials delivered or deliverable in connection with the rendering of Tax Opinions (collectively, the “ Tax Materials ”) and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to AWI or any member of the AWI Group or the AWI Businesses, were, at the time presented or represented and from such time until and including the Distribution Date, true, correct, and complete in all material respects. AWI, on behalf of itself and all other members of the AWI Group, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to AWI or any member of the AWI Group or the AWI Businesses.

 

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(b) AFI, on behalf of itself and all other members of the AFI Group, hereby represents and warrants that (i) it has examined the Tax Materials and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to AFI or any member of the AFI Group or the AFI Business, were, at the time presented or represented and from such time until and including the Distribution Date, true, correct, and complete in all material respects. AFI, on behalf of itself and all other members of the AFI Group, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to AFI or any member of the AFI Group or the AFI Business.

4.2 Consent Requirement for Major Transactions . AFI, on behalf of itself and all other members of the AFI Group, hereby covenants and agrees that no member of the AFI Group will take or permit to be taken:

(a) within the Restricted Period, any of the following actions:

(i) any Proposed Acquisition Transaction, or approval of any Proposed Acquisition Transaction for any purpose;

(ii) any merger, scheme of arrangement, or consolidation with any other Person or liquidation or partial liquidation; or any approval or allowance of any merger, scheme of arrangement, consolidation, liquidation, or partial liquidation of any of the ATOB Entities;

(iii) any approval or allowance of the discontinuance, cessation, or sale or other transfer (to an Affiliate or otherwise) of, or a material change in, any Active Business;

(iv) any approval or allowance of the sale, transfer, issuance, or other disposition (to an Affiliate or otherwise), directly or indirectly, of any share of, or other equity interest or an instrument convertible into an equity interest in, any of the ATOB Entities;

(v) any sale, transfer, or other disposition of more than 35 percent (35%) of its consolidated gross or net assets, or approval or allowance of the sale, transfer, or other disposition (to an Affiliate or otherwise) of more than 35 percent (35%) of the consolidated gross or net assets of any of the ATOB Entities (in each case, excluding sales in the ordinary course of business, and measured based on fair market values as of the date of the Distribution);

(vi) any amendment to its certificate of incorporation (or other organizational documents), or any other action or approval or allowance of the taking of any action, whether through a stockholder vote or otherwise, affecting the voting rights of the stock of AFI or any of the ATOB Entities;

 

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(vii) any issuance of shares of a new class of nonvoting stock or approval or allowance of any of the ATOB Entities to issue shares of a new class of nonvoting stock;

(viii) any purchase, directly or through any Affiliate, of any of its outstanding stock after the Distribution, other than through stock purchases meeting the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30; or

(b) any action at any time that could jeopardize, directly or indirectly, any of the conclusions contained in any Tax Opinion (any such action, together with any actions described in Article 4.2(a) , collectively, the “ Prohibited Acts ”).

Notwithstanding the foregoing, AFI or a member of the AFI Group may take any of the Prohibited Acts if AFI either (i) obtains an Unqualified Tax Opinion in form and substance reasonably satisfactory to AWI or (ii) obtains the prior written consent of AWI waiving the requirement that AFI obtain an Unqualified Tax Opinion, such waiver to be provided in AWI’s sole and absolute discretion. AWI’s evaluation of an Unqualified Tax Opinion may consider, among other factors, the appropriateness of any underlying assumptions, representations, and covenants made in connection with such opinion. AFI shall bear all costs and expenses of securing any such Unqualified Tax Opinion and shall reimburse AWI for all reasonable out-of-pocket expenses that AWI or its Subsidiaries may incur in good faith in seeking to obtain or evaluate any such Unqualified Tax Opinion. Neither the delivery of an Unqualified Tax Opinion nor AWI’s waiver of AFI’s obligation to deliver an Unqualified Tax Opinion shall limit or modify AFI’s continuing indemnification obligation pursuant to Article V .

4.3 AWI Covenants . Notwithstanding anything to the contrary contained in this Agreement or any other agreement, AWI, on behalf of itself and all other members of the AWI Group, hereby confirms and agrees that neither AWI nor any member of the AWI Group will take or permit to be taken any action at any time that would likely jeopardize, directly or indirectly, any of the conclusions contained in any Tax Opinion.

ARTICLE V

INDEMNITY OBLIGATIONS

5.1 Indemnity Obligations .

(a) AWI shall indemnify and hold harmless AFI from and against, and will reimburse AFI for, (i) all liability for Taxes allocated to AWI pursuant to Article II , and (ii) all Taxes and Tax-Related Losses arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant, or obligation of any member of the AWI Group pursuant to this Agreement.

(b) Without regard to whether any action is permitted or consented to hereunder and notwithstanding anything to the contrary contained herein, AFI shall indemnify and hold harmless AWI from and against, and will reimburse AWI for, (i) all liability for Taxes allocated to AFI pursuant to Article II , (ii) all Taxes and Tax-Related Losses arising out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as

 

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applicable, any representation, covenant, or obligation of any member of the AFI Group pursuant to this Agreement, (iii) all Taxes and Tax-Related Losses arising out of, based upon, or relating or attributable to any Prohibited Act by AFI or any member of the AFI Group, regardless of whether (A) AWI consented to such Prohibited Act, or (B) AFI obtained an Unqualified Tax Opinion, and (iv) the amount of any Refund received by any member of the AFI Group that is allocated to AWI pursuant to Article 2.4(a) .

(c) To the extent that any Tax or Tax-Related Loss is subject to indemnity pursuant to both Articles 5.1(a) and 5.1(b) , responsibility for such Tax or Tax-Related Loss shall be shared by AWI and AFI according to relative fault.

5.2 Indemnification Payments .

(a) Except as otherwise provided in this Agreement, if either Party (the “ Indemnitee ”) is required to pay to a Governmental Authority a Tax or to another Party an indemnification payment in respect of a Tax that another Party (the “ Indemnifying Party ”) is liable for under this Agreement, including as the result of a Final Determination, the Indemnitee shall notify the Indemnifying Party, in writing, of its obligation to pay such Taxes and, in reasonably sufficient detail, its calculation of the amount due by such Indemnifying Party to the Indemnitee, including any Tax-Related Losses attributable thereto. The Indemnifying Party shall pay such amount, including any Tax-Related Losses attributable thereto, to the Indemnitee no later than the later of (i) five (5) Business Days prior to the date on which such payment is due to the applicable Governmental Authority or (ii) fifteen (15) Business Days after the receipt of notice from the other Party.

(b) If, as a result of any change or redetermination made with respect to Article 2.1 or 2.2 , any amount previously allocated to and borne by one Party pursuant to the provisions of Article II is thereafter allocated to the other Party, then, no later than ten (10) Business Days after such change or redetermination, such other Party shall pay to such Party the amount previously borne by such Party which is allocated to such other Party as a result of such change or redetermination.

5.3 Payment Mechanics .

(a) Subject to Article 10.2 , all payments under this Agreement shall be made by AWI directly to AFI and by AFI directly to AWI; provided , however , that if the Parties mutually agree with respect to any such indemnification payment, any member of the AWI Group, on the one hand, may make such indemnification payment to any member of the AFI Group, on the other hand, and vice versa. All indemnification payments shall be treated in the manner described in Article 5.4 .

(b) Any late payment made by one Party to another Party pursuant to this Agreement shall be subject to interest at a rate per annum equal to the then effective Prime Rate plus 1% (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, and accrued from the date on which such payment was due up to the date of the actual receipt of payment.

 

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(c) In the case of any payment of Taxes made by a Responsible Party or Indemnitee pursuant to this Agreement for which such Responsible Party or Indemnitee, as the case may be, has received a payment from the other Party, such Responsible Party or Indemnitee shall provide to the other Party a copy of any official government receipt received with respect to the payment of such Taxes to the applicable Governmental Authority (or, if no such official governmental receipts are available, executed bank payment forms or other reasonable evidence of payment).

5.4 Treatment of Payments . The Parties agree that any payment made among the Parties pursuant to this Agreement shall be treated, to the extent permitted by law, for all United States federal income Tax purposes as either (i) a non-taxable contribution by AWI to AFI, or (ii) a distribution by AFI to AWI, in each case, made immediately prior to the Distribution.

ARTICLE VI

TAX CONTESTS

6.1 Notice . Each Party shall promptly notify the other Party in writing upon receipt by such Party or any member of its Group of a written communication from any Governmental Authority with respect to any pending or threatened audit, claim, dispute, suit, action, proposed assessment or other proceeding concerning any Taxes for which the other Party may be liable pursuant to this Agreement (a “ Tax Contest ”).

6.2 Control of Contests by AWI . AWI shall have the sole responsibility and right to control the prosecution of any Tax Contest, including the exclusive right to communicate with agents of the applicable Governmental Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of any such Tax Contest, other than AFI Controlled Tax Contests (collectively, “ AWI Controlled Tax Contests ”).

6.3 Control of Contests by AFI . AFI shall have the full responsibility and right to control the prosecution of any Tax Contest, including the exclusive right to communicate with agents of the applicable Governmental Authority and to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of any such Tax Contest, involving any Tax Return filed or required (or purportedly required) to be filed by AFI or any member of the AFI Group, and any Tax Contest relating exclusively to AFI Indirect Taxes for any taxable year or taxable period (collectively, “ AFI Controlled Tax Contests ”).

6.4 Obligation of Continued Notice . During the pendency of any Tax Contest or threatened Tax Contest, each of the Parties shall provide prompt notice to the other Party of any written communication received by it or a member of its respective Group from a Governmental Authority regarding any Tax Contest for which it is indemnified by the other Party hereunder or for which it may be required to indemnify the other Party hereunder. Such notice shall attach copies of the pertinent portion of any written communication from a Governmental Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents

 

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received from any Governmental Authority in respect of any such matters. Such notice shall be provided in a reasonably timely fashion; provided , however , that in the event that timely notice is not provided, a Party shall be relieved of its obligation to indemnify the other Party only to the extent that such delay results in actual increased costs or actual prejudice to such other Party.

6.5 Settlement Rights . Unless waived by the Parties in writing, in connection with any potential adjustment in a Tax Contest as a result of which adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement: (i) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (ii) the Controlling Party shall timely provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; (iii) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment in such Tax Contest; and (iv) the Controlling Party shall defend such Tax Contest diligently and in good faith; provided , however , that nothing in this Article 6.5 shall affect AWI’s right to control, resolve, settle, or agree to any deficiency, claim, or adjustment proposed, asserted, or assessed in connection with or as a result of any AWI Controlled Tax Contest, or consent to the resolution, settlement or agreement of any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such AFI Controlled Tax Contest, in AWI’s sole and absolute discretion. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.

ARTICLE VII

COOPERATION

7.1 General . Each Party shall fully cooperate, and shall cause all members of such Party’s Group to fully cooperate, with the other Party in connection with the preparation and filing of any Tax Return or the conduct of any Tax Contest (including, where appropriate or necessary, providing a power of attorney) concerning any issues or any other matter contemplated pursuant to this Agreement. Each Party shall make its employees and facilities available on a mutually convenient basis to facilitate such cooperation.

7.2 Consistent Treatment . Unless and until there has been a Final Determination to the contrary, each Party agrees not to take any position on any Tax Return, in connection with any Tax Contest or otherwise that is inconsistent with the treatment of payments between the AWI Group and the AFI Group as set forth in Article 5.4 , or the Tax Materials.

 

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ARTICLE VIII

RETENTION OF RECORDS; ACCESS

8.1 Retention of Records . For so long as the contents thereof may become material in the administration of any matter under applicable Tax law, but in any event until the later of (i) the expiration of any applicable statutes of limitation and (ii) seven years after the Distribution Date, the Parties shall retain records, documents, accounting data and other information (including computer data) necessary for the preparation and filing of all Tax Returns (collectively, “ Tax Records ”) in respect of Taxes of any member of either the AWI Group or the AFI Group for any Pre-Distribution Period, Straddle Period, or Post-Distribution Period or for any Tax Contests relating to such Tax Returns. At any time after the Distribution Date that the AWI Group proposes to destroy such material or information, it shall first notify the AFI Group in writing and the AFI Group shall be entitled to receive such materials or information proposed to be destroyed. At any time after the Distribution Date that the AFI Group proposes to destroy such material or information, it shall first notify the AWI Group in writing and the AWI Group shall be entitled to receive such materials or information proposed to be destroyed.

8.2 Access to Tax Records . The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Governmental Authority or other Tax auditor direct access, during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items pursuant to this Agreement. The Party seeking access to the records of the other Party shall bear all costs and expenses associated with such access, including any professional fees.

8.3 Preservation of Privilege . No member of the AFI Group shall provide access to, copies of, or otherwise disclose to any Person any documentation relating to Taxes existing as of the date hereof to which Privilege may reasonably be asserted without the prior written consent of AWI, such consent not to be unreasonably withheld.

ARTICLE IX

DISPUTE RESOLUTION

9.1 Any dispute, controversy or claim arising out of or relating to this Agreement (a “ Dispute ”), shall initially referred to the Transition Committee (as defined in the Separation and Distribution Agreement) for resolution. If the Transition Committee is unable to resolve such Dispute within thirty (30) days, then either Party may provide written notice thereof to the other Party (the “ Initial Notice ”), and the Parties shall thereafter attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of vice president and who have authority to settle the Dispute. All such

 

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negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. In the event that a Dispute is not resolved within sixty (60) days after receipt by a Party of an Initial Notice, or within such longer period as the Parties may agree to in writing, then the Parties to such Dispute shall each separately retain an independent, nationally recognized law or accounting firm (each, a “ Preliminary Tax Advisor ” and, together, the “ Preliminary Tax Advisors ”), which Preliminary Tax Advisors shall jointly retain a third independent, nationally recognized law or accounting firm which must be located in New York, New York (the “ Tax Advisor ”) on behalf of the Parties to the Dispute to act as an arbitrator in order to resolve the Dispute. The Tax Advisor’s determination as to any Dispute shall be made in accordance with the terms of this Agreement and shall be final and binding on the Parties and not subject to collateral attack for any reason (other than manifest error). All fees and expenses of the Preliminary Tax Advisor shall be borne by the Party that engaged such advisor and all of the fees and expenses of the Tax Advisor shall be shared equally by each of the Parties to the Dispute.

9.2 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY DISPUTE DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.2.

ARTICLE X

MISCELLANEOUS PROVISIONS

10.1 Conflicting Agreements . In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Separation and Distribution Agreement or any Ancillary Agreement, this Agreement shall control with respect to the subject matter thereof.

10.2 Assignability . This Agreement shall be binding upon and inure to the benefit of the Parties hereto, and their respective successors and permitted assigns. A Party hereto may assign its respective rights or delegate its respective obligations under this Agreement to any Affiliate of such Party; provided , however , that in connection with each such assignment or delegation, the assigning Party provides a guarantee to the non-assigning Party for any liability

 

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or obligation assigned or delegated pursuant to this Section 10.2 ; provided , further , that AFI shall only be entitled to assign its rights or delegate its obligations under this Agreement with the prior written consent of AWI.

10.3 No Fiduciary Relationship . The duties and obligations of the Parties, and their respective successors and permitted assigns, contained herein are the extent of the duties and obligations contemplated by this Agreement; nothing in this Agreement is intended to create a fiduciary relationship between the Parties hereto, or any of their successors and permitted assigns, or create any relationship or obligations other than those explicitly described.

10.4 Application to Present and Future Subsidiaries . This Agreement is being entered into by AWI and AFI on behalf of themselves and the members of their respective Group. This Agreement shall constitute a direct obligation of each such Party and shall be deemed to have been readopted and affirmed on behalf of any entity that becomes a Subsidiary of AWI or AFI in the future.

10.5 Further Assurances . Subject to the provisions hereof, the Parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby.

10.6 Survival . Notwithstanding any other provision of this Agreement to the contrary, all representations, covenants and obligations contained in this Agreement shall survive until the expiration of the applicable statute of limitations with respect to any such matter (including extensions thereof).

10.7 Notices . All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Article 10.7 ):

 

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If to AWI, to:  
Armstrong World Industries, Inc.
P.O. Box 3001  
Lancaster PA 17604  
Email:   mahershey@armstrongceilings.com
Attention:   General Counsel
with a copy to:  
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square  
New York, NY 10036  
Email:   Steven.Matays@skadden.com
Attention:   Steven J. Matays
If to AFI, to:  
Armstrong Flooring, Inc.
P.O. Box 3025  
Lancaster, PA 17604  
Email:   csparisi@armstrongflooring.com
Attention:   General Counsel
with a copy (prior to the Distribution Effective Time (as defined in the Separation and Distribution Agreement)) to:
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square  
New York, NY 10036  
Email:   Steven.Matays@skadden.com
Attention:   Steven J. Matays

Any Party may, by notice to the other Party, change the address to which such notices are to be given.

10.8 No Circumvention . The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action, or cause or allow any member of any such Party’s Group to take any actions (including the failure to take a reasonable action) such that the resulting effect is to materially undermine the effectiveness of any of the provisions of this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement (including adversely affecting the rights or ability of any Party to successfully pursue indemnification or payment pursuant to the provisions of this Agreement).

10.9 No Duplication; No Double Recovery . Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation, or recovery with respect to any matter arising out of the same facts and circumstances.

 

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10.10 Separation and Distribution Agreement . To the extent not inconsistent with any specific term of this Agreement, the provisions of the Separation and Distribution Agreement shall apply in relevant part to this Agreement, including Article IX Termination; 10.1 Counterparts; Entire Agreement; Corporate Power; 10.2 Governing Law; 10.4 Third-Party Beneficiaries; 10.6 Severability; 10.7 Force Majeure; 10.9 Publicity; 10.10 Expenses; 10.11 Headings; 10.12 Survival of Covenants; 10.13 Waivers of Default; 10.14 Specific Performance; 10.15 Amendments; 10.16 Interpretation; 10.17 Limitations of Liability; 10.18 Performance; and 10.19 Mutual Drafting.

*        *        *

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the day and year first above written.

 

ARMSTRONG WORLD INDUSTRIES, INC.
By:  

/s/ Brian L. MacNeal

  Name:   Brian L. MacNeal
  Title:   Authorized Officer
ARMSTRONG FLOORING, INC.
By:  

/s/ John W. Thompson

  Name:   John W. Thompson
  Title:   Authorized Officer

 

-23-

Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

ARMSTRONG WORLD INDUSTRIES, INC.

AND

ARMSTRONG FLOORING, INC.

DATED AS OF APRIL 1, 2016


TABLE OF CONTENTS

 

          Page  

Article I

  

DEFINITIONS

  

Section 1.01

  

Definitions

     1   

Section 1.02

  

Interpretation

     7   

Article II

  

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

  

Section 2.01

  

General Principles

     8   

Section 2.02

  

Service Credit

     9   

Section 2.03

  

Benefit Plans

     10   

Section 2.04

  

Individual Agreements

     11   

Section 2.05

  

Collective Bargaining

     11   

Section 2.06

  

Non-U.S. Jurisdictions

     12   

Article III

  

ASSIGNMENT OF EMPLOYEES

  

Section 3.01

  

Active Employees

     12   

Section 3.02

  

Global No-Hire and Non-Solicitation

     13   

Article IV

  

EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION

  

Section 4.01

  

Generally

     14   

Section 4.02

  

Equity Incentive Awards

     14   

Section 4.03

  

Non-Equity Incentive Plans

     17   

Section 4.04

  

Director Compensation

     18   

Article V

  

U.S. QUALIFIED RETIREMENT PLANS

  

Section 5.01

  

AFI U.S. Pension Plan

     19   

Section 5.02

  

AFI U.S. Savings Plan

     21   

 

i


Article VI  

U.S. NONQUALIFIED PLANS

  

Section 6.01

  

AFI Nonqualified Plans

     22   

Section 6.02

  

Retained Nonqualified Plans

     23   

Section 6.03

  

Participation; Distributions

     23   

Article VII

  

WELFARE BENEFIT PLANS

  

Section 7.01

  

Welfare Plans

     24   

Section 7.02

  

U.S. COBRA and HIPAA

     25   

Section 7.03

  

Vacation, Holidays and Leaves of Absence

     26   

Section 7.04

  

U.S. Severance Plan

     26   

Section 7.05

  

Severance and Unemployment Compensation

     26   

Section 7.06

  

Workers’ Compensation

     26   

Section 7.07

  

Insurance Contracts

     27   

Section 7.08

  

Third-Party Vendors

     27   

Section 7.09

  

AFI Retained Welfare Plans

     27   

Article VIII

  

NON-U.S. EMPLOYEES

  

Article IX

  

MISCELLANEOUS

  

Section 9.01

  

Employee Records

     27   

Section 9.02

  

Preservation of Rights to Amend

     28   

Section 9.03

  

Fiduciary Matters

     29   

Section 9.04

  

Further Assurances

     29   

Section 9.05

  

Counterparts; Entire Agreement; Corporate Power

     29   

Section 9.06

  

Governing Law

     30   

Section 9.07

  

Assignability

     30   

Section 9.08

  

Third-Party Beneficiaries

     30   

Section 9.09

  

Notices

     30   

Section 9.10

  

Severability

     31   

Section 9.11

  

Force Majeure

     32   

Section 9.12

  

Headings

     32   

Section 9.13

  

Survival of Covenants

     32   

Section 9.14

  

Waivers of Default

     32   

Section 9.15

  

Dispute Resolution

     32   

Section 9.16

  

Specific Performance

     32   

Section 9.17

  

Amendments

     32   

 

ii


Section 9.18

  

Interpretation

     32   

Section 9.19

  

Limitations of Liability

     33   

Section 9.20

  

Mutual Drafting

     33   

 

iii


EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT, dated as of April 1, 2016 (this “ Agreement ”), is by and between Armstrong World Industries, Inc., a Pennsylvania corporation (“ AWI ”), and Armstrong Flooring, Inc., a Delaware corporation (“ AFI ”).

R E C I T A L S:

WHEREAS, the board of directors of AWI (the “ AWI Board ”) has determined that it is in the best interests of AWI and its shareholders to create a new publicly traded company that shall operate the AFI Business;

WHEREAS, in furtherance of the foregoing, the AWI Board has determined that it is appropriate and desirable to separate the AFI Business from the AWI Business (the “ Separation ”) and, following the Separation, distribute, on a pro rata basis to holders of AWI Shares on the Record Date, all the outstanding AFI Shares owned by AWI (the “ Distribution ”);

WHEREAS, in order to effectuate the Separation and Distribution, AWI and AFI have entered into a Separation and Distribution Agreement, dated as of April 1, 2016 (the “ Separation and Distribution Agreement ”); and

WHEREAS, in addition to the matters addressed by the Separation and Distribution Agreement, the Parties desire to enter into this Agreement to set forth the terms and conditions of certain employment, compensation and benefit matters.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions . For purposes of this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to them in the Separation and Distribution Agreement.

Action ” shall have the meaning set forth in the Separation and Distribution Agreement.

Affiliate ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI ” shall have the meaning set forth in the preamble to this Agreement.

AFI Awards ” shall mean AFI Options and AFI Stock Unit Awards, collectively.


AFI Benefit Plan ” shall mean any Benefit Plan established, sponsored, maintained or contributed to by a member of the AFI Group as of or after the Effective Time.

AFI Board ” shall mean the Board of Directors of AFI.

AFI Business ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI Designees ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI Equity Plan ” shall mean the AFI 2016 Equity Incentive Plan.

AFI Group ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI Group Defined Benefit Plan Participants ” shall mean any AFI Group Employee who has accrued a benefit under the AWI Pension Plan and any Former AFI Group Employee who qualified to retire on or after October 1, 2006 under the retirement provisions of the AWI Pension Plan from a currently operating AFP site (operating as of the Effective Time) and any alternate payees of this group. This group shall exclude the following individuals: 1) any Former AFI Group Employee who did not qualify to retire on or after October 1, 2006 under the retirement provisions of the AWI Pension Plan from a currently operating AFP site (operating as of the Effective Time), and 2) any beneficiaries of Former AFI Group Employee who qualified to retire on or after October 1, 2006 under the retirement provisions of the AWI Pension Plan from a currently operating AFP site (operating as of the Effective Time) who are receiving pension payments from the AWI Pension Plan due to the death of the Former AFI Group Employee.

AFI Group Employee ” shall mean any individual who is intended to be an employee of the AFI Group as of the Effective Time as evidenced by written notice provided to such individual or by designation in the HRIS system of record (SAP or otherwise) of AWI in an organization or cost center code of the AFI Group (including any such individual who is not actively working as of the Effective Time as a result of an illness, injury or leave of absence approved by the AWI Human Resources department or otherwise taken in accordance with applicable Law).

AFI HSA ” shall have the meaning set forth in Section 7.01(b) .

AFI Liability ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI Nonqualified Deferred Compensation Plan ” shall mean the U.S. AFI Nonqualified Deferred Compensation Plan.

AFI Nonqualified Defined Benefit Plan ” shall mean the U.S. Retirement Benefit Equity Plan of Armstrong Flooring, Inc.

 

2


AFI Option ” shall mean an option to purchase AFI Shares granted by AFI pursuant to the AFI Equity Plan in accordance with Section 4.02(a) .

AFI Pension Plan ” shall mean the U.S. Retirement Income Plan for Employees of Armstrong Flooring, Inc.

AFI Pension Trust ” shall have the meaning set forth in Section 5.01(a) .

AFI Ratio ” shall mean a ratio, the numerator of which is the closing price of AWI Shares trading on the “regular way with due bills attached” basis for the Distribution Date, and the denominator of which is the opening price of AFI Shares trading on the “regular way” basis for the first trading day following the Distribution Date.

AFI Savings Plan ” shall mean the U.S. Armstrong Flooring, Inc. 401(k) Savings Plan.

AFI Severance Pay Plan ” shall mean the severance pay plan to be established by AFI in accordance with Section 7.04 .

AFI Shares ” shall have the meaning set forth in the Separation and Distribution Agreement.

AFI Welfare Plans ” shall mean the Welfare Plans established, sponsored, maintained or contributed to by any member of the AFI Group for the benefit of AFI Group Employees and Former AFI Group Employees.

Agreement ” shall have the meaning set forth in the preamble to this Agreement and shall include all Schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 9.17 .

Ancillary Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

Assets ” shall have the meaning set forth in the Separation and Distribution Agreement.

AWI ” shall have the meaning set forth in the preamble to this Agreement.

AWI Awards ” shall mean AWI Options and AWI Stock Unit Awards, collectively.

AWI Benefit Plan ” shall mean any Benefit Plan established, sponsored or maintained by AWI or any of its Subsidiaries immediately prior to the Effective Time, excluding any AFI Benefit Plan.

AWI Board ” shall have the meaning set forth in the recitals to this Agreement.

AWI Business ” shall have the meaning set forth in the Separation and Distribution Agreement.

AWI Compensation Committee ” shall mean the Management Development and Compensation Committee of the AWI Board.

 

3


AWI Equity Plan ” shall mean any equity compensation plan sponsored or maintained by AWI immediately prior to the Effective Time, including the 2011 Long-Term Incentive Plan, the 2008 Directors Stock Unit Plan, as amended, the 2006 Phantom Stock Unit Plan, as amended, and the 2006 Long-Term Incentive Plan, as amended.

AWI Group ” shall have the meaning set forth in the Separation and Distribution Agreement.

AWI Group Defined Benefit Plan Participant ” shall mean any Employee or Former Employee who has accrued a benefit under the AWI Pension Plan excluding all AFI Group Defined Benefit Plan Participants.

AWI Group Employee ” shall mean each individual who is employed by the AWI Group as of the Effective Time and who is not a AFI Group Employee (including any such individual who is not actively working as of the Effective Time as a result of an illness, injury or leave of absence approved by the AWI Human Resources department or otherwise taken in accordance with applicable Law).

AWI HSA ” shall have the meaning set forth in Section 7.01(b) .

AWI Liability ” shall have the meaning set forth in the Separation and Distribution Agreement.

AWI Non-Equity Incentive Plans ” shall mean the Management Achievement Plan and the Salaried Employee Bonus Plan as in effect immediately prior to the Effective Time.

AWI Nonqualified Deferred Compensation Plan ” shall mean the U.S. Armstrong Nonqualified Deferred Compensation Plan.

AWI Nonqualified Defined Benefit Plan ” shall mean the U.S. Retirement Benefit Equity Plan.

AWI Option ” shall mean an option to purchase AWI Shares granted pursuant to an AWI Equity Plan that is outstanding as of immediately prior to the Effective Time.

AWI Pension Plan ” shall mean the U.S. Retirement Income Plan for Employees of Armstrong World Industries, Inc.

AWI Pension Trust ” shall mean the U.S. Retirement Master Trust.

AWI Ratio ” shall mean a ratio, the numerator of which is the closing price of AWI Shares trading on the “regular way with due bills attached” basis for the Distribution Date, and the denominator of which is the opening price of AWI Shares trading on the “regular way” basis for the first trading day following the Distribution Date.

AWI Savings Plan ” shall mean the U.S. Savings and Investment Plan of Armstrong World Industries, Inc.

 

4


AWI Severance Pay Plan ” shall mean the U.S. Severance Pay Plan for Salaried Employees of Armstrong World Industries, Inc.

AWI Shares ” shall have the meaning set forth in the Separation and Distribution Agreement.

AWI Stock Unit Award ” shall mean a time-based restricted stock unit award or performance-based restricted stock unit award granted pursuant to an AWI Equity Plan that is outstanding as of immediately prior to the Effective Time.

AWI Welfare Plan ” shall mean any Welfare Plan established, sponsored, maintained or contributed to by AWI or any of its Subsidiaries for the benefit of Employees or Former Employees, including but not limited to each Welfare Plan listed on Schedule 1.01(c) but excluding any AFI Welfare Plan.

Benefit Plan ” shall mean any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature from an employer to any Employee, or to any family member, dependent, or beneficiary of any such Employee, including pension plans, thrift plans, supplemental pension plans and welfare plans, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits, severance benefits, change in control protections or benefits, travel and accident, life, accidental death and dismemberment, disability and accident insurance, tuition reimbursement, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays; provided , however , the term “Benefit Plan” does not include any government-sponsored benefits, such as workers’ compensation, unemployment or any similar plans, programs or policies.

COBRA ” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq . of ERISA and at Section 4980B of the Code.

Code ” shall have the meaning set forth in the Separation and Distribution Agreement.

Distribution ” shall have the meaning set forth in the recitals to this Agreement.

Distribution Date ” shall have the meaning set forth in the Separation and Distribution Agreement.

Effective Time ” shall mean the Distribution Effective Time as defined in the Separation and Distribution Agreement.

Employee ” shall mean any AWI Group Employee or AFI Group Employee.

ERISA ” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

FICA ” shall have the meaning set forth in Section 3.01(e) .

 

5


Force Majeure ” shall have the meaning set forth in the Separation and Distribution Agreement.

Former AFI Group Employee ” shall mean any individual who is a former employee of AWI or any of its former Subsidiaries or Subsidiaries as of the Effective Time, in each case, whose most recent employment with AWI was with a member of the AFI Group and who is designated as such in the HRIS system of record (SAP or otherwise) of AWI in an organization or cost center code of the AFI Group as of the individual’s last date of employment.

Former AWI Group Employee ” shall mean any individual who is a former employee of the AWI Group as of the Effective Time and who is not a Former AFI Group Employee.

Former Employees ” shall mean Former AWI Group Employees and Former AFI Group Employees.

FUTA ” shall have the meaning set forth in Section 3.01(e) .

General Continuation Period ” shall mean a period of time commencing as of the Distribution Date and ending on December 31, 2016.

Governmental Authority ” shall have the meaning set forth in the Separation and Distribution Agreement.

HIPAA ” shall mean the U.S. Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.

Individual Agreement ” shall mean any individual (i) employment contract, (ii) retention, severance or change of control agreement, (iii) expatriate (including any international assignee) contract or agreement (including agreements and obligations regarding repatriation, relocation, equalization of taxes and living standards in the host country), or (iv) other agreement containing restrictive covenants (including confidentiality, non–competition and non–solicitation provisions) between a member of the AWI Group and a AFI Group Employee, as in effect immediately prior to the Effective Time.

IRS ” shall mean the United States Department of Treasury Internal Revenue Service.

Law ” shall have the meaning set forth in the Separation and Distribution Agreement.

Liabilities ” shall have the meaning set forth in the Separation and Distribution Agreement.

Party ” shall mean a party to this Agreement.

PBGC ” shall mean the Pension Benefit Guaranty Corporation.

Person ” shall have the meaning set forth in the Separation and Distribution Agreement.

 

6


Post-Distribution AWI Awards ” shall mean the Post-Distribution AWI Options and Post-Distribution AWI Stock Unit Awards, collectively.

Post-Distribution AWI Option ” shall have the meaning set forth in Section 4.02(a) .

Post-Distribution AWI Stock Unit Award ” shall have the meaning set forth in Section 4.02(b) .

Providing Party ” shall have the meaning set forth in Section 2.02(b) .

QDRO ” shall mean a qualified domestic relations order within the meaning of Section 206(d) of ERISA and Section 414(p) of the Code.

Record Date ” shall have the meaning set forth in the Separation and Distribution Agreement.

Requesting Party ” shall have the meaning set forth in Section 2.02(b) .

Securities Act ” shall mean the U.S. Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

Separation ” shall have the meaning set forth in the recitals to this Agreement.

Separation and Distribution Agreement ” shall have the meaning set forth in the recitals to this Agreement.

Transferred Account Balances ” shall have the meaning set forth in Section 7.01(c) .

Transferred Director ” shall have the meaning set forth in Section 4.04(a) .

Transition Services Agreement ” shall have the meaning set forth in the Separation and Distribution Agreement.

U.S. ” shall mean the United States of America.

Welfare Plan ” shall mean any “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, mental health, substance abuse and retiree health), disability benefits, or life, accidental death and dismemberment, and business travel insurance, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time-off programs, contribution funding toward a health savings account, flexible spending accounts or cashable credits.

Section 1.02 Interpretation . Section 10.16 of the Separation and Distribution Agreement is hereby incorporated by reference.

 

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ARTICLE II

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 2.01 General Principles .

(a) Acceptance and Assumption of AFI Liabilities. On or prior to the Effective Time, but in any case prior to the Distribution, AFI and the applicable AFI Designees shall accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities in accordance with their respective terms (each of which shall be considered a AFI Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by AWI’s or AFI’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the AWI Group or the AFI Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the AWI Group or the AFI Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates:

(i) except as set forth on Schedule 2.4(b) of the Separation and Distribution Agreement, any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any AFI Group Employees and Former AFI Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;

(ii) any and all Liabilities whatsoever with respect to claims made by or with respect to any AFI Group Employees or Former AFI Group Employees in connection with any Benefit Plan not retained or assumed by any member of the AWI Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and

(iii) any and all Liabilities expressly assumed or retained by any member of the AFI Group pursuant to this Agreement.

(b) Acceptance and Assumption of AWI Liabilities. On or prior to the Effective Time, but in any case prior to the Distribution, AWI and certain members of the AWI Group designated by AWI shall accept, assume and agree to faithfully perform, discharge and fulfill all of the following Liabilities held by AFI or any AFI Designee and AWI and the applicable members of the AWI Group shall be responsible for such Liabilities in accordance with their respective terms (each of which shall be considered an AWI Liability), regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by

 

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AWI’s or AFI’s respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates against any member of the AWI Group or the AFI Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the AWI Group or the AFI Group, or any of their respective directors, officers, Employees, Former Employees, agents, Subsidiaries or Affiliates:

(i) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), equity compensation (as the same may be modified by this Agreement), commissions, bonuses and any other employee compensation or benefits payable to or on behalf of any AWI Group Employees and Former AWI Group Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, equity compensation, commissions, bonuses or other employee compensation or benefits are or may have been awarded or earned;

(ii) any and all Liabilities whatsoever with respect to claims made by or with respect to any AWI Group Employees or Former AWI Group Employees in connection with any Benefit Plan not retained or assumed by any member of the AFI Group pursuant to this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; and

(iii) any and all Liabilities expressly assumed or retained by any member of the AWI Group pursuant to this Agreement or Schedule 2.4(b) of the Separation and Distribution Agreement.

(c) Unaddressed Liabilities. To the extent that this Agreement does not address particular Liabilities under any Benefit Plan and the Parties later determine that they should be allocated in connection with the Distribution, the Parties shall agree in good faith on the allocation, taking into account the handling of comparable Liabilities under this Agreement.

Section 2.02 Service Credit .

(a) Service for Eligibility, Vesting and Benefit Purposes . The AFI Benefit Plans shall, and AFI shall cause each member of the AFI Group to, recognize each AFI Group Employee’s and each Former AFI Group Employee’s full service with AWI or any of its Subsidiaries or predecessor entities at or before the Effective Time, to the same extent that such service was credited by AWI for similar purposes prior to the Effective Time as if such full service had been performed for a member of the AFI Group, for purposes of eligibility, vesting and determination of level of benefits under any such AFI Benefit Plan.

(b) Evidence of Prior Service. Notwithstanding anything in this Agreement to the contrary, but subject to Section 3.02 and applicable Law, upon reasonable request by either Party (the “ Requesting Party ”), the other Party (the “ Providing Party ”) will provide to the Requesting Party copies of any records available to the Providing Party to document the service, plan participation and membership of former Employees of the Providing Party who are then Employees of the Requesting Party, and will cooperate with the Requesting Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any such Employee.

 

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Section 2.03 Benefit Plans .

(a) Establishment of Plans . Before the Effective Time, AFI shall, or shall cause an applicable member of the AFI Group to, adopt Benefit Plans (and related trusts, if applicable), with terms comparable (or such other standard as is specified in this Agreement with respect to any particular Benefit Plan) to those of the corresponding AWI Benefit Plans. The U.S. AWI Benefit Plans are listed on Schedule 2.03(a) . AFI may limit participation in any such AFI Benefit Plan to AFI Group Employees and Former AFI Group Employees who participated in the corresponding AWI Benefit Plan immediately prior to the Effective Time. AFI shall, or shall cause an applicable member of the AFI Group to, adopt such other Benefit Plans as specified in this Agreement.

(b) Information and Operation . AWI shall provide AFI with information describing each AWI Benefit Plan election made by a AFI Group Employee or Former AFI Group Employee that may have application to AFI Benefit Plans from and after the Effective Time, and AFI shall use its commercially reasonable efforts to administer the AFI Benefit Plans using those elections. Each Party shall, upon reasonable request, provide the other Party and the other Party’s respective Affiliates, agents, and vendors all information reasonably necessary to the other Party’s operation or administration of its Benefit Plans.

(c) No Diminution of Benefits . Except as provided herein, during the General Continuation Period, AFI shall provide to each AFI Group Employee and Former AFI Group Employee employee benefits under AFI Benefit Plans that, in the aggregate, are substantially similar to the employee benefits provided to such employees immediately prior to the Effective Time. Notwithstanding the foregoing, during such period, AFI may make such changes, modifications or amendments to the applicable AFI Benefit Plan as may be required by applicable Law or as are necessary and appropriate to reflect the Separation.

(d) No Duplication or Acceleration of Benefits. Notwithstanding anything to the contrary in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement, no participant in any AFI Benefit Plan shall receive service credit or benefits to the extent that receipt of such service credit or benefits would result in duplication of benefits provided to such participant by the corresponding AWI Benefit Plan or any other plan, program or arrangement sponsored or maintained by a member of the AWI Group. Furthermore, unless expressly provided for in this Agreement, the Separation and Distribution Agreement or in any Ancillary Agreement or required by applicable Law, no provision in this Agreement shall be construed to create any right to accelerate vesting or entitlements under any compensation or Benefit Plan, program or arrangement sponsored or maintained by a member of the AWI Group or member of the AFI Group on the part of any Employee or Former Employee.

(e) No Expansion of Participation . Unless otherwise expressly provided in this Agreement, as otherwise determined or agreed to by AWI and AFI, as required by applicable Law, or as explicitly set forth in a AFI Benefit Plan, a AFI Group Employee or Former AFI Group Employee shall be entitled to participate in the AFI Benefit Plans at the

 

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Effective Time only to the extent that such AFI Group Employee or Former AFI Group Employee was entitled to participate in the corresponding AWI Benefit Plan as in effect immediately prior to the Effective Time (to the extent that such AFI Group Employee or Former AFI Group Employee does not participate in the respective AFI Benefit Plan immediately prior to the Effective Time), it being understood that this Agreement does not expand (i) the number of AFI Group Employees or Former AFI Group Employees entitled to participate in any AFI Benefit Plan or (ii) the participation rights of AFI Group Employees or Former AFI Group Employees in any AFI Benefit Plans beyond the rights of such AFI Group Employees or Former AFI Group Employees under the corresponding AWI Benefit Plans, in each case, after the Effective Time.

(f) Transition Services . The Parties acknowledge that the AWI Group or the AFI Group may provide administrative services for certain of the other Party’s compensation and benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement.

(g) Beneficiaries . References to AWI Group Employees, Former AWI Group Employees, AFI Group Employees, Former AFI Group Employees, and non-employee directors of either AWI or AFI (including Transferred Directors), shall be deemed to refer to their beneficiaries, dependents, survivors and alternate payees, as applicable.

Section 2.04 Individual Agreements .

(a) Assignment by AWI . To the extent necessary, AWI shall assign, or cause an applicable member of the AWI Group to assign, to AFI or another member of the AFI Group, as designated by AFI, all Individual Agreements, with such assignment to be effective as of the Effective Time; provided , however , that to the extent that assignment of any such Individual Agreement is not permitted by the terms of such agreement or by applicable Law, effective as of the Effective Time, each member of the AFI Group shall be considered to be a successor to each member of the AWI Group for purposes of, and a third-party beneficiary with respect to, such Individual Agreement, such that each member of the AFI Group shall enjoy all of the rights and benefits under such agreement (including rights and benefits as a third-party beneficiary), with respect to the business operations of the AFI Group; provided , further , that in no event shall AWI be permitted to enforce any Individual Agreement (including any agreement containing non-competition or non-solicitation covenants) against a AFI Group Employee or Former AFI Group Employee for action taken in such individual’s capacity as a AFI Group Employee or Former AFI Group Employee.

(b) Assumption by AFI. Effective as of the Effective Time, AFI will assume and honor, or will cause a member of the AFI Group to assume and honor, any individual agreement to which any AFI Group Employee or Former AFI Group Employee is a party with any member of the AWI Group, including any Individual Agreement.

Section 2.05 Collective Bargaining . Effective no later than immediately prior to the Effective Time, to the extent necessary, AFI shall cause the appropriate member of the AFI

 

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Group to (a) assume all collective bargaining agreements (including any national, sector or local collective bargaining agreement) that cover AFI Group Employees or Former AFI Group Employees, including those bargaining agreements listed on Schedule 2.05 , and the Liabilities arising under any such collective bargaining agreements, and (b) join any industrial, employer or similar association or federation if membership is required for the relevant collective bargaining agreement to continue to apply.

Section 2.06 Non-U.S. Jurisdictions . Except as expressly set forth herein, the provisions of this Agreement shall apply in respect of all jurisdictions wherever situated; provided, however, that to the extent an Ancillary Agreement or an appendix attached hereto or a separation agreement between the Parties addresses employment, compensation and employee benefit matters, the terms of such Ancillary Agreement, appendix or separation agreement shall govern in respect of matters relating to employees employed in the applicable jurisdiction. AWI shall have the authority to adjust the treatment described in this Agreement (including any appendix attached hereto) or an Ancillary Agreement with respect to AFI Group Employees who are located outside of the United States in order to address different plans or benefits not addressed herein or to address applicable plans and benefits in a manner appropriate to the jurisdiction; ensure compliance with the applicable laws or regulations of countries outside of the United States; or to preserve the tax benefits provided under local tax law or regulation before the Distribution.

ARTICLE III

ASSIGNMENT OF EMPLOYEES

Section 3.01 Active Employees .

(a) Assignment and Transfer of Employees. Effective no later than immediately prior to the Effective Time and except as otherwise agreed by the Parties, (i) the applicable member of the AWI Group shall have taken such actions as are necessary to ensure that each AFI Group Employee is employed by a member of the AFI Group as of immediately after the Effective Time, and (ii) the applicable member of the AWI Group shall have taken such actions as are necessary to ensure that each AWI Group Employee is employed by a member of the AWI Group as of immediately after the Effective Time. Each of the Parties agrees to execute, and to seek to have the applicable Employees execute, such documentation, if any, as may be necessary to reflect such assignment and/or transfer.

(b) At-Will Status. Nothing in this Agreement shall create any obligation on the part of any member of the AWI Group or any member of the AFI Group to (i) continue the employment of any Employee or permit the return from a leave of absence for any period after the date of this Agreement (except as required by applicable Law) or (ii) change the employment status of any Employee from “at-will,” to the extent that such Employee is an “at-will” employee under applicable Law.

(c) Severance. The Parties acknowledge and agree that the Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 3.01 shall not be deemed an involuntary termination of employment entitling any AFI Group Employee or AWI Group Employee to severance payments or benefits.

 

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(d) Not a Change of Control/Change in Control . The Parties acknowledge and agree that neither the consummation of the Distribution nor any transaction contemplated by this Agreement, the Separation and Distribution Agreement or any other Ancillary Agreement shall be deemed a “change of control,” “change in control,” or term of similar import for purposes of any Benefit Plan sponsored or maintained by any member of the AWI Group or member of the AFI Group.

(e) U.S. Payroll and Related Taxes . With respect to any AFI Group Employee or group of AFI Group Employees, the Parties shall, or shall cause their respective Subsidiaries to, (i) treat AFI (or the applicable member of the AFI Group) as a “successor employer” and AWI (or the applicable member of the AWI Group) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, for purposes of taxes imposed under the United States Federal Insurance Contributions Act, as amended (“ FICA ”), or the United States Federal Unemployment Tax Act, as amended (“ FUTA ”), (ii) cooperate with each other to avoid, to the extent possible, the restart of FICA and FUTA upon or following the Effective Time with respect to each such AFI Group Employee for the tax year during which the Effective Time occurs, and (iii) use commercially reasonably efforts to implement the alternate procedure described in Section 5 of Revenue Procedure 2004-53; provided , however , that, to the extent that AFI (or the applicable member of the AFI Group) cannot be treated as a “successor employer” to AWI (or the applicable member of the AWI Group) within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code with respect to any AFI Group Employee or group of AFI Group Employees, (x) with respect to the portion of the tax year commencing on January 1, 2016 and ending on the Distribution Date, AWI will (A) be responsible for all payroll obligations, tax withholding and reporting obligations for such AFI Group Employees and (B) furnish a Form W-2 or similar earnings statement to all such AFI Group Employees for such period, and (y) with respect to the remaining portion of such tax year, AFI will (A) be responsible for all payroll obligations, tax withholding and reporting obligations regarding such AFI Group Employees and (B) furnish a Form W-2 or similar earnings statement to all such AFI Group Employees.

Section 3.02 Global No-Hire and Non-Solicitation . Each Party agrees that, for a period of eighteen (18) months from the Distribution Date, such Party shall not hire or solicit for employment, or solicit and enter into in any contractual arrangement for consulting or other professional services, any individual who is an AWI Group Employee, in the case of AFI, or a AFI Group Employee, in the case of AWI; provided , however , that, without limiting the generality of the foregoing prohibition on solicitation and hiring Employees of the other Party, this Section 3.02 shall not prohibit (a) generalized solicitations that are not directed to specific Persons or Employees of the other Party, (b) the solicitation and hiring of a Person whose employment was involuntarily terminated by the other Party, or (c) the solicitation and hiring of a Person after receipt by the soliciting Party (in advance of any solicitation or, in the case of a response to a general solicitation as permitted under clause (a) above, in advance of any subsequent solicitation in connection with the recruiting process) of the express written consent of the senior Human Resources executive of the Party that employs the Person who is to be solicited and/or hired. Except as provided in clause (b) above with respect to involuntary terminations, without regard to the use of the term “Employee” or “employs,” the restrictions

 

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under this Section 3.02 shall be applicable to (i) AWI Group Employees whose employment terminates sixty (60) days prior to the Distribution Date or after the Distribution Date, and (ii) AFI Group Employees whose employment terminates sixty (60) days prior to the Distribution Date or after the Distribution Date, in each case, until the date that is six months after such Employee’s last date of employment with AWI or AFI, as applicable. For the avoidance of doubt, the restrictions under this Section 3.02 shall not apply to (i) Former Employees whose most recent employment with AWI and its Subsidiaries was involuntarily terminated prior to the Distribution Date, (ii) those Employees to be included on a list of employees to be agreed to be the Parties who provide payroll transition services to AWI pursuant to the Transition Services Agreement or (iii) Former Employees whose termination with AWI and its Subsidiaries occurred as a result of voluntary retirement prior to January 1, 2016.

ARTICLE IV

EQUITY, INCENTIVE AND EXECUTIVE COMPENSATION

Section 4.01 Generally . Each AWI Award granted that is outstanding as of immediately prior to the Effective Time shall be adjusted as described below; provided , however , that, effective immediately prior to the Effective Time, the AWI Compensation Committee may provide for different adjustments with respect to some or all AWI Awards to the extent that the AWI Compensation Committee deems such adjustments necessary and appropriate. Any adjustments made by the AWI Compensation Committee pursuant to the foregoing sentence shall be deemed incorporated by reference herein as if fully set forth below and shall be binding on the Parties and their respective Affiliates. Before the Effective Time, the AFI Equity Plan shall be established, with such terms as are necessary to permit the implementation of the provisions of Section 4.02 .

Section 4.02 Equity Incentive Awards .

(a) Stock Options .

(i) AWI Options . Each AWI Option that is outstanding immediately prior to the Effective Time and that is held by an AWI Group Employee or a Former AWI Group Employee shall be adjusted immediately following the close of market on the Distribution Date (and shall thereafter be referred to as a “ Post-Distribution AWI Option ”) as follows:

(A) The number of AWI Shares subject to each Post-Distribution AWI Option shall be equal to the product (rounded down to the nearest whole share) of (A) the number of AWI Shares subject to the corresponding AWI Option immediately prior to the Distribution Date and (B) the AWI Ratio.

(B) The exercise price per share for each Post-Distribution AWI Option shall be equal to (rounded up to the nearest whole cent) (A) the exercise price of the corresponding AWI Option immediately prior to the Distribution Date divided by (B) the AWI Ratio.

 

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(C) Except as set forth in Section 4.02(c) , each Post-Distribution AWI Option shall otherwise be subject to the same terms, vesting conditions, exercise procedures, expiration dates and termination provisions and other terms and conditions as were in effect immediately prior to the Distribution Date for the corresponding AWI Option.

(ii) AFI Options . Each AWI Option that is outstanding immediately prior to the Effective Time and that is held by a AFI Group Employee or a Former AFI Group Employee shall, effective immediately following the close of market on the Distribution Date, be cancelled and immediately replaced with an option to purchase AFI Shares (a “ AFI Option ”) as follows:

(A) The number of AFI Shares subject to each AFI Option shall be equal to the product (rounded down to the nearest whole share) of (A) the number of AWI Shares subject to the corresponding AWI Option immediately prior to the Distribution Date and (B) the AFI Ratio.

(B) The per share exercise price for each AFI Option shall be equal to (rounded up to the nearest whole cent) (A) the exercise price of the corresponding AWI Option immediately prior to the Distribution Date divided by (B) the AFI Ratio.

(C) Except as set forth in Section 4.02(c) , each AFI Option shall otherwise be subject to the same terms, vesting conditions, exercise procedures, expiration dates and termination provisions and other terms and conditions as were in effect immediately prior to the Distribution Date for the corresponding AWI Option. With respect to each AFI Option, AFI shall give each AFI Group Employee, Former AFI Group Employee and Transferred Director full vesting service credit for such individual’s service with AWI or any of its Subsidiaries prior to the Distribution Date to the same extent such service was recognized with respect to the corresponding AWI Option immediately prior to the Distribution Date.

(b) Time-Based and Performance-Based Restricted Stock Units .

(i) AWI RSUs . Each AWI Stock Unit Award that is outstanding immediately prior to the Effective Time and that is held by an AWI Group Employee, a Former AWI Group Employee or a member of the AWI Board other than a Transferred Director shall be adjusted immediately following the close of market on the Distribution Date (and shall thereafter be referred to as a “ Post-Distribution AWI Stock Unit Award ”) as follows:

(A) The number of AWI Shares subject to each Post-Distribution AWI Stock Unit Award shall be equal to the product (rounded down to the nearest whole share) of (A) the number of AWI Shares subject to corresponding AWI Stock Unit Award immediately prior to the Distribution Date and (B) the AWI Ratio;

 

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(B) Each Post-Distribution AWI Stock Unit Award shall be subject to the same terms, vesting conditions, issuance dates and method of distribution and other terms and conditions as were in effect immediately prior to the Distribution Date for the corresponding AWI Stock Unit Award.

(C) Each outstanding performance-based Post-Distribution AWI Stock Unit Award (the performance period of which commenced January 1, 2014 and ends December 31, 2016) shall vest and be paid at fifty percent (50%) of target subject to the AWI Group Employee’s continued service through December 31, 2016.

(ii) AFI RSUs . Each AWI Stock Unit Award that is outstanding immediately prior to the Effective Time and that is held by a AFI Group Employee, a Former AFI Group Employee or a Transferred Director shall, immediately following the close of market on the Distribution Date, be cancelled and immediately replaced with a time-based restricted stock unit award or performance-based restricted stock unit award with respect to AFI Shares (a “ AFI Stock Unit Award ”) as follows:

(A) The number of AFI Shares subject to each AFI Stock Unit Award shall be equal to the product (rounded down to the nearest whole share) of (A) the number of AWI Shares subject to the corresponding AWI Stock Unit Award immediately prior to the Distribution Date and (B) the AFI Ratio.

(B) Each AFI Stock Unit Award shall be subject to the same terms, vesting conditions, issuance dates and method of distribution and other terms and conditions that were in effect immediately prior to the Distribution Date for the corresponding AWI Stock Unit Award. With respect to each AFI Stock Unit Award, AFI shall give each AFI Group Employee, Former AFI Group Employee and Transferred Director full vesting service credit for such individual’s service with AWI or any of its Subsidiaries prior to the Distribution Date to the same extent such service was recognized with respect to the corresponding AWI Stock Unit Award immediately prior to the Distribution Date.

(C) Each outstanding performance-based AFI Stock Unit Award (the performance period of which commenced January 1, 2014 and ends December 31, 2016) shall vest and be paid at fifty percent (50%) of target subject to the AFI Group Employee’s continued service through December 31, 2016.

(c) Miscellaneous Award Terms . All of the foregoing adjustments shall be effected in accordance with Sections 424 and 409A of the Code. None of the Separation, the Distribution or any employment transfer described in Section 3.01(a) shall constitute a termination of employment for any Employee for purposes of any Post-Distribution AWI Award or any AFI Award. After the Effective Time, for each award adjusted under this Section 4.02 , any reference to a “change in control,” “change of control” or similar definition in an award agreement, employment agreement or AWI Equity Plan applicable to such award (A)

 

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with respect to Post-Distribution AWI Awards, shall be deemed to refer to a “change in control,” “change of control” or similar definition as set forth in the applicable award agreement, employment agreement or AWI Equity Plan, and (B) with respect to AFI Awards, shall be deemed to refer to a “Change in Control” as defined in the AFI Equity Plan.

(d) Equity Plan Restrictive Covenants . Without limiting the generality of Section 2.04(a) , effective as of the Effective Time, to the extent permitted under applicable Law, each member of the AFI Group shall be considered to be a successor to each member of the AWI Group for purposes of, and a third-party beneficiary with respect to, the restrictive covenants (including non-competition covenants) contained in the AWI Equity Plans and award agreements thereunder (only to the extent that such agreements are not assigned to AFI in accordance with Section 2.04 ), such that each member of the AFI Group shall enjoy all of the rights and benefits under such arrangements (including rights and benefits as a third-party beneficiary), with respect to the business operations of the AFI Group; provided , that from and after the Distribution Date, in no event shall AWI or any member of the AWI Group be permitted to enforce any restrictive covenant (including non-competition covenants) in the AWI Equity Plan or any award agreement thereunder against a AFI Group Employee or Former AFI Group Employee for action taken in such individual’s capacity as a AFI Group Employee or Former AFI Group Employee.

(e) Registration and Other Regulatory Requirements . AFI agrees to file applicable registration statements with respect to, and to cause to be registered pursuant to the Securities Act, the AFI Shares authorized for issuance under the AFI Equity Plan, as required pursuant to the Securities Act, before the date of issuance of any AFI Shares pursuant to the AFI Equity Plan. The Parties shall take such additional actions as are deemed necessary or advisable to effectuate the foregoing provisions of this Section 4.02(e) , including compliance with securities Laws and other legal requirements associated with equity compensation awards in affected non-U.S. jurisdictions. AWI agrees to facilitate the adoption and approval of the AFI Equity Plan consistent with the requirements of Treasury Regulations Section 1.162-27(f)(4)(iii).

Section 4.03 Non-Equity Incentive Plans .

(a) Corporate Bonus Plans . AWI shall establish bonus award opportunities for Employees participating in the AWI Non-Equity Incentive Plans with a Performance Period commencing as of January 1, 2016 and ending as of December 31, 2016. Such awards shall be paid in 2017 in accordance with normal payroll processes based on the performance of AWI for AWI Group Employees and AFI for AFI Group Employees, which performance shall be measured against respective budgeted 2016 targets approved by the AWI Compensation Committee in accordance with the terms of the AWI Non-Equity Incentive Plans prior to the Distribution; provided that the measurement of performance shall be based on the performance of the relevant business unit as part of a combined business prior to the Distribution and on a separate business unit basis for the remainder of the performance period. The achievement of performance against the targets shall be determined by the compensation committee of the board of directors of each respective business.

(b) Allocation of Liabilities. The AWI Group shall be solely responsible for funding, paying and discharging all obligations relating to the 2016 annual

 

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incentive bonus awards under the AWI Non–Equity Incentive Plans or other short-term compensation plan with respect to payments earned before, as of or after the Effective Time by AWI Group Employees or Former AWI Group Employees, and no member of the AFI Group shall have any obligations with respect thereto. The AFI Group shall be solely responsible for funding, paying and discharging all obligations relating to the 2016 annual incentive bonus awards under the AWI Non-Equity Incentive Plans or other short-term incentive compensation plan with respect to payments earned before, as of or after the Effective Time by AFI Group Employees or Former AFI Group Employees, and no member of the AWI Group shall have any obligations with respect thereto.

(c) Transfer of Accruals . As soon as practicable following the Distribution, AWI shall transfer to AFI the AWI Non-Equity Incentive Plan accruals in respect of AFI Group Employees and Former AFI Group Employees for the portion of the 2016 performance period that occurs prior to the Distribution.

Section 4.04 Director Compensation .

(a) Establishment of AFI Outside Directors’ Compensation Plan . Before the Effective Time, AFI shall, as it deems appropriate, establish an outside directors’ compensation program for each AFI non-employee director as of the Effective Time who served on the AWI Board immediately prior to the Effective Time but who will no longer serve on the AWI Board following the Effective Time (a “ Transferred Director ”). As of the Effective Time, AWI shall cease to have any Liability to any such Transferred Director under the AWI outside directors’ compensation program.

(b) Other Liabilities . Except as provided in Section 4.04(a) , AWI shall retain all other Liabilities and Assets relating to AWI non-employee director compensation.

(c) Director Compensation. AWI shall be responsible for the payment of any fees for service on the AWI Board that are earned at, before, or after the Effective Time, and AFI shall not have any responsibility for any such payments. With respect to any AFI non-employee director, AFI shall be responsible for the payment of any fees for service on the AFI Board that are earned at any time after the Effective Time and AWI shall not have any responsibility for any such payments. Notwithstanding the foregoing, AFI shall commence paying quarterly cash retainers to AFI non-employee directors in respect of the quarter in which the Effective Time occurs; provided that (i) if AWI has already paid such quarter’s cash retainers to AWI non-employee directors prior to the Effective Time, then within 30 days after the Distribution Date, AFI will pay AWI an amount equal to the portion of such payment that is attributable to Transferred Directors’ service to AFI after the Distribution Date, and (ii) if AWI has not yet paid such quarter’s cash retainers to AWI non-employee directors prior to the Effective Time, then within 30 days after the Distribution Date, AWI will pay AFI an amount equal to the portion of such payment that is attributable to Transferred Directors’ service to AWI on and prior to the Distribution Date. AWI Awards held by non-employee directors as of immediately prior to the Effective Time shall be treated as described in Section 4.02 .

 

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ARTICLE V

U.S. QUALIFIED RETIREMENT PLANS

Section 5.01 AFI U.S. Pension Plan .

(a) Establishment of AFI U.S. Pension Plan . As soon as practicable after the Effective Time and upon receipt by AWI of (i) a copy of the AFI Pension Plan; (ii) a copy of certified resolutions of the AFI Board (or its authorized committee or other delegate) evidencing adoption of the AFI Pension Plan and any related trust(s) (the “ AFI Pension Trust ”) and the assumption by the AFI Pension Plan of the Liabilities described in Section 5.01(b) ; and (iii) an opinion of counsel, which counsel and opinion are reasonably satisfactory to AWI, with respect to the qualified status of the AFI Pension Plan under Section 401(a) of the Code and the tax-exempt status of the AFI Pension Trust under Section 501(a) of the Code (the “ Pension Transfer Date ”), AWI shall direct the trustee of the AWI Pension Trust to transfer assets of the AWI Pension Plan to the AFI Pension Trust in the amounts described in Section 5.01(b) .

(b) Assumption of Liabilities; ERISA Section 4044 Transfer .

(i) AWI Pension Plan . As of the Effective Time, AFI shall cause the AFI Pension Plan to assume liabilities under the AWI Pension Plan with respect to AFI Group Defined Benefit Plan Participants, and shall cause the AFI Pension Trust to accept a transfer of assets from the AWI Pension Trust with respect to such assumed liabilities (including assets and liabilities in respect of alternate payees under any QDROs pertaining to such AFI Group Defined Benefit Plan Participants). The AWI Pension Trust shall transfer such assets to the AFI Pension Trust and, upon completion of such asset transfer, the AWI Pension Plan and the AWI Group shall be relieved of such liabilities.

(ii) Transfer of Assets . The amount of assets (whether in cash or kind, as determined by AWI) to be transferred from the AWI Pension Trust to the AFI Pension Trust in respect of the assumption of liabilities by AFI under Section 5.01(b)(i) (the “ Pension Transfer Amount ”) shall be determined as of the Distribution Date in accordance with, and shall comply with, Section 414(l) of the Code and, Section 4044 of ERISA. The Pension Transfer Amount shall be determined by the actuary for the AWI Pension Plan and shall be (a) the amount which would be allocated to the AFI Group Defined Benefit Plan Participants (and their alternate payees and beneficiaries, if any) if the AWI Pension Plan were terminated on the Distribution Date and assets were allocated to the AFI Group Defined Benefit Plan Participants (and their alternate payees and beneficiaries, if any) in accordance with Section 4044 of ERISA, based on the actuarial assumptions specified under regulations promulgated by the PBGC under Section 4044 of ERISA and, to the extent not so specified, on reasonable actuarial assumptions, as determined by the actuary of the AWI Pension Plan, plus (b) any investment return with respect to such amount stated in clause (a) from the Distribution Date through the Pension Transfer Date, minus (c) any investment losses with respect to such amount stated in clause (a) from the Distribution Date through the Pension Transfer Date, minus (d) the pro rata share of expenses charged to the AWI Pension Trust, including consulting, investment manager, legal and audit fees and costs, associated with such

 

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amount stated in clause (a) for the period between the Distribution Date and the Pension Transfer Date, minus (e) the PBGC premium amount with respect to such amount stated in clause (a) for the period between the Distribution Date and the Pension Transfer Date, and minus (f) any benefit payments made from the AWI Pension Trust following the Distribution Date and prior to the Pension Transfer Date in respect of AFI Group Defined Benefit Plan Participants. The entries in the AWI Pension Plan funding standard accounts shall be divided between the AWI Pension Plan and the AFI Pension Plan based on the guidance provided in Revenue Rulings 81-212 and 86-47, to the extent applicable.

(c) AFI Pension Plan Provisions . The AFI Pension Plan shall provide that:

(i) AFI Group Defined Benefit Plan Participants shall (A) be eligible to participate in the AFI Pension Plan as of the Effective Time to the extent that they were eligible to participate in the AWI Pension Plan and accruing pension benefits thereunder as of immediately prior to the Effective Time, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the AWI Pension Plan as of the Effective Time as if that service had been rendered to AFI;

(ii) the compensation paid by the AWI Group to a AFI Group Defined Benefit Plan Participant that is recognized under the AWI Pension Plan as of immediately prior to the Effective Time shall be credited and recognized for all applicable purposes under the AFI Pension Plan as though it were compensation from the AFI Group;

(iii) the accrued benefit of each AFI Group Defined Benefit Plan Participants under the AWI Pension Plan as of the Effective Time shall be payable under the AFI Pension Plan at the time and in a form that would have been permitted under the AWI Pension Plan as in effect as of the Effective Time, with employment by the AWI Group before the Effective Time treated as employment by the AFI Group under the AFI Pension Plan for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms;

(iv) the AFI Pension Plan shall assume and honor the terms of all QDROs in effect under the AWI Pension Plan as of immediately prior to the Effective Time with respect to AFI Group Defined Benefit Plan Participants; and

(v) following the Distribution Date, AFI shall fund the AFI Pension Plan to the extent required by applicable Law.

(d) AWI Pension Plan after Effective Time . From and after the Effective Time, (i) the AWI Pension Plan shall continue to be responsible for liabilities in respect of AWI Group Defined Benefit Plan Participants and (ii) no AFI Group Defined Benefit Plan Participants shall accrue any benefits under the AWI Pension Plan. Without limiting the generality of the foregoing, AFI Group Defined Benefit Plan Participants shall cease to be participants in the AWI Pension Plan, effective as of the Effective Time.

 

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(e) Plan Fiduciaries . For all periods after the Effective Time, the Parties agree that the applicable fiduciaries of each of the AWI Pension Plan and the AFI Pension Plan, respectively, shall have the authority with respect to the AWI Pension Plan and the AFI Pension Plan, respectively, to determine the plan investments and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents.

(f) No Loss of Unvested Benefits; No Distributions . The transfer of any AFI Group Defined Benefit Plan Participant’s employment to the AFI Group will not result in the loss of that AFI Group Defined Benefit Plan Participant’s unvested accrued benefits (if any) under the AWI Pension Plan, which benefit liability shall be assumed under the AFI Pension Plan as provided herein. No AFI Group Defined Benefit Plan Participant shall be entitled to a distribution of his or her benefit under the AWI Pension Plan or the AFI Pension Plan as a result of such transfer of employment.

Section 5.02 AFI U.S. Savings Plan .

(a) Establishment of Plan. Before the Effective Time, AFI shall provide AWI with (i) a copy of the AFI Savings Plan; (ii) a copy of certified resolutions of the AFI Board (or its authorized committee or other delegate) evidencing adoption of the AFI Savings Plan and the related trust(s) and the assumption by the AFI Savings Plan of the liabilities described in Section 5.02(b) ; and (iii) an opinion of counsel, which counsel and opinion are reasonably satisfactory to AWI, with respect to the qualified status of the AFI Savings Plan under Section 401(a) of the Code and the tax-exempt status of its related trust under Section 501(a) of the Code.

(b) Transfer of Account Balances . Not later than 30 days following the Distribution Date (or such later time as mutually agreed by the Parties), AWI shall cause the trustee of the AWI Savings Plan to transfer from the trust(s) which forms a part of the AWI Savings Plan to the trust(s) which forms a part of the AFI Savings Plan the account balances of the AFI Group Employees and Former AFI Group Employees under the AWI Savings Plan, determined as of the date of the transfer. Such transfers shall be made in kind, including promissory notes evidencing the transfer of outstanding loans. Any asset and liability transfers pursuant to this Section 5.02(b) shall comply in all respects with Sections 414(l) and 411(d)(6) of the Code.

(c) AFI Savings Plan Provisions . The AFI Savings Plan shall provide that:

(i) AFI Group Employees and Former AFI Group Employees shall (A) be eligible to participate in the AFI Savings Plan as of the Effective Time to the extent that they were eligible to participate in the AWI Savings Plan as of immediately prior to the Effective Time, and (B) receive credit for purposes of eligibility and vesting for all service credited for those purposes under the AWI Savings Plan as of immediately prior to the Distribution Date as if that service had been rendered to AFI; and

(ii) the account balance of each AFI Group Employee and Former AFI Group Employee under the AWI Savings Plan as of the date of the transfer of assets from the AWI Savings Plan (including any outstanding promissory notes) shall be credited to such individual’s account balance under the AFI Savings Plan.

 

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(d) AWI Savings Plan after Effective Time . From and after the Effective Time, (i) the AWI Savings Plan shall continue to be responsible for liabilities in respect of AWI Group Employees and Former AWI Group Employees, and (ii) no AFI Group Employees or Former AFI Group Employees shall accrue any benefits under the AWI Savings Plan. Without limiting the generality of the foregoing, AFI Group Employees and Former AFI Group Employees shall cease to be participants in the AWI Savings Plan effective as of the Effective Time.

(e) Plan Fiduciaries . For all periods after the Effective Time, the Parties agree that the applicable fiduciaries of each of the AWI Savings Plan and the AFI Savings Plan, respectively, shall have the authority with respect to the AWI Savings Plan and the AFI Savings Plan, respectively, to determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents.

(f) No Loss of Unvested Benefits; No Distributions . The transfer of any AFI Group Employee’s employment to the AFI Group will not result in loss of that AFI Group Employee’s unvested benefits (if any) under the AWI Savings Plan, which benefit liability will be assumed under the AFI Savings Plan as provided herein. No AFI Group Employee shall be entitled to a distribution of his or her benefit under the AWI Savings Plan or AFI Savings Plan as a result of such transfer of employment.

ARTICLE VI

U.S. NONQUALIFIED PLANS

Section 6.01 AFI Nonqualified Plans.

(a) Transfer of Nonqualified Deferred Compensation Plan Liabilities from AWI . As of the Effective Time, AFI shall, and shall cause the AFI Nonqualified Deferred Compensation Plan to, assume all Liabilities under the AWI Nonqualified Deferred Compensation Plan for the benefit of AFI Group Employees and Former AFI Group Employees and their respective beneficiaries and/or alternate payees, and the AWI Group and the AWI Nonqualified Deferred Compensation Plan shall be relieved of all Liabilities for those benefits. AWI shall retain all Liabilities under the AWI Nonqualified Deferred Compensation Plan for the benefits for AWI Group Employees and Former AWI Group Employees and their respective beneficiaries and/or alternate payees. From and after the Effective Time, AFI Group Employees and Former AFI Group Employees shall cease to be participants in the AWI Nonqualified Deferred Compensation Plan.

(b) Transfer of Nonqualified Defined Benefit Plan Liabilities from AWI

(i) As of the Effective Time, AFI shall, and shall cause the AFI Nonqualified Defined Benefit Plan to, assume a portion of Liabilities under the AWI

 

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Nonqualified Defined Benefit Plan for the benefit of AFI Group Defined Benefit Plan Participants then participating in the AWI Nonqualified Defined Benefit Plan and their respective beneficiaries and/or alternate payees, and the AWI Group and the AWI Nonqualified Defined Benefit Plan shall be relieved of all Liabilities for those benefits. AWI shall retain all Liabilities under the AWI Nonqualified Defined Benefit Plan for the benefit of AWI Group Defined Benefit Plan Participants and Former AWI Group Employees and their respective beneficiaries and/or alternate payees. From and after the Effective Time, AFI Group Defined Benefit Plan Participants shall cease to be participants in the AWI Nonqualified Defined Benefit Plan.

(ii) The AFI Nonqualified Defined Benefit Plan shall provide that:

(A) AFI Group Defined Benefit Plan Participants shall (A) be eligible to participate in the AFI Nonqualified Defined Benefit Plan as of the Effective Time to the extent that they were eligible to participate in the AWI Nonqualified Defined Benefit Plan as of immediately prior to the Effective Time, and (B) receive credit for vesting, eligibility and benefit service for all service credited for those purposes under the AWI Nonqualified Defined Benefit Plan as of the Effective Time as if that service had been rendered to AFI;

(B) the compensation paid by the AWI Group to a AFI Group Defined Benefit Plan Participant that is recognized under the AWI Nonqualified Defined Benefit Plan as of immediately prior to the Effective Time shall be credited and recognized for all applicable purposes under the AFI Nonqualified Defined Benefit Plan as though it were compensation from the AFI Group; and

(C) the accrued benefit of each AFI Group Defined Benefit Plan Participant under the AWI Nonqualified Defined Benefit Plan as of the Effective Time shall be payable under the AFI Nonqualified Defined Benefit Plan at the time and in a form that would have been permitted under the AWI Nonqualified Defined Benefit Plan as in effect as of the Effective Time, with employment by the AWI Group before the Effective Time treated as employment by the AFI Group under the AFI Nonqualified Defined Benefit Plan for purposes of determining eligibility for optional forms of benefit, early retirement benefits, or other benefit forms.

Section 6.02 Retained Nonqualified Plans . The Parties acknowledge that AWI will retain the Deferred Compensation Plan for Marketing Representatives of Thomasville Furniture Industries, Inc., the Armstrong Deferred Compensation Plan and the Directors Retirement Income Plan of AWI, Inc. (collectively, the “ Retained Nonqualified Plans ”), and AFI will not assume any liabilities in respect of the Retained Nonqualified Plans.

Section 6.03 Participation; Distributions . The Parties acknowledge that none of the transactions contemplated by this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement will trigger a payment or distribution of compensation under any of the

 

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AWI Nonqualified Deferred Compensation Plan, AWI Nonqualified Defined Benefit Plan, Retained Nonqualified Plans, AFI Nonqualified Deferred Compensation Plan or AFI Nonqualified Defined Benefit Plan for any participant and, consequently, that the payment or distribution of any compensation to which such participant is entitled under any of the AWI Nonqualified Deferred Compensation Plan, AWI Nonqualified Defined Benefit Plan, Retained Nonqualified Plans, AFI Nonqualified Deferred Compensation Plan or AFI Nonqualified Defined Benefit Plan will occur upon such participant’s separation from service from the AWI Group or AFI Group or at such other time as provided in the applicable plan or participant’s deferral election.

ARTICLE VII

WELFARE BENEFIT PLANS

Section 7.01 Welfare Plans .

(a) Waiver of Conditions; Benefit Maximums . AFI shall use commercially reasonable efforts to cause the AFI Welfare Plans to:

(i) with respect to initial enrollment as of the Effective Time, waive (A) all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any AFI Group Employee or Former AFI Group Employee, other than limitations that were in effect with respect to the AFI Group Employee or Former AFI Group Employee under the applicable AWI Welfare Plan as of immediately prior to the Effective Time, and (B) any waiting period limitation or evidence of insurability requirement applicable to a AFI Group Employee or Former AFI Group Employee other than limitations or requirements that were in effect with respect to such AFI Group Employee or Former AFI Group Employee under the applicable AWI Welfare Plans as of immediately prior to the Effective Time; and

(ii) take into account (A) with respect to aggregate annual, lifetime, or similar maximum benefits available under the AFI Welfare Plans, a AFI Group Employee’s or Former AFI Group Employee’s prior claim experience under the AWI Welfare Plans and any Benefit Plan that provides leave benefits; and (B) any eligible expenses incurred by a AFI Group Employee or Former AFI Group Employee and his or her covered dependents during the portion of the plan year of the applicable AWI Welfare Plan ending as of the Effective Time to be taken into account under such AFI Welfare Plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such AFI Group Employee or Former AFI Group Employee and his or her covered dependents for the applicable plan year to the same extent as such expenses were taken into account by AWI for similar purposes prior to the Effective Time as if such amounts had been paid in accordance with such AFI Welfare Plan.

(b) U.S. Health Savings Accounts . Before the Effective Time, AFI shall, or shall cause a member of the AFI Group to, establish a AFI Welfare Plan that will

 

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provide health savings account benefits to AFI Group Employees on and after the Effective Time (a “ AFI HSA ”). It is the intention of the Parties that all activity under a AFI Group Employee’s health savings account under an AWI Welfare Plan (a “ AWI HSA ”) for the year in which the Effective Time occurs be treated instead as activity under the corresponding account under the AFI HSA, such that (i) any period of participation by a AFI Group Employee in an AWI HSA during the year in which the Effective Time occurs will be deemed a period when such AFI Group Employee participated in the corresponding AFI HSA; (ii) all expenses incurred during such period will be deemed incurred while such AFI Group Employee’s coverage was in effect under the corresponding AFI HSA; and (iii) all elections and reimbursements made with respect to such period under the AWI HSA will be deemed to have been made with respect to the corresponding AFI HSA.

(c) U.S. Flexible Spending Accounts . The Parties shall use commercially reasonable efforts to ensure that as of the Effective Time any health or dependent care flexible spending accounts of AFI Group Employees (whether positive or negative) (the “ Transferred Account Balances ”) under AWI Welfare Plans that are health or dependent care flexible spending account plans are transferred, as soon as practicable after the Effective Time, from the AWI Welfare Plans to the corresponding AFI Welfare Plans. Such AFI Welfare Plans shall assume responsibility as of the Effective Time for all outstanding health or dependent care claims under the corresponding AWI Welfare Plans of each AFI Group Employee for the year in which the Effective Time occurs and shall assume and agree to perform the obligations of the corresponding AWI Welfare Plans from and after the Effective Time. As soon as practicable after the Effective Time, and in any event within 30 days after the amount of the Transferred Account Balances is determined or such later date as mutually agreed upon by the Parties, AFI shall pay AWI the net aggregate amount of the Transferred Account Balances, if such amount is positive, and AWI shall pay AFI the net aggregate amount of the Transferred Account Balances, if such amount is negative.

(d) Allocation of Welfare Assets and Liabilities . Effective as of the Effective Time, the AFI Group shall assume all Liabilities relating to, arising out of or resulting from health and welfare coverage or claims incurred by or on behalf of AFI Group Employees or Former AFI Group Employees or their covered dependents under the AWI Welfare Plans or AFI Welfare Plans before, at, or after the Effective Time. No AWI Welfare Plan shall provide coverage to any AFI Group Employee or Former AFI Group Employee after the Effective Time.

(e) Retiree Medical . Former AFI Group Employees and AFI Group Employees who are eligible for retiree medical and/or retiree life insurance under an AWI Welfare Plan immediately before the Effective Time, shall continue to be eligible for retiree medical and/or retiree life insurance through an AFI Welfare Plan immediately after the Effective Time. Former AWI Group Employees and AWI Group Employees who are eligible for retiree medical and/or retiree life insurance under an AWI Welfare Plan immediately before the Effective Time, shall continue to be eligible for retiree medical and/or retiree life insurance through an AWI Welfare Plan immediately after the Effective Time.

Section 7.02 U.S. COBRA and HIPAA . The AWI Group shall continue to be responsible for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the

 

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corresponding provisions of the AWI Welfare Plans with respect to any AWI Group Employees and any Former AWI Group Employees (and their covered dependents) who incur a qualifying event under COBRA before, as of, or after the Effective Time. Effective as of the Effective Time, the AFI Group shall assume responsibility for complying with, and providing coverage pursuant to, the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the AFI Welfare Plans with respect to any AFI Group Employees or Former AFI Group Employees (and their covered dependents) who incur a qualifying event or loss of coverage under the AWI Welfare Plans and/or the AFI Welfare Plans before, as of, or after the Effective Time. The Parties agree that the consummation of the transactions contemplated by the Separation and Distribution Agreement shall not constitute a COBRA qualifying event for any purpose of COBRA.

Section 7.03 Vacation, Holidays and Leaves of Absence . Effective as of the Effective Time, the AFI Group shall assume all Liabilities of the AWI Group with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each AFI Group Employee. The AWI Group shall retain all Liabilities with respect to vacation, holiday, annual leave or other leave of absence, and required payments related thereto, for each AWI Group Employee.

Section 7.04 U.S. Severance Plan . Before the Effective Time, AFI shall, or shall cause another member of the AFI Group to, establish the AFI Severance Pay Plan, which, for one year immediately following the Effective Time, shall have substantially the same terms as of immediately prior to the Effective Time as the AWI Severance Pay Plan. Notwithstanding the foregoing, during such period, AFI may make such changes, modifications or amendments to the AFI Severance Pay Plan as may be required by applicable Law or as are necessary and appropriate to reflect the Separation, it being understood that any such changes, modifications or amendments shall not result in benefits that are less favorable than those provided under the AWI Severance Pay Plan to the AFI Group Employees who were participants in the AWI Severance Pay Plan immediately prior to the Effective Time. During the one year immediately following the Effective Time, the AFI Group Employees who participated in the AWI Severance Pay Plan immediately prior to the Effective Time shall be eligible to participate in the AFI Severance Pay Plan as of the Effective Time at the same level and to the same extent as they had participated in the AWI Severance Pay Plan as of immediately prior to the Effective Time.

Section 7.05 Severance and Unemployment Compensation . Without limiting the generality of Section 7.04 , effective as of the Effective Time, the AFI Group shall assume any and all Liabilities to, or relating to, AFI Group Employees and Former AFI Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time. The AWI Group shall be responsible for any and all Liabilities to, or relating to, AWI Group Employees and Former AWI Group Employees in respect of severance and unemployment compensation, regardless of whether the event giving rise to the Liability occurred before, at or after the Effective Time.

Section 7.06 Workers’ Compensation . With respect to claims for workers’ compensation, (a) the AFI Group shall be responsible for claims in respect of AFI Group Employees and Former AFI Group Employees, whether occurring before, at or after the Effective Time, and (b) the AWI Group shall be responsible for all claims in respect of AWI

 

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Group Employees and Former AWI Group Employees, whether occurring before, at or after the Effective Time. The treatment of workers’ compensation claims by AFI with respect to AWI insurance policies shall be governed by Section 5.1 of the Separation and Distribution Agreement.

Section 7.07 Insurance Contracts . To the extent that any AWI Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, the Parties will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for AFI (except to the extent that changes are required under applicable state insurance Laws or filings by the respective insurers) and to maintain any pricing discounts or other preferential terms for both AWI and AFI for a reasonable term. Neither Party shall be liable for failure to obtain such insurance contracts, pricing discounts, or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.07 .

Section 7.08 Third-Party Vendors . To the extent that any AWI Welfare Plan is administered by a third-party vendor, the Parties will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for AFI and to maintain any pricing discounts or other preferential terms for both AWI and AFI for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any additional premiums, charges, or administrative fees that such Party may incur pursuant to this Section 7.08 .

Section 7.09 AFI Retained Welfare Plans . As of the Effective Time, the AFI Group shall retain sponsorship of the Welfare Plans listed on Schedule 7.09 (the “ AFI Retained Welfare Plans ”), and, from and after the Effective Time, all Liabilities thereunder shall be Liabilities of the AFI Group.

ARTICLE VIII

NON-U.S. EMPLOYEES

Notwithstanding anything in this Agreement to the contrary, all actions taken with respect to non-U.S. Employees or U.S. Employees working in non-U.S. jurisdictions shall be subject to and accomplished in accordance with applicable Law in the custom of the applicable jurisdictions.

ARTICLE IX

MISCELLANEOUS

Section 9.01 Employee Records .

(a) Sharing of Information. Subject to any limitations imposed by applicable Law, AWI and AFI (acting directly or through members of the AWI Group or the AFI Group, respectively) shall provide to the other and their respective authorized agents and vendors all information necessary for the Parties to perform their respective duties under this Agreement.

 

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(b) Transfer of Personnel Records and Authorization . Subject to any limitation imposed by applicable Law and to the extent that it has not done so before the Effective Time, AWI shall transfer to AFI any and all employment records (including any Form I-9, Form W-2 or other IRS forms) with respect to AFI Group Employees and Former AFI Group Employees and other records reasonably required by AFI to enable AFI properly to carry out its obligations under this Agreement. Such transfer of records generally shall occur as soon as administratively practicable at or after the Effective Time. Each Party will permit the other Party reasonable access to Employee records, to the extent reasonably necessary for such accessing Party to carry out its obligations hereunder.

(c) Access to Records. To the extent not inconsistent with this Agreement, the Separation and Distribution Agreement or any applicable privacy protection Laws or regulations, reasonable access to Employee-related records after the Effective Time will be provided to members of the AWI Group and members of the AFI Group pursuant to the terms and conditions of Article VI of the Separation and Distribution Agreement.

(d) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all Employee-related information, AWI and AFI shall comply with all applicable Laws, regulations and internal policies, and shall indemnify and hold harmless each other from and against any and all Liability, claims, actions, and damages that arise from a failure (by the indemnifying Party or its Subsidiaries or their respective agents) to so comply with all applicable Laws, regulations and internal policies applicable to such information.

(e) Cooperation. Each Party shall use commercially reasonable efforts to cooperate and work together to unify, consolidate and share (to the extent permissible under applicable privacy/data protection laws) all relevant documents, resolutions, government filings, data, payroll, employment and benefit plan information on regular timetables and cooperate as needed with respect to (i) any litigation with respect to any employee benefit plan, policy or arrangement contemplated by this Agreement, (ii) efforts to seek a determination letter, private letter ruling or advisory opinion from the IRS or U.S. Department of Labor on behalf of any employee benefit plan, policy or arrangement contemplated by this Agreement, and (iii) any filings that are required to be made or supplemented to the IRS, U.S. Pension Benefit Guaranty Corporation, U.S. Department of Labor or any other Governmental Authority; provided , however , that requests for cooperation must be reasonable and not interfere with daily business operations.

(f) Confidentiality. Notwithstanding anything in this Agreement to the contrary, all confidential records and data relating to Employees to be shared or transferred pursuant to this Agreement shall be subject to Section 6.9 of the Separation and Distribution Agreement and the requirements of applicable Law.

Section 9.02 Preservation of Rights to Amend . The rights of each member of the AWI Group and each member of the AFI Group to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.

 

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Section 9.03 Fiduciary Matters . AWI and AFI each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party shall be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and shall fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

Section 9.04 Further Assurances . Each Party hereto shall take, or cause to be taken, any and all reasonable actions, including the execution, acknowledgment, filing and delivery of any and all documents and instruments that any other Party hereto may reasonably request in order to effect the intent and purpose of this Agreement and the transactions contemplated hereby.

Section 9.05 Counterparts; Entire Agreement; Corporate Power .

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b) This Agreement and the Exhibits, Schedules and appendices hereto contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein.

(c) AWI represents on behalf of itself and, to the extent applicable, each of its Subsidiaries, and AFI represents on behalf of itself and, to the extent applicable, each of its Subsidiaries, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

(ii) this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof.

(d) Each Party acknowledges that it and each other Party is executing this Agreement by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format

 

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(PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

Section 9.06 Governing Law . This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of Laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 9.07 Assignability . The assignability provisions set forth in Section 10.3 of the Separation and Distribution Agreement shall apply to this Agreement.

Section 9.08 Third-Party Beneficiaries . The provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any other Person except the Parties any rights or remedies hereunder. There are no other third-party beneficiaries of this Agreement and this Agreement shall not provide any third party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any employee benefit plan or affect AWI’s, AFI’s or the applicable plan sponsor’s right to amend or terminate any employee benefit plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement.

Section 9.09 Notices . All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by electronic mail (for which a confirmation email is obtained), or sent by overnight courier (providing proof of delivery) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.09 ):

If to AWI (prior to the Distribution Effective Time), to:

Armstrong World Industries, Inc.

P.O. Box 3001

Lancaster PA 17604

Email: MAHershey@armstrongceilings.com

Attention: General Counsel

and

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Email: Peter.Atkins@skadden.com

   Eric.Cochran@skadden.com

Attention: Peter A. Atkins

         Eric L. Cochran

 

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      and   
      Skadden, Arps, Slate, Meagher & Flom LLP
      920 N. King Street
      Wilmington, DE 19801
      Email: Steven.Daniels@skadden.com
      Attention: Steven J. Daniels
    If to AFI, to:
      Armstrong Flooring, Inc.
      P.O. Box 3025
      Lancaster, PA 17604
      E-mail: CSParisi@armstrongflooring.com
      Attention: General Counsel
    with a copy (prior to the Distribution Effective Time) to:
      Skadden, Arps, Slate, Meagher & Flom LLP
      Four Times Square
      New York, New York 10036
     

Email: Peter.Atkins@skadden.com

     

 Eric.Cochran@skadden.com

      Attention:    Peter A. Atkins
         Eric L. Cochran
      and   
      Skadden, Arps, Slate, Meagher & Flom LLP
      920 N. King Street
      Wilmington, DE 19801
      Email: Steven.Daniels@skadden.com
      Attention: Steven J. Daniels

Any Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 9.10 Severability . If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of any such

 

31


provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

Section 9.11 Force Majeure . The Force Majeure provision set forth in Section 10.7 of the Separation and Distribution Agreement shall apply to this Agreement.

Section 9.12 Headings . The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.13 Survival of Covenants . Except as expressly set forth in this Agreement, the covenants, representations and warranties and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect thereafter.

Section 9.14 Waivers of Default . Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the waiving Party. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 9.15 Dispute Resolution . The dispute resolution procedures set forth in Article VII of the Separation and Distribution Agreement shall apply to any dispute, controversy or claim arising out of or relating to this Agreement.

Section 9.16 Specific Performance . Subject to Article VII of the Separation and Distribution Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its rights or their rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are hereby waived by each of the Parties.

Section 9.17 Amendments . No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 9.18 Interpretation . In this Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include

 

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the other genders as the context requires; (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Annexes and Exhibits hereto and thereto) and not to any particular provision of this Agreement; (c) Article, Section, Exhibit, Annex and Schedule references are to the Articles, Sections, Exhibits, Annexes and Schedules to this Agreement unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or Lancaster, Pennsylvania; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to APRIL 1, 2016.

Section 9.19 Limitations of Liability . Notwithstanding anything in this Agreement to the contrary, neither AFI or any member of the AFI Group, on the one hand, nor AWI or any member of the AWI Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

Section 9.20 Mutual Drafting . This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable to this Agreement.

[ Remainder of page intentionally left blank ]

 

33


IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be executed by their duly authorized representatives.

 

ARMSTRONG WORLD INDUSTRIES, INC.
By:  

/s/ Brian L. MacNeal

  Name: Brian L. MacNeal
  Title: Authorized Officer
ARMSTRONG FLOORING, INC.
By:  

/s/ John W. Thompson

  Name: John W. Thompson
  Title: Authorized Officer

 

[Signature Page to Employee Matters Agreeme nt ]

Exhibit 10.4

TRADEMARK LICENSE AGREEMENT

BY AND BETWEEN

ARMSTRONG WORLD INDUSTRIES, INC.,

AWI LICENSING LLC

AND

ARMSTRONG FLOORING, INC.

DATED AS OF APRIL 1, 2016


TRADEMARK LICENSE AGREEMENT

This TRADEMARK LICENSE AGREEMENT (this “ Agreement ”), is dated as of April 1, 2016 (the “ Effective Date ”), by and between Armstrong World Industries, Inc., a Pennsylvania corporation (“ AWI ”), and AWI Licensing LLC, a Delaware limited liability company (“ AWI LC ”) (AWI and AWI LC collectively, “ Licensor ”), and Armstrong Flooring, Inc., a Delaware corporation (“ AFI ” or “ Licensee ”) (each a “ Party ” and together, the “ Parties ”).

R E C I T A L S

WHEREAS, the board of directors of AWI (the “ AWI Board ”) has determined that it is in the best interests of AWI to separate AWI’s flooring business from its ceilings (building products) business, creating two independent industry-leading publicly traded companies;

WHEREAS, in furtherance of the foregoing, the Parties have entered into a Separation and Distribution Agreement, dated as of March 11, 2016 (as amended, modified or supplemented from time to time in accordance with its terms, the “ Separation Agreement ”), pursuant to which certain entities and assets constituting the AFI Business have been transferred to Licensee;

WHEREAS, Licensor is the owner of all right, title and interest in and to the Marks (as defined below);

WHEREAS, the Separation Agreement provides for the execution and delivery of this Agreement by the Licensor and the Licensee at the Closing (as defined in the Separation Agreement); and

WHEREAS, subject to the terms and conditions hereinafter set forth, the Licensor wishes to grant to the Licensee, and the Licensee desires to obtain, a license to use the Marks in accordance with the terms, and subject to the conditions, set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement, the following terms shall have the following meanings:

Action ” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.


Affiliates ” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, for purposes of this Agreement, (a) no member of the AFI Group shall be deemed to be an Affiliate of any member of the AWI Group and (b) no member of the AWI Group shall be deemed to be an Affiliate of any member of the AFI Group.

AFI ” shall have the meaning set forth in the Preamble.

AFI Business ” shall mean (a) the business, operations and activities of the Resilient Flooring and the Wood Flooring segments of AWI conducted at any time prior to the Division Effective Time by either Party or any of their current or former Subsidiaries and (b) except for the Retained Legacy Matters (as defined in the Separation Agreement) (which are expressly excluded from the AFI Business), any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to (i) the business, operations or activities described in clause (a) as then conducted, or (ii) any other business operations or activities previously conducted as part of the flooring business of AWI and its Subsidiaries, including those set forth on Schedule 1.2 of the Separation Agreement.

AFI Group ” shall mean (a) prior to the Division Effective Time, AFI and each Person that will be a Subsidiary of AFI as of immediately after the Division Effective Time, including the Transferred Entities (as defined in the Separation Agreement), even if, prior to the Division Effective Time, such Person is not a Subsidiary of AFI; and (b) on and after the Division Effective Time, AFI and each Person that is a Subsidiary of AFI.

AFI Indemnitees ” shall have the meaning set forth in Section 7.2 .

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

AWI ” shall have the meaning set forth in the Preamble.

AWI Board ” shall have the meaning set forth in the Recitals.

AWI Business ” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Division Effective Time by either Party or any member of its Group, other than the AFI Business.

AWI Group ” shall mean AWI and each Person that is a Subsidiary of AWI.

AWI Indemnitees ” shall have the meaning set forth in Section 7.1 .

 

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AWI LC ” shall have the meaning set forth in the Preamble.

Brand Manual ” shall mean Licensor’s brand presentation guidelines prescribing the permitted form and manner in which the Mark may be used, a copy of which is attached to this Agreement as Schedule F , including any amendments or additions thereto notified in writing by Licensor to Licensee from time to time.

Complaint ” shall mean any warranty claim or Action submitted by a customer or Governmental Authority concerning the performance, design or installation of Licensor Products and Services (with respect to Licensor) or Licensee Products and Services (with respect to Licensee) under the Marks, provided such claim is either substantiated or allowed by the Licensor and its Affiliates or Licensee and its Affiliates, as applicable, as evidenced by payment, refund, credit or exchange.

Complaint Threshold ” shall mean the percentage of dollars paid by Licensee and its Affiliates or Licensor and its Affiliates, respectively for Complaints per gross sales by Licensee and its Affiliates or Licensor and its Affiliates, respectively as follows: 3.6% for Licensee Products and Services globally under the Marks (with respect to Licensee), or 3.6% for Licensor Products and Services globally under the Marks (with respect to Licensor). The foregoing total sales figure in the Complaint Threshold shall be adjusted following the Effective Date to account for applicable changes in the Consumer Price Index. In addition, if the nature and method of Complaint reporting materially changes following the Effective Date due to material changes in applicable Law or technology, then the foregoing Complaint Threshold shall be equitably adjusted to account for and proportionately reflect such change.

Dispute ” shall have the meaning set forth in Section 10.3(a) .

Division Effective Time ” shall have the meaning set forth in the Separation Agreement.

Effective Date ” shall have the meaning set forth in the Preamble.

Electronic Addresses ” shall mean Internet domain names, social media addresses and other similar or successor electronic addresses.

Field of Use ” shall mean, with respect to Licensor, the Licensor Products and Services, and, with respect to Licensee, the Licensee Products and Services.

Governmental Authority ” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

Group ” shall mean either the AFI Group or the AWI Group, as the context requires.

Indemnifying Party ” shall have the meaning set forth in Section 7.3(a) .

Indemnitee ” shall have the meaning set forth in Section 7.3(a) .

 

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Indemnity Payment ” shall have the meaning set forth in Section 7.3(a) .

Infringements ” shall have the meaning set forth in Section 5.3(a) .

Initial Notice ” shall have the meaning set forth in Section 10.3(a) .

Insurance Proceeds ” shall have the meaning set forth in the Separation Agreement.

Law ” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

Liabilities ” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

License ” shall mean the rights and licenses with respect to the Marks granted pursuant and subject to Section 2.1 of this Agreement.

Licensee ” shall have the meaning set forth in the Preamble.

Licensee Combination Marks ” shall have the meaning set forth in Section 4.2(b) .

Licensee Competitors ” shall mean (i) those Persons or competitor brands set forth in Schedule E hereto and any successors thereto, and (ii) any Person that, following the Effective Date, becomes a direct competitor of Licensee with respect to Licensee Products and Services (excluding Licensor Walls) to an equivalent or greater extent than any of those Persons identified in Schedule E as of the Effective Date.

Licensee Designators ” shall have the meaning set forth in Section 4.2(b) .

Licensee Products and Services ” shall mean those products and services set forth in Schedule B and, subject to Section 4.3 , Walls.

Licensee Trademark ” shall mean a trademark or service mark owned by Licensee or its Affiliates that does not include a generic word or words that denotes Licensor Products and Services.

 

4


Licensee Walls ” shall mean the following Walls: (i) LVT (<250mils), (ii) VCT (<250mils), and (iii) Sheet (<250mils).

Licensor ” shall have the meaning set forth in the Preamble.

Licensor Combination Marks ” shall have the meaning set forth in Section 4.2(c) .

Licensor Competitors ” shall mean those (i) Persons or competitor brands set forth in Schedule D hereto and any successors thereto, and (ii) any Person that, following the Effective Date, becomes a direct competitor of Licensor with respect to Licensor Products and Services (excluding Licensee Walls) to an equivalent or greater extent than any of those Persons identified in Schedule D as of the Effective Date.

Licensor Designators ” shall have the meaning set forth in Section 4.2(c) .

Licensor Products and Services ” shall mean those products and services set forth in Schedule C and, subject to Section 4.3 , Walls.

Licensor Trademark ” means a trademark or service mark owned by Licensor or its Affiliates (other than the Marks) that does not include a generic word or words that denotes Licensee Products and Services (except Walls).

Licensor Walls ” shall mean all Walls other than Licensee Walls.

Losses ” shall mean actual losses, costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

Marks ” shall mean the trademarks and service marks set forth on Schedule A hereto.

Off-Specification Goods ” shall mean products manufactured outside the acceptable specification range such that they have no consumer or commercial value for their intended use.

Party ” or “ Parties ” shall have the meaning set forth in the Preamble.

Person ” shall mean an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association, or other entity.

Representatives ” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

Separation Agreement ” shall have the meaning set forth in the Recitals.

Subsidiary ” shall mean, with respect to any Person, any corporation, general or limited partnership, trust, joint venture, unincorporated organization, limited liability company or other entity of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the

 

5


total combined equity interests or (iii) in the case of a partnership, is a general partner, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

Tax Matters Agreement ” shall have the meaning set forth in the Separation Agreement.

Term ” shall have the meaning set forth in Section 8.1(a) .

Territory ” shall mean worldwide.

Third Party ” shall mean any Person other than the Parties or any members of their respective Groups.

Third-Party Claim ” shall have the meaning set forth in Section 7.4(a) .

Walls ” means walls, wainscoting, room dividers, backsplashes, wall planks, wall tiles, and products, accessories and services relating thereto.

ARTICLE II

LICENSE GRANT

Section 2.1 Grant of License . Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an exclusive (except with respect to Walls, which license shall be nonexclusive), royalty-free, non-transferrable (subject to Section 10.4 ) license to use the Marks throughout the Territory, which license shall include the right to use the Marks in corporate names and trade names and Electronic Addresses, in each case solely in connection with its business of manufacturing, distributing, marketing and selling the Licensee Products and Services.

Section 2.2 Sublicensing . Licensee shall have the right to grant to any Person a sublicense of any of its rights granted under the License, provided that: (a) such sublicensee uses the Marks in support of the businesses of the AFI Group (and not for the independent use by a Third Party); (b) the terms of any sublicense are in writing and consistent with this Agreement; and (c) Licensee shall ensure that each sublicensee complies with the terms and conditions of this Agreement applicable to Licensee.

Section 2.3 Limitations and Reservations . Licensor shall not use the Marks to designate products or services other than the Licensor Products and Services, and Licensee shall not use the Marks to designate products or services other than the Licensee Products and Services. Notwithstanding anything to the contrary herein, the License is subject to any rights of or obligations owed to any Third Party under any agreement existing as of the Effective Date between Licensor or its Affiliates and any such Third Party. Except as expressly provided herein, Licensor reserves all rights with respect to the Marks, including with respect to the use, registration and licensing thereof.

 

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ARTICLE III

QUALITY STANDARDS

Section 3.1 Quality Control and Standards .

(a) Licensee shall use the Marks and offer Licensee Products and Services under the Marks at a level of quality which generally equals or exceeds the levels of quality associated with the AFI Business. Without limitation to the foregoing, Licensee shall ensure that (i) factories and facilities of Licensee and its Affiliates offering, using or creating Licensee Products and Services under the Marks are operated in a manner consistent with good industry practices; (ii) the Complaints related to Licensee Products and Services shall not exceed the Complaint Threshold for more than four (4) consecutive quarters; and (iii) Licensee Products and Services under the Marks do not include Off-Specification Goods ( provided that Off-Specification Goods may be sold for recycling purposes only).

(b) Licensor shall use the Marks and offer Licensor Products and Services under the Marks at a level of quality which generally equals or exceeds the levels of quality associated with the AWI Business. Without limitation to the foregoing, Licensor shall ensure that (i) factories and facilities of Licensor and its Affiliates offering, using or creating Licensor Products and Services under the Marks in a manner consistent with best practices; (ii) Complaints related to Licensor Products and Services shall not exceed the Complaint Threshold for more than four (4) consecutive quarters; and (iii) Licensor Products and Services under the Marks do not include Off-Specification Goods ( provided that Off-Specification Goods may be sold for recycling purposes only).

(c) Each Party shall, within thirty (30) days of the end of each calendar quarter, report its Complaint Threshold to the other Party, and provide further information reasonably requested by the other Party in connection therewith.

(d) Each Party shall use the Marks in a manner that would not reasonably be expected to disparage or reflect negatively on the goodwill or reputation of the Marks, including by refraining from the use of inappropriate packaging, images and materials used in connection with the Marks. Each Party shall use the Marks and operate its business under the Marks in compliance with applicable Law.

(e) In the event of any event or circumstance that arises in connection with any act or omission of the AWI Group which results or would be reasonably expected to result in material negative publicity for any member of the AFI Group, the AWI Group or the Marks, or materially tarnishes or would reasonably be expected to materially tarnish the reputation of the AFI Group, the AWI Group or the Marks, the Parties will reasonably cooperate with each other to promptly implement a communications plan and effort intended to address and remedy such negative impact, in a form reasonably approved in writing by AFI, with all costs and expenses relating to such plan and effort to be borne by the AWI Group. In the event of any event or circumstance that arises in connection with any act or omission of the AFI Group which results or would be reasonably expected to result in material negative publicity for any member of the AFI Group, the AWI Group or the Marks, or materially tarnishes or would reasonably be

 

7


expected to materially tarnish the reputation of the AFI Group, the AWI Group or the Marks, the Parties will reasonably cooperate with each other to promptly implement a communications plan and effort intended to address and remedy such negative impact, in a form reasonably approved in writing by AWI, with all costs and expenses relating to such plan and effort to be borne by the AFI Group.

ARTICLE IV

USE OF THE MARKS

Section 4.1 Use of Marks .

(a) The Licensee shall use the Marks in accordance with sound trademark usage principles and in accordance with all Laws relating to the maintenance of the validity and enforceability of the Marks; and shall not take action which is intended, or would reasonably be expected, to harm the reputation of the Marks or the reputation of the Licensor under the Marks.

(b) The Licensor shall use the Marks in accordance with sound trademark usage principles and in accordance with all Laws relating to the maintenance of the validity and enforceability of the Marks; and shall not take action which is intended, or would reasonably be expected, to harm the reputation of the Marks or the reputation of the Licensee under the Marks.

Section 4.2 Presentation of Marks .

(a) Licensee and Licensor shall use the Marks in a manner consistent with the Brand Manual; provided that (i) Licensee may vary its presentation of the Marks from the Brand Manual with the prior written consent of Licensor, such consent not to be unreasonably withheld or delayed, and (ii) if Licensor changes the stylized format of the Marks as presented in the Brand Manual then Licensee shall have the right upon written notice to Licensor to continue to use the stylized format of the Marks used by Licensee hereunder prior to such change.

(b) Licensee shall always use ARMSTRONG followed by (i) “FLOORS,” “FLOORING”, “FLOORING SYSTEMS”, “FLOORING SOLUTIONS,” “FLOOR PRODUCTS”, “FLOORING PRODUCTS”, “RESIDENTIAL FLOORING”, “COMMERCIAL FLOORING”, “FLOORING SERVICES”, or “FLOOR FASHION CENTER” or (ii) a generic word or words that denotes Licensee Products and Services that are not included in Licensor Products and Services (each of the foregoing permitted words or terms, “ Licensee Designators ”, with such Licensee Designator presented in a manner consistent with the Brand Manual, “ Licensee Combination Marks ”). Notwithstanding the foregoing, Licensee may use ARMSTRONG (i) alone if stamped or embedded directly in products included within Licensee Products and Services so long as the Licensee Combination Mark is readily observable on the packaging thereto, (ii) alone or in combination with Licensee Trademarks in textual sentences (with the Mark not presented in logo or stylized format or more prominently than the Licensee Combination Mark) as a short-hand reference to the Licensee Combination Mark so long as the Licensee Combination Mark is readily observable, (iii) alone in corporate signage located at buildings owned or occupied by Licensee or its Affiliates (subject to Section 4.4 ), and (iv) as may be agreed in writing by the Parties from time to time to the extent reasonably necessary to maintain applications and registrations for the Mark alone or in logo or stylized format, with such agreed-to use to be only periodically and in a non-prominent matter.

 

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(c) Licensor shall always use ARMSTRONG followed by (i) “WORLD INDUSTRIES”, “WORLD”, “BUILDING PRODUCTS”, “CEILINGS”, “CEILING SYSTEMS”, “CEILING INSTALLATION SYSTEMS”, “CEILING SOLUTIONS”, “CEILINGS & WALLS” , “CEILINGS & WALL SYSTEMS”, “CEILING & WALL SOLUTIONS”, “WALLS”, “WALL SOLUTIONS”, or “WALLS SYSTEMS” or (ii) a generic word or words that denotes Licensor Products and Services that are not included in Licensee Products and Services (each of the foregoing permitted words or terms, “ Licensor Designators ”, with such Licensor Designator presented in a manner consistent with the Brand Manual, “ Licensor Combination Marks ”). Notwithstanding the foregoing, Licensor may use the Marks (i) alone if stamped or embedded directly in products included within Licensee Products and Services, (ii) alone or in combination with Licensor Trademarks in textual sentences (with the Mark not presented in logo or stylized format or more prominently than the Licensor Combination Mark) as a short-hand reference to the Licensor Combination Mark so long as the Licensor Combination Mark is readily observable, (iii) alone in corporate signage located at buildings owned or occupied by Licensor or its Affiliates (subject to Section 4.4 ), and (iv) as may be agreed in writing by the Parties from time to time to the extent reasonably necessary to maintain applications and registrations for the Mark alone or in logo or stylized format, with such agreed-to use to be only periodically and in a non-prominent matter.

(d) Licensee shall ensure that any Electronic Addresses that include the Mark and are used by or on behalf of Licensee contain a Licensee Designator (and Licensee shall maintain such Electronic Addresses and associated sites at Licensee’s cost), and Licensor shall ensure that any Electronic Addresses that include the Mark and are used by or on behalf of Licensor contain a Licensor Designator (and Licensor shall maintain such Electronic Addresses and associated sites at Licensor’s cost).

(e) The homepage of www.armstrong.com shall serve as a landing page to redirect Persons to Licensor and Licensee sites, as reasonably agreed to by the Parties and in a form and manner that is intended to provide equivalent placement for and access to Licensor and Licensee (and such domain name and associated site shall be maintained at Licensor’s and Licensee’s cost, with such cost to be shared equally between the Parties). In addition, certain other domain names shall be handled by the Parties as set forth in Schedule G .

(f) Except as permitted in the Brand Manual or by Section 4.2(g) or Section 4.2(h) , Licensee and Licensor shall not combine the Marks with another name or mark other than a Licensee Designator (with respect to Licensee) or a Licensor Designator (with respect to Licensor).

(g) Subject to the other provisions of this Agreement, (i) Licensee shall have the right to include a Licensee Trademark as separate word(s) prior to or after a Licensee Combination Mark (i.e., “[Licensee Combination Mark] [Licensee Trademark] [applicable product or service within Licensee Products and Services]” or “[Licensee Trademark] [applicable product or service within Licensee Products and Services] by [Licensee Combination Mark]”), and (ii) Licensor shall have the right to include a Licensor Trademark as separate

 

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word(s) prior to or after a Licensor Combination Mark (i.e., “[Licensor Combination Mark] [Licensor Trademark] [applicable product or service within Licensor Products and Services]” or “[Licensor Trademark] [applicable product or service within Licensor Products and Services] by [Licensor Combination Mark]”). Licensee and Licensor shall also have the right to include corporate entity designators (e.g., “Inc.”, “Company”, “LLC”, or the like) at the end of a Licensee Combination Mark or Licensor Combination Mark, respectively, for purposes of identifying the applicable entity.

(h) Licensee shall have the right to use marks owned by and licensed from Third Parties in close association with the Licensee Combination Marks, provided that such other marks (i) do not include words that denote Licensor Products and Services, and (ii) are not owned by or principally associated by the public with a Licensor Competitor. Licensor shall have the right to use marks owned by and licensed from Third Parties in close association with the Licensor Combination Marks, provided that such other marks (i) do not include words that denote Licensee Products and Services (except Walls), and (ii) are not owned by or principally associated by the public with a Licensee Competitor. The foregoing restrictions in this Section 4.2(h) shall not prevent a Party from (i) conducting business with a Licensor Competitor (in the case of Licensee) or a Licensee Competitor (in the case of Licensor), or (ii) participating in industry sponsorships, including trade shows, outings, and speaking engagements, that might result in the use of Licensor Combination Marks or Licensee Combination Marks with Third Party marks of a Licensee Competitor or Licensor Competitor.

Section 4.3 Walls . Licensee may not use the Marks in connection with Licensor Walls, provided that the foregoing shall not apply to (i) non-prominent references by Licensee to its corporate name, trade name or Electronic Addresses (with the Mark not presented in logo or stylized format), or (ii) uses of the Marks in connection with Licensor Walls if such uses are in a manner not intended to and that do not directly associate the Marks with Licensor Walls (for example, the following would be permitted: “[Brand]™ Walls” to designate Licensor Walls on one page of a brochure where (x) on the header or footer of such page a Licensee Combination Mark identifies the corporate or trade name of Licensee in a non-prominent manner and/or (y) on a separate page of such brochure the Mark is used in connection with Licensee Products and Services). Licensor may not use the Marks in connection with Licensee Walls, provided that the foregoing shall not apply to (i) non-prominent references by Licensor to its corporate name, trade name or Electronic Addresses (with the Mark not presented in logo or stylized format), or (ii) uses of the Marks in connection with Licensee Walls if such uses are in a manner not intended to and that do not directly associate the Marks with Licensee Walls (for example, the following would be permitted: “[Brand]™ Walls” to designate Licensee Walls on one page of a brochure where (x) on the header or footer of such page a Licensor Combination Mark identifies the corporate or trade name of Licensor in a non-prominent manner and/or (y) on a separate page of such brochure the Mark is used in connection with Licensor Products and Services would be permitted).

Section 4.4 Transition . The Parties acknowledge and agree that, notwithstanding any other provision in this Agreement, Licensee and Licensor shall have the right to transition from use of the Marks alone to use of the Marks as set forth in this Article IV after the Effective Date; provided, however, that each Party shall (i) use commercially reasonable efforts to transition from use of the Marks alone to use of the Marks as set forth in this Article IV in a timely and

 

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expeditious manner, recognizing that the intent of the Parties is to transition as promptly and cost-effectively as possible and, in any event, except as otherwise provided below, within one (1) year of the Effective Date, (ii) be permitted to exhaust in the ordinary course all product inventory, product samples and kits, product brochures, product catalogs and packaging inventory existing or first initiated as of the Effective Date and (iii) ensure that any and all orders, requisitions and purchases of new materials (for example, letterhead, stationary, catalogs, business cards, presentations, promotional items, decals, brochures, displays, signs and marketing materials), including any use of those materials, made or first initiated after the Effective Date shall comply with Sections 4.1 through 4.3 . Notwithstanding the foregoing, the Parties shall (i) transition “big box” (for example, Lowe’s and The Home Depot) store displays in a timely and expeditious manner to the extent permitted by the applicable definitive agreement with the “big box” store in effect as of the Effective Date, and (ii) transition facility signage within two (2) years of the Effective Date (or such later date as may be approved by the other Party in writing in the exercise of its discretion). Without limitation to the foregoing, any cessation of use of a Mark that requires approval by a Governmental Authority shall be expeditiously assembled, submitted and diligently prosecuted for approval by the applicable Governmental Authority in a timely fashion by the Party seeking approval.

Section 4.5 Communication and Collaboration . The Parties acknowledge that, in connection with the conduct of their respective businesses hereunder under the Marks, there may be certain matters with respect to which the Parties may communicate or collaborate. Any such communications or collaboration shall be governed by Article IX hereof, and Licensor shall limit its use of such activities to the Licensor Products and Services and Licensee shall limit its use of such activities to the Licensee Products and Services.

Section 4.6 Misdirected Communications . In the event that a Party or its Affiliates experience an appreciable number of communications intended for the other Party or its Affiliates as a result of the use of the Marks hereunder, then at a Party’s request the Parties will reasonably cooperate with each other to implement a process to cross-refer to the other Party misdirected inquiries and complaints intended for such other Party.

ARTICLE V

OWNERSHIP AND PROTECTION OF MARKS

Section 5.1 Ownership of the Marks . Licensee acknowledges that the Marks and all rights therein and thereto and the goodwill pertaining thereto, including Licensor Combination Marks and (other than, for clarity, with respect to a Licensee Trademark) Licensee Combination Marks, are owned exclusively by and belong exclusively to Licensor. Licensee’s use of the Marks and Licensee Combination Marks and any and all goodwill generated thereby or associated therewith shall inure solely to the benefit of Licensor (other than, for clarity, with respect to a Licensee Trademark). Licensee shall not (a) register or seek to register in any jurisdiction any Mark (including any mark that includes or is a derivation of or confusingly similar to a Mark), (b) directly or indirectly contest the ownership or validity of any rights of the Licensor in or to any of the Marks, Licensor Combination Marks or Licensee Combination Marks (other than, for clarity, with respect to a Licensee Trademark), or (c) contest the fact that Licensee’s rights under this Agreement are as a licensee and subject to all of the terms and conditions herein.

 

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Section 5.2 Registration . All applications and registrations for or that include a Mark shall be filed in the name of Licensor and, as between Licensor and Licensee, Licensor shall file the documents with the applicable Governmental Authorities in connection therewith. Licensee shall be responsible for the cost of searching, investigating, filing, prosecuting, registering and maintaining such applications and registrations that cover only Licensee Products and Services. Licensor shall be responsible for the cost of searching, investigating, filing, prosecuting, registering and maintaining such applications and registrations that cover only Licensor Products and Services. With respect to such applications and registrations that cover both Licensee Products and Services and Licensor Products and Services, Licensee shall reimburse Licensor for fifty (50%) percent of all costs of Licensor and its Affiliates in connection therewith. At the reasonable request of a Party, the other Party shall reasonably consult and cooperate with such Party in connection with filings for applications and registrations for or that include a Mark.

Section 5.3 Enforcement .

(a) Licensor shall have the exclusive right to challenge Third Party infringements, dilutions and other violations of or with respect to the Marks (“ Infringements ”) within the Licensor’s Field of Use (excluding Licensee Walls). If Licensor does not challenge such Infringement within ninety (90) days following written notice from Licensee requesting that action be taken, Licensor will at the request of Licensee consult in good faith with Licensee in connection therewith and consider in good faith any reasonable request by Licensee in connection thereto.

(b) Licensor shall have the initial right to challenge Infringements outside of the Parties’ respective Field of Use. If Licensor does not challenge such Infringement within ninety (90) days following written notice from Licensee requesting that action be taken, Licensee may challenge such Infringement.

(c) Licensee shall have the exclusive initial right to challenge Infringements that are solely within Licensee’s Field of Use (excluding Licensor Walls). If Licensee does not challenge such Infringement within ninety (90) days following written notice from Licensor requesting that action be taken, Licensor may challenge such Infringement and, in such instance, Licensee shall reimburse Licensor for fifty percent (50%) of all costs of Licensor and its Affiliates in connection therewith.

(d) Except as otherwise set forth in this Agreement, (i) Licensor shall bear the cost of any challenges it brings against Infringements and shall be entitled to retain all sums recovered in any such Action, and (ii) Licensee shall bear the cost of any challenges it brings and shall be entitled to retain all sums recovered in any such Action.

(e) With respect to an Action challenging an Infringement which a Party has the right to bring under Section 5.3(a) through (c) , at the reasonable request and at the expense of such Party, the other Party shall (i) cooperate with the requesting Party in connection with such Action, and (ii) join as a party in such Action if necessary for the purpose of maintaining standing in such Action. If at the request of a Party the other Party so joins an Action for the purpose of maintaining standing, the requesting Party shall indemnify and hold harmless the other Party from any Liabilities relating thereto or arising or resulting therefrom.

 

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Section 5.4 Recordation . In the event Licensor or Licensee deems recordation of this Agreement necessary, the other Party shall reasonably cooperate, at the requesting Party’s expense, in connection with the recording of this Agreement with the appropriate Governmental Authorities and in the renewal of such recordation. The Parties shall provide assistance and information to each other as reasonably necessary to accomplish such recordation, including by submitting a revised version of this Agreement in a form necessary, but without change of substance (except where such change is necessary for purposes of recordation) hereof, for recordation. Upon termination or expiration of this Agreement, the Parties shall cooperate to effect a cancellation or termination of any recordation of this Agreement with the appropriate Governmental Authorities, and the Parties will grant, and hereby do grant, to each other an irrevocable power of attorney coupled with an interest to effect such cancellation within twenty (20) days after the termination of this Agreement.

ARTICLE VI

DISCLAIMER OF REPRESENTATIONS AND WARRANTIES

Section 6.1 DISCLAIMER .

(a) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ALL LICENSES TO THE MARKS ARE BEING MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE (A) AS TO THEIR VALUE OR FREEDOM FROM ANY SECURITY INTERESTS; (B) AS TO TITLE, NONINFRINGEMENT, VALIDITY, ACCURACY OF INFORMATIONAL CONTENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (WHETHER OR NOT A PARTY OR ITS AFFILIATES KNOWS OR HAS REASON TO KNOW ANY SUCH PURPOSE) OR ANY OTHER MATTER, INCLUDING ANY WARRANTY (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, BY COURSE OF DEALING OR OTHERWISE; OR (C) AS TO THE LEGAL SUFFICIENCY TO GRANT ANY RIGHTS THEREIN AND AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AND NEITHER PARTY, NOR ANY OF ITS REPRESENTATIVES, MAKES OR HAS MADE ANY REPRESENTATION OR WARRANTY, AND HEREBY EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AT LAW OR IN EQUITY, IN CONNECTION WITH THIS AGREEMENT, INCLUDING WITH RESPECT TO THE MARKS, INCLUDING WITH RESPECT TO THE MATTERS DESCRIBED IN THE FOREGOING CLAUSES (A)-(C). WITHOUT LIMITING THE FOREGOING, THE LICENSEE HEREBY ACKNOWLEDGES AND AGREES THAT ALL LICENSES IN THIS AGREEMENT ARE BEING MADE “AS IS, WHERE IS,” AND, INTER ALIA, SUBJECT TO ANY AGREEMENTS EXISTING AS OF THE EFFECTIVE DATE.

 

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ARTICLE VII

INDEMNIFICATION

Section 7.1 Indemnification by AFI . Except as otherwise specifically set forth in this Agreement, to the fullest extent permitted by Law, AFI shall, and shall cause the other members of the AFI Group (including any sublicensee) to, indemnify, defend and hold harmless AWI, each member of the AWI Group and each of their respective past, present and future directors, officers, employees and agents, in each case, in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ AWI Indemnitees ”), from and against any and all Liabilities of the AWI Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any Liabilities to the extent such Liabilities arise out of any Third-Party Claim relating to, arising out of or resulting from, directly or indirectly, use of the Marks by, under or through AFI or its Affiliates or sublicensees (including with respect to the manufacture, marketing, offering, use, issuance, sale or performance of any Licensee Products and Services); or

(b) any breach by AFI or any other member of the AFI Group (including any sublicensee) of this Agreement.

Section 7.2 Indemnification by AWI . Except as otherwise specifically set forth in this Agreement, to the fullest extent permitted by Law, AWI shall, and shall cause the other members of the AWI Group (other than AFI and its sublicensees) to, indemnify, defend and hold harmless AFI, each member of the AFI Group and each of their respective past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ AFI Indemnitees ”), from and against any and all Liabilities of the AFI Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any Liabilities to the extent such Liabilities arise out of any Third-Party Claim relating to, arising out of or resulting from, directly or indirectly, use of the Marks by, under or through AWI or its Affiliates or sublicensees (other than AFI and its sublicensees) (including with respect to the manufacture, marketing, offering, use, issuance, sale or performance of any Licensor Products and Services); or

(b) any breach by AWI or any other member of the AWI Group (other than AFI and its sublicensees) of this Agreement.

Section 7.3 Indemnification Obligations Net of Insurance Proceeds and Other Amounts .

(a) The Parties intend that the indemnification, contribution or reimbursement with respect to any Liability pursuant to this Article VII shall be net of Insurance Proceeds and other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the

 

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collection thereof, including increased premiums) from any Person by or on behalf of the Indemnitee in respect of any indemnifiable Liability. Accordingly, the amount which either Party (an “ Indemnifying Party ”) is required to pay to any Person entitled to indemnification, contribution or reimbursement hereunder (an “ Indemnitee ”) will be reduced by any Insurance Proceeds and other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) from any Person by or on behalf of the Indemnitee in respect of the related Liability. If an Indemnitee receives an indemnification, contribution or reimbursement payment (an “ Indemnity Payment ”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or any other amounts in respect of the related Liability, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) had been received, realized or recovered before the Indemnity Payment was made.

(b) The Parties agree that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement, have any subrogation rights with respect thereto, it being understood that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification, contribution and reimbursement provisions hereof. Each Party shall, and shall cause the members of such Party’s Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification, contribution or reimbursement may be available under this Article VII . Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification, contribution or reimbursement, or receiving any Indemnity Payment otherwise owed to it under this Agreement.

Section 7.4 Procedures for Indemnification of Third-Party Claims .

(a) Notice of Claims . If, at or following the Effective Date, an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) that is not a member of the AWI Group or the AFI Group (or their respective sublicensees) of any claim or of the commencement by any such Person of any Action (collectively, a “ Third-Party Claim ”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 7.1 or 7.2 , or any other Section of this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as practicable, but in any event within fourteen (14) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and

 

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documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 7.4(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced in some material respect by the Indemnitee’s failure to provide notice in accordance with this Section 7.4(a) .

(b) Control of Defense. An Indemnifying Party may elect to defend (and seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim; provided that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any such Liabilities to the extent resulting from, or arising out of, such Third-Party Claim. Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (ii) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim. Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 7.4(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in Section 7.4(a) , then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim.

(c) Allocation of Defense Costs . If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification, contribution or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in Section 7.4(a) , and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

 

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(d) Right to Monitor and Participate. An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 7.4(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

(e) No Settlement. Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages, does not involve any finding or determination of wrongdoing or violation of Law by the other Party and provides for a full, unconditional and irrevocable release of the other Party from all Liability in connection with the Third-Party Claim.

(f) Tax Matters Agreement Governs . The above provisions of this Section 7.4 do not apply to Taxes (as defined in the Separation Agreement) (Taxes being governed by the Tax Matters Agreement). In the case of any conflict between this Agreement and the Tax Matters Agreement in relation to any matters addressed by the Tax Matters Agreement, the Tax Matters Agreement shall prevail.

ARTICLE VIII

TERM AND TERMINATION

Section 8.1 Term and Termination .

(a) This Agreement shall commence as of the Effective Date, and shall be non-terminable, unless terminated earlier pursuant to this Section 8.1 (the “ Term ”).

(i) In the event that Licensee (and its sublicensees) ceases all use of the Marks everywhere throughout the world for a period of three (3) consecutive years, this Agreement may be terminated upon written notice by Licensor.

 

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(ii) In the event that Licensor (and its licensees other than Licensee and its sublicensees) ceases all use of the Marks everywhere throughout the world for a period of three (3) consecutive years, this Agreement may be terminated upon written notice by Licensee, provided that in the event of such a termination by Licensee for nonuse then Licensor shall assign all of its right, title and interest in the Marks to Licensee.

(iii) In the event that the Complaint Threshold applicable to a Party is exceeded for more than four (4) consecutive calendar quarters, then such Party shall have two (2) years from the end of the last such calendar quarter to come into compliance with such applicable Complaint Threshold, and in the event that such Party fails to be in compliance with the Complaint Threshold during the last calendar quarter of such two (2) year period and such Party is not using commercially reasonable efforts to come into compliance, then the other Party may terminate this Agreement upon written notice thereof, provided that in the event of such a termination by Licensee of this Agreement in its entirety pursuant to the provisions further above in this Section 8.1(a)(iii) for failure by Licensor to be in compliance with the applicable Complaint Threshold then Licensor shall assign all of its right, title and interest in the Marks to Licensee.

(iv) In the event that a Party materially breaches this Agreement and such breach has a material adverse impact on the business or reputation, taken as a whole, of the non-breaching Party, and the breaching Party fails to cure such breach, or if such breach is not reasonably curable during such time period fails to implement steps reasonably intended to cure or remedy such breach, within sixty (60) days’ written notice from the non-breaching Party, this Agreement may be terminated upon written notice by the non-breaching Party, and if this Agreement is so terminated by Licensee then Licensor shall assign all of its right, title and interest in the Marks to Licensee.

(v) Licensee shall have the right at any time to terminate this Agreement upon written notice to Licensor.

Section 8.2 Effect of Termination .

(a) Upon the termination of this Agreement, unless termination occurs by Licensee pursuant to Section 8.1(a)(iii) or  8.1(a)(iv) , the Licensee shall and shall cause each of its sublicensees to no later than one (1) year following such termination:

(i) cease any and all use of the Marks and any mark confusingly similar thereto;

(ii) change all corporate and trade names to not include the Marks or any mark confusingly similar thereto;

(iii) destroy and require all agents and employees to destroy all materials; and

(iv) send a written statement to the Licensor verifying that it has complied with the foregoing clauses (i)–(iii).

 

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(b) Upon the termination of this Agreement by Licensee pursuant to Section 8.1(a)(iii) or 8.1(a)(iv) , the Licensor shall and shall cause each of its sublicensees to no later than one (1) year following such termination:

(i) cease any and all use of the Marks and any mark confusingly similar thereto;

(ii) change all corporate and trade names to not include the Marks or any mark confusingly similar thereto;

(iii) destroy and require all agents and employees to destroy all materials; and

(iv) send a written statement to the Licensee verifying that it has complied with the foregoing clauses (i)–(iii).

Section 8.3 Rights and Remedies . The rights and remedies of Licensor set forth in this Article VIII are in addition to all other rights and remedies available at law or equity.

ARTICLE IX

CONFIDENTIALITY

Section 9.1 Confidentiality . Each of Licensor and Licensee, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to AWI’s confidential and proprietary information pursuant to policies in effect as of the Effective Date, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses that may be in its possession as of the Effective Date or is furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder, except, in each case, to the extent that such confidential and proprietary information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group.

Section 9.2 Protective Arrangements . In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the

 

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circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

ARTICLE X

MISCELLANEOUS

Section 10.1 Counterparts; Entire Agreement; Corporate Power .

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b) This Agreement and the Exhibits, Schedules and appendices hereto, and the Separation Agreement, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. In the case of any conflict between this Agreement and the Separation Agreement in relation to any matters addressed by this Agreement, the Separation Agreement shall prevail.

(c) AWI represents on behalf of itself and each other member of the AWI Group, and AFI represents on behalf of itself and each other member of the AFI Group, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii) this Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

(d) Each Party acknowledges that this Agreement may be executed by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature)

 

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by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

Section 10.2 Governing Law . This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 10.3 Dispute Resolution .

(a) Good Faith Negotiation . Any dispute, controversy or claim arising out of or relating to this Agreement (a “ Dispute ”), shall initially be referred to the Transition Committee (as defined in the Separation Agreement, and for so long as such Transition Committee exists) for resolution. If the Transition Committee (as defined in the Separation Agreement) is unable to resolve such Dispute within thirty (30) days (or if such Transition Committee no longer exists), then either Party may provide written notice thereof to the other Party (the “ Initial Notice ”), and the Parties shall thereafter attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of vice president and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

(b) In the event that a Dispute has not been resolved within sixty (60) days after receipt by a Party of an Initial Notice, or within such longer period as the Parties may agree to in writing, then each Party hereby agrees and consents to be subject to the jurisdiction of the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, to resolve any such unresolved Dispute in any suit, action or proceeding seeking to enforce any provision of, or based on any other matter arising out of or in connection with, this Agreement or the transactions contemplated hereby. Each Party hereby irrevocably consents to the service of any and all process in any such suit, action or proceeding by the delivery of such process to such Party at the address and in the manner provided in Section 10.7 hereof. Each of the Parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery

 

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lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3(c) .

(d) Notwithstanding the foregoing provisions of this Section 10.3 , a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 10.3(a) if such action is reasonably necessary to avoid irreparable damage.

(e) Unless otherwise agreed in writing, the Parties shall, and shall cause their respective members of their Group to, continue to honor all commitments under this Agreement to the extent required by this Agreement during the course of dispute resolution pursuant to the provisions of this Section 10.3 , unless such commitments are the specific subject of the Dispute at issue.

Section 10.4 Assignability . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , however , that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party hereto. Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement in whole (i.e., the assignment of a Party’s rights and obligations under this Agreement all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any member of its Group from being party to or undertaking a change of control.

Section 10.5 Third-Party Beneficiaries . Except for the indemnification rights under this Agreement of any AWI Indemnitee or AFI Indemnitee in their respective capacities as such, and

 

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as set forth in Article VII (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 10.6 Recovery of Fees . In the event that any Action is instituted or commenced by either Party hereto against the other Party as a result of a Dispute, the Party that substantially prevails in such Action as determined by a final, nonappealable judgment of an arbitration or court shall be entitled to recover its reasonable attorneys’ fees and other costs incurred in such Action from the non-prevailing party.

Section 10.7 Notices .

(a) All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by electronic mail (for which a confirmation email is obtained), or sent by overnight courier (providing proof of delivery) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.7 ):

 

If to AWI, to:

  Armstrong World Industries, Inc.
  P.O. Box 3001
  Lancaster, PA 17604
  Email: mahershey@armstrongceilings.com
  Attention:   General Counsel

with a copy to:

  Skadden, Arps, Slate, Meagher & Flom LLP
  Four Times Square
  New York, New York 10036
  Email:   Peter.Atkins@skadden.com
    Eric.Cochran@skadden.com
  Attention:   Peter A. Atkins
    Eric L. Cochran
  and  
  Skadden, Arps, Slate, Meagher & Flom LLP
  One Rodney Square
  920 N. King Street
  Wilmington, DE 19801
  Email:   Steven.Daniels@skadden.com
  Attention:   Steven J. Daniels

 

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If to AFI, to:

  Armstrong Flooring, Inc.
  P.O. Box 3025
  Lancaster, PA 17604
  Email: csparisi@armstrongflooring.com
  Attention:   General Counsel

with a copy (prior to the Distribution Effective Time (as defined in the Separation Agreement)) to:

  Skadden, Arps, Slate, Meagher & Flom LLP
  Four Times Square
  New York, New York 10036
  Email:   Peter.Atkins@skadden.com
    Eric.Cochran@skadden.com
  Attention:   Peter A. Atkins
    Eric L. Cochran
  and  
  Skadden, Arps, Slate, Meagher & Flom LLP
  920 N. King Street
  Wilmington, DE 19801
  Email:   Steven.Daniels@skadden.com
  Attention:   Steven J. Daniels

A Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 10.8 Force Majeure . No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure (as defined in the Separation Agreement). In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement, as soon as reasonably practicable.

Section 10.9 Headings . The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 10.10 Waivers of Default . Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any

 

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subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 10.11 Specific Performance . Subject to the provisions of Section 10.3 , in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

Section 10.12 Amendments . No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 10.13 Interpretation . In this Agreement (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires, (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement, (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement unless otherwise specified, (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement, (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified, (f) the word “or” shall not be exclusive, (g) unless otherwise specified in a particular case, the word “days” refers to calendar days, (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or Lancaster, Pennsylvania, (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified, and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to the Effective Date.

Section 10.14 Limitations of Liability . Notwithstanding anything in this Agreement to the contrary, neither AFI or any member of the AFI Group, on the one hand, nor AWI or any member of the AWI Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

 

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Section 10.15 Performance . AWI will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the AWI Group. AFI will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the AFI Group. Each Party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement to all of the other members of its Group and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement.

Section 10.16 Mutual Drafting . This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties have caused this Trademark License Agreement to be executed by their duly authorized representatives.

 

ARMSTRONG WORLD INDUSTRIES, INC.
By:  

/s/ Brian L. MacNeal

  Name: Brian L. MacNeal
  Title: Authorized Officer
AWI LICENSING LLC
By:  

/s/ /Stephen F. McNamara

  Name: Stephen F. McNamara
  Title: Authorized Officer
ARMSTRONG FLOORING, INC.
By:  

/s/ John W. Thompson

  Name: John W. Thompson
  Title: Authorized officer

[ Signature Page to Trademark License Agreement ]

Exhibit 10.5

TRANSITION TRADEMARK LICENSE AGREEMENT

BY AND BETWEEN

ARMSTRONG FLOORING, INC.,

AFI LICENSING LLC

AND

ARMSTRONG WORLD INDUSTRIES, INC.,

DATED AS OF APRIL 1, 2016


TRANSITION TRADEMARK LICENSE AGREEMENT

This TRANSITION TRADEMARK LICENSE AGREEMENT (this “ Agreement ”), is dated as of April 1, 2016 (the “ Effective Date ”), by and between Armstrong Flooring, Inc., a Delaware corporation (“ AFI ”), and AFI Licensing LLC, a Delaware limited liability company (“ AFI LC ”) (AFI and AFI LC collectively, “ Licensor ”), and Armstrong World Industries, Inc., a Pennsylvania corporation (“ AWI ” or “ Licensee ”) (each a “ Party ” and together, the “ Parties ”).

R E C I T A L S

WHEREAS, the board of directors of AWI (the “ AWI Board ”) has determined that it is in the best interests of AWI to separate AWI’s flooring business from its ceilings (building products) business, creating two independent industry-leading publicly traded companies;

WHEREAS, in furtherance of the foregoing, the Parties have entered into a Separation and Distribution Agreement, dated as of March 11, 2016 (as amended, modified or supplemented from time to time in accordance with its terms, the “ Separation Agreement ”), pursuant to which certain entities and assets constituting the AFI Business have been transferred to AFI;

WHEREAS, Licensor is the owner of all right, title and interest in and to the Marks (as defined below);

WHEREAS, the Separation Agreement provides for the execution and delivery of this Agreement by AFI and the Licensee at the Closing (as defined in the Separation Agreement); and

WHEREAS, subject to the terms and conditions hereinafter set forth, the Licensor wishes to grant to the Licensee, and the Licensee desires to obtain, a license to use the Marks in accordance with the terms, and subject to the conditions, set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement, the following terms shall have the following meanings:

Action ” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.


Affiliates ” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, for purposes of this Agreement, (a) no member of the AFI Group shall be deemed to be an Affiliate of any member of the AWI Group and (b) no member of the AWI Group shall be deemed to be an Affiliate of any member of the AFI Group.

AFI ” shall have the meaning set forth in the Preamble.

AFI Business ” shall mean (a) the business, operations and activities of the Resilient Flooring and the Wood Flooring segments of AWI conducted at any time prior to the Division Effective Time by either Party or any of their current or former Subsidiaries and (b) except for the Retained Legacy Matters (as defined in the Separation Agreement) (which are expressly excluded from the AFI Business), any terminated, divested or discontinued businesses, operations and activities that, at the time of termination, divestiture or discontinuation, primarily related to (i) the business, operations or activities described in clause (a) as then conducted, or (ii) any other business operations or activities previously conducted as part of the flooring business of AWI and its Subsidiaries, including those set forth on Schedule 1.2 of the Separation Agreement.

AFI Group ” shall mean (a) prior to the Division Effective Time, AFI and each Person that will be a Subsidiary of AFI as of immediately after the Division Effective Time, including the Transferred Entities (as defined in the Separation Agreement), even if, prior to the Division Effective Time, such Person is not a Subsidiary of AFI; and (b) on and after the Division Effective Time, AFI and each Person that is a Subsidiary of AFI.

AFI Indemnitees ” shall have the meaning set forth in Section 7.1 .

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

AWI ” shall have the meaning set forth in the Preamble.

AWI Board ” shall have the meaning set forth in the Recitals.

AWI Business ” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Division Effective Time by either Party or any member of its Group, other than the AFI Business.

AWI Group ” shall mean AWI and each Person that is a Subsidiary of AWI.

AWI Indemnitees ” shall have the meaning set forth in Section 7.2 .

 

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Brand Manual ” shall mean Licensor’s brand presentation guidelines prescribing the permitted form and manner in which the Mark may be used, a copy of which is attached to this Agreement as Schedule D , including any amendments or additions thereto notified in writing by Licensor to Licensee from time to time.

Dispute ” shall have the meaning set forth in Section 10.3(a) .

Division Effective Time ” shall have the meaning set forth in the Separation Agreement.

Effective Date ” shall have the meaning set forth in the Preamble.

Field of Use ” shall mean, with respect to Licensor, the Licensor Products and Services, and, with respect to Licensee, the Licensee Products and Services.

Governmental Authority ” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

Group ” shall mean either the AFI Group or the AWI Group, as the context requires.

Indemnifying Party ” shall have the meaning set forth in Section 7.3(a) .

Indemnitee ” shall have the meaning set forth in Section 7.3(a) .

Indemnity Payment ” shall have the meaning set forth in Section 7.3(a) .

Infringements ” shall have the meaning set forth in Section 5.2(a) .

Initial Notice ” shall have the meaning set forth in Section 10.3(a) .

Insurance Proceeds ” shall have the meaning set forth in the Separation Agreement.

Law ” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

Liabilities ” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration

 

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tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

License ” shall mean the rights and licenses with respect to the Marks granted pursuant and subject to Section 2.1 of this Agreement.

Licensee ” shall have the meaning set forth in the Preamble.

Licensee Products and Services ” shall mean those products and services set forth in Schedule B and Walls.

Licensor ” shall have the meaning set forth in the Preamble.

Licensor Products and Services ” shall mean those products and services set forth in Schedule C and Walls.

Losses ” shall mean actual losses, costs, damages, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

Marks ” shall mean the trademarks and service marks set forth on Schedule A hereto.

Party ” or “ Parties ” shall have the meaning set forth in the Preamble.

Person ” shall mean an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association, or other entity.

Representatives ” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

Separation Agreement ” shall have the meaning set forth in the Recitals.

Subsidiary ” shall mean, with respect to any Person, any corporation, general or limited partnership, trust, joint venture, unincorporated organization, limited liability company or other entity of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) in the case of a partnership, is a general partner, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

Tax Matters Agreement ” shall have the meaning set forth in the Separation Agreement.

Term ” shall have the meaning set forth in Section 8.1(a) .

Territory ” shall mean worldwide.

 

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Third Party ” shall mean any Person other than the Parties or any members of their respective Groups.

Third-Party Claim ” shall have the meaning set forth in Section 7.4(a) .

Walls ” means walls, wainscoting, room dividers, backsplashes, wall planks, wall tiles, and products, accessories and services relating thereto.

ARTICLE II

LICENSE GRANT

2.1 Grant of License . Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an exclusive (except with respect to Walls, which license shall be nonexclusive), royalty-free, non-transferrable (subject to Section 10.4 ) license to use the Marks throughout the Territory, in each case solely in connection with its business of manufacturing, distributing, marketing and selling the Licensee Products and Services.

2.2 Sublicensing . Licensee shall have the right to grant to any Person a sublicense of any of its rights granted under the License, provided that: (a) such sublicensee uses the Marks in support of the businesses of the AWI Group (and not for the independent use by a Third Party); (b) the terms of any sublicense are in writing and consistent with this Agreement; and (c) Licensee shall ensure that each sublicensee complies with the terms and conditions of this Agreement applicable to Licensee.

2.3 Limitations and Reservations . Notwithstanding anything to the contrary herein, the License is subject to any rights of or obligations owed to any Third Party under any agreement existing as of the Effective Date between Licensor or its Affiliates and any such Third Party. Except as expressly provided herein, Licensor reserves all rights with respect to the Marks, including with respect to the use, registration and licensing thereof.

ARTICLE III

QUALITY STANDARDS

3.1 Quality Control and Standards .

(a) Licensee shall use the Marks in a manner generally consistent with prior use.

(b) Licensee shall use the Marks and offer Licensee Products and Services under the Marks at a level of quality which generally equals or exceeds the levels of quality associated with the AWI Business. Without limitation to the foregoing, Licensee shall ensure that factories and facilities of Licensee and its Affiliates offering, using or creating Licensee Products and Services under the Marks are operated in a manner consistent with good industry practices.

(c) Each Party shall use the Marks in a manner that would not reasonably be expected to disparage or reflect negatively on the goodwill or reputation of the Marks, including by refraining from the use of inappropriate packaging, images and materials used in connection with the Marks. Each Party shall use the Marks and operate its business under the Marks in compliance with applicable Law.

 

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ARTICLE IV

USE OF THE MARKS

4.1 Use of Marks .

(a) The Licensee shall use the Marks in accordance with sound trademark usage principles and in accordance with all Laws relating to the maintenance of the validity and enforceability of the Marks; and shall not take action which is intended, or would reasonably be expected, to harm the reputation of the Marks or the reputation of the Licensor under the Marks.

(b) The Licensor shall use the Marks in accordance with sound trademark usage principles and in accordance with all Laws relating to the maintenance of the validity and enforceability of the Marks; and shall not take action which is intended, or would reasonably be expected, to harm the reputation of the Marks or the reputation of the Licensee under the Marks.

4.2 Presentation of Marks .

(a) Licensee shall use the Marks in a manner consistent with past practices and as set forth in the Brand Manual; provided that (i) Licensee may vary its presentation of the Marks from the Brand Manual with the prior written consent of Licensor, such consent not to be unreasonably withheld or delayed, and (ii) if Licensor changes the stylized format of the Marks as presented in the Brand Manual then Licensee shall have the right upon written notice to Licensor to continue to use the stylized format of the Marks used by Licensee hereunder prior to such change.

(b) Licensor shall use the Marks consistent with past practice and in a manner consistent with the Brand Manual during the Term, provided, however, that Licensor may use the Marks after the Term as Licensor sees fit.

(c) During the Term, the domain names inspiringgreatspaces.com and inspiringgreenspaces.com shall be held by Licensor, but not used by Licensor or its Affiliates, unless as otherwise agreed to in writing between the Parties.

4.3 Communication and Collaboration . The Parties acknowledge that, in connection with the conduct of their respective businesses hereunder under the Marks, there may be certain matters with respect to which the Parties may communicate or collaborate. Any such communications or collaboration shall be governed by Article IX hereof, and Licensor shall limit its use of such activities to the Licensor Products and Services and Licensee shall limit its use of such activities to the Licensee Products and Services.

 

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ARTICLE V

OWNERSHIP AND PROTECTION OF MARKS

5.1 Ownership of the Marks . Licensee acknowledges that the Marks and all rights therein and thereto and the goodwill pertaining thereto are owned exclusively by and belong exclusively to Licensor. Licensee’s use of the Marks and any and all goodwill generated thereby or associated therewith shall inure solely to the benefit of Licensor. Licensee shall not (a) register or seek to register in any jurisdiction any Mark (including any mark that includes or is a derivation of or confusingly similar to a Mark), (b) directly or indirectly contest the ownership or validity of any rights of the Licensor in or to any of the Marks, or (c) contest the fact that Licensee’s rights under this Agreement are as a licensee and subject to all of the terms and conditions herein.

5.2 Enforcement .

(a) Licensor shall have the exclusive right to challenge Third Party infringements, dilutions and other violations of or with respect to the Marks (“ Infringements ”) within the Licensor’s Field of Use (including Walls). If Licensor does not challenge such Infringement within ninety (90) days following written notice from Licensee requesting that action be taken, Licensor will at the request of Licensee consult in good faith with Licensee in connection therewith and consider in good faith any reasonable request by Licensee in connection thereto.

(b) Licensor shall have the initial right to challenge Infringements outside of the Parties’ respective Field of Use. If Licensor does not challenge such Infringement within ninety (90) days following written notice from Licensee requesting that action be taken, Licensee may challenge such Infringement.

(c) Licensee shall have the exclusive initial right to challenge Infringements that are solely within Licensee’s Field of Use (but not including Walls). If Licensee does not challenge such Infringement within ninety (90) days following written notice from Licensor requesting that action be taken, Licensor may challenge such Infringement and, in such instance, Licensee shall reimburse Licensor for fifty percent (50%) of all costs of Licensor and its Affiliates in connection therewith.

(d) Except as otherwise set forth in this Agreement, (i) Licensor shall bear the cost of any challenges it brings against Infringements and shall be entitled to retain all sums recovered in any such Action, and (ii) Licensee shall bear the cost of any challenges it brings and shall be entitled to retain all sums recovered in any such Action.

(e) With respect to an Action challenging an Infringement which a Party has the right to bring under Section 5.2(a) through (c) , at the reasonable request and at the expense of such Party, the other Party shall (i) cooperate with the requesting Party in connection with such Action, and (ii) join as a party in such Action if necessary for the purpose of maintaining standing in such Action. If at the request of a Party the other Party so joins an Action for the purpose of maintaining standing, the requesting Party shall indemnify and hold harmless the other Party from any Liabilities relating thereto or arising or resulting therefrom.

 

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5.3 Recordation . In the event Licensor or Licensee deems recordation of this Agreement necessary, the other Party shall reasonably cooperate, at the requesting Party’s expense, in connection with the recording of this Agreement with the appropriate Governmental Authorities and in the renewal of such recordation. The Parties shall provide assistance and information to each other as reasonably necessary to accomplish such recordation, including by submitting a revised version of this Agreement in a form necessary, but without change of substance (except where such change is necessary for purposes of recordation) hereof, for recordation. Upon termination or expiration of this Agreement, the Parties shall cooperate to effect a cancellation or termination of any recordation of this Agreement with the appropriate Governmental Authorities, and the Parties will grant, and hereby do grant, to each other an irrevocable power of attorney coupled with an interest to effect such cancellation within twenty (20) days after the termination of this Agreement.

ARTICLE VI

DISCLAIMER OF REPRESENTATIONS AND WARRANTIES

6.1 DISCLAIMER .

(a) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ALL LICENSES TO THE MARKS ARE BEING MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE (A) AS TO THEIR VALUE OR FREEDOM FROM ANY SECURITY INTERESTS; (B) AS TO TITLE, NONINFRINGEMENT, VALIDITY, ACCURACY OF INFORMATIONAL CONTENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (WHETHER OR NOT A PARTY OR ITS AFFILIATES KNOWS OR HAS REASON TO KNOW ANY SUCH PURPOSE) OR ANY OTHER MATTER, INCLUDING ANY WARRANTY (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, BY COURSE OF DEALING OR OTHERWISE; OR (C) AS TO THE LEGAL SUFFICIENCY TO GRANT ANY RIGHTS THEREIN AND AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AND NEITHER PARTY, NOR ANY OF ITS REPRESENTATIVES, MAKES OR HAS MADE ANY REPRESENTATION OR WARRANTY, AND HEREBY EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AT LAW OR IN EQUITY, IN CONNECTION WITH THIS AGREEMENT, INCLUDING WITH RESPECT TO THE MARKS, INCLUDING WITH RESPECT TO THE MATTERS DESCRIBED IN THE FOREGOING CLAUSES (A)–(C). WITHOUT LIMITING THE FOREGOING, THE LICENSEE HEREBY ACKNOWLEDGES AND AGREES THAT ALL LICENSES IN THIS AGREEMENT ARE BEING MADE “AS IS, WHERE IS,” AND, INTER ALIA, SUBJECT TO ANY AGREEMENTS EXISTING AS OF THE EFFECTIVE DATE.

 

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ARTICLE VII

INDEMNIFICATION

7.1 Indemnification by AWI . Except as otherwise specifically set forth in this Agreement, to the fullest extent permitted by Law, AWI shall, and shall cause the other members of the AWI Group (including any sublicensee) to indemnify, defend and hold harmless AFI, each member of the AFI Group and each of their respective past, present and future directors, officers, employees and agents, in each case, in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ AFI Indemnitees ”), from and against any and all Liabilities of the AFI Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any Liabilities to the extent such Liabilities arise out of any Third-Party Claim relating to, arising out of or resulting from, directly or indirectly, use of the Marks by, under or through AWI or its Affiliates or sublicensees (including with respect to the manufacture, marketing, offering, use, issuance, sale or performance of any Licensee Products and Services); or

(b) any breach by AWI or any other member of the AWI Group (including any sublicensee) of this Agreement.

7.2 Indemnification by AFI . Except as otherwise specifically set forth in this Agreement, to the fullest extent permitted by Law, AFI shall, and shall cause the other members of the AFI Group (other than AWI and its sublicensees) to, indemnify, defend and hold harmless AWI, each member of the AWI Group and each of their respective past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ AWI Indemnitees ”), from and against any and all Liabilities of the AWI Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

(a) any Liabilities to the extent such Liabilities arise out of any Third-Party Claim relating to, arising out of or resulting from, directly or indirectly, use of the Marks by, under or through AFI or its Affiliates or sublicensees (other than AWI and its sublicensees) (including with respect to the manufacture, marketing, offering, use, issuance, sale or performance of any Licensor Products and Services); or

(b) any breach by AFI or any other member of the AFI Group (other than AWI and its sublicensees) of this Agreement.

7.3 Indemnification Obligations Net of Insurance Proceeds and Other Amounts .

(a) The Parties intend that the indemnification, contribution or reimbursement with respect to any Liability pursuant to this Article VII shall be net of Insurance Proceeds and other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) from any Person by or on behalf of the

 

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Indemnitee in respect of any indemnifiable Liability. Accordingly, the amount which either Party (an “ Indemnifying Party ”) is required to pay to any Person entitled to indemnification, contribution or reimbursement hereunder (an “ Indemnitee ”) will be reduced by any Insurance Proceeds and other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) from any Person by or on behalf of the Indemnitee in respect of the related Liability. If an Indemnitee receives an indemnification, contribution or reimbursement payment (an “ Indemnity Payment ”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or any other amounts in respect of the related Liability, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof, including increased premiums) had been received, realized or recovered before the Indemnity Payment was made.

(b) The Parties agree that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement, have any subrogation rights with respect thereto, it being understood that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification, contribution and reimbursement provisions hereof. Each Party shall, and shall cause the members of such Party’s Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification, contribution or reimbursement may be available under this Article VII . Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification, contribution or reimbursement, or receiving any Indemnity Payment otherwise owed to it under this Agreement.

7.4 Procedures for Indemnification of Third-Party Claims .

(a) Notice of Claims . If, at or following the Effective Date, an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) that is not a member of the AWI Group or the AFI Group (or their respective sublicensees) of any claim or of the commencement by any such Person of any Action (collectively, a “ Third-Party Claim ”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 7.1 or 7.2 , or any other Section of this Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as soon as practicable, but in any event within fourteen (14) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim.

 

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Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 7.4(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced in some material respect by the Indemnitee’s failure to provide notice in accordance with this Section 7.4(a) .

(b) Control of Defense. An Indemnifying Party may elect to defend (and seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim; provided that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any such Liabilities to the extent resulting from, or arising out of, such Third-Party Claim. Notwithstanding the foregoing, if the Indemnifying Party assumes such defense and, in the course of defending such Third-Party Claim, (i) the Indemnifying Party discovers that the facts presented at the time the Indemnifying Party acknowledged its indemnification obligation in respect of such Third-Party Claim were not true in all material respects and (ii) such untruth provides a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then (A) the Indemnifying Party shall not be bound by such acknowledgment, (B) the Indemnifying Party shall promptly thereafter provide the Indemnitee written notice of its assertion that it does not have an indemnification obligation in respect of such Third-Party Claim and (C) the Indemnitee shall have the right to assume the defense of such Third-Party Claim. Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 7.4(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in Section 7.4(a) , then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim.

(c) Allocation of Defense Costs . If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification, contribution or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in Section 7.4(a) , and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

 

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(d) Right to Monitor and Participate. An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 7.4(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

(e) No Settlement. Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages, does not involve any finding or determination of wrongdoing or violation of Law by the other Party and provides for a full, unconditional and irrevocable release of the other Party from all Liability in connection with the Third-Party Claim.

(f) Tax Matters Agreement Governs . The above provisions of this Section 7.4 do not apply to Taxes (as defined in the Separation Agreement) (Taxes being governed by the Tax Matters Agreement). In the case of any conflict between this Agreement and the Tax Matters Agreement in relation to any matters addressed by the Tax Matters Agreement, the Tax Matters Agreement shall prevail.

ARTICLE VIII

TERM AND TERMINATION

8.1 Term and Termination .

(a) This Agreement shall commence as of the Effective Date, and shall terminate on the fifth anniversary of the Effective Date, unless terminated earlier pursuant to this Section 8.1 (the “ Term ”).

(i) In the event that Licensee (and its sublicensees) ceases all use of the Marks everywhere throughout the world for a period of three (3) consecutive years, this Agreement may be terminated immediately upon written notice by Licensor.

 

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(ii) In the event that a Party materially breaches this Agreement and such breach has a material adverse impact on the business or reputation, taken as a whole, of the non-breaching Party, and the breaching Party fails to cure such breach or, if such breach is not reasonably curable during such time period, fails to implement steps reasonably intended to cure or remedy such breach within sixty (60) days’ written notice from the non-breaching Party, this Agreement may be terminated upon written notice by the non-breaching Party.

(iii) Licensee shall have the right at any time to terminate this Agreement upon written notice to Licensor.

8.2 Effect of Termination .

(a) Upon expiration or earlier termination of this Agreement, the Licensee shall and shall cause each of its sublicensees to, within one (1) year of termination or by or upon the date of expiration, cease any and all use of the Marks and any mark confusingly similar thereto.

8.3 Rights and Remedies . The rights and remedies of Licensor set forth in this Article VIII are in addition to all other rights and remedies available at law or equity.

ARTICLE IX

CONFIDENTIALITY

9.1 Confidentiality . Each of Licensor and Licensee, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to AWI’s confidential and proprietary information pursuant to policies in effect as of the Effective Date, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses that may be in its possession as of the Effective Date or is furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder, except, in each case, to the extent that such confidential and proprietary information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group.

9.2 Protective Arrangements . In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any

 

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Governmental Authority to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as practicable under the circumstances prior to disclosing or providing such information and shall cooperate, at the expense of the other Party, in seeking any appropriate protective order requested by the other Party. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

ARTICLE X

MISCELLANEOUS

10.1 Counterparts; Entire Agreement; Corporate Power .

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

(b) This Agreement and the Exhibits, Schedules and appendices hereto, and the Separation Agreement, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties other than those set forth or referred to herein or therein. In the case of any conflict between this Agreement and the Separation Agreement in relation to any matters addressed by this Agreement, the Separation Agreement shall prevail.

(c) AWI represents on behalf of itself and each other member of the AWI Group, and AFI represents on behalf of itself and each other member of the AFI Group, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii) this Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

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(d) Each Party acknowledges that this Agreement may be executed by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such Party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other Party at any time, it will as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

10.2 Governing Law . This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein , whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware including all matters of validity, construction, effect, enforceability, performance and remedies.

10.3 Dispute Resolution.

(a) Good Faith Negotiation . Any dispute, controversy or claim arising out of or relating to this Agreement (a “ Dispute ”), shall initially be referred to the Transition Committee (as defined in the Separation Agreement, and for so long as such Transition Committee exists) for resolution. If the Transition Committee (as defined in the Separation Agreement) is unable to resolve such Dispute within thirty (30) days (or if such Transition Committee no longer exists), then either Party may provide written notice thereof to the other Party (the “ Initial Notice ”), and the Parties shall thereafter attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of vice president and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

(b) In the event that a Dispute has not been resolved within sixty (60) days after receipt by a Party of an Initial Notice, or within such longer period as the Parties may agree to in writing, then each Party hereby agrees and consents to be subject to the jurisdiction of the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, to resolve any such unresolved Dispute in any suit, action or proceeding seeking to enforce any provision of, or based on any other matter arising out of or in connection with, this Agreement or the transactions contemplated hereby. Each Party hereby irrevocably consents to the service of any and all process in any such suit, action or proceeding by the delivery of such process to such Party at the address and in the manner provided in Section 10.7 hereof. Each of the Parties hereto

 

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irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the Court of Chancery of the State of Delaware in and for New Castle County, or if the Court of Chancery lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in New Castle County, Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3(c) .

(d) Notwithstanding the foregoing provisions of this Section 10.3 , a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 10.3(a) if such action is reasonably necessary to avoid irreparable damage.

(e) Unless otherwise agreed in writing, the Parties shall, and shall cause their respective members of their Group to, continue to honor all commitments under this Agreement to the extent required by this Agreement during the course of dispute resolution pursuant to the provisions of this Section 10.3 , unless such commitments are the specific subject of the Dispute at issue.

10.4 Assignability . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , however , that neither Party may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other Party hereto. Notwithstanding the foregoing, no such consent shall be required for the assignment of a Party’s rights and obligations under this Agreement in whole (i.e., the assignment of a Party’s rights and obligations under this Agreement all at the same time) in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any member of its Group from being party to or undertaking a change of control.

 

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10.5 Third-Party Beneficiaries . Except for the indemnification rights under this Agreement of any AWI Indemnitee or AFI Indemnitee in their respective capacities as such, and as set forth in Article VII (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third person with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

10.6 Recovery of Fees . In the event that any Action is instituted or commenced by either Party hereto against the other Party as a result of a Dispute, the Party that substantially prevails in such Action as determined by a final, nonappealable judgment of an arbitration or court shall be entitled to recover its reasonable attorneys’ fees and other costs incurred in such Action from the non-prevailing party.

10.7 Notices .

(a) All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by electronic mail (for which a confirmation email is obtained), or sent by overnight courier (providing proof of delivery) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.7 ):

 

If to AWI, to:

Armstrong World Industries, Inc.

P.O. Box 3001

Lancaster, PA 17604

Email: mahershey@armstrongceilings.com

Attention:

   General Counsel
with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Email:

   Peter.Atkins@skadden.com
   Eric.Cochran@skadden.com

Attention:

   Peter A. Atkins
   Eric L. Cochran

and

 

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Skadden, Arps, Slate, Meagher & Flom LLP

One Rodney Square

920 N. King Street

Wilmington, DE 19801

Email:

   Steven.Daniels@skadden.com

Attention:

   Steven J. Daniels
If to AFI, to:

Armstrong Flooring, Inc.

P.O. Box 3025

Lancaster, PA 17604

Email: csparisi@armstrongflooring.com

Attention:

   General Counsel
with a copy (prior to the Distribution Effective Time (as defined in the Separation Agreement)) to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Email:

   Peter.Atkins@skadden.com
   Eric.Cochran@skadden.com

Attention:

   Peter A. Atkins
   Eric L. Cochran

and

Skadden, Arps, Slate, Meagher & Flom LLP

920 N. King Street

Wilmington, DE 19801

Email:

   Steven.Daniels@skadden.com

Attention:

   Steven J. Daniels

A Party may, by notice to the other Party, change the address to which such notices are to be given.

10.8 Force Majeure . No Party shall be deemed in default of this Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure (as defined in the Separation Agreement). In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement, as soon as reasonably practicable.

 

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

10.10 Waivers of Default . Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

10.11 Specific Performance . Subject to the provisions of Section 10.3 , in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

10.12 Amendments . No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

10.13 Interpretation . In this Agreement (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires, (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement, (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement unless otherwise specified, (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement, (e) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified, (f) the word “or” shall not be exclusive, (g) unless otherwise specified in a particular case, the word “days” refers to calendar days, (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or Lancaster, Pennsylvania, (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter,

 

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unless otherwise specified, and (j) unless expressly stated to the contrary in this Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to the Effective Date.

10.14 Limitations of Liability . Notwithstanding anything in this Agreement to the contrary, neither AFI or any member of the AFI Group, on the one hand, nor AWI or any member of the AWI Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

10.15 Performance . AWI will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the AWI Group. AFI will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by any member of the AFI Group. Each Party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement to all of the other members of its Group and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement.

10.16 Mutual Drafting . This Agreement shall be deemed to be the joint work product of the Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties have caused this Transition Trademark License Agreement to be executed by their duly authorized representatives.

 

ARMSTRONG FLOORING, INC.
By:  

/s/ John W. Thompson

  Name:  

John W. Thompson

  Title:   Authorized Officer
AFI LICENSING LLC
By:  

/s/ Douglas B. Bingham

  Name:   Douglas B. Bingham
  Title:   Authorized Officer
ARMSTRONG WORLD INDUSTRIES, INC.
By:  

/s/ Brian L. MacNeal

  Name:   Brian L. MacNeal
  Title:   Authorized Officer

[ Signature Page for Transition Trademark License Agreement ]

Exhibit 10.6

LEASE BETWEEN

ARMSTRONG WORLD INDUSTRIES, INC.

AND

ARMSTRONG FLOORING, INC.

DATED AS OF APRIL 1, 2016


TABLE OF CONTENTS

LEASE

 

     Page No.  

Article 1 PREMISES; TERM

     1   

Article 2 OCCUPANCY

     2   

Article 3 RENT

     3   

Article 4 DEFINITIONS

     3   

Article 5 ADJUSTMENTS OF RENT

     4   

Article 6 LATE PAYMENT CHARGE

     12   

Article 7 ALTERATIONS

     13   

Article 8 REPAIRS; SERVICES PROVIDED BY LANDLORD

     16   

Article 9 REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOAD

     20   

Article 10 SUBORDINATION

     21   

Article 11 PROPERTY LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY

     22   

Article 12 DESTRUCTION, FIRE AND OTHER CASUALTY

     24   

Article 13 EMINENT DOMAIN

     26   

Article 14 ASSIGNMENT, SUBLETTING, ETC.

     26   

Article 15 ACCESS TO PREMISES

     29   

Article 16 VAULT, VAULT SPACE, AREA

     31   

Article 17 BANKRUPTCY

     31   

Article 18 DEFAULT

     32   

Article 19 REMEDIES OF LANDLORD AND WAIVER OF REDEMPTION

     33   

Article 20 FEES AND EXPENSES

     34   

Article 21 NO REPRESENTATIONS BY LANDLORD

     35   

Article 22 END OF TERM

     35   

Article 23 QUIET ENJOYMENT

     35   

Article 24 NO WAIVER

     36   

Article 25 DISPUTE RESOLUTION; WAIVER OF TRIAL BY JURY

     36   

Article 26 INABILITY TO PERFORM

     37   

Article 27 CAPTIONS

     37   

Article 28 ADJACENT EXCAVATION – SHORING

     38   

Article 29 COMPLIANCE

     38   

Article 30 SUCCESSORS AND ASSIGNS

     38   

Article 31 INSURANCE

     38   

Article 32 BROKERAGE

     39   

Article 33 ESTOPPEL CERTIFICATE

     39   

Article 34 HOLDING OVER

     40   

Article 35 NOTICES

     41   

Article 36 EXISTING FF&E

     42   

Article 37 CERTAIN RIGHTS RESERVED TO LANDLORD

     42   

Article 38 HAZARDOUS MATERIALS

     43   

Article 39 SIGNAGE

     44   

Article 40 LICENSED AREA

     44   

Article 41 MISCELLANEOUS

     47   

 

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EXHIBIT A-1 and A-2 – DESCRIPTION OF PREMISES
EXHIBIT B – COMMON AREAS
EXHIBIT C – EXISTING VACANT SPACE
EXHIBIT D – OTHER PROPERTY
EXHIBIT E – EXCLUDED FF&E
EXHIBIT F-1, F-2 and F-3 – DESCRIPTION OF LICENSED SPACE
EXHIBIT G- DATA CENTER LICENSED SPACE
SCHEDULE 5.1 – BASE YEAR OPERATING EXPENSE STATEMENT
SCHEDULE 40.2(B) – DESIGNATED TENANT REPRESENTATIVES

 

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AGREEMENT OF LEASE

This AGREEMENT OF LEASE, dated as of April 1, 2016 (this “ Lease ”), between Armstrong World Industries, Inc., a Pennsylvania corporation, having an address at 2500 Columbia Avenue, Building 5, Lancaster, PA 17603, party of the first part (hereinafter referred to as “ Landlord ”), and Armstrong Flooring, Inc., a Delaware corporation, having an address at 2500 Columbia Avenue, Building 701, Lancaster, PA 17603, party of the second part (hereinafter referred to as “ Tenant ”).

RECITALS

WHEREAS, pursuant to that certain Separation and Distribution Agreement, dated as of April 1, 2016 (the “ Separation and Distribution Agreement ”), by and between Landlord and Tenant, Landlord desires to lease the Premises (as hereinafter defined) to Tenant and Tenant desires to lease the Premises from Landlord upon the terms set forth in this Lease.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE 1

PREMISES; TERM

1.1 Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, upon and subject to the terms, covenants, provisions and conditions of this Lease, the following premises located within the Campus (as hereinafter defined) consisting of (i) the entire Buildings (as hereinafter defined) identified on Exhibit A-1 attached hereto and made a part hereof and (ii) portions of certain Buildings identified on Exhibit A-2 and made a part hereof, in each case, together with all Premises FF&E (as defined below) located thereon (collectively the “ Premises ”, and together with the land and all other improvements thereon, the “ Property ”). Subject to the terms of this Lease, Tenant shall have the non-exclusive right to use, in common with Landlord and other tenants and each of their agents, guests and invitees, (i) the parking areas, exterior plazas, entrances, roadways and walkways located within the Campus and (ii) the common areas of the Buildings described on Exhibit B attached hereto, including, without limitation, the stairways, hallways, restrooms, lobbies, patios, elevators, corridors, the meeting rooms, the fitness center, the cafeteria, the auditorium, the loading docks and the product display areas located therein (collectively, the “ Common Areas ”).

1.2 The term (the “ Term” ) of this Lease shall commence on the date hereof (the “ Commencement Date ”), and end on the date (as the same may be extended pursuant to the terms hereof, the “ Expiration Date ”) which is the last day of the month preceding the month in which occurs the fifth (5 th ) anniversary of the Commencement Date (the “ Initial Expiration Date ”) or until such Term shall sooner cease and terminate as herein provided. Tenant shall have the option (the “ 6th Year Renewal Option ”) to extend the Term until the sixth (6 th ) anniversary of the Commencement Date, which option shall be exercised upon delivery of written notice to Landlord on or prior to the fourth (4 th ) anniversary of the Commencement Date. After the 6 th Year Renewal Option is exercised, the Term shall thereafter automatically renew for successive


one (1) year periods (each a “ Renewal Term ”), unless either Landlord or Tenant delivers written notice of non-renewal to the other party on or before (i) with respect to the first Renewal Term, twelve (12) months prior to Initial Expiration Date and (ii) with respect to any subsequent Renewal Term, eighteen (18) months prior to the expiration of the then current Renewal Term. This Lease, if and as so extended during the Renewal Term, shall be upon the same terms and conditions as contained in this Lease, except for the Term.

ARTICLE 2

OCCUPANCY

2.1 Tenant agrees to use and occupy the Premises and the Licensed Space (as defined below) in a manner that is consistent with the uses made of the Premises during the twelve (12) month period immediately prior to the Commencement Date (each a “ Permitted Use ” and collectively, the “ Permitted Uses ”) and for no other purpose whatsoever. For the avoidance of doubt, the parties agree and acknowledge that the testing of products on the existing flooring manufacturing pilot line located within the Premises and/or the Licensed Space in connection with the research and development components of Tenant’s business shall be a Permitted Use hereunder, but in no event shall finished production manufacturing be permitted on any portion of the Premises or the Licensed Space.

2.2 Tenant will not make or permit to be made any use of the Premises, the Common Areas, the Licensed Space or any part thereof (i) which would violate any of the covenants, agreements, terms, provisions and conditions of this Lease, (ii) which would violate the provisions of any service agreements relating to the Premises or the Licensed Space in a manner inconsistent with past practices at the Premises and Licensed Space, (iii) which is forbidden by Legal Requirements (as hereinafter defined), (iv) which may be dangerous to life, limb, or property, (v) which may invalidate or increase the premium cost of any policy of insurance carried on the Campus or concerning its operation, (vi) which will suffer or permit the Premises, the Common Areas, the Licensed Space or any part thereof to be used in any manner, or anything to be brought into or kept therein, which, in the reasonable judgment of Landlord, shall in any way impair or tend to impair the character, reputation or appearance of the Campus, or (vii) which would impair or interfere, other than to a de minimis extent, or tend to impair or interfere, other than to a de minimis extent, with any of the services performed by Landlord for the Campus or which will interfere with or disturb other tenants or users. Landlord makes no representation as to the condition of the Premises, the Common Areas or the Licensed Space except as otherwise expressly provided in this Lease, and Tenant agrees to accept the same subject to violations whether or not of record. Tenant will not at any time use or occupy the Premises, the Common Areas or the Licensed Space or permit same to be used or occupied in violation of the certificate of occupancy for the applicable Building in which such Premises, Common Areas or Licensed Space is located. Landlord agrees that it will not amend the current certificate of occupancy to preclude the use of the Premises for the Permitted Use applicable thereto.

 

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ARTICLE 3

RENT

3.1 During the Term, Tenant shall pay minimum annual rent (the “ Minimum Rent ”) of $5,622,900.00 per annum, together with all other sums of money as shall become due and payable by Tenant under this Lease (hereinafter called “ additional rent ” or “ Additional Rent ”) which Tenant agrees to pay in lawful money of the United States of America which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Landlord or such other place as Landlord may designate in writing, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof. The Minimum Rent and Additional Rent are collectively referred to herein as the “rent”.

3.2 If the payment of Minimum Rent hereunder shall commence on any day other than the first day of a calendar month, then the Minimum Rent for such calendar month shall be prorated on a per diem basis, and any excess amount paid on the execution of this Lease shall be credited to the Minimum Rent for the next calendar month.

3.3 In the event Landlord leases all or any portion of the space identified on Exhibit C attached hereto to a third party (a “ Third Party Lease ”) Tenant shall be entitled to a credit against the Minimum Rent and Additional Rent payable by Tenant hereunder by an amount equal to Tenant’s Proportionate Share of any Net Third Party Rents actually received by Landlord, as shown on Landlord’s Operating Statement in accordance with the terms set forth in Section 5.3(c) . For purposes of this Section 3.3 , the term “ Net Third Party Rents ” shall mean all rents, additional charges or other consideration payable under a Third Party Lease which are in excess of any brokerage commissions, tenant allowances, free rent, landlord alterations, reimbursements, reasonable attorney’s fees and other costs and expenses incurred by Landlord in connection with such Third Party Lease amortized over the term of such Third Party Lease. In no event shall unforfeited security deposits be considered Net Third Party Rents.

ARTICLE 4

DEFINITIONS

The following definitions shall have the meanings set forth below:

4.1 “ Building ” shall mean each of the buildings located within the Campus.

4.2 “ Business Days ” or “ business days ” shall mean all days other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by law to close in the United States or Lancaster, Pennsylvania.

4.3 “ Campus ” shall mean the multi-building campus located at 2500 Columbia Avenue, Lancaster, Pennsylvania consisting of (i) the Property, (ii) the Common Areas and (iii) the Buildings (or portions of Buildings) identified on Exhibit D attached hereto which contain service and/or mechanical facilities or are otherwise used and/or occupied by Landlord and/or

 

3


one or more of its designees. For the avoidance of doubt, the term “Campus” shall not include any portion of the unimproved land consisting of approximately four hundred (400) acres that is located adjacent to the multi-building campus and is currently used for agricultural purposes.

4.4 “ Interest Rate ” shall mean the annual interest rate that is three (3%) percent per annum above the then published prime interest rate upon unsecured loans charged by JP Morgan Chase Bank (or any successor thereto) on loans of 90 days (the “ Prime Rate ”).

4.5 “ Landlord ” shall mean only the then-Landlord under this Lease, and not any prior “Landlord” so that in the event of any transfer or transfers of title to the Buildings or of Landlord’s interest in this Lease, the transferor shall be and hereby is automatically relieved and freed of all obligations of Landlord under this Lease accruing after such transfer provided that such transferee shall assume such obligations.

4.6 “ Legal Requirements ” shall mean any national, supranational, federal, state, provincial, local or similar laws (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority (as defined in the Separation and Distribution Agreement).

ARTICLE 5

ADJUSTMENTS OF RENT

5.1 Definitions as used herein:

(a) “ Taxes ” shall mean (1) the amount finally determined to be legally payable, by legal proceedings or otherwise, of all real estate taxes or other taxes imposed in substitution thereof, assessments (including for any business improvement district), and other governmental impositions and charges of every kind whatsoever, nonrecurring as well as recurring, special or extraordinary as well as ordinary, foreseen and unforeseen, and each and every installment thereof, which shall be levied, assessed or imposed, or become due and payable or become liens upon, or arise in connection with the use, occupancy or possession of, the Campus or any part thereof or interest therein during the term of this Lease, and (2) all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Landlord in contesting the assessment of the Campus for real estate tax purposes or in otherwise contesting the amount of any of the real estate taxes or other governmental charges described above. If, due to a change in the method of taxation, a new or additional tax, however designated, shall be levied against Landlord, and/or the Campus, in addition to or in substitution, in whole or in part, for any tax which would otherwise constitute “Taxes”, or in lieu of additional Taxes, such tax or imposition shall be deemed for the purposes hereof to be included within the term “Taxes”. “Taxes” shall not include (i) any succession, gains, recording, income, franchise, transfer, inheritance, capital stock, excise, excess profits, occupancy or rent, gift, estate, foreign ownership or control, payroll or stamp tax of Landlord or any superior party (except as expressly set forth in the preceding sentence), (ii) any other tax, assessment, charge or levy on the rent reserved under this Lease (other than any commercial occupancy taxes payable by Tenant) or (iii) any other tax, assessment, imposition or other charge that is levied, assessed or imposed upon any portion of the land or improvements that do not comprise the Campus.

 

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(b) “ Tax Base ” shall mean the Taxes for the fiscal year commencing on July 1, 2015 and ending on June 30, 2016.

(c) “ Tenant’s Proportionate Share ” shall mean forty-seven percent (47%).

(d) “ Tax Year ” shall mean each period of twelve months, commencing on the first day of July, in which occurs any part of the Term or such other period as may hereafter be adopted as the fiscal year for real estate tax purposes in Lancaster, Pennsylvania.

(e) “ Landlord’s Tax Statement ” shall mean an annual statement setting forth the amount payable by Tenant for a specified Tax Year pursuant to this Article 5 .

(f) “ Base Operating Expenses ” shall mean Operating Expenses for the 2015 calendar year. Attached hereto as Schedule 5.1 for informational purposes only is a statement setting forth the major line item expenses included in Landlord’s calculation of the Base Operating Expenses which Tenant has reviewed and approved.

5.2 Payments – Tax Escalations .

(a) If Taxes payable in any Tax Year shall exceed the Tax Base, Tenant shall pay as Additional Rent a sum (hereinafter referred to as “ Tenant’s Tax Payment ”) equal to Tenant’s Proportionate Share of the amount by which the Taxes for such Tax Year exceed the Tax Base in accordance with the terms of this Section 5.2 .

(b) At any time before or after the commencement of any Tax Year, Landlord may furnish to Tenant a statement (the “ Estimated Tax Statement ”) of Landlord’s reasonable estimate of Tenant’s Tax Payment for such Tax Year (the “ Tenant’s Estimated Tax Payment ”). The Estimated Tax Statement shall be accompanied by a copy of the tax statement or bill for the Taxes or all components thereof. If Landlord delivers to Tenant an Estimated Tax Statement with respect to any such Tax Year, subject to the terms of Section 5.2(c) , Tenant shall pay to Landlord, as Additional Rent, on account of Tenant’s Tax Payment due hereunder for such Tax Year (or prorated portion thereof) on the date which is the later to occur of (a) thirty (30) days after receipt of Landlord’s Estimated Tax Statement, or (b) fifteen (15) days prior to the date on which the applicable Taxes or any component thereof or any installments thereof, are due to the applicable taxing authority (such earlier date, the “ Tax Due Date ”).

(c) If during any Tax Year the last-issued Estimated Tax Statement for such Tax Year is inaccurate in any respect, Landlord shall promptly issue a revised Estimated Tax Statement. If there shall be any increase in Taxes for any Tax Year as indicated on a revised Estimated Tax Statement, Tenant shall pay to Landlord the amount shown on the revised Estimated Tax Statement on or before the applicable Tax Due Date. Subject to the provisions of the last sentence of this Section 5.2(c) , if there shall be any decrease in Taxes for any Tax Year as indicated on a revised Estimated Tax Statement, such that Tenant shall have overpaid Tenant’s Tax Payment for the Tax Year in question, then (1) if such decrease will give rise to a credit issued by the taxing authority against future Taxes, Landlord shall credit Tenant’s

 

5


Proportionate Share of the amount of such credit, as and when received by Landlord, against the next subsequent payments of rent until such credit is fully applied, or (2) if such decrease will give rise to a cash refund from the taxing authority to Landlord, Landlord shall refund to Tenant within thirty (30) days after receipt of such refund by Landlord, the amount of such overpayment on the revised Estimated Tax Statement for such Tax Year. If, at the time Landlord receives any such credit or refund, Tenant is then in monetary default or material non-monetary default under this Lease, in each case, beyond the expiration of any applicable notice and/or cure period, Landlord may offset the amount of such credit or refund payable to Tenant against amounts properly due and owing by Tenant to Landlord.

(d) Landlord shall within sixty (60) days after the end of such Tax Year issue a statement of Taxes for such Tax Year, including a computation of Tenant’s Tax Payment for such Tax Year (a “ Tax Statement ”). If Tenant shall have overpaid Taxes or any component thereof for any Tax Year, Landlord, at its option, shall, subject to the last sentence of Section 5.2(c) hereof, either refund the amount overpaid to Tenant together with delivery of the Tax Statement or allow Tenant a credit against the next subsequent payments of Rent in the amount of Tenant’s overpayment of Taxes. If Tenant shall have underpaid Taxes for any Tax Year, Tenant shall pay to Landlord an amount equal to the amount of such underpayment of Tenant’s Tax Payment with respect to such Tax Year within thirty (30) days after receipt of the applicable Tax Statement.

(e) If the Tax Year shall be changed during the Term, any Taxes for such fiscal year, a part of which is included within a particular Tax Year and a part of which is not so included, shall be equitably apportioned.

(f) If the Tax Base is reduced as a result of a certiorari proceeding or otherwise, the Taxes as so reduced shall for all purposes be deemed to be the Taxes comprising the Tax Base and Landlord shall give notice thereof to Tenant but such reduction shall not increase any Tenant’s Tax Payment previously paid by Tenant for any period prior to the effective date of the reduction of the Tax Base as aforesaid.

(g) Only Landlord shall be eligible to institute tax reduction or other proceedings to reduce the assessed valuation of the Campus. If Landlord shall receive a refund or credit of Taxes for any Tax Year subsequent to the date of the Tax Statement for such Tax Year but subject to the last sentence of Section 5.2(c) , Landlord shall either pay to Tenant, or, at Landlord’s election, credit against the next due payments under this Section 5.2 an amount equal to Tenant’s Proportionate Share of the refund, but such amount shall not exceed Tenant’s Tax Payment paid for such Tax Year. Provided Tenant is not then in default beyond the expiration of any applicable notice and/or cure period, any credit or refund due Tenant at the expiration or sooner termination of the Term of this Lease shall be paid to Tenant within thirty (30) days after the expiration or sooner termination of this Lease. Nothing herein shall obligate Landlord to file any application or institute any proceeding seeking a reduction in Taxes or assessed valuation.

5.3 Payments – Operating Expenses .

(a) “ Operating Expenses ” shall mean the aggregate of all costs and expenses (including taxes (other than Taxes)) paid or incurred by or on behalf of Landlord (whether

 

6


directly or through independent contractors) in connection with the operation and maintenance of the Campus, except as provided herein. Operating Expenses shall be calculated on the accrual basis of accounting and shall, include, without limitation, but subject to the limitations set forth herein, the following expenses:

(i) salaries, wages, pension and welfare payments or contributions and all medical, insurance and other fringe benefits paid to, for or with respect to all persons (whether they be employees of Landlord or any independent contractor) for their services in the operation (including, without limitation, security services), maintenance, repair or cleaning of the Campus, and payroll taxes, workers’ compensation, and uniforms for such persons;

(ii) payments under service contracts with independent contractors for operating (including, without limitation, providing security services), maintaining, repairing, or cleaning the Campus or any portion thereof or any fixtures or equipment therein and any payments associated with the services provided by or on behalf of Landlord to the Common Areas in accordance with the terms of this Lease;

(iii) except to the extent directly billed to Tenant, all costs or charges for steam, electricity water and heating, ventilation and air-conditioning service (“ HVAC ”) furnished to the Campus and/or used in the operation of the Campus, including any taxes on any such utilities;

(iv) all costs and expenses for repairs, replacements, capital expenditures and capital improvements which are reasonable and necessary (determined by the Landlord in good faith and consistent with past practices) for the continued operation of the Campus, except that in the case of capital expenditures and capital improvements, Operating Expenses shall only include the amortized cost thereof based on their useful life and a discount rate equal to the Interest Rate at the time of Landlord having incurred said expenditure;

(v) cost of lobby decoration, and painting and decoration of non-tenant areas within the Campus;

(vi) cost of snow removal and landscaping in and about the Campus;

(vii) cost of building and cleaning supplies and equipment, cost of replacements for tools, equipment, bulbs, light fixtures, tubes, lamps, starters and ballasts used in the operation, maintenance and repair of the Campus and charges for telephone service for the Campus;

(viii) financial expenses incurred in connection with the operation of the Campus, such as insurance premiums, including, without limitation, liability insurance, fire and other casualty insurance, rent insurance and any other insurance that is then generally carried by owners of similar properties in similar geographic areas or may be reasonably required by the holder of any mortgage on the Campus or any portion thereof, reasonable attorneys’ fees and disbursements, auditing and other professional fees and expenses, association dues and other ordinary and customary financial expenses incurred in connection with the operation of the Campus;

 

7


(ix) rental payments made for equipment used in the operation and maintenance of the Campus;

(x) the cost of governmental licenses and permits, or renewals thereof, necessary for the operation of the Campus; and

(xi) all other reasonable and necessary expenses paid in connection with the operation, maintenance, repair and cleaning of the Campus which are properly chargeable against income.

The following costs and expenses shall be excluded from Operating Expenses or Operating Expenses shall be limited as provided herein:

 

  (1) Taxes;

 

  (2) debt service, amortization of principal and penalties or refinancing costs;

 

  (3) leasing costs and expenses, including brokerage commissions and similar fees;

 

  (4) any legal and accounting fees and disbursements incurred in connection with the preparation of Landlord’s tax returns or Landlord’s tax reporting or accounting at Landlord entity level or higher;

 

  (5) the cost of any item to the extent to which such cost is covered by insurance or condemnation proceeds;

 

  (6) costs and expenses incurred in connection with enforcement of leases or disputes with tenants (including Tenant);

 

  (7) costs and expenses incurred in connection with procuring tenants;

 

  (8) profits, franchise, gains, estate, income, succession, gift, corporation, unincorporated business and gross receipts taxes imposed upon Landlord, or any interest or penalties for failure to timely pay those taxes or any other taxes; and any mortgage recording or transfer taxes;

 

  (9)

any expenses which are not paid or incurred solely in respect of the Campus but rather in respect of the Campus and other property owned by Landlord or its affiliates, except that notwithstanding the foregoing, with respect to any expenses attributable in part to the Campus and in part to other property owned or managed by

 

8


  Landlord or its affiliates (including salaries, fringe benefits and other compensation of personnel below the grade of building manager who provide services to both the Campus and other properties) Operating Expenses shall include only such portion thereof as are apportioned by Landlord to the Campus on a fair and equitable basis;

 

  (10) costs incurred with respect to a sale or transfer of all or any portion of the Campus or any interest therein or in any person of whatever tier owning an interest therein;

 

  (11) costs incurred in connection with making any additions to, or building additional stories on, the Buildings or its plazas, or adding buildings or other structures adjoining the Buildings, or connecting the Buildings to other structures adjoining the Buildings

 

  (12) salaries of fringe benefits of personnel above the grade of building manager; and

 

  (13) any damages and attorneys’ fees and disbursements and other costs in connection with any judgment, settlement or arbitration award resulting from any tort liability of Landlord.

(b) For each calendar year during the term of this Lease, Tenant shall pay to Landlord as Additional Rent for the Premises, in accordance with the terms of this Section 5.3 , an amount (“ Tenant’s Operating Expense Payment ”) equal to Tenant’s Proportionate Share of the amount by which Operating Expenses for such calendar year exceed Base Operating Expenses (such excess being referred to herein as the “ Operating Excess ”).

(c) Following the end of each calendar year, Landlord shall furnish to Tenant a written statement (“ Landlord’s Operating Statement ”) in reasonable detail covering the calendar year just expired showing: (A) with respect to the Operating Expenses, (i) the Operating Expenses for such calendar year, (ii) the amount of Tenant’s Proportionate Share of the Operating Excess for such year, (iii) payments, if any, made by Tenant with respect to the Operating Excess, and (iv) the Monthly Operating Expense Payment Amount (as defined below) for the calendar year immediately following the calendar year that just expired and (B) if there are any Third Party Leases in effect during the calendar year just expired, (i) the Net Third Party Rents actually received during such calendar year, and (ii) the Minimum Rent and Additional Rent payments, if any, made by Tenant for such year. Landlord shall use reasonable efforts to deliver to Tenant Landlord’s Operating Statement within one hundred twenty (120) days following the expiration of the applicable calendar year without being obligated to incur any commercially unreasonable costs in connection therewith, it being agreed that Landlord shall have no liability to Tenant if Landlord fails for any reason to deliver to Tenant any Landlord’s Operating Statement prior to such date for any reason.

(d) On account of its obligations in respect of Operating Expenses, Tenant shall pay to Landlord, monthly, in advance, together with each monthly installment of Minimum

 

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Rent, an amount (the “ Monthly Operating Expense Payment Amount ”) equal to one-twelfth (1/12th) of Tenant’s Proportionate Share of the Operating Excess for the preceding lease year excluding any extraordinary Operating Expenses incurred during the preceding calendar year that Landlord does not reasonably anticipate will be incurred during the then-current lease year; provided however, that in no event shall the foregoing limit Tenant’s obligation to make any payments to Landlord under Section 5.3(e) in the event Landlord subsequently incurs such extraordinary Operating Expenses during the applicable calendar year. Landlord’s determination of the Monthly Operating Expense Payment Amount for the applicable year shall be reflected in Landlord’s Operating Statement.

(e) In the event Landlord furnishes Landlord’s Operating Statement subsequent to the commencement of the applicable calendar year, then (a) until the first day of the month following the month in which Landlord’s Operating Statement is furnished to Tenant, Tenant shall continue to pay to Landlord on the first day of each month an amount equal to the Monthly Operating Expense Payment Amount as reflected on the most recent Landlord’s Operating Statement delivered to Tenant, (b) after such Landlord Operating Statement is furnished to Tenant or together therewith, Landlord shall give notice to Tenant stating whether the installments of Tenant’s Operating Expense Payment previously made for such calendar year pursuant to clause (a) of this sentence were greater or less than the installments of Tenant’s Operating Expense Payment to be made for such calendar year in accordance with such Landlord Operating Statement, and (1) if there shall be a deficiency, Tenant shall pay the amount thereof within thirty (30) days after demand therefor or (2) subject to the provisions of the last sentence of Section 5.3(f) , if there shall have been an overpayment, Landlord shall, at Landlord’s option, pay to Tenant together with such notice, or credit against the next subsequent payments of rent, the amount thereof. The Monthly Operating Expense Payment Amount reflected on Landlord’s Operating Statement for the applicable calendar year may be adjusted by Landlord once a year to account for any increases in Operating Expenses that Landlord actually incurs during such calendar year and which were not reasonably anticipatable based on Landlord’s past practices if such increases result in a variance of ten percent (10%) or more in Operating Expenses required to be paid by Landlord, by furnishing to Tenant a written statement explaining the basis for the revision together with Landlord’s reasonable estimate of the revised Monthly Operating Expense Payment Amount.

(f) If Landlord’s Operating Statement shall indicate any overpayment or deficiency, then Landlord or Tenant, as the case may be, shall pay the same to the party entitled to the same within thirty (30) days after delivery of Landlord’s Operating Statement or, in the case of sums payable to Tenant, at Landlord’s option and subject to the terms of this Section 5.3(f) , Tenant shall be granted a credit for the amount of the overpayment made by Tenant, to be applied against the next due payments of rent. If, at the time Tenant becomes entitled to any refund or credit of rent, Tenant is then in monetary default or material non-monetary default under this Lease, in each case, beyond the expiration of any applicable notice and/or cure period, Landlord may offset the amount of such credit or refund payable to Tenant against amounts properly due and owing by Tenant to Landlord. Provided Tenant is not then in default beyond the expiration of any applicable notice and/or grace period, any credit or refund due Tenant at the expiration or sooner termination of the Term of this Lease shall be paid to Tenant within thirty (30) days after the expiration or sooner termination of this Lease.

 

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5.4 In the event that the date of the expiration or other termination of this Lease shall be a day other than the last day of a Tax Year or a calendar year, then, in such event, in applying the provisions of this Article 5 with respect to any Tax Year (for the purpose of calculating Tenant’s share of Taxes) or calendar year (for the purpose of calculating Tenant’s share of Operating Expenses), appropriate pro rata adjustments in the escalation due hereunder shall be made to reflect the occurrence of such event on a basis consistent with the principles underlying the provisions of this Article 5 taking into consideration that the expiration date of this Lease occurred during a partial lease year.

5.5 In no event shall the Minimum Rent ever be reduced by operation of this Article 5 . Landlord’s failure to render a Landlord’s Tax Statement with respect to any Tax Year or a Landlord’s Operating Statement with respect to any calendar year, respectively, shall not prejudice Landlord’s right to thereafter render a Landlord’s Tax Statement or Landlord’s Operating Statement with respect thereto or with respect to any subsequent Tax Year or calendar year provided that such Landlord’s Tax Statement or Landlord’s Operating Statement, as applicable, shall have been given to Tenant within two (2) years after the expiration of the Tax Year or calendar year in question, as applicable.

5.6 Each of Landlord’s Tax Statements and Landlord’s Operating Statements shall be conclusive and binding upon Tenant unless (i) pending the determination of such dispute by agreement or otherwise, Tenant shall pay additional rent in accordance with the applicable Landlord’s Tax Statement and/or Landlord’s Operating Statement, as the case may be, without prejudice to Tenant’s position, and (ii) within one hundred twenty (120) days after receipt of such Landlord’s Tax Statement and/or Landlord’s Operating Statement, Tenant shall notify Landlord in writing that it disputes the correctness thereof, which notice shall specify the particular respects in which the disputed Statement is inaccurate to the extent known. Tenant shall have the right, during reasonable business hours and upon not less than ten (10) business days’ prior written notice to Landlord, to examine Landlord’s books and records with respect to any Landlord’s Tax Statement or Landlord’s Operating Statement, provided that (a) such examination is commenced within one hundred twenty (120) days and concluded within one hundred eighty (180) days following the rendition of the statement in question, (b) such examination may only be conducted by: (i) a certified public accountant or other qualified professional who is a member of an independent certified public accounting firm or other qualified professional services firm having at least twenty-five (25) professionals or (ii) an employee of Tenant, who, in each instance, is not (and whose firm is not) being compensated by Tenant or any other person or entity, in whole or in part, on a contingency basis and is not and has not during the Term been affiliated with, a shareholder, an officer, director, partner or employee of Landlord, and (c) upon Landlord’s request, Tenant and such accounting or other firm or employee of Tenant deliver a confidentiality agreement to Landlord with respect to such dispute and such examination in form and substance reasonably satisfactory to Landlord. In connection with any examination by Tenant of Landlord’s books and records, Tenant agrees to treat, and to instruct its employees, accountants and agents reviewing such records to treat, all information as confidential and not disclose it to any other person except as may be required by law or in connection with any dispute with Landlord under this Lease relating thereto. Each party shall be responsible for its own fees in connection with such dispute. If Landlord and Tenant are unable to resolve a dispute regarding Landlord’s Tax Statement or Landlord’s Operating Statement and provided that the amount that Tenant claims is due is substantially

 

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different from the amount Landlord claims is due, Tenant shall send a notice to Landlord, within one hundred twenty (120) days after the date on which the records are made available to Tenant in connection with the disagreement in question indicating that Tenant desires to have such disagreement determined by an Arbiter (as hereinafter defined) and setting forth the name of an individual proposed by Tenant to serve as Arbiter. If Landlord does not agree with Tenant’s selection of an Arbiter, Landlord and Tenant shall attempt to agree on another individual to serve as Arbiter, and if Landlord and Tenant shall be unable to agree upon the designation of the Arbiter within thirty (30) days after Landlord’s receipt of Tenant’s notice requesting the appointment of an Arbiter, then either party shall have the right to request the American Arbitration Association (or any organization which is the successor thereto) to designate an Arbiter. The “ Arbiter ” shall be a certified public accountant who is a member of an independent certified public accounting firm having at least twenty-five (25) accounting professionals. The Arbiter’s determination, made in accordance with this Section 5.6 , shall be conclusive and binding upon the parties; it being understood that if the amount Tenant claims is due is not substantially different from the amount Landlord claims is due, then Tenant shall have no right to protest such amount and shall pay the amount that Landlord claims is due to the extent not theretofore paid. If the determination of the Arbiter shall substantially confirm the determination of Landlord, then Tenant shall pay the cost of the Arbiter. If the Arbiter shall substantially confirm the determination of Tenant, then Landlord shall pay the cost of the Arbiter. In all other events, the cost of the Arbiter shall be borne equally by Landlord and Tenant. In rendering such determination such Arbiter shall not add to, subtract from or otherwise modify the provisions of this Lease. Pending the resolution of any contest pursuant to this Section 5.6 , and as a condition to Tenant’s right to prosecute such contest (but without prejudice to Tenant’s position), Tenant shall pay all sums required to be paid in accordance with Landlord’s Operating Statement or Landlord’s Tax Statement in question. The term “substantially different”, as used in this Section 5.6 , shall mean a variance of five percent (5%) or more of the amount required to be paid by Tenant pursuant to Landlord’s Operating Statement or Landlord’s Tax Statement in question and the term “substantially confirm”, as used in this Section 5.6 , shall mean a variance of less than five percent (5%) of the amount required to be paid by Tenant pursuant to Landlord’s Operating Statement or Landlord’s Tax Statement in question.

5.7 Landlord’s and Tenant’s obligations under this Article 5 shall survive the expiration or earlier termination of the term of this Lease.

ARTICLE 6

LATE PAYMENT CHARGE

6.1 If Tenant shall fail to make any payment of Minimum Rent or Additional Rent for more than five (5) days after the same is due and payable, Tenant shall pay a late payment charge of $.05 for each $1.00 which remains unpaid to compensate Landlord for additional expenses in processing such late payment. In addition, if Tenant fails to pay any Minimum Rent or Additional Rent when due, Tenant shall pay interest thereon from the date due until the date paid at an annual rate equal to the Prime Rate plus one percent (1%) per annum but not in excess of the maximum amount permitted by law to be charged to Tenant, and such interest shall be deemed to be Additional Rent hereunder.

6.2 If any check of Tenant shall be returned for insufficient funds, there shall be an additional charge to Tenant of $150.00 and, thereafter, at the request of Landlord, Tenant shall make all payments required hereunder by certified or official bank check only.

 

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ARTICLE 7

ALTERATIONS

7.1 Tenant shall make no alterations, installations, additions or improvements (collectively, “ Alterations ”) in or to the Premises or the Licensed Space of any nature without Landlord’s prior consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that with respect to Alterations which are structural in nature or which would adversely affect (i) a Building’s base mechanical, electrical, fire protection, plumbing, HVAC systems or structure, (ii) the use by Landlord or any tenant of their respective premises, or (iii) Landlord’s insurance rates as determined by Landlord’s property insurance carrier, then Landlord may withhold, condition or delay its consent in its sole and absolute discretion. Any Alterations to be performed by Tenant may only be performed by using contractors or mechanics from Landlord’s approved list of contractors or such other reputable contractors or mechanics as Landlord shall approve (which approval shall not be unreasonably withheld, conditioned or delayed), it being agreed, however, that Tenant must use Landlord’s designated contractor for any Alterations relating to fire safety or structural changes. Tenant agrees that all Alterations shall be performed by Tenant in accordance with all applicable Legal Requirements (including, without limitation, the Americans with Disabilities Act of 1990 and all regulations issued thereunder) and the Campus policies then in effect. Tenant agrees to use a reputable engineer and architect licensed in the Commonwealth of Pennsylvania approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) for the preparation of all construction documents and drawings pertaining to any Alterations and to file all plans with and obtain all required permits from appropriate governmental authorities. Notwithstanding the foregoing, prior to the commencement of any Alteration, Tenant shall provide Landlord’s designated engineer any construction documents or drawings prepared by or on behalf of Tenant in connection with any Alteration that affects a Building’s base mechanical, electrical, fire protection, plumbing, HVAC systems or structure, recognizing that the integrity of the Building’s systems shall be maintained through such review by the Building engineer. Tenant’s architect shall file all required architectural drawings and obtain all necessary permits at Tenant’s cost. Upon receipt thereof, Tenant shall promptly submit to Landlord, copies of all approved plans, permits, applications, final approvals and sign-offs.

7.2 Notwithstanding anything to the contrary contained in this Article 7 , Landlord’s consent shall not be required with respect to (i) decorative alterations such as painting, wall coverings and floor coverings (“ Decorative Alterations ”) or (ii) non-structural Alterations by Tenant which (a) shall be located wholly within the Premises, (b) shall not affect the structural integrity of the Building or the operation of the HVAC, plumbing, electrical, or water and sewer systems of the Building, (c) are not visible from outside of the Premises, and (d) do not cost more than $50,000 for any single Alteration, provided, in each instance that (1) such Alterations shall otherwise be performed in accordance with all of the terms and conditions of this Lease, (2) Tenant gives Landlord at least ten (10) days’ prior notice of such work and, for informational purposes, the plans and specifications therefor but only to the extent the same would be

 

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customarily prepared or be required to be prepared in order to obtain any necessary permits, (3) such Alteration shall be performed in a good and workmanlike manner, (4) Tenant is not in default or default under this Lease beyond the expiration of any applicable notice and/or cure period, and (5) such Alterations do not adversely affect Landlord’s insurance rates as determined by Landlord’s property insurance carrier.

7.3 Except for the Excluded FF&E (as hereinafter defined), trade fixtures that are installed by or on behalf of Tenant at Tenant’s sole cost and expense during the Term, and moveable furniture and equipment purchased by Tenant at its sole cost and expense (collectively, “ Tenant’s Property ”), all fixtures and all paneling, partitions, railings and like installations, installed in the Premises and Licensed Space at any time (whether prior to or during the applicable term thereof), either by Tenant or by Landlord on Tenant’s behalf, shall, upon installation, become the property of Landlord and, subject to the provisions of Section 7.5 , Article 36 and Article 40 below, shall remain upon and be surrendered with the Premises or the Licensed Space, as applicable. Nothing in this Article 7 shall be construed to give Landlord title to or to prevent Tenant’s removal of Tenant’s Property, but upon removal of any such items of Tenant’s Property from the Premises or upon removal of other installations as may be required pursuant to the terms hereof, Tenant shall promptly and at its expense, and repair any damage to the Premises or the Building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the Premises after Tenant’s removal shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord’s property or may be removed from the Premises by Landlord at Tenant’s expense.

7.4 Tenant shall, before making any Alterations, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Landlord. If any mechanic’s lien is filed against the Premises or any Building for work claimed to have been performed by or on behalf of Tenant (but not by Landlord) or for materials claimed to have been furnished to Tenant (but not by Landlord), it shall be discharged by Tenant within thirty (30) days after Tenant receives notice thereof (from whatever source), at Tenant’s expense, by filing the bond required by law or payment or otherwise. If Tenant fails to discharge such lien within such thirty (30) day period, then Landlord shall have the right to discharge same (by filing the bond required by law or by payment in full of the mechanic’s lien or otherwise) and Landlord’s costs and expense in obtaining such discharge shall be repaid in full by Tenant to Landlord as additional rent within twenty (20) days after demand therefor.

7.5 As to any Alteration allowed to be made by Tenant pursuant to this Lease, Tenant shall not be required to remove such Alterations at or prior to the expiration or earlier termination of this Lease unless (i) at the time Landlord approves the plans and specifications for any such proposed Alterations, Landlord specifically designates those items it reserves the right to require Tenant to remove at the end of the Term or (ii) Landlord, by notice to Tenant no later than sixty (60) days prior to the stated Expiration Date, directs Tenant to remove such items from the Premises, in which event, the same shall be removed from the Premises by Tenant prior to the expiration of this Lease at Tenant’s sole cost and expense, and Tenant shall, at its sole cost and expense, restore the Premises with respect thereto to the same condition as that which existed on the Commencement Date, reasonable wear and tear excepted.

 

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7.6 Tenant agrees that with respect to the performance of any Alterations in the Premises, Tenant shall pay to Landlord, as additional rent hereunder, promptly upon being billed therefor, Landlord’s reasonable out-of-pocket and other expenses including, without limitation, the fees of any architect, engineer or expeditor employed or hired by Landlord, indirect costs, costs of field supervision and coordination incurred by Landlord; it being agreed that Tenant shall not be obligated to pay any such indirect costs or costs of field supervision and coordination in connection with Tenant’s Initial Work.

7.7 (a) Before proceeding with any Alteration estimated to cost in excess of $50,000.00 (other than Decorative Alterations), Tenant shall furnish to Landlord one of the following: (i) a cash deposit or (ii) a performance bond and a labor and materials payment bond (issued by a corporate surety licensed to do business in Pennsylvania reasonably satisfactory to Landlord), (iii) an irrevocable, unconditional, negotiable letter of credit, issued by and drawn on a bank or trust company which is a member of the Clearing House in a form reasonably satisfactory to Landlord; each in an amount equal to one hundred twenty-five (125%) percent of the estimated cost of the Alteration or (iv) such other security as Landlord may be reasonably acceptable to Landlord.

(b) Upon (i) the completion of the Alteration in accordance with the terms of this Article 7 and (ii) the submission to Landlord of proof evidencing the payment in full for said Alteration including, but not limited to, delivery of a waivers of mechanic liens, the security deposited under Section 7.7(a) with Landlord (or the balance of the proceeds thereof, if Tenant has furnished cash or a letter of credit and if Landlord has drawn on the same) shall be returned to Tenant.

(c) Upon Tenant’s failure to properly perform, complete and fully pay for the said Alteration, as reasonably determined by Landlord, Landlord shall be entitled to draw on the security deposited under Section 7.7(a) to the extent it deems necessary to complete any incomplete Alteration or otherwise hazardous condition, to effect any necessary restoration and/or protection of the Premises or the Property and to apply such funds to the payment or satisfaction of any costs, damages or expenses in connection with the foregoing and/or Tenant’s obligations under this Article 7 and this Lease relating to Alterations and repairs, including the satisfaction of any mechanic’s lien.

7.8 All Alterations shall be performed by Tenant in compliance with all applicable requirements of insurance bodies and with Legal Requirements and the same shall be diligently performed in a good and workmanlike manner.

7.9 Tenant agrees that Tenant will not at any time during the term hereof, either directly or indirectly, use any contractors and/or labor and/or materials if the use of such contractors and/or labor and/or materials would or will create any difficulty with other contractors and/or labor engaged by Tenant or Landlord or others in the performance of any work at a Building or any part thereof.

7.10 Tenant shall cause each contractor to carry personal injury and property damage and general liability insurance for any occurrence in or about the applicable Building in a combined single limit of not less than $2,000,000. Before commencing any work or delivering

 

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material to the applicable Building, each such contractor shall deliver certificates evidencing such insurance to Landlord and naming Landlord as an insured party under the policy. Each contractor performing work at the applicable Building shall also carry workmen’s compensation insurance in statutory limits covering all persons employed in connection with the work for death or injury. Notwithstanding the foregoing, the obligation for a contractor to carry the insurance under this Section 7.10 shall be waived by Landlord to the extent such Alteration constitutes a Decorative Alteration and such waiver is consistent with past practice in Landlord’s reasonable determination.

7.11 Tenant and all contractors shall comply promptly with the procedures and regulations reasonably prescribed by Landlord for the use of the freight elevators and the other Common Areas; it being that the foregoing is not intended to imply that Tenant or its contractors have the right to use any such areas if the same is prohibited by any other provisions of this Lease.

7.12 No approval or deemed approval of any plans or specifications by Landlord or consent by Landlord allowing Tenant to make any improvements (including Tenant’s Initial Work) or any inspection of improvements made by or for Landlord shall in any way be deemed to be an agreement by Landlord that the contemplated improvements comply with any Legal Requirements or insurance requirements or the certificate of occupancy for the applicable Building nor shall it be deemed to be a waiver by Landlord of the compliance by Tenant of any provision of this Lease.

7.13 Provided Tenant is not in default hereunder beyond the expiration of any applicable notice and/or cure period, Landlord shall promptly after Tenant’s request, at no out of pocket cost, expense or liability to Landlord, cooperate with and assist Tenant in all reasonable respects in attempting to procure all permits and approvals that may be required for the performance of any approved or otherwise permissible Alterations to be performed by Tenant provided that any applications and other documents comply in all respects with all Legal Requirements and the applicable provisions of this Lease; provided, however, as to any such request, the subject matter thereof and/or the work contemplated thereby shall not constitute (or, if effectuated by Tenant, would not constitute) a breach by Tenant of any of its obligations under this Lease. Nothing contained in this Lease shall be deemed or construed as a representation, warranty, or guaranty of any nature whatsoever, that any such permit, approval, certificate, or application, plans or other document is, or will be made, available to Tenant (or approved) by the applicable governmental authority notwithstanding the cooperation of Landlord as set forth above or in any other provision of this Lease.

ARTICLE 8

REPAIRS; SERVICES PROVIDED BY LANDLORD

8.1 Repairs . (a) Except for repairs required to be made by Tenant in accordance with the terms hereof, Landlord shall make all repairs and replacements, structural and otherwise, necessary or desirable in order to keep in good order and repair (the need for which Landlord shall have knowledge) all structural portions of the Buildings comprising the Premises (including, without limitation, any roofs, foundation, footings, exterior walls, load bearing

 

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columns and floor slabs), the Building systems that service the Premises, the Common Areas, the Licensed Space, the exterior walls of the Premises, the windows of the Premises and the air conditioning systems and equipment as presently exist in the Premises. Tenant agrees to notify Landlord of the necessity of repairs of which Tenant may have knowledge, for which Landlord may be responsible under the provisions of the preceding sentence. In performing any such repairs Landlord agrees to use commercially reasonable efforts to (i) perform the same with due diligence and continuity and (ii) minimize interference with Tenant’s use and occupancy of the Premises; provided that in no event shall Landlord be required to utilize overtime or premium pay labor or incur any extraordinary costs in connection therewith.

(b) Subject to Section 8.1 hereof, Tenant shall, throughout the term of this Lease, take good care of the Premises, the fixtures and equipment therein and any Alterations, and at Tenant’s sole cost and expense, make all repairs thereto as and when needed to preserve them in good working order and condition, reasonable wear and tear, obsolescence and damage from the elements, fire or other casualty, excepted.

(c) Notwithstanding anything to the contrary contained herein, all damage or injury to the Property, the Common Areas, the Licensed Space or to the fixtures, equipment and appurtenances therein, whether requiring structural or non-structural repairs, caused by or resulting from (i) the omission, neglect or improper conduct of Tenant, Tenant’s servants, employees, invitees, guests or licensees, (ii) any Alterations, and/or (iii) the moving of Tenant’s fixtures, furniture or equipment, shall be repaired promptly by Tenant at its sole cost and expense, to the satisfaction of Landlord reasonably exercised (except that Landlord may elect to perform such repairs on behalf of Tenant upon prior written notice to Tenant, and the expenses thereof incurred by Landlord shall be collectible as additional rent within twenty (20) days after rendition of a bill or statement therefor). All the repairs required to be made by Tenant hereunder shall be of quality or class equal to the original work or construction. Except as specifically provided in Article 12 of this Lease, there shall be no allowance to Tenant for a diminution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from Landlord, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the Building, Premises, the Common Areas, the Licensed Space or in and to the fixtures, appurtenances or equipment thereof. The provisions of this Article 8 with respect to the making of repairs shall not apply in the case of fire or other casualty which are dealt with in Article 12 hereof.

8.2 HVAC . Landlord shall supply heating, ventilation, and air conditioning to the Premises, the Licensed Space and the Common Areas. No representation is made by Landlord with respect to the adequacy or fitness of such air conditioning or ventilation to maintain temperatures as may be required for, or because of, the operation or use of any computer, data processing or other equipment of Tenant and whether air conditioning or ventilation is required for any such purpose and Landlord assumes no responsibility, and shall have no liability, for any loss or damage, however sustained, in connection therewith.

8.3 Water . Landlord shall furnish adequate hot and cold water for normal drinking, lavatory, and normal cleaning purposes. If Tenant uses water for any other purpose, Landlord may install and maintain, at Tenant’s expense, meters to measure Tenant’s consumption of cold water and/or hot water for such other purpose. Tenant shall reimburse Landlord on demand for the cost of cold water and hot water shown on such meters.

 

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8.4 Cleaning . Landlord shall cause the Premises, the Licensed Space and the Common Areas to be cleaned. Tenant shall pay to Landlord, within twenty (20) days after demand, the reasonable out of pocket costs incurred by Landlord for (i) extra cleaning work in the Premises, the Licensed Space and the Common Areas required because of (1) the act, omission, misuse or neglect of or by Tenant or any subtenant or licensee, or their respective employees, agents, contractors or invitees, (2) use of portions of the Premises or the Licensed Space for special purposes requiring greater or more difficult cleaning work than required in normal and customary uses, (3) interior glass partitions or unusual quantity of interior glass surfaces, and (4) special materials or finishes on items installed by Tenant or any other occupant of the Premises or the Licensed Space, (ii) collection and removal from the Premises, the Licensed Space and the Property of any refuse or rubbish of Tenant in excess of ordinary commercial waste. Landlord’s cleaning contractor and its employees shall have afterhours access to the Premises and the Licensed Space and the use, at no cost to Landlord or its cleaning contractor, of Tenant’s light, power and water in the Premises and the Licensed Space as may be required for the cleaning services to be furnished by Landlord.

8.5 Electricity .

(a) Landlord will furnish electricity to Tenant through presently installed electrical facilities for Tenant’s reasonable use of such lighting, electrical appliances, air conditioning systems and equipment as exist on the date hereof, and subject to Landlord consent, such other equipment as Tenant may be permitted to install in the Premises and the Licensed Space, which consent shall be in Landlord’s reasonable determination solely with respect to installations that Tenant proposes to install in the Premises. Tenant agrees that at all times its use of electrical current shall never exceed the electrical capacity of the existing feeders to the applicable Building or the existing risers or the wiring installations serving the applicable portion of the Premises or the Licensed Space, as applicable. Subject to the terms of Section 8.9 , Landlord shall not be liable in any way to Tenant for any failure or defect in the supply or character of electric energy, or other utilities furnished to the Premises or the Licensed Space. Any additional risers, feeders, or other equipment proper or necessary to supply Tenant’s electrical requirements with respect to the Premises, upon written request of Tenant, will be installed by Landlord at the sole cost and expense of Tenant, if, in Landlord’s reasonable judgment, the same will not cause or create a hazardous condition or entail excessive or unreasonable alterations, repairs or expense or interfere with or disturb Landlord or any other tenants or cause permanent damage or injury to any Building.

(b) If required under applicable Legal Requirements and subject to the terms of Section 8.9 , Landlord shall be permitted to terminate the furnishing of electrical energy, upon at least thirty (30) days’ notice (provided that such longer notice as is reasonably feasible under the circumstances shall be given) to Tenant unless a shorter period of notice is required or necessitated by Legal Requirements. If Landlord shall so discontinue the furnishing of electrical energy, (a) Tenant shall arrange to obtain electrical energy directly from the public utility company or other service provider then furnishing electrical energy to the Buildings and, unless required by such Legal Requirements, Landlord shall not terminate such service until Tenant

 

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shall have obtained such direct service, (b) Landlord shall permit the existing feeders, risers, wiring and other electrical facilities serving the Premises to be used by Tenant for such purpose, (c) from and after the effective date of such discontinuance, Landlord shall not be obligated to furnish electric energy to Tenant, (d) subject to the terms hereof, Landlord shall not have liability to Tenant on account of such discontinuance and (e) Tenant shall install and maintain at locations in the Buildings reasonably selected by Landlord any necessary electrical meter equipment, panel boards, feeders, risers, wiring and other conductors and equipment which may be required to obtain electrical energy directly from the public utility or other service provider supplying the same; it being agreed that the reasonable out-of-pocket cost of any such installation shall be shared equally between Landlord and Tenant.

(c) Landlord shall be responsible for replacing all light bulbs, light fixtures, tubes, lamps, starters and ballasts required in the Premises and the Licensed Space.

8.6 Common Areas .

(a) Subject to the terms of Section 8.9(b) , Landlord shall be responsible for maintaining and furnishing the Common Areas in a manner that is generally consistent with past practice, subject to Landlord’s right to reallocate furniture and equipment in its reasonable discretion.

(b) Landlord shall station (i) one (1) receptionist at the reception desk located in the lobby of Building 402 and (ii) one (1) building manager on the premises of Building 402, in each case, from at least 8:00 AM until 5:00 PM on all Business Days, in each case in the manner consistent with past practices.

(c) Landlord shall provide Tenant with wireless internet access in the meeting rooms, the auditorium and the cafeteria located within the Common Areas.

8.7 Other Services . Landlord shall provide elevator service, security, landscaping and snow removal services to the Premises, the Licensed Space and the Common Areas.

8.8 No Other Services . Landlord shall not be required to furnish any services to the Premises, the Licensed Space and the Common Areas, except as specifically set forth in this Lease.

8.9 Standard of Services .

(a) Subject to Section 8.9(b) below, all of the services to be provided by Landlord under this Article 8 shall be provided in a manner that is generally consistent with past practice.

(b) Notwithstanding anything to the contrary contained herein, Landlord reserves the right to (i) stop or reduce any services to be provided by Landlord hereunder to the extent: (A) such stoppage or reduction is necessary by reason of accident or repairs, alterations, replacements or improvements to the Buildings, the Premises, the Licensed Space, the Common Areas, or Building systems for as long as may be reasonably required by reason thereof or by reason of strikes, accidents, laws, order or regulations or any other reason beyond the control of

 

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Landlord, provided that reasonable prior notice is delivered to Tenant (except in the case of an emergency) and that Landlord shall use reasonable efforts to minimize the duration of such stoppage or reduction of service without in any event being obligated to employ overtime labor or to incur any extraordinary costs in connection therewith or (B) a significant change has occurred in the underlying conditions that contributed or otherwise gave rise to Landlord’s carrying out the past practice, provided that with respect to clause (B) only, Landlord shall have delivered prior written notice to Tenant of its intent to terminate or modify such practice and the parties cooperate in good faith to agree on any modification or replacement (if applicable) to such practice and (ii) make reasonable modifications to a service being provided by Landlord upon prior written notice to Tenant so long as such modifications do not diminish the quality or quantity of the applicable service beyond a de minimis amount.

ARTICLE 9

REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOAD

9.1 Prior to the commencement of the Term, if Tenant is then in possession or otherwise given access to the Premises or the Licensed Space and at all times thereafter during the applicable term thereof, Tenant, at Tenant’s sole cost and expense, shall promptly comply with all present and future Legal Requirements, whether or not arising out of Tenant’s use or manner of use thereof, or, with respect to the Buildings or Licensed Space, if arising out of Tenant’s particular use or manner of use of the Premises, the Licensed Space or the Buildings. Nothing herein shall require Tenant to make structural repairs or alterations under this Article 9 unless (i) the use of the Premises, the Licensed Space or the method of operation therein violated any such Legal Requirements or orders, rules, regulations or requirements with respect thereto, or (ii) the same relate or are otherwise necessary as a result of any Alterations. Tenant may, after securing Landlord to Landlord’s reasonable satisfaction against all damages, interest, penalties and expenses, including, but not limited to, reasonable attorneys’ fees and disbursements, by cash deposit or by surety bond in an amount and in a company reasonably satisfactory to Landlord, contest and appeal any such Legal Requirements, orders, rules, regulations or requirements provided same is done with all reasonable promptness and provided such appeal shall not subject Landlord to any civil liability, prosecution for a criminal offense or constitute a default under any lease or mortgage under which Landlord may be obligated, or cause the Premises, the Licensed Space or any part thereof to be condemned or vacated. Tenant shall not do or permit any act or thing to be done in or to the Premises or the Licensed Space which is contrary to Legal Requirements, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Landlord with respect to the Premises, the Licensed Space or the Buildings, or which shall or might subject Landlord to any liability or responsibility to any person or for property damage, nor shall Tenant keep anything in the Premises or the Licensed Space except as now or hereafter permitted by the Fire Department or other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the Building, nor use the Premises or the Licensed Space in a manner which will increase the insurance rate for the Campus, any Building or any property located therein over that in effect prior to the commencement of Tenant’s occupancy. Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon Landlord by reason of Tenant’s failure to comply with the provisions of this Article 9 . Tenant shall not place a load upon any floor of the Premises or Licensed Space

 

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exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installation shall be placed and maintained by Tenant, at Tenant’s expense, in settings sufficient, in Landlord’s reasonable judgment, to absorb and prevent vibration, noise and annoyance.

9.2 Subject to the terms of this Lease including, without limitation, Section 5.3 hereof, Landlord shall be responsible at its own cost and expense to comply with (or cause to be complied with) all Legal Requirements applicable to the Buildings which are not the obligation of Tenant hereunder; provided, however , that Landlord shall not have any liability to Tenant for any failure to comply with the foregoing obligation unless Landlord’s failure to comply with a particular Legal Requirement adversely affects (more than to a de minimis extent) Tenant’s use and enjoyment of the Premises and access thereto.

ARTICLE 10

SUBORDINATION

10.1 The rights of Tenant under this Lease shall be and are subject and subordinate at all times to all ground leases, and/or underlying leases, if any, now or hereafter in force against the Property, and to each and every mortgage that may now or hereafter be placed by Landlord on its interest in the Property, and to all increases, renewals, modifications, consolidations, replacements and extensions thereof. This Article 10 is self-operative and no further instrument of subordination shall be required. In confirmation of such subordination Tenant shall promptly execute such further instruments as may be reasonably requested by Landlord. Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant any such instrument or instruments if Tenant fails to execute the same within ten (10) business days after request. To the extent not so provided by applicable Legal Requirements, in the event of the enforcement by such mortgagee or lessor of the remedies provided for by Legal Requirements or by the mortgage or lease, if such mortgagee or lessor or any successors or assigns of such mortgagee or lessor shall, at its or their sole option, succeed to the interest of Landlord under this Lease, whether through possessory or foreclosure action or a deed in lieu of foreclosure or otherwise, and this Lease shall not be terminated or affected by such foreclosure or any such proceedings, Tenant, at the election of such mortgagee or lessor or its successors or assigns, shall attorn to and recognize such mortgagee or lessor (or its successors or assigns) as its landlord upon the terms, covenants, conditions and agreements contained in this Lease to the same extent and in the same manner as if this Lease was a direct lease between such mortgagee or lessor (or its successors or assigns) and Tenant, except that such mortgagee or lessor (or its successors or assigns), whether or not it shall have succeeded to the interest of Landlord under this Lease, shall not (i) have any liability for refusal or failure to perform or complete any work required to be performed by Landlord under this Lease to prepare the Premises for occupancy in accordance with the provisions of this Lease or otherwise, (ii) be liable for any act, omission or default of any prior landlord under this Lease except for a default continuing after any such succession, (iii) be subject to any offsets, claims or defenses which shall have heretofore accrued to Tenant against any prior landlord under this Lease, (iv) be bound by any rent or additional rent which Tenant might have paid to any prior landlord for more than one (1) month in advance, (v) be liable for the return of any security deposit unless

 

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such security shall actually be received by such superior mortgagee or superior lessor and/or (vi) be bound by any cancellation, abridgement, surrender, modification or amendment of this Lease, without the prior written consent of such mortgagee or lessor or such successor in interest. Upon request by said successor in interest, Tenant shall execute and deliver an instrument or instruments confirming such attornment.

ARTICLE 11

PROPERTY LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY

11.1 Subject to the terms of Section 12.6 , Landlord shall indemnify, defend and hold harmless Tenant and Tenant’s past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ Tenant Party ”) (except to the extent any claim arises from the gross negligence or willful misconduct of Tenant or any Tenant Party) against and from all liabilities, obligations, damages, penalties, claims, costs and expenses including reasonable attorneys’ fees and disbursements, paid, suffered or incurred by the Tenant Party in connection with, relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication): (i) all claims of whatever nature against Tenant or any Tenant Party arising from any gross negligence or willful misconduct of Landlord, any Landlord Party (as hereinafter defined) or Landlord’s contractors, licensees, agents, servants, employees, invitees or visitors; (ii) the gross negligence or willful acts of Landlord, any Landlord Party and any of Landlord’s agents, contractors, employees, invitees, guests or licensees or any other person or entity claiming by, through or under Tenant; and (iii) any breach, violation or non-performance of any covenant, condition or agreement in this Lease set forth and contained on the part of Landlord to be fulfilled, kept, observed and performed. In case any action or proceeding is brought against Tenant by reason of any such claim, Landlord, upon notice from Tenant will, at Landlord’s expense, resist or defend such action or proceeding by counsel approved by Tenant in writing, such approval not to be unreasonably withheld or delayed (it being agreed that counsel to Landlord’s insurance carrier is acceptable). In connection with such indemnity, (a) Tenant shall endeavor to promptly notify Landlord of the relevant claim or action (it being agreed that the timing of said notice shall not be a condition to the effectiveness of the foregoing indemnity), (b) Tenant shall reasonably cooperate with Landlord in Landlord’s defense of such claim or action, provided that Tenant shall not incur any expense thereby, (c) prior to Tenant’s settlement of any such claim or action, Tenant shall request Landlord’s consent thereto, such consent not to be unreasonably withheld, conditioned or delayed and (d) if Landlord shall request that Tenant settle such claim or action, and Landlord shall deliver to Tenant the necessary funds to do so (together with all other amounts due or payable to Landlord in connection with this indemnity), Tenant shall accede to such request in any case where the only relief being sought by the claimant or plaintiff in any proposed settlement is monetary damages and Tenant and the Tenant Parties are absolutely and unconditionally released in connection therewith. If at any time any windows of the Premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Landlord’s own acts, Landlord shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction.

 

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11.2 Subject to the terms of Section 12.6 , Tenant shall indemnify, defend and hold harmless Landlord and Landlord’s past, present and future directors, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ Landlord Party ”) (except to the extent any claim arises from the gross negligence or willful misconduct of Landlord or any Landlord Party) against and from all liabilities, obligations, damages, penalties, claims, costs and expenses including reasonable attorneys’ fees and disbursements, paid, suffered or incurred by Landlord Party in connection with, relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication): (i) any breach by Tenant, Tenant’s agents, contractors, employees, invitees, guests or licensees, of any covenant or condition of this Lease on Tenant’s part to be performed; (ii) the gross negligence or willful misconduct of Tenant, any Tenant Party and any of Tenant’s agents, contractors, employees, invitees, guests or licensees or any other person or entity claiming by, through or under Tenant; (iii) the use or occupancy of the Premises, the Licensed Space and/or the Common Areas by Tenant, any Tenant Party or any person or entity claiming by, through or under Tenant; (iv) any acts, omissions or gross negligence of Tenant, any Tenant Affiliate or any such person or entity, or the contractors, agents, employees, invitees or licensees of Tenant or any such person or entity, in or about the Property, the Licensed Space or the Common Areas; or (v) any Alteration, work or thing whatsoever done, or any condition created by Tenant, any Tenant Affiliate or any such person or entity, or the contractors, agents, employees, invitees or licensees of Tenant or any such person or entity, in or about the Property, the Licensed Space or the Common Areas. Tenant shall pay to Landlord as Additional Rent, within twenty (20) days following rendition by Landlord to Tenant of bills or statements therefor, sums equal to all losses, costs, liabilities, claims, damages, fines, penalties and expenses referred to in this Section 11.2 . Tenant’s liability under this Lease extends to the acts and omissions of any subtenant, and any agent, contractor, employee, invitee or licensee of any subtenant or any person or entity claiming by, through or under any subtenant. In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant, upon notice from Landlord, will, at Tenant’s expense, resist or defend such action or proceeding by counsel approved by Landlord in writing, such approval not to be unreasonably withheld or delayed (it being agreed that counsel to Tenant’s insurance carrier is acceptable). In connection with such indemnity, (a) Landlord shall endeavor to promptly notify Tenant of the relevant claim or action (it being agreed that the timing of said notice shall not be a condition to the effectiveness of the foregoing indemnity), (b) Landlord shall reasonably cooperate with Tenant in Tenant’s defense of such claim or action, provided that Landlord shall not incur any expense thereby, (c) prior to Landlord’s settlement of any such claim or action, Landlord shall request Tenant’s consent thereto, such consent not to be unreasonably withheld, conditioned or delayed and (d) if Tenant shall request that Landlord settle such claim or action, and Tenant shall deliver to Landlord the necessary funds to do so (together with all other amounts due or payable to Landlord in connection with this indemnity), Landlord shall accede to such request in any case where the only relief being sought by the claimant or plaintiff in any proposed settlement is monetary damages and Landlord and parties related to Landlord are absolutely and unconditionally released in connection therewith.

11.3 Tenant shall look only to Landlord’s estate and interest in the Buildings (or the net proceeds of any sale thereof) for the satisfaction of Tenant’s remedies or for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by or liability of Landlord under this Lease, and no other property or assets of

 

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Landlord and no property of any officer, member, employee, director, shareholder, partner or principal of Landlord shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies under or with respect to this Lease, the relationship of Landlord and Tenant hereunder or Tenant’s use or occupancy of the Premises or the Licensed Space.

11.4 Notwithstanding anything contained in this Lease to the contrary, neither Landlord nor Tenant shall be liable to the other in connection with any matter arising from or relating to this Lease for any consequential, special or indirect damages.

11.5 The provisions of this Article 11 shall survive the expiration or sooner termination of this Lease.

ARTICLE 12

DESTRUCTION, FIRE AND OTHER CASUALTY

12.1 If the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Landlord and this Lease shall continue in full force and effect except as hereinafter set forth.

12.2 If the Premises or any part thereof shall be damaged or rendered untenantable by fire or other casualty and this Lease is not terminated pursuant to any provision of this Article 12 , Landlord shall proceed, with reasonable diligence after the collection of the insurance proceeds attributable to such damage, to repair or cause to be repaired such damage to the Premises but only to the extent not a part of any Alterations or otherwise not the responsibility of Tenant under this Lease to construct, install, repair, replace and/or maintain. All repairs to the Premises required by reason of such fire or other casualty that are not the responsibility of Landlord hereunder shall be performed by Tenant, at its sole cost and expense, promptly and with due diligence unless this Lease shall have been terminated pursuant to this Article 12 , in which event Tenant need not make such repairs. Except as provided in Section 12.8 , the Minimum Rent and the Additional Rent payable under Article 5 shall be equitably abated to the extent that the Premises shall have been rendered untenantable, such abatement to be from the date of such damage to the date the repairs required hereinabove to be performed by Landlord shall have been substantially completed; provided, however, should Tenant reoccupy a portion of the Premises for the conduct of Tenant’s business prior to the date such repair work shall have been substantially completed, the Minimum Rent and the Additional Rent payable under Article 5 allocable to such reoccupied portion of the Premises, based upon the proportion which the occupied portion of the Premises bears to the total area of the Premises, shall be payable by Tenant from the date of such occupancy.

12.3 If the Premises are rendered wholly unusable or if a substantial part ( i.e. , more than seventy-five percent (75%)) of the Premises shall be damaged, either Landlord or Tenant may elect to terminate this Lease by notice to the other party given within ninety (90) days after such fire or casualty specifying a date for the expiration of this Lease, which date shall not be more than sixty (60) days after the giving of such notice, and upon the date specified in such notice the term of this Lease shall expire as fully and completely as if such date were the date set forth above for the expiration of this Lease and Tenant shall forthwith quit, surrender and vacate

 

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the Premises without prejudice however, to Landlord’s rights and remedies against Tenant under the provisions hereof in effect prior to such termination, and any rent owing shall be paid up to the date of such casualty and, provided Tenant is not otherwise in default hereunder beyond the expiration of any applicable notice and/or cure period, any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant.

12.4 Notwithstanding anything herein to the contrary, if the Premises are totally or substantially damaged (or rendered unusable for the ordinary conduct of Tenant’s business) by a fire or other casualty at any time during the Term and provided this Lease is not terminated by Landlord or Tenant as provided in this Article 12 , if either (i) Landlord shall not have commenced repairs as provided in Section 12.2 within sixty (60) days after Landlord’s collection of insurance proceeds or (ii) Landlord has not completed the making of the repairs required by it to be made under Section 12.2 within twelve (12) months from the date of such fire or other casualty, with such additional time after such date, as shall equal the aggregate period Landlord may have been delayed in doing so by force majeure or adjustment of insurance, as applicable, Tenant, within twenty (20) days after the date on which such applicable time period expires, may serve notice on Landlord of its intention to terminate this Lease, and if within said twenty (20) day period, Landlord shall not have so commenced repairs or substantially completed the making of such required repairs, as the case may be, this Lease shall terminate on the expiration of such twenty (20) day period as if such termination date were the Expiration Date and Tenant shall forthwith quit, surrender and vacate the Premises without prejudice, however, to each party’s rights and remedies against the other under the provisions hereof in effect prior to such termination, and any rent owing shall be paid up to the date of such casualty and, provided that Tenant is not otherwise in default hereunder beyond the expiration of any applicable notice and/or cure period, any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant.

12.5 Unless Landlord shall serve a termination notice as provided for herein or this Lease is terminated by Tenant pursuant to Section 12.3 or Section 12.4 , Tenant shall cooperate with Landlord’s restoration obligations by removing from the Premises as promptly as reasonably possible, all of Tenant’s salvageable inventory and movable equipment, furniture, and other property.

12.6 Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and, except as provided in Section 12.8 , to the extent that such insurance is in force and collectible and to the extent permitted by law, Landlord and Tenant each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. The foregoing release and waiver shall be in force only if both releasors’ insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance and also, provided that such a policy can be obtained without additional premiums.

12.7 Tenant acknowledges that Landlord will not carry insurance on Tenant’s furniture, furnishings and other personal property or any Alterations installed by or on behalf of Tenant and agrees that Landlord will not be obligated to repair any damage thereto or replace the same

 

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and unless this Lease is terminated as provided in this Article 12 , Tenant shall promptly repair, restore and/or replace the same regardless if the insurance proceeds therefor are sufficient for the same.

12.8 Notwithstanding any of the foregoing provisions of this Article 12 , if and to the extent by reason of some wrongful act on the part of Tenant or any of its employees, agents, contractors, subcontractors, licensees or concessionaires after the occurrence of a casualty which wrongful act is not cured prior to the expiration of any applicable notice and/or cure period, either (i) Landlord shall be unable to collect all of the insurance proceeds (including rent insurance proceeds) applicable to damage or destruction of the Premises or any Building by fire or other casualty or (ii) the Premises or any Building shall be damaged or destroyed or rendered completely or partially untenantable on account of fire or other casualty, then, without prejudice to any other remedy which may be available against Tenant, (a) the abatement of rent provided for in this Article 12 shall not be effective to the extent of the uncollected insurance proceeds and (b) Landlord shall have no obligation to make any repairs whatsoever to the portions of the Premises required to be repaired by Landlord under Section 12.2 hereof.

ARTICLE 13

EMINENT DOMAIN

If the whole or any material part of the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then and in that event, the term of this Lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of this Lease. Tenant acknowledges that Landlord shall be entitled to receive the entire compensation or award therefor. Notwithstanding the foregoing, Tenant may make a separate claim in any eminent domain proceeding (affecting all or any portion of the Premises) solely for the then value of Tenant’s property and/or for any moving expenses incurred by Tenant in connection therewith, provided that such award shall not result in a reduction of the award made to Landlord in connection therewith. If only a non-material part of the Premises shall be acquired or condemned by eminent domain as aforesaid and this Lease shall not be terminated, this Lease and the term of this Lease shall continue in full force and effect, provided, however, that from and after the date of the vesting of title, the Minimum Rent and Additional Rent shall be equitably reduced to include only that portion of the Premises that was not acquired or condemned by eminent domain.

ARTICLE 14

ASSIGNMENT, SUBLETTING, ETC.

14.1 Tenant expressly agrees that neither this Lease nor any part hereof, shall, by operation of law or otherwise, be assigned, mortgaged, pledged, encumbered or otherwise transferred (a “ Transfer ”) by Tenant, Tenant’s legal representatives or successors in interest and neither the Premises, nor any part thereof, nor any Tenant’s property shall be encumbered in any manner by reason of any act or omission on the part of Tenant or anyone claiming under or through Tenant, or shall be sublet or be used, occupied or utilized for concession or desk space

 

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or for mailing privileges by anyone other than Tenant, without the prior consent of Landlord in each instance except as otherwise expressly provided in this Article 14 . For purposes of this Article 14 , (i) the issuance of interests in Tenant (whether stock, partnership interests, interests in a limited liability company or otherwise) to any person or group of related persons, whether in a single transaction or a series of related or unrelated transactions, in such quantities that after such issuance control of Tenant or the ability effectively to control or direct the business decisions of Tenant, directly or indirectly, shall have changed, shall be deemed an assignment of this Lease, as the case may be, (ii) a Transfer of more than 50% in beneficial interest of Tenant (whether stock, partnership interests, interests in a limited liability company or otherwise) by any party or parties in interest whether in a single transaction or a series of related or unrelated transactions shall be deemed an assignment of this Lease, (iii) a take-over agreement shall be deemed an assignment of this Lease and (iv) any person or legal representative of Tenant, to whom Tenant’s interest under this Lease passes by operation of law, or otherwise, shall be bound by the provisions of this Article 14 . Any assignment (or deemed assignment), sublease (or deemed sublease), license, concession, mortgage, pledge, encumbrance or transfer by Tenant in contravention of this Article 14 shall be void. Notwithstanding the foregoing, if Tenant is a corporation whose stock is publicly traded on a nationally recognized stock exchange (including, without limitation, an initial public offering), then the issuance of stock or one or more transfers of stock or other beneficial interest in Tenant (whether or not more than 50% of the stock or other beneficial interest in Tenant is so transferred other than to those deemed “insiders” within the meaning of the Securities Exchange Act of 1934, as amended) which is effected through “over-the-counter market” or through any recognized stock exchange shall not constitute an assignment hereunder.

14.2 If this Lease be assigned, or if the Premises or any part thereof be underlet or occupied by anybody other than Tenant, whether or not in violation of this Article 14 , Landlord may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Landlord to an assignment or underletting shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment or underletting except to the extent such consent is not required under the express terms of this Article 14 .

14.3 In connection with any request for consent to an assignment of this Lease or the subletting of the Premises in whole or in part, Tenant shall provide Landlord with all information reasonably requested by Landlord, including but not limited to, financial reports with respect to such proposed assignee or subtenant.

14.4 (a) No assignment or sublease shall be valid, and no assignee or subtenant shall take possession of the Premises until an executed counterpart of such assignment or sublease has been delivered to Landlord, which sublease or assignment agreement, as applicable, shall be in form reasonably satisfactory to Landlord and shall comply with the applicable provisions of this Article 14 .

 

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(b) Each sublease shall expressly provide that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that, in the event of any termination, re-entry, or dispossess by Landlord under this Lease, Landlord may, at its option, take over all of the right, title and interest of Tenant as sublandlord under such sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not (i) be liable for any previous act or omission of Tenant under such sublease, (ii) be subject to any offset, not expressly provided in such sublease, that theretofore accrued to such subtenant against Tenant or (iii) be bound by any previous modification of such sublease not approved in writing by Landlord or by any prepayment of more than one month’s minimum rent or any additional rent then due.

(c) Any assignment or transfer shall be made only if, and shall not be effective until, the assignee shall execute, acknowledge and deliver to Landlord an agreement, in form and substance reasonably satisfactory to Landlord, whereby the assignee shall assume all of the obligations of this Lease on the part of Tenant to be performed or observed.

14.5 Notwithstanding any provision to the contrary contained herein, Tenant may, without obtaining Landlord’s consent (but subject to compliance with the requirements of this Section 14.5 ), (i) assign or transfer this Lease to a corporation or other entity into which Tenant shall be merged or consolidated (a “successor entity”) or an entity which acquires all or substantially all of the assets, stock, or other equity interest of Tenant (an “acquiring entity”) or (ii) sublet the entire Premises to an entity which controls, is controlled by, or is under common control with Tenant (a “related entity”), provided that in all such cases: (a) Tenant shall not be in default hereunder beyond the expiration of any applicable notice and/or cure period at the time of such assignment, transfer or sublease; (b) the principal purpose of such transfer or acquisition is not the acquisition of Tenant’s interest in this Lease and is not made to circumvent the provisions of this Article 14 ; (c) in the case of an assignment to a successor entity or acquiring entity, reasonably satisfactory proof has been delivered to Landlord demonstrating that such successor entity or acquiring entity has a net worth immediately following such merger or acquisition computed in accordance with generally accepted accounting principles at least equal to the net worth of Tenant herein named on the date of this Lease; (d) in the case of a subletting to a related entity, the rights granted to Tenant and such related entity pursuant to this Section 14.5 shall be for only so long as such person or entity shall remain a related entity and at such time as such person or entity shall no longer be a related entity the rights accorded to Tenant by this Section 14.5 shall not apply and Tenant shall promptly comply with all of the terms and conditions of this Article 14 , and (e) in the event of an assignment, there shall have been delivered to Landlord, at least ten (10) days after the effective date of such assignment, an instrument in form and substance reasonably satisfactory to Landlord, duly executed by the assignee, in which such assignee assumes (as of the effective date of such assignment) observance of and performance of, and agrees to be bound by, all of the terms, covenants and conditions of this Lease on Tenant’s part to be performed.

14.6 Notwithstanding any provision to the contrary contained herein, Tenant may, without obtaining Landlord’s consent (but subject to compliance with the requirements of this Section 14.6 ) enter into desk sharing arrangements (each, a “ Desk Sharing Arrangement ”), provided that in all such cases: (a) Tenant shall not be in default hereunder beyond the expiration of any applicable notice and/or cure period at the time of such Desk Sharing

 

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Arrangement; (b) such arrangement shall be subject and subordinate to the terms of this Lease; (c) such arrangement will terminate automatically upon a default by Tenant occurring and continuing beyond any applicable notice and cure period under this Lease; (d) the party under the Desk Sharing Arrangement shall use the Premises in conformity with all applicable provisions of this Lease; (e) in no event shall the use of any portion of the Premises by any entity under any Desk Sharing Arrangement create or be deemed to create any right, title or interest in or to the Premises for such entity; (f) the portion(s) of the Premises occupied by such party(ies) and the portion of the Premises occupied by Tenant shall not be, and shall not be required by law to be, separated by demising walls so as to create separate entrances from the elevator landing or public corridors; (g) the aggregate space covered by all Desk Sharing Arrangements shall not be more than fifteen percent (15%) of the rentable square footage of the Premises, in the aggregate; and (h) no such arrangement shall be deemed to release Tenant from any of its obligations and liabilities hereunder.

14.7 In no event shall any assignment or subletting (including any assignment not requiring Landlord’s consent hereunder) release or relieve Tenant from its obligations fully to perform all of the terms, covenants and conditions of this Lease on Tenant’s part to be performed.

14.8 Tenant shall reimburse Landlord (whether or not the proposed transaction is consummated), within ten (10) days after demand, for all reasonable costs incurred by Landlord in connection with any assignment (whether or not Landlord’s consent is required therefor) or sublease, including the costs of making investigations as to the acceptability of the proposed assignee or subtenant (or whether such proposed assignee or subtenant satisfies the conditions set forth in this Article 14 ) and reasonable attorney’s fees and disbursements incurred in connection with the granting or reviewing of any matters reasonably related to any such assignment, subletting or other transfer.

ARTICLE 15

ACCESS TO PREMISES

15.1 Subject to the provisions of Section 15.2 , Landlord or Landlord’s agents shall have the right (but shall not be obligated) to enter the Premises and the Licensed Space in any emergency at any time, and, at other reasonable times, upon reasonable prior notice to Tenant, to examine the same, to confirm Tenant’s compliance with the terms and provisions of this Lease, and/or to make such repairs, replacements and improvements as Landlord may perform pursuant to the terms of Section 8.1 , or which Landlord may deem necessary or reasonably desirable to the Premises, the Licensed Space or to any other portion of the Building or which Landlord may elect to perform following Tenant’s failure to make repairs or perform any work which Tenant is obligated to perform under this Lease (after the expiration of any applicable notice and/or cure period), or for the purpose of complying with Legal Requirements or other directions of governmental authorities. Landlord shall repair, at Landlord’s expense, any actual damage caused by Landlord during the course of such work and/or entry into the Premises, and shall restore the Premises as nearly as reasonably practicable to the condition existing prior to such installation but in no event shall Landlord be obligated to employ overtime labor or to incur any extraordinary expenses in connection therewith. Tenant shall permit Landlord to erect, use and

 

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maintain ducts, pipes and conduits in and through the Premises and the Licensed Space and to erect new pipes and conduits therein, provided, however, that (i) to the extent reasonably possible (without the expenditure of any extraordinary expense), any such ducts, pipes or conduits installed in or through any portion of the Premises where there is no drop ceiling shall either be concealed behind, beneath or within partitioning, columns, ceilings or floors located in the Premises, or completely furred at points immediately adjacent to partitioning, columns, ceilings or floors located in the Premises, (ii) the installation of any such pipes, ducts, or conduits, when completed, shall not reduce the usable area of the Premises beyond a de minimis amount and (iii) Landlord shall repair any damage caused by Landlord to the Premises as a result of any such installations. Landlord may, during the progress of any work in the Premises and the Licensed Space, take all necessary materials and equipment into the Premises and the Licensed Space, as applicable, without the same constituting an eviction nor shall Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof but subject to the provisions of Section 15.2 , Landlord shall have the right to enter the Premises at reasonable hours, upon reasonable prior notice to Tenant, for the purpose of showing the same to (i) prospective purchasers or mortgagees of the Building or (ii) to any other persons to the extent such showing relates to sustainable design efforts, improvements, and/or initiatives at the Campus. During the last year of the Term, Landlord shall have the right to enter the Premises at reasonable hours, upon reasonable prior notice to Tenant, for the purpose of showing the same to prospective tenants. If Tenant is not present to open and permit an entry into the Premises or the Licensed Space, Landlord or Landlord’s agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly (in the event of any emergency) and provided reasonable care is exercised to safeguard Tenant’s property and such entry shall not render Landlord or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected except that Landlord shall promptly repair any damage caused by Landlord as a result thereof. Landlord shall have the right at any time (including, without limitation, in connection with any repairs, replacements and improvements that Landlord may perform pursuant to the terms of Section 8.1(a) hereof), without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement, design and/or location of public entrances, storefronts, passageways, doors, doorways, corridors, elevators, stairs, toilets, or other public parts of any Building and to change the name, number or designation by which a Building may be known, provided that any such change does not diminish Tenant’s means of access to the Premises beyond a de minimis extent. In connection with any access under this Article 15 , Landlord agrees to use commercially reasonable efforts to minimize interference with Tenant’s use and occupancy of the Premises; provided that in no event shall Landlord be required to utilize overtime or premium pay labor or incur any extraordinary costs in connection therewith.

15.2 Tenant shall have the right to reasonably designate, by written notice to Landlord, certain areas of the Premises (including any area containing a safe, financial information or information relating to Tenant’s product research and development) as secure areas (each, a “ Secure Area ”). Tenant shall have the right to have a representative accompany Landlord (and persons authorized by Landlord) during any entry into the Secure Area (except in an emergency), which representative Tenant agrees to make available upon Landlord’s reasonable request. Landlord agrees to keep all information obtained by it during any entry into a Secure Area confidential and shall use commercially reasonable efforts to comply and cause its employees

 

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and contractors to comply with any controls instituted by Tenant to prevent the disclosure of confidential information contained in any Secure Area. In furtherance of the foregoing, upon Tenant’s request, Landlord shall and shall cause any of its contractors seeking to access any portion of the Secure Area to execute and deliver a confidentiality agreement in form and substance reasonable acceptable to Tenant and the party intending to access such Secure Area.

ARTICLE 16

VAULT, VAULT SPACE, AREA

No vaults, vault space or area, whether or not enclosed or covered, not within the property line of the Buildings is leased hereunder, anything contained in or indicated on any sketch, blue print or plan or anything contained elsewhere in this Lease to the contrary notwithstanding. Landlord makes no representation as to the location of the property line of the Buildings. All vaults and vault space and all such areas not within the property line of the Buildings, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Landlord shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant.

ARTICLE 17

BANKRUPTCY

17.1 Neither Tenant’s interest in this Lease, nor any estate hereby created in Tenant nor any interest herein or therein, shall pass to any debtor-in-possession, trustee, or receiver or assignee for the benefit of creditors or otherwise by operation of law except as may specifically be provided pursuant to the provisions of the Bankruptcy Code, 11 U.S.C.§ 101 et seq. (the “ Bankruptcy Code ”). If this Lease is assigned to any person or entity pursuant to the Bankruptcy Code, any and all consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all monies and other consideration constituting Landlord’s property under the preceding sentence not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and be promptly paid to or turned over to Landlord.

17.2 Anything elsewhere in this Lease to the contrary notwithstanding, this Lease may be cancelled by Landlord by the sending of a notice to Tenant within a reasonable time after the happening of any one or more of the following events: (i) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; which case shall not have been dismissed within ninety (90) days after the institution thereof, or (ii) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the Premises but shall forthwith quit

 

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and surrender the Premises. If this Lease shall be assigned in accordance with its terms, the provisions of this Article 17 shall be applicable only to the party then owning Tenant’s interest in this Lease.

17.3 It is stipulated and agreed that in the event of the termination of this Lease pursuant to Section 17.2 hereof, Landlord shall forthwith, notwithstanding any other provisions of this Lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rent reserved hereunder for the unexpired portion of the term demised for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the Premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof shall be re-let by Landlord for the unexpired term of this Lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such re-letting shall be deemed to be the fair and reasonable rental value for the part or the whole of the Premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of Landlord to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above.

ARTICLE 18

DEFAULT

18.1 If Tenant defaults in fulfilling any of the covenants of this Lease other than the covenants for the payment of Minimum Rent or additional rent; or if the Premises are abandoned; or if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the Premises shall be taken or occupied by someone other than Tenant without Landlord’s express consent; then, in any one or more of such events, upon Landlord serving a thirty (30) days’ notice upon Tenant specifying the nature of said default and upon the expiration of said thirty (30) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said thirty (30) day period, and if Tenant shall not have diligently commenced curing such default within such applicable period, and shall not thereafter, to the extent permitted, with reasonable diligence and in good faith proceed to remedy or cure such default, then Landlord may serve a three (3) business days’ notice of cancellation of this Lease upon Tenant and upon the expiration of said three (3) business days, this Lease and the term hereunder shall end and expire as fully and completely as if the expiration of such three (3) business day period were the day herein definitely fixed for the end and expiration of this Lease and the term thereof and Tenant shall then quit and surrender the Premises to Landlord but Tenant shall remain liable as hereinafter provided.

18.2 If the notice provided for in Section 18.1 hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the Minimum Rent reserved herein or any item of additional rent herein mentioned or any part of either or in

 

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making any other payment herein required and such default shall not be cured within five (5) days after the delivery of notice from Landlord to Tenant with respect thereto; then and in any of such events Landlord may without further notice, re-enter the Premises either by force (but only to the extent permitted under applicable Legal Requirements) or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the Premises as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this Lease, Landlord may cancel and terminate such renewal or extension agreement by notice. The words “re-enter” and “re-entry” as used in this Lease are not restricted to their technical legal meaning.

ARTICLE 19

REMEDIES OF LANDLORD AND WAIVER OF REDEMPTION

19.1 In case of any such default beyond the expiration of any applicable notice and/or cure period, re-entry, expiration and/or dispossess by summary proceedings or otherwise, (i) the rent shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, together with such expenses as Landlord may incur for attorneys’ fees and disbursements, brokerage, and/or putting the Premises in good order, or for preparing the same for re-rental; (ii) Landlord may (but without any obligation to do so) re-let the Premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms, which may at Landlord’s option be less than or exceed the period which would otherwise have constituted the balance of the term of this Lease and may grant concessions or free rent or charge a higher rental than that in this Lease, and/or (iii) Tenant or the legal representatives of Tenant shall also pay Landlord as liquidated damages for the failure of Tenant to observe and perform said Tenant’s covenants herein contained, any deficiency between the rent hereby reserved and/or covenanted to be paid and the net amount, if any, of the rents collected on account of the lease or leases of the Premises for each month of the period which would otherwise have constituted the balance of the Term of this Lease. The failure of Landlord to re-let the Premises or any part or parts thereof shall not release or affect Tenant’s liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Landlord may incur in connection with re-letting, such as legal expenses, attorneys’ fees and disbursements, brokerage, advertising and for keeping the Premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this Lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Landlord to collect the deficiency for any subsequent month by a similar proceeding. Landlord, in putting the Premises in good order or preparing the same for re-rental may, at Landlord’s option, make such alterations, repairs, replacements, and/or decorations in the Premises as Landlord, in Landlord’s sole judgment, considers advisable and necessary for the purpose of re-letting the Premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall in no event be liable in any way whatsoever for failure to re-let the Premises, or in the event that the Premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rent collected over the sums payable by Tenant. Landlord

 

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shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of demised premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease, or otherwise.

19.2 In the event this Lease is terminated pursuant to the provisions of Article 18 herein, then in addition to the remedies Landlord may have pursuant to Section 19.1 herein, Landlord may elect, at its option, to recover from Tenant, all damages it may incur by reason of such breach, including the cost of recovering the Premises and reasonable attorneys’ fees and expenses and shall be entitled to recover as and for liquidated damages, and not as a penalty, an amount equal to the difference between (1) the Minimum Rent, Additional Rent and charges equivalent to rent payable hereunder for the remainder of the stated Term and (2) the reasonable rental value of the Premises for the remainder of the stated term, both discounted at the rate of four (4%) percent per annum to present worth, all of which shall be immediately due and payable by Tenant. In determining the rental value of the Premises for such period, the rental realized by any reletting, if such reletting be accomplished by Landlord within a reasonable period of time after the termination of this Lease, shall be deemed prima facie to be the rental value. Landlord shall not be liable in any way whatsoever for its failure or refusal to relet the Premises or any part thereof, or if the Premises are so relet, for its failure to collect the rent under such reletting, and no refusal or failure to relet or failure to collect rent shall affect Tenant’s liability for damages or otherwise hereunder. Nothing herein contained shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amounts referred to herein.

ARTICLE 20

FEES AND EXPENSES

If Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed or performed under or by virtue of any of the terms or provisions in any Article of this Lease and such default shall continue after the expiration of any applicable notice and/or cure period, then, unless otherwise provided elsewhere in this Lease, Landlord may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder, and if Landlord, in connection therewith or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorneys’ fees and disbursements, in instituting, prosecuting or defending any action or proceeding, such sums so paid or obligations incurred with interest and costs shall be deemed to be additional rent hereunder and shall be paid by Tenant to Landlord within ten (10) days of rendition of any bill or statement to Tenant therefore, and if the Term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Landlord as damages.

 

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ARTICLE 21

NO REPRESENTATIONS BY LANDLORD

Neither Landlord nor Landlord’s agents have made any representations or promises with respect to the physical condition of the Building, the Land, the Premises or the Licensed Space, the rents, leases, expenses of operation or any other matter or thing affecting or related to the Premises or the Licensed Space except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this Lease. Tenant has inspected the Buildings, the Premises and the Licensed Space and is thoroughly acquainted with their condition, and agrees to take the same “as is”. All understandings and agreements heretofore made between the parties hereto are merged in this Lease, which alone fully and completely expresses the agreement between Landlord and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.

ARTICLE 22

END OF TERM

Upon the expiration or other termination of the term of this Lease, Tenant shall quit and surrender to Landlord the Premises, broom clean, vacant, in good order and condition, ordinary wear excepted, together with the Premises FF&E in good order and condition subject to ordinary wear, and Tenant shall perform any restoration obligation imposed upon Tenant pursuant to the terms hereof, including, without limitation, Article 7 and Article 36 and remove all of its personal property. Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of this Lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this Lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire on the preceding business day.

ARTICLE 23

QUIET ENJOYMENT

Landlord covenants and agrees with Tenant that upon Tenant paying the Minimum Rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant’s part to be observed and performed, Tenant may peaceably and quietly enjoy the Premises hereby demised, subject, nevertheless, to the terms and conditions of this Lease including, but not limited to, Article 29 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned.

 

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ARTICLE 24

NO WAIVER

The failure of Landlord or Tenant to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Lease shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Landlord, or the payment by Tenant, of rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach and no provision of this Lease shall be deemed to have been waived by Landlord or Tenant unless such waiver be in writing signed by the party to be charged with such waiver. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease provided. No act or thing done by Landlord or Landlord’s agents during the term hereby demised shall be deemed an acceptance of a surrender of the Premises and no agreement to accept such surrender shall be valid unless in writing signed by Landlord. No employee of Landlord or Landlord’s agent shall have any power to accept the keys of the Premises prior to the termination of this Lease and the delivery of keys to any such agent or employee shall not operate as a termination of this Lease or a surrender of the Premises.

ARTICLE 25

DISPUTE RESOLUTION; WAIVER OF TRIAL BY JURY

25.1 Any dispute, controversy or claim arising out of or relating to this Lease (a “ Dispute ”), shall initially be referred to the Transition Committee (as defined in the Separation and Distribution Agreement) for resolution. If the Transition Committee is unable to resolve such Dispute within thirty (30) days, then either party may provide written notice thereof to the other party (the “ Initial Notice ”), and the parties shall thereafter attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of vice president and who have authority to settle the Dispute. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

25.2 In the event that a Dispute has not been resolved within sixty (60) days after receipt by a party of an Initial Notice, or within such longer period as the Parties may agree to in writing, then each party hereby agrees and consents to be subject to the jurisdiction of the Court of Common Pleas of the Commonwealth of Pennsylvania in and for Lancaster County, or if the Court of Common Pleas lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in Lancaster County, Pennsylvania, to resolve any such unresolved Dispute in any suit, action or proceeding seeking to enforce any provision of, or based on any other matter arising out of or in connection with, this Lease. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the

 

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Court of Common Pleas of the Commonwealth of Pennsylvania in and for Lancaster County, or if the Court of Common Pleas lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in Lancaster County, Pennsylvania, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding this Article 25 , Landlord may seek injunctive relief from the Court of Common Pleas of the Commonwealth of Pennsylvania in and for Lancaster County (or if the Court of Common Pleas lacks jurisdiction over such dispute, in any state or federal court having jurisdiction over the matter situated in Lancaster County, Pennsylvania) at any time after a breach by Tenant of any of its obligations under Section 2.2 of this Lease.

25.3 It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use of or occupancy of the Premises or the Licensed Space, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Landlord commences any summary proceeding for possession of the Premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding (except such compulsory or mandatory counterclaims that would be waived if not raised in such proceeding).

ARTICLE 26

INABILITY TO PERFORM

This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is unable to perform any of its obligations under this Lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed from so doing by reason of strike or labor troubles or any cause whatsoever including, but not limited to, government preemption in connection with a national emergency or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions of supply and demand which have been or are affected by war or other emergency.

ARTICLE 27

CAPTIONS

The captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Lease nor the intent of any provision hereof.

 

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ARTICLE 28

ADJACENT EXCAVATION – SHORING

If an excavation shall be made upon land adjacent to the Premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the Buildings from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Landlord, or diminution or abatement of rent.

ARTICLE 29

COMPLIANCE

Tenant and Tenant’s servants, employees, agents, visitors, and licensees shall use the Premises, the Licensed Space and the Common Areas in a manner that is generally consistent with Landlord’s past practices (including Landlord’s past practices with respect to environmental, health and safety practices) unless otherwise agreed to by Landlord in writing. Nothing in this Lease contained shall be construed to impose upon Landlord any duty or obligation to enforce the terms, covenants or conditions in any other lease, as against any other tenant and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees.

ARTICLE 30

SUCCESSORS AND ASSIGNS

The covenants, conditions and agreements contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise expressly provided in this Lease, their assigns.

ARTICLE 31

INSURANCE

31.1 Tenant covenants and agrees to obtain on or before the Commencement Date and to keep in force during the Term (i) “all risk” property insurance covering all present and future property of Tenant, furniture and/or furnishings and any Alterations installed by or on behalf of Tenant, to a limit of not less than the full replacement value thereof, such insurance to include a replacement cost endorsement, and (ii) a commercial general liability insurance policy protecting against any liability whatsoever, occasioned by any occurrence on or about the Premises or any appurtenances thereto with limits of liability thereunder of not less than the amount of $5,000,000 per occurrence for bodily or personal injury (including death) and in the amount of $1,000,000 in respect of property damage. The insurance policies required hereunder shall be written by insurance companies authorized to do business in the Commonwealth of Pennsylvania

 

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and with AM Best Rating of A- or better and shall be in such limits as Landlord may reasonably require. All insurance required hereunder shall name Tenant as the insured and shall also name as additional insureds Landlord and such other parties as Landlord shall reasonably designate as additional insureds. The insurance required hereby may be carried under a blanket policy covering the Premises and other locations of Tenant, if any. Prior to the time such insurance is first required to be carried by Tenant and thereafter, no later than ten (10) days of renewal thereof, Tenant agrees to deliver to Landlord either a duplicate original of the aforesaid policies or a certificate evidencing such insurance, except that the property insurance referred to above, however, must be evidenced by delivery by Tenant to Landlord of the ACORD Form 27, Evidence of Property Insurance Form or its equivalent. Said certificates (including ACORD Form 27 or its equivalent) shall contain an endorsement that such insurance may not be cancelled except upon at least thirty (30) days’ prior notice to all insureds thereunder. Tenant’s failure to provide and keep in force the aforementioned insurance shall be regarded as a material default hereunder entitling Landlord to exercise any or all of the remedies as provided in this Lease in the event of Tenant’s default.

31.2 Landlord at its expense shall maintain throughout the term (with customary deductibles) (a) all-risk insurance against loss or damage by fire or other casualty, in an amount equal to one hundred percent (100%) of the replacement value of the Buildings and (b) a policy of commercial general liability insurance in an amount of $5,000,000 per occurrence for bodily or personal injury (including death).

ARTICLE 32

BROKERAGE

Tenant and Landlord covenant, represent and warrant that neither party has had any dealings or communications with any broker or agent in connection with the consummation of this Lease, and Tenant and Landlord covenant and agree to hold harmless and indemnify the other party and its officers, directors, employees and members from and against any and all cost, expense (including reasonable attorneys’ fees and disbursements) and liability arising out of any inaccuracy or alleged inaccuracy of the above representation.

ARTICLE 33

ESTOPPEL CERTIFICATE

33.1 Tenant shall, at any time and from time to time, as requested by Landlord, upon fifteen (15) days’ prior notice, execute and deliver to Landlord a statement setting forth the Commencement Date, the Expiration Date, the Minimum Rent and Additional Rent and certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force as modified and stating the modifications), the dates to which the Minimum Rent and Additional Rent have been paid, whether or not, to the best knowledge of Tenant, Landlord is in default in performance of any of its obligations under this Lease, and, if so, specifying each such default of which Tenant may have knowledge, and whether there exist any offsets or defenses against enforcement of any of the terms of this Lease upon the part of Tenant to be performed, and, if so, specifying the same, and any other information Landlord may reasonably request, it being intended that any such statement delivered pursuant hereto may be relied upon by others with whom Landlord may be dealing.

 

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33.2 Landlord shall, at any time and from time to time, as reasonably requested by Tenant, upon ten (10) days’ prior notice, execute and deliver to Tenant a statement certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force as modified and stating the modifications), the dates to which the Minimum Rent and Additional Rent have been paid, the amount of Tenant’s security deposit then being held by Landlord, whether or not, to the best knowledge of Landlord, Tenant is in default in performance of any of its obligations under this Lease, and, if so, specifying each such default of which Landlord may have knowledge.

ARTICLE 34

HOLDING OVER

34.1 Tenant acknowledges that possession of the entire Premises must be surrendered to Landlord at the expiration or sooner termination of the term hereof. The parties recognize and agree that the damage to Landlord resulting from any failure by Tenant timely to surrender possession of the entire Premises as aforesaid will be substantial, will exceed the amount of annual Minimum Rent and additional rent theretofore payable hereunder, and will be impossible to measure accurately. Tenant therefore agrees that if possession of the entire Premises is not surrendered to Landlord upon the expiration or sooner termination of the term of this Lease, then notwithstanding anything to the contrary contained in this Lease, Tenant shall pay to Landlord for each month and for each portion of any month during which Tenant holds over in the Premises after the expiration or sooner termination of the term hereof, for use and occupancy, Minimum Rent at (i) 150% of the final monthly rate of the then current Term specified in Article 3 for the first thirty (30) days that Tenant thus remains in possession, (ii) 200% thereafter, together with all Additional Rent payable hereunder (and Landlord may accept such amounts without in any way waiving its rights to require Tenant to vacate the Premises) and, in addition thereto, if such holdover shall continue for more than five (5) business days, Tenant shall pay Landlord for all damages sustained by reason of Tenant’s retention of possession beyond five (5) business days after the expiration or earlier termination of this Lease, but in no event shall Tenant be liable to Landlord for any indirect, special, punitive or consequential damages.

34.2 If Tenant remains in possession of the Premises, or any part thereof, after the expiration or earlier termination of the term of this Lease, such holding over shall, at the election of Landlord expressed in a notice to Tenant and not otherwise, constitute a tenancy from month-to-month. The provisions of this Article 34 do not imply any right in Tenant to remain in the Premises after the termination of this Lease, or exclude Landlord’s right of re-entry or any other right or remedy hereunder or at law which Landlord may have against a holdover tenant.

 

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ARTICLE 35

NOTICES

All notices, requests, claims, demands or other communications under this Agreement (collectively, “ notices ”) shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Article 35 ):

If to Landlord, to:

Armstrong World Industries, Inc.

Building 5B

2500 Columbia Avenue

Lancaster, PA 17603

Attention: General Counsel

With a copy to:

Armstrong World Industries, Inc.

P.O. Box 3001

Lancaster, PA 17604

Attention: General Counsel

If to Tenant, to:

Armstrong Flooring, Inc.

Building 701

2500 Columbia Avenue

Lancaster, PA 17603

Attention: General Counsel

With a copy to:

Armstrong Flooring, Inc.

P.O. Box 3025

Lancaster, PA 17604

Attention: General Counsel

Any party may, by notice to the other party, change the address to which such notices are to be given. A notice given by counsel for Landlord or Tenant shall be deemed a valid notice if addressed and sent in accordance with the provisions of this Article 35 . Each of the parties hereto waives personal or any other service other than as provided for in this Article 35 . Notwithstanding the foregoing, either party hereto may give the other party facsimile or oral notice of the need of emergency repairs. Landlord’s Tax Statements and all other rent bills may be delivered by Landlord via ordinary United States mail.

 

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ARTICLE 36

EXISTING FF&E

All of the furniture, fixtures and equipment located in the Premises and the Licensed Space as of the Commencement Date (collectively, the “ Premises FF&E ”) shall remain the property of Landlord. For the avoidance of doubt, the equipment located in the Premises and the Licensed Space and identified on Exhibit E attached hereto (the “ Excluded FF&E ,” and together with the Premises FF&E, collectively, the “ Existing FF&E ”) is the sole property of the Tenant and does not constitute part of the property being leased to Tenant hereunder; it being agreed and acknowledged that all of Landlord’s right, title and interest in and to the Excluded FF&E have been conveyed to Tenant pursuant to and subject to the terms of the Separation and Distribution Agreement. Notwithstanding the foregoing, the Premises FF&E shall not include any testing, manufacturing, laboratory, operating or other equipment currently use primarily by Tenant in connection with the AFI Business (as defined in the Separation and Distribution Agreement). Landlord makes no representation or warranty with respect to the Existing FF&E. Landlord shall have no obligation or liability to repair, replace or maintain the Existing FF&E. Tenant, at Tenant’s sole cost and expense, shall maintain the Existing FF&E in good working order and condition subject to reasonable wear and tear and shall have the right to replace the Existing FF&E or otherwise install such other furniture, fixtures and equipment in the Premises or the Licensed Space in accordance with the terms set forth in Article 7 and Article 40 , as applicable. At or prior to the expiration or earlier termination of this Lease, Tenant shall remove all Excluded FF&E from the Premises and shall restore, at Tenant’s sole cost and expense, the Premises in a manner reasonably satisfactory to Landlord. All Excluded FF&E remaining in the Premises following the expiration or earlier termination of this Lease shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord’s property or may be removed from the Premises by Landlord at Tenant’s expense.

ARTICLE 37

CERTAIN RIGHTS RESERVED TO LANDLORD

37.1 Landlord reserves the following rights:

(a) Subject to the terms of Article 39 , to install, affix and maintain all signs, awnings, scaffolding, sidewalk bridges and canopies on the exterior of the Buildings.

(b) To constantly have pass keys to the Premises and the Licensed Space and to any portion(s) of the Premises and the Licensed Space that is secured by Tenant.

(c) To close the Buildings for all days observed by the State or Federal Government as legal holidays and those designated as holidays established by any union contract applicable to Building employees.

(d) Subject to Landlord’s security measures, Tenant shall have access to the Premises 24 hours per day, 7 days per week. Notwithstanding the foregoing but subject to the provisions of Sections 8.9 , Article 12 and Article 13 , Landlord shall have no liability to Tenant,

 

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nor shall Tenant be entitled to terminate this Lease, to claim an actual or constructive eviction in whole or in part, or be entitled to any abatement or diminution of rent payable by Tenant under this Lease or to any relief from any of its obligations under this Lease if by reason of strike or labor trouble or any other similar cause beyond the reasonable control of Landlord (including, but not limited to, acts of war, emergency, casualty, terrorism, bioterrorism, or governmental preemption in connection with a national emergency) (A) there is (i) a lack of access to any Building, the Premises, the Licensed Space or the Common Areas (which shall include without limitation the lack of access to the Buildings, the Premises, the Licensed Space or the Common Areas when it or they are structurally sound but inaccessible due to evacuation of the surrounding area or damage to nearby structures or public areas); (ii) reduced air quality or other contaminants in the Buildings, the Licensed Space or the Common Areas that would adversely affect the Building or its occupants, including without limitation the presence of biological or other airborne agents within the Building, the Licensed Space or the Premises; (iii) disruption of mail and deliveries to the Building or the Premises; (iv) disruption of telephone and/or other communications services to the Buildings, the Premises or the Common Areas; (v) disruption of any other services to the Premises, any of the Building systems or the Common Areas; or (B) Tenant is otherwise unable to use and/or occupy the Premises or the Licensed Space for the conduct of its business.

ARTICLE 38

HAZARDOUS MATERIALS

38.1 Tenant hereby represents, warrants and covenants that it shall not install, cause or permit any Hazardous Materials to be placed or stored in or about the Premises or the Licensed Space in violation of any applicable environmental or other Legal Requirements; provided, that nothing herein shall prevent Tenant’s use of such reasonable amounts of Hazardous Materials customarily used in the ordinary course of operation of Tenant’s business in the Premises in accordance with this Lease if such use is for such ordinary course of such operation or in connection with Alterations provided that, in either case, such use is in accordance with all Legal Requirements applicable to the Building or the Premises or any part thereof, and Tenant’s observance of all provisions of this Lease. For the avoidance of doubt, Tenant shall promptly notify the Landlord’s Director of Facilities if: (i) Tenant intends to change how it currently stores any Hazardous Material such that additional modifications or special treatment (including, without limitation, the installation of sprinklers or secondary containment) will be required at that portion of the Premises or the Licensed Space at which the Hazardous Material is present, (ii) Tenant intends to change any laboratory or pilot line equipment such that an environmental permit review by the Pennsylvania Department of Environmental Protection will be reasonably required, or (iii) there are any new instances of generating or storing any Hazardous Material; provided, however, that the foregoing shall not apply to small amounts of Hazardous Materials customarily used by Tenant in a laboratory and in accordance with all Legal Requirements applicable to the Building or the Premises or any part thereof. Tenant shall indemnify and hold Landlord harmless from and against any claims, demands, losses, liabilities, penalties and damages arising out of, or in any way connected with the installation, placement, storage or release of Hazardous Materials used or installed by Tenant, Tenant’s employees, contractors or agents upon the Premises or the Licensed Space in violation of the terms of this Lease. If Tenant, or its employees, contractors or agents install, use, store or place Hazardous Materials in

 

43


the Premises or the Licensed Space, Tenant shall be obligated to remove and dispose of said Hazardous Materials in compliance with all Legal Requirements. This covenant shall survive the expiration or earlier termination of this Lease.

38.2 As used herein, the term “ Hazardous Materials ” shall be any petroleum product, asbestos product, or any other material, substance or waste that is now, or hereafter during the Term, recognized as being hazardous or dangerous to health or the environment by any federal, state or local agency having jurisdiction over the Building (including, without limitation, any material, substance or waste that has been classified as hazardous under 29 CFR § 1910.1200).

ARTICLE 39

SIGNAGE

The parties acknowledge that there is limited space available in the Campus for the installation of signage. The parties will cooperate in good faith to develop a fair and equitable approach to signage (including, without limitation, the location, size, design, materials and installation of such signage) that takes into account the needs of Landlord, Tenant and any other existing and future tenants at the Campus, the space occupied by each of the respective parties, the expectations of the surrounding community, and applicable Legal Requirements. Tenant shall, at its sole cost and expense, remove any signage installed by or on behalf of Tenant on or before the expiration or earlier termination of this Lease and shall repair any damage caused by said removal.

ARTICLE 40

LICENSED AREA

40.1 Licensed Space – Building 4, Building 5A and Building 701.

(a) Landlord hereby grants to Tenant an exclusive license, subject to and in accordance with the provisions of this Section 40.1 and upon and subject to all of the other terms of this Lease, to use the space designated on Exhibit F-1 attached hereto (collectively, the “ Building 5A Licensed Space ”), Exhibit F-2 attached hereto (the “ Building 4 Licensed Space ”) and Exhibit F-3 attached hereto (the “ Building 701 Licensed Space ”, and together with the Building 5A Licensed Space and the Building 4 Licensed Space, the “ Building Licensed Space ”), in each case, solely for a Permitted Use. Tenant shall not make any Alterations to the Building Licensed Space without Landlord’s prior written consent, which consent may be withheld in Landlord’s sole discretion.

(b) Notwithstanding anything to the contrary contained herein, the term of the license granted herein shall commence on the Commencement Date and shall expire on the earlier of (A) (i) with respect to the Building 5A Licensed Space and the Building 4 Licensed Space, the date that is one (1) year from the date that Landlord delivers written notice to Tenant of its desire to use, lease or otherwise occupy all or any portion of the Building 5A Licensed Space or the Building 4 Licensed Space, as applicable (the “ Equipment License Expiration Date ”) and (ii) with respect to the Building 701 Licensed Space, the earlier of (x) date that is ninety (90) days from the date

 

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that Landlord delivers written notice (the “ Termination Notice ”) to Tenant of its desire to use, lease or otherwise occupy all or any portion of the Building 701 Licensed Space or (y) the Initial Expiration Date (the “ 701 License Expiration Date ,” and together with the Equipment License Expiration Date, the “ Building Licensed Space Expiration Date ”) or (B) that date the term of the Lease shall cease and terminate as herein provided.

(c) In the event Landlord delivers a Termination Notice to Tenant which requires Tenant to vacate the Building 701 Licensed Space prior to the Initial Expiration Date and Tenant is not then in default beyond the expiration of any applicable notice and/or cure period, Landlord shall upgrade (the “ Building 123 Upgrade ”) the portion of the Premises located within Buildings 1, 2 and 3 with such furniture, fixtures and equipment as are necessary to accommodate the relocation of Tenant’s employees from the Building 701 Licensed Space to Buildings 1, 2 and 3, provided that the costs in connection with such Building 123 Upgrade shall not exceed $600,000 in the aggregate. The parties hereby agree and acknowledge that the costs incurred by Landlord in connection with the Building 123 Upgrade (which shall not exceed $600,000 in the aggregate) shall be treated as Operating Expenses pursuant to and in accordance with Section 5.3(a)(iv) .

(d) Tenant shall remove Tenant’s Property within the applicable Building Licensed Space upon the applicable Building Licensed Space Expiration Date or earlier termination of the Lease and repair any damage to the Building Licensed Space or other portions of the applicable building caused by the removal thereof, all at Tenant’s sole cost and expense. In the event Tenant’s Property remains in the Building Licensed Space following the applicable Building Licensed Space Expiration Date or earlier termination of the Lease, the same shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord’s property or may be removed from the applicable Licensed Space by Landlord at Tenant’s expense.

40.2 Data Center Licensed Space

(a) Landlord hereby grants to Tenant an exclusive license, subject to and in accordance with the provisions of this Section 40.2 and upon and subject to all of the other terms of this Lease, to use the space designated on Exhibit G attached hereto (the “ Data Center Licensed Space ”; and together with the Building Licensed Space, the “ Licensed Space ”) solely for equipment storage, data center and telecommunication uses that comply with the terms hereof.

(b) Tenant hereby agrees and acknowledges that the individuals set forth on Schedule 40.2(b) attached hereto (the “ Designated Tenant Representatives ”) are the sole representatives of Tenant that are permitted to access the Data Center Licensed Space at any time, provided that Tenant shall have the right to update the list of Designated Tenant Representatives from time to time by delivering written notice thereof to Landlord, but in no event shall the total number of Designated Tenant Representatives exceed twenty (20) persons at any one time. Landlord shall have the right to have a representative accompany any of the Designated Tenant Representatives during any entry into the Data Center Licensed Space. Tenant shall cause the Designated Tenant Representatives to

 

45


keep all information obtained during any entry into the Data Center Licensed Space confidential and shall comply with and cause the Designated Tenant Representatives to comply with any controls instituted by Landlord to prevent the disclosure of confidential information contained in the Data Center Licensed Space. In furtherance of the foregoing, upon Landlord’s request, each of Tenant and the Designated Tenant Representatives shall execute and deliver a confidentiality agreement in form and substance reasonably acceptable to Landlord and Tenant.

(c) Tenant shall not make any Alterations to the Data Center Licensed Space without Landlord’s prior written consent, which consent may be withheld in Landlord’s sole discretion. Notwithstanding the foregoing, Tenant shall be permitted to install additional equipment in the Data Center Licensed Space or replace existing equipment in the Date Center Licensed Space, provided that (i) the power consumed following such installation (taking into account all other installations) is not more than twenty percent (20%) of the power consumed the previous year, (ii) Tenant delivers to Landlord at least 180 days prior written notice of such installation, (iii) Tenant otherwise complies with the terms and conditions set forth in Article 7 which terms and conditions shall apply to Alterations to the Data Center Licensed Space with the same force and effect, and (iv) the costs of such installation shall be borne solely by Tenant except to the extent Landlord determines, in its reasonable discretion, that such installation benefits both Landlord and Tenant, in which case such installation shall be performed by Landlord and the cost thereof shall be treated as an Operating Expense.

(d) At or prior to the expiration or earlier termination of this Lease, Tenant shall remove Tenant’s Property from the Data Center Licensed Space and shall restore, at Tenant’s sole cost and expense, the Data Center Licensed Space in a manner reasonably satisfactory to Landlord. All Tenant’s Property remaining in the Data Center Licensed Space following the expiration or earlier termination of this Lease shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord’s property or may be removed from the Data Center Licensed Space by Landlord at Tenant’s expense.

40.3 Tenant acknowledges that neither Landlord nor Landlord’s agents has made any representations nor promises with respect to the fitness or suitability of the Licensed Space for any purposes intended by Tenant therefor. Tenant shall not look to Landlord to supply or provide any security, material, services, repairs, alterations or property whatsoever in connection with the Licensed Space except as expressly set forth in Article 8 . Subject to Section 8.1 hereof, Tenant shall, throughout the term of the applicable Licensed Space, take good care of the Licensed Space and the fixtures and equipment therein, and at Tenant’s sole cost and expense, make all repairs thereto as and when needed to preserve them in good working order and condition, reasonable wear and tear, obsolescence and damage from the elements, fire or other casualty, excepted. Without limiting the terms of Section 15.1 , Landlord shall have the right to enter the Licensed Space at reasonable hours, upon reasonable prior notice to Tenant, for the purpose of showing the same to (i) prospective purchasers, mortgagees and tenants or (ii) any other persons to the extent such showing relates to sustainable design efforts, improvements, and/or initiatives at the Campus.

 

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40.4 Tenant shall secure, and keep in full force and effect, such supplementary insurance with respect to the Licensed Space as Landlord may reasonably require from time to time. The rights granted in respect of the Licensed Space are given in connection with, and as part of the rights created under, this Lease and are not separately transferable or assignable. This Article 40 does not, and shall not be deemed to, constitute a lease or a conveyance of the Licensed Space by Landlord to Tenant or to confer upon Tenant any right, title, estate or interest in the Licensed Space. This Article 40 grants to Tenant only a personal privilege to occupy the Licensed Space and maintain and use the equipment therein on the terms and conditions set forth herein.

ARTICLE 41

MISCELLANEOUS

41.1 If any of the provisions of this Lease, or the application thereof to any person or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

41.2 This Lease shall be governed in all respects by the laws of the Commonwealth of Pennsylvania without giving effort to the principles of conflicts of law.

41.3 If, in connection with obtaining financing for the Buildings, a bank, insurance company or other lending institution shall request reasonable modifications to this Lease as a condition to such financing, Tenant will not unreasonably withhold its consent thereto, provided that such modifications do not materially and adversely affect Tenant’s rights or obligations hereunder.

41.4 Wherever it is specifically provided in this Lease that a party’s consent is not to be unreasonably withheld, a response to a request for such consent shall also not be unreasonably conditioned or delayed. If either Landlord or Tenant considers that the other has unreasonably withheld or delayed a consent (where such standard is applicable), it shall so notify the other party within thirty (30) days after receipt of notice of denial of the requested consent or, in case notice of denial is not received within ten (10) days after making its request for the consent, within ten (10) days thereafter. Tenant hereby waives any claim against Landlord which it may have based upon any assertion that Landlord has unreasonably withheld or unreasonably delayed any consent required hereunder, and Tenant agrees that its sole remedy shall be an action or proceeding to enforce any such provision or for specific performance, injunction or declaratory judgment. In the event of such a determination, the requested consent shall be deemed to have been granted; however, Landlord shall have no liability to Tenant for its refusal or failure to give such consent. The sole remedy for Landlord’s unreasonably withholding or delaying of consent shall be as provided in this Section 41.4 . Notwithstanding anything to the contrary provided in this Lease, in any instance where the consent of a ground lessor and/or a mortgagee is required, Landlord shall not be required to give its consent until and unless such ground lessor and/or mortgagee has given its consent. Landlord agrees to seek such consent if Landlord would otherwise consent in such instance.

 

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41.5 The person(s) executing this Lease on behalf of Tenant and Landlord hereby represent and warrant that they have been duly authorized to execute this Lease for and on behalf of their respective parties.

41.6 The listing of any name other than that of Tenant, whether on the doors of the Premises, on the Building directory, if any, or otherwise, shall not operate to vest any right or interest in this Lease or in the Premises, nor shall it be deemed to be the consent of Landlord to any assignment or transfer of this Lease, to any sublease of the Premises, or to the use or occupancy thereof by others.

41.7 In the event that Landlord or Tenant places the enforcement of this Lease or the collection of any Minimum Rent or additional rent due, or to become due hereunder, or recovery of the possession of the Premises, in the hands of an attorney, or files suit upon the same, Landlord shall recover its reasonable attorneys’ fees, disbursements and court costs from Tenant in connection with such matter. The provisions of this Section 41.7 shall survive the expiration or earlier termination of this Lease.

41.8 Landlord and Tenant understand, agree, and acknowledge that (i) this Lease has been freely negotiated by both parties and (ii) in any controversy, dispute, or contest over the meaning, interpretation, validity, or enforceability of this Lease or any of its terms or conditions, there shall be no inference, presumption, or conclusion drawn whatsoever against either party by virtue of that party having drafted this Lease or any portion thereof.

41.9 Tenant represents and warrants to Landlord that (a) Tenant and each person or entity directly or indirectly owning an interest in Tenant is (1) not currently identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control of the Department of the Treasury (“ OFAC ”) and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the “ List ”), and (2) not a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States, (b) none of the funds or other assets of Tenant constitute property of, or are beneficially owned, directly or indirectly, by, any Embargoed Person, (c) no Embargoed Person has any interest of any nature whatsoever in Tenant (whether directly or indirectly), (d) none of the funds of Tenant have been derived from any unlawful activity with the result that the investment in Tenant is prohibited by law or that this Lease is in violation of law, and (e) Tenant has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times. The term “ Embargoed Person ” means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Tenant is prohibited by law or Tenant is in violation of law.

(a) Tenant covenants and agrees (i) to comply with all Legal Requirements relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect, (ii) to immediately notify Landlord in writing if any of the representations,

 

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warranties or covenants set forth in this Section 41.9 are no longer true or have been breached or if Tenant has a reasonable basis to believe that they may no longer be true or have been breached, (iii) not to use funds from any “Prohibited Person” (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Landlord under this Lease and (iv) at the request of Landlord, to provide such information as may be reasonably requested by Landlord to determine Tenant’s compliance with the terms hereof.

(b) Tenant hereby acknowledges and agrees that Tenant’s inclusion on the List at any time during this Lease Term shall be a material default of this Lease. Notwithstanding anything to the contrary contained herein, including but not limited to Tenant’s rights under Section 14.8 , Tenant shall not permit the Premises or any portion thereof to be used or occupied by any person or entity on the List or by any Embargoed Person (on a permanent, temporary or transient basis), and any such use or occupancy of the Premises by any such person or entity shall be a material default of this Lease.

41.10 Landlord hereby represents and warrants to Tenant that, on the date hereof, Landlord is primarily engaged in the design and manufacturing of ceiling systems. Tenant hereby represents and warrants to Landlord that, on the date hereof, Tenant is primarily engaged in the design and manufacturing of flooring systems. In the event that either Landlord or Tenant intends on entering into a merger, consolidation, acquisition or other transaction (each a “ Corporate Transaction ”) that would result in either party expanding into the production, manufacturing, design or sale of any product other than as represented herein, then (i) Landlord or Tenant, as applicable, shall notify the other party in writing no less than ten (10) days prior to the effective date of the proposed Corporate Transaction and (ii) the parties shall discuss in good faith whether any changes or modifications should be made with respect to Tenant’s access to and/or usage of the Common Areas under this Lease to ensure that adequate controls are in place to protect the respective interests of Landlord and Tenant, including, without limitation, any controls relating to security and confidentiality.

41.11 This Lease may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single agreement. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

[end of agreement; signatures follow on the next page]

 

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IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this Lease as of the date first above written.

 

LANDLORD:
ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvania corporation
By:  

/s/ Brian L. MacNeal

  Name:   Brian L. MacNeal
  Title:   Authorized Officer
TENANT:
ARMSTRONG FLOORING, INC., a Delaware corporation
By:  

/s/ John W. Thompson

  Name:   John W. Thompson
  Title:   Authorized Officer

Exhibit 10.7

 

 

CREDIT AGREEMENT

dated as of April 1, 2016,

among

ARMSTRONG FLOORING, INC.,

and

ARMSTRONG HARDWOOD FLOORING COMPANY ,

as Borrowers,

CERTAIN SUBSIDIARIES OF ARMSTRONG FLOORING, INC. IDENTIFIED HEREIN,

as the Guarantors,

BANK OF AMERICA, N.A. ,

as Administrative Agent and Collateral Agent,

THE OTHER LENDERS PARTY HERETO

and

JPMORGAN CHASE BANK, N.A.

and

SUNTRUST ROBINSON HUMPHREY, INC. ,

as Co-Syndication Agents,

 

 

Arranged By:

BANK OF AMERICA, N.A.,

JPMORGAN CHASE BANK, N.A.

and

SUNTRUST ROBINSON HUMPHREY, INC. ,

as Joint Lead Arrangers and Joint Book Managers

 

 


EXECUTION COPY

TABLE OF CONTENTS

 

          PAGE  

ARTICLE I.

   DEFINITIONS AND ACCOUNTING TERMS      1   

Section 1.01

  

Defined Terms

     1   

Section 1.02

  

Other Interpretive Provisions

     44   

Section 1.03

  

Accounting Terms

     45   

Section 1.04

  

Rounding

     45   

Section 1.05

  

Times of Day

     45   

Section 1.06

  

Letter of Credit Amounts

     45   

Section 1.07

  

Rates

     45   

Section 1.08

  

Uniform Commercial Code

     46   

ARTICLE II.

   THE COMMITMENTS AND CREDIT EXTENSIONS      46   

Section 2.01

  

Revolving Loans to Borrowers

     46   

Section 2.02

  

Borrowings, Conversions and Continuations of Loans

     49   

Section 2.03

  

Letters of Credit

     51   

Section 2.04

  

Swing Line Loans

     59   

Section 2.05

  

Prepayments

     62   

Section 2.06

  

Termination or Reduction of Aggregate Committed Amount

     62   

Section 2.07

  

Repayment of Obligations

     63   

Section 2.08

  

Interest

     64   

Section 2.09

  

Fees

     64   

Section 2.10

  

Computation of Interest and Fees

     65   

Section 2.11

  

Evidence of Debt

     65   

Section 2.12

  

Payments Generally; Administrative Agent’s Clawback

     66   

Section 2.13

  

Sharing of Payments by Lenders

     67   

Section 2.14

  

Cash Collateral

     68   

Section 2.15

  

Defaulting Lenders

     69   

Section 2.16

  

Joint and Several Liability

     71   

Section 2.17

  

Overadvances and Protective Advances

     72   

ARTICLE III.

   TAXES, YIELD PROTECTION AND ILLEGALITY      74   

Section 3.01

  

Taxes

     74   

Section 3.02

  

Illegality

     78   

Section 3.03

  

Inability to Determine Rates

     79   

Section 3.04

  

Increased Costs

     79   


Section 3.05

  

Compensation for Losses

     81   

Section 3.06

  

Mitigation of Obligations; Replacement of Lenders

     81   

Section 3.07

  

Survival

     82   

ARTICLE IV.

  

GUARANTY

     82   

Section 4.01

  

The Guaranty

     82   

Section 4.02

  

Obligations Unconditional

     82   

Section 4.03

  

Reinstatement

     83   

Section 4.04

  

Certain Additional Waivers

     83   

Section 4.05

  

Remedies

     84   

Section 4.06

  

Rights of Contribution

     84   

Section 4.07

  

Guarantee of Payment; Continuing Guarantee

     84   

Section 4.08

  

Keepwell

     84   

ARTICLE V.

  

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     85   

Section 5.01

  

Conditions of Initial Credit Extension

     85   

Section 5.02

  

Conditions to all Credit Extensions

     88   

ARTICLE VI.

  

REPRESENTATIONS AND WARRANTIES

     88   

Section 6.01

  

Existence, Qualification and Power

     88   

Section 6.02

  

Authorization; No Contravention

     89   

Section 6.03

  

Governmental Authorization; Other Consents

     89   

Section 6.04

  

Binding Effect

     89   

Section 6.05

  

Financial Statements; No Material Adverse Effect

     89   

Section 6.06

  

Litigation

     90   

Section 6.07

  

No Default

     90   

Section 6.08

  

Ownership of Property; Liens

     90   

Section 6.09

  

Environmental Compliance

     90   

Section 6.10

  

Insurance

     91   

Section 6.11

  

Taxes

     91   

Section 6.12

  

ERISA Compliance

     91   

Section 6.13

  

Subsidiaries

     92   

Section 6.14

  

Margin Regulations; Investment Company Act

     92   

Section 6.15

  

Disclosure

     92   

Section 6.16

  

Compliance with Laws; OFAC; PATRIOT Act, Etc.

     93   

Section 6.17

  

Intellectual Property; Licenses, Etc.

     93   

Section 6.18

  

Solvency

     94   

Section 6.19

  

Perfection of Security Interests in the Collateral

     94   

 

ii


Section 6.20

  

Business Locations

     94   

Section 6.21

  

Labor Matters

     95   

Section 6.22

  

Brokers

     95   

Section 6.23

  

Accounts

     95   

Section 6.24

  

Eligible Inventory

     95   

Section 6.25

  

Machinery and Equipment

     96   

Section 6.26

  

Eligible Pledged Cash

     96   

Section 6.27

  

Burdensome Contracts

     96   

ARTICLE VII.

  

AFFIRMATIVE COVENANTS

     96   

Section 7.01

  

Financial Statements

     96   

Section 7.02

  

Certificates; Other Information

     97   

Section 7.03

  

Notices

     98   

Section 7.04

  

Payment of Obligations

     99   

Section 7.05

  

Preservation of Existence, Etc.

     99   

Section 7.06

  

Maintenance of Properties

     99   

Section 7.07

  

Maintenance of Insurance

     100   

Section 7.08

  

Compliance with Laws

     100   

Section 7.09

  

Books and Records

     100   

Section 7.10

  

Appraisals

     100   

Section 7.11

  

Use of Proceeds

     101   

Section 7.12

  

Additional Subsidiaries

     101   

Section 7.13

  

ERISA Compliance

     102   

Section 7.14

  

Pledged Assets

     102   

Section 7.15

  

Further Assurances

     103   

Section 7.16

  

Collateral Administration

     103   

Section 7.17

  

Post-Closing Matters

     108   

ARTICLE VIII.

  

NEGATIVE COVENANTS

     108   

Section 8.01

  

Liens

     108   

Section 8.02

  

Investments

     111   

Section 8.03

  

Indebtedness

     113   

Section 8.04

  

Fundamental Changes

     115   

Section 8.05

  

Dispositions

     115   

Section 8.06

  

Restricted Payments

     116   

Section 8.07

  

Change in Nature of Business

     117   

 

iii


Section 8.08

  

Transactions with Affiliates

     117   

Section 8.09

  

Burdensome Agreements

     117   

Section 8.10

  

Use of Proceeds

     118   

Section 8.11

  

Financial Covenant

     119   

Section 8.12

  

Prepayment of Other Indebtedness, Etc.

     119   

Section 8.13

  

Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity

     119   

ARTICLE IX.

  

EVENTS OF DEFAULT AND REMEDIES

     119   

Section 9.01

  

Events of Default

     119   

Section 9.02

  

Remedies Upon Event of Default

     121   

Section 9.03

  

Application of Funds

     122   

Section 9.04

  

License

     123   

Section 9.05

  

Remedies Cumulative; No Waiver

     124   

ARTICLE X.

  

ADMINISTRATIVE AGENT

     124   

Section 10.01

  

Appointment and Authority

     124   

Section 10.02

  

Rights as a Lender

     125   

Section 10.03

  

Exculpatory Provisions

     125   

Section 10.04

  

Reliance by Administrative Agent

     126   

Section 10.05

  

Delegation of Duties

     126   

Section 10.06

  

Resignation of Administrative Agent

     126   

Section 10.07

  

Non-Reliance on Administrative Agent and Other Lenders

     128   

Section 10.08

  

No Other Duties; Etc.

     128   

Section 10.09

  

Administrative Agent May File Proofs of Claim

     128   

Section 10.10

  

Collateral and Guaranty Matters

     129   

Section 10.11

  

Swap Contracts and Treasury Management Agreements

     130   

Section 10.12

  

Secured Bank Product Providers

     130   

Section 10.13

  

Loan Party Representative

     130   

ARTICLE XI.

  

MISCELLANEOUS

     131   

Section 11.01

  

Amendments, Etc.

     131   

Section 11.02

  

Notices; Effectiveness; Electronic Communications

     134   

Section 11.03

  

No Waiver; Cumulative Remedies; Enforcement

     136   

Section 11.04

  

Expenses; Indemnity; Damage Waiver

     136   

Section 11.05

  

Payments Set Aside

     138   

Section 11.06

  

Successors and Assigns

     138   

Section 11.07

  

Treatment of Certain Information; Confidentiality

     143   

 

iv


Section 11.08

  

Set-off

     143   

Section 11.09

  

Interest Rate Limitation

     144   

Section 11.10

  

Counterparts; Integration; Effectiveness

     144   

Section 11.11

  

Survival of Representations and Warranties

     145   

Section 11.12

  

Severability

     145   

Section 11.13

  

Replacement of Lenders

     145   

Section 11.14

  

Governing Law; Jurisdiction; Etc.

     146   

Section 11.15

  

Waiver of Right to Trial by Jury

     147   

Section 11.16

  

USA PATRIOT Act Notice

     147   

Section 11.17

  

No Advisory or Fiduciary Responsibility

     147   

Section 11.18

  

Electronic Execution of Assignments and Certain Other Documents

     148   

Section 11.19

  

Acknowledgement and Consent to Bail-In of EEA Financial Institutions

     148   

 

v


SCHEDULES

 

1.01    Eligible Pledged Cash Accounts
1.01(p)    Permitted Inventory Locations
1.02    Excluded Property
2.01    Commitments and Pro Rata Shares
2.03    Existing Letters of Credit
6.10    Insurance
6.13    Subsidiaries
6.17    IP Rights
6.20(a)(i)    Location of Chief Executive Office, Etc.
6.20(b)    Changes in Legal Name, State of Formation and Structure
6.21    Labor Matters
7.16(d)    Deposit Accounts
7.16(f)    Location of Collateral
7.17    Post-Closing Matters
8.01    Liens Existing on the Closing Date
8.02    Investments Existing on the Closing Date
8.03    Indebtedness Existing on the Closing Date
8.05    Dispositions
8.09    Burdensome Agreements
11.02    Certain Addresses for Notices

EXHIBITS

 

A-1    Form of Loan Notice
A-2    Form of Notice of Continuation/Conversion
B    Form of Swing Line Loan Notice
C-1    Form of Revolving Note
C-2    Form of Swing Line Note
D    Form of Compliance Certificate
E    Form of Assignment and Assumption
F    Form of Guaranty Joinder Agreement
G    Form of Collateral Joinder Agreement
H    Form of U.S. Tax Compliance Certificates

 

vi


EXECUTION COPY

CREDIT AGREEMENT

This CREDIT AGREEMENT is entered into as of April 1, 2016 among ARMSTRONG FLOORING, INC., a Delaware corporation, and ARMSTRONG HARDWOOD FLOORING COMPANY, a Tennessee corporation, as Borrowers, the Guarantors (defined herein), the Lenders (defined herein) and BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent.

WHEREAS, the Borrowers have requested, and the Lenders have agreed to make available to the Borrowers, a revolving credit facility (including a letter of credit subfacility) upon and subject to the terms and conditions set forth in this Agreement to (a) pay, on the date hereof, a dividend or distribution to AWI in an amount not to exceed $50,000,000 (the “ Closing Date Dividend ”), (b) provide for working capital, capital expenditures, Permitted Acquisitions and other general corporate purposes of the Borrowers and their Subsidiaries and (c) fund certain fees and expenses associated with the funding of the Loans and consummation of the Closing Date Dividend and the Spin-Off;

NOW, THEREFORE, in consideration of these premises and the mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Defined Terms .

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

Acceptable BOL ” means with respect to In-Transit Inventory, (i) a tangible, bill of lading that (ii) covers only such In-Transit Inventory, (iii) is issued to the order of a Borrower or, if so requested by the Administrative Agent in its reasonable discretion, to the order of the Administrative Agent, (iv) is subject to Administrative Agent’s duly perfected, first priority security interest and no other Lien that is not a Permitted Lien, (v) if Foreign In-Transit Inventory, is a negotiable document that names the Administrative Agent as a notify party and bears a conspicuous notation on its face of the Administrative Agent’s security interest therein (unless such bill of lading is issued to the order of the Administrative Agent), (vi) if Domestic In-Transit Inventory, is either a negotiable or non-negotiable bill of lading, and (vii) is otherwise in form and content reasonably acceptable to the Administrative Agent.

Account ” has the meaning set forth in the UCC, in each case including all rights to payment for goods sold or leased, or for services rendered, whether or not they have been earned by performance.

Account Debtor ” means any U.S. Person obligated under an Account, Chattel Paper or General Intangible.

Acquisition ”, by any Person, means the acquisition by such Person, in a single transaction or in a series of related transactions, of all or any substantial portion of the Property of, or of a business unit or division of, another Person or at least a majority of the Voting Stock of another Person, in each case whether or not involving a merger or consolidation with such other Person and whether for cash, property, services, assumption of Indebtedness, securities or otherwise.

Adequate Assurance ” means:

(a) with respect to Revolving Loans, such assurance as the Administrative Agent may require, in its discretion,


(b) with respect to L/C Obligations, such assurance as the L/C Issuer may require, in its discretion, and

(c) with respect to Swing Line Loans, such assurance as the Swing Line Lender may require, in its discretion,

in each case, that the Defaulting Lender will be capable of funding its portion of Revolving Loans, L/C Obligations and Swing Line Loans and participation interests therein and otherwise honoring its existing and future obligations hereunder and under the other Loan Documents, including the posting of cash collateral or letters of credit or other arrangement, in each case in form and substance and pursuant to arrangements satisfactory to the Administrative Agent, the L/C Issuer or the Swing Line Lender, as appropriate, in their reasonable discretion.

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

Administrative Agent’s Office ” means the Administrative Agent’s address as set forth on Schedule 11.02 , or such other address as the Administrative Agent may from time to time notify to the Borrowers and the Lenders.

Administrative Questionnaire ” means an administrative questionnaire for the Lenders in a form supplied by the Administrative Agent.

Affiliate ” means, 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. “ 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. For purposes of this Agreement, AWI and its Affiliates shall not be considered Affiliates of the Borrowers and their respective Affiliates.

Affiliated Lender ” means a Lender that is an Affiliate of a Borrower (but excluding, in any case, each of the Borrowers and the other Loan Parties and their respective Subsidiaries).

AFI ” means Armstrong Flooring, Inc., a Delaware corporation.

Agent Parties ” has the meaning specified in Section 11.02(c) .

Aggregate Commitments ” means the aggregate principal amount of Commitments of all the Revolving Lenders.

Aggregate Committed Amount ” means, subject to any increase in commitments in accordance with Section 2.01 , TWO HUNDRED TWENTY-FIVE MILLION DOLLARS ($225,000,000).

Agreement ” means this Credit Agreement, as amended and modified.

Agreement Currency ” has the meaning specified in Section 1.08(b) .

 

2


Anti-Terrorism Law ” means any law relating to terrorism or money laundering, including the Proceeds of Crime Act and the Patriot Act.

Applicable Borrower ” means the applicable Borrower with regard to any Credit Extension.

Applicable Law ” means all laws, rules, regulations and legally binding governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law and common law, and all provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities (having the force of law).

Applicable Rate ” means, from time to time:

(a) The respective margin set forth below, based on the Borrowers’ average daily Excess Availability expressed as a percentage of the average daily Borrowing Base for the most recent fiscal quarter determined as of the most recent determination date:

 

         

Revolving Loans

   

Letter of Credit Fee

Pricing Level

  

Excess Availability

  

Eurodollar

Rate Loans

   Base
Rate Loans
     

I

   > 66.66%    1.25%      0.25   1.25%

II

   £  66.66%, but > 33.33%    1.50%      0.50   1.50%

III

   £ 33.33%    1.75%      0.75   1.75%

Through the second full fiscal quarter ending after the Closing Date, margins shall be determined as if Level II were applicable. Thereafter, margins shall be subject to increase or decrease by the Administrative Agent on the first day of the fiscal quarter following each fiscal quarter end. If the Administrative Agent is unable to calculate average daily Excess Availability for a fiscal quarter due to the Borrowers’ failure to deliver any Borrowing Base Certificate when required hereunder, then, at the option of the Administrative Agent or Required Lenders, margins shall be determined as if Level III were applicable until the first day of the calendar month following its receipt.

(b) With respect to the commitment fee set forth in Section 2.09(a) , (i) one-quarter of one percent (0.25%) per annum to the extent that average Revolver Usage during a fiscal quarter is greater than or equal to thirty-five percent (35%), and (ii) three-eighths of one percent (0.375%) per annum otherwise.

(c) Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b) .

Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

Arrangers ” means Bank of America, N.A., JPMorgan Chase Bank, N.A., and SunTrust Robinson Humphrey, Inc.

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 11.06(b) ), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form (including electronic documentation generated by MarkitClear or other electronic platform) approved by the Administrative Agent.

 

3


Attorney Costs ” means and includes all reasonable fees, expenses and disbursements of any law firm or other external counsel.

Attributable Indebtedness ” means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease, (c) in respect of any securitization transaction or series of transactions (including factoring arrangements) of any Person, the outstanding principal amount of such financing, after taking into account reserve accounts and making appropriate adjustments, determined by the Administrative Agent in its reasonable judgment and (d) in the case of any Sale and Leaseback Transaction, the present value (discounted in accordance with GAAP at the debt rate implied in the applicable lease) of the obligations of the lessee for rental payments during the term of such lease).

Audited Financial Statements ” means the audited consolidated balance sheet of AFI and its Subsidiaries for the fiscal year ended December 31, 2015, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of AFI and its Subsidiaries, including the notes thereto.

Australian Dollars ” means the lawful currency of Australia.

Australian Incremental Amendment ” an amendment establishing an Australian Incremental Credit Facility in form and substance satisfactory to the Administrative Agent, the Borrowers and each FILO Lender, the terms and conditions of which shall satisfy all the Australian Incremental Conditions.

Australian Incremental Conditions ” means, in addition to the conditions specified in Section 2.01 , the collective reference to the following conditions, or any of them, as the context may require:

(A) the Dollar Equivalent of the aggregate principal amount of all loans outstanding at any time under the Australian Incremental Credit Facility shall not exceed Fifteen Million Dollars ($15,000,000);

(B) the payment waterfall established in connection therewith shall provide that any funds remaining after Full Payment of the Obligations under the Australian Incremental Credit Facility shall be applied to other outstanding Obligations;

(C) subject to other express limitations set forth in Section 2.01 , the Australian Incremental Credit Facility shall be on terms and conditions as determined by AFI, the Administrative Agent and the Australian Incremental Lenders, it being understood and agreed that such terms and conditions may include, without limitation, Australian Incremental Credit Facility-specific borrowing base, advance rate, eligibility criteria, availability reserves (including reserves implemented against the Borrowing Base with respect to obligations owing to the Australian Incremental Lenders), pledge of all assets of the borrowers under the Australian Incremental Facility, cash dominion requirements, collection allocation mechanisms, representations, warranties, covenants and Events of Default, interest rates, fees, final maturity date, amortization, mandatory and voluntary prepayment and commitment termination provision as to the Australian Incremental Credit Facility or any other provision of the Loan Documents related to cash dominion, and amendment and waiver provisions (including modifications to Section 11.01 to provide for customary or market provisions in favor of the Australian

 

4


Incremental Lenders, which may include voting rights in favor of the Australian Incremental Lenders relating to modifications of the Australian Borrowing Base and release of Australian collateral) in respect of or relating to the Australian Incremental Credit Facility and other customary or market terms and conditions for asset-based loans advanced in Australian Dollars;

(D) subject to amortization or mandatory Australian Incremental Credit Facility reduction terms and conditions, the stated maturity date of the Australian Incremental Credit Facility shall not be earlier than the then Maturity Date;

(E) the arrangement of the Australian Incremental Credit Facility, and any upfront, underwriting, arrangement or similar fees in respect of the Australian Incremental Credit Facility, shall be agreed to solely by AFI, the Administrative Agent and the Australian Incremental Lenders;

(F) the Australian Incremental Credit Facility shall be subject to closing conditions as may be determined by the Administrative Agent, the Australian Incremental Lenders and AFI;

(G) the Australian Incremental Credit Facility shall be subject to the condition precedent that no Event of Default shall have occurred and be continuing immediately before or after giving effect thereto; and

(H) the Australian Incremental Amendment and all other documentation in respect of the Australian Incremental Credit Facility shall be consistent with the foregoing and in form and substance reasonably satisfactory to the Administrative Agent and the Australian Incremental Lenders.

Australian Incremental Credit Facility ” has the meaning set forth in Section 2.01(b)(iv) .

Australian Incremental Lender ” means any Lender or Eligible Assignee that satisfies the applicable conditions of Section 2.01 and becomes a Lender under the Australian Incremental Credit Facility, if any, as may be established from time to time in accordance herewith.

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

Availability ” means as of any date of determination, (a) the lesser of (i) the Commitments and (ii) the Borrowing Base as of such date of determination, minus (b) the principal balance of all Revolving Loans and all L/C Obligations.

Availability Period ” means, the period from and including the Closing Date to the earliest of (a) with respect to the Commitments (other than issuance and extension of Letters of Credit), the Maturity Date and, with respect to the issuance and extension of Letters of Credit, the Letter of Credit Expiration Date, (b) the date of termination of the Aggregate Committed Amount of Commitments pursuant to Section 2.06 , and (c) the date of termination of the commitment of each Revolving Lender to make Revolving Loans and of the obligation of the of the L/C Issuers to make L/C Credit Extensions pursuant to Section 9.02 .

Availability Reserves ” means the sum (without duplication) of (a) the Rent and Charges Reserve; (b) the Bank Product Reserve; (d) the Priority Payables Reserve; (e) the Inventory Reserve; (f) the Dilution Reserve; (g) the Warranty Reserve; (h) the Distribution Reserve; (i) reserves established in

 

5


any FILO Incremental Amendment, Australian Incremental Amendment or Canadian Incremental Amendment; (j) the loan balance of any Overadvance Loans under any Incremental Credit Facility to a Foreign Subsidiary of AFI; and (k) such additional reserves, in such amounts and with respect to such matters, as the Administrative Agent may establish in its Permitted Discretion.

AWI ” means Armstrong World Industries, Inc., a Pennsylvania corporation.

Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

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

Bank of America (Canada) ” means Bank of America (acting through its Canada branch).

Bank Product ” means any of the following products, services or facilities extended to any Loan Party or Affiliate of a Loan Party by a Lender or any of its Affiliates: (a) Cash Management Services; (b) products under Swap Contracts; (c) commercial credit card, purchasing cards and merchant card services; and (d) other banking products or services, other than Letters of Credit.

Bank Product Reserve ” means at any time with respect to Secured Bank Product Obligations for the account of the Loan Parties and their Subsidiaries, an amount equal to the sum of (a) the Swap Termination Value of the then outstanding Qualified Secured Bank Product Obligations for the account of the Loan Parties and their Subsidiaries owing (i) to Bank of America and its Affiliates as determined by the Administrative Agent in its reasonable discretion and (ii) to any other Secured Bank Product Provider as set forth in the notice delivered by such Secured Bank Product Provider providing such Bank Product and the Loan Party Representative to the Administrative Agent in accordance with the definition of Secured Bank Product Provider, and (b) with respect to any other Secured Bank Product Obligations for the account of the Loan Parties and their Subsidiaries, reserves established by the Administrative Agent from time to time in its Permitted Discretion to reflect the reasonably anticipated liabilities in respect of the then outstanding Secured Bank Product Obligations for the account of the Loan Parties and their Subsidiaries.

Bankruptcy Code ” means Title 11 of the United States Code.

Bankruptcy Court ” means the United States Bankruptcy Court for the District of Delaware.

Base Rate ” means for any day, a per annum rate equal to the greatest of (a) the Prime Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; and (c) Eurodollar Rate for a 30 day interest period as of such day, plus 1.0%; provided , that for the avoidance of doubt, in no event shall the Base Rate be less than zero.

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

Borrower Materials ” has the meaning specified in Section 7.02 .

 

6


Borrowers ” means (a) AFI and (b) each Domestic Subsidiary of AFI that (i) executes this Agreement on the Closing Date as a Borrower or (ii)(x) is joined as a Borrower pursuant to joinder documentation reasonably acceptable to the Administrative Agent and (y) has delivered to each Lender all information reasonably requested by such Lender to enable it to meet its internal “know your customer” requirements and internal operating procedures.

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

Borrowing Base ” means at any time, an amount equal to the result (expressed in Dollars) of, without duplication:

(a) the Value of Eligible Accounts of Account Debtors with a Corporate Rating of at least A by S&P and A2 by Moody’s multiplied by the advance rate of 90%, plus

(b) the Value of Eligible Accounts of Account Debtors not covered by clause (a) above multiplied by the advance rate of 85%, plus

(c) the lesser of (i) 70% of the Value of Eligible Inventory (excluding Eligible Supplies Inventory) and (ii) 85% of the NOLV Percentage of the Value of Eligible Inventory (excluding Eligible Supplies Inventory), plus

(d) the lesser of (i) 50% of the Value of Eligible Supplies Inventory and (ii) $10,000,000, plus

(e) during the M&E Availability Period, the M&E Sublimit as of such time, plus

(f) 100% of Eligible Pledged Cash of the Borrowers, minus

(g) all Availability Reserves, any change therein to become effective immediately upon notification thereof to AFI by the Administrative Agent.

The Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate theretofore delivered to the Administrative Agent with such adjustments as the Administrative Agent deems appropriate in its Permitted Discretion to assure that the Borrowing Base is calculated in accordance with the terms of this Agreement.

Notwithstanding anything to the contrary in this Agreement, any Accounts, Inventory, Equipment, or other Property acquired in a Permitted Acquisition or otherwise outside the Ordinary Course of Business or added to the Borrowing Base as a result of the addition of a new Borrower hereunder, in each case shall not be included in the calculation of the Borrowing Base until completion of applicable field examinations and appraisals (which shall not be included in the limits on the number of field examinations or appraisals provided in Section 10.1.1 ) satisfactory to the Administrative Agent.

Borrowing Base Certificate ” means a certificate, executed by a Responsible Officer of AFI, in form and substance satisfactory to the Administrative Agent.

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 Eurodollar Rate Loan, means any such day that is also a London Banking Day.

 

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Businesses ” means, at any time, a collective reference to the businesses operated by AFI and its Subsidiaries at such time.

Canadian Dollars or Cdn$ ” means the lawful currency of Canada.

Canadian Incremental Amendment ” an amendment establishing a Canadian Incremental Credit Facility in form and substance satisfactory to the Administrative Agent, Canadian Subsidiaries of AFI and each Canadian Incremental Lender, the terms and conditions of which shall satisfy all the Canadian Incremental Conditions.

Canadian Incremental Conditions ” means, in addition to the conditions specified in Section 2.01 , the collective reference to the following conditions, or any of them, as the context may require:

(A) the Dollar Equivalent of the aggregate principal amount of all loans outstanding at any time under the Canadian Incremental Credit Facility shall not exceed Twenty Million Dollars ($20,000,000);

(B) the payment waterfall established in connection therewith shall provide that any funds remaining after Full Payment of the Obligations under the Canadian Incremental Credit Facility shall be applied to other outstanding Obligations;

(C) subject to other express limitations set forth in Section 2.01 , the Canadian Incremental Credit Facility shall be on terms and conditions as determined by AFI, the Administrative Agent and the Canadian Incremental Lenders, it being understood and agreed that such terms and conditions may include, without limitation, Canadian Incremental Credit Facility-specific borrowing base, advance rate, eligibility criteria, availability reserves (including reserves implemented against the Borrowing Base with respect to obligations owing to the Canadian Incremental Lenders), pledge of specified assets of the borrowers under the Canadian Incremental Facility, cash dominion requirements, collection allocation mechanisms, representations, warranties, covenants and Events of Default, interest rates, fees, final maturity date, amortization, mandatory and voluntary prepayment and commitment termination provision as to the Canadian Incremental Credit Facility or any other provision of the Loan Documents related to cash dominion, and amendment and waiver provisions (including modifications to Section 11.01 to provide for customary or market provisions in favor of the Canadian Incremental Lenders, which may include voting rights in favor of the Canadian Incremental Lenders relating to modifications of the Canadian Borrowing Base and release of Australian collateral) in respect of or relating to the Canadian Incremental Credit Facility and other customary or market terms and conditions for asset-based loans advanced in Canadian Dollars;

(D) subject to amortization or mandatory Canadian Incremental Credit Facility reduction terms and conditions, the stated maturity date of the Canadian Incremental Credit Facility shall not be earlier than the then Maturity Date;

(E) the arrangement of the Canadian Incremental Credit Facility, and any upfront, underwriting, arrangement or similar fees in respect of the Canadian Incremental Credit Facility, shall be agreed to solely by AFI, the Administrative Agent and the Canadian Incremental Lenders;

 

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(F) the Canadian Incremental Credit Facility shall be subject to closing conditions as may be determined by the Administrative Agent, the Canadian Incremental Lenders and AFI; and

(G) the Canadian Incremental Amendment and all documentation in respect of the Canadian Incremental Credit Facility shall be consistent with the foregoing and in form and substance reasonably satisfactory to the Administrative Agent and the Canadian Incremental Lenders.

Canadian Incremental Credit Facility ” has the meaning set forth in Section 2.01(b)(iii) .

Canadian Incremental Lender ” means any Lender or Eligible Assignee that satisfies the applicable conditions of Section 2.01 and becomes a Lender under the Canadian Incremental Credit Facility, if any, as may be established from time to time in accordance herewith.

Capital Expenditures ” means all liabilities incurred or expenditures made by a Loan Party or Subsidiary for the acquisition of fixed assets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year; provided , however , that Capital Expenditures shall not include any such expenditures which are: (a) made with the proceeds of any contribution of capital to AFI or sale or issuance by AFI of Capital Stock, in each case the proceeds of which have been contributed to the Borrowers, which are designated as being for such purpose by written notice from AFI to the Administrative Agent and which expenditures are made within six (6) months of the receipt of such proceeds; (b) Permitted Acquisitions; or (c) made with net proceeds of the sale or other disposition (including by casualty or condemnation) of a capital asset reinvested in assets to the extent such reinvestment is made within six (6) months of the effective date of such sale or disposition.

Capital Lease ” means, as applied to any Person, any lease of any Property by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person.

Capital Stock ” means (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

Capital Stock Equivalents ” means warrants, options or other rights for the purchase, acquisition or exchange of any items of Capital Stock (including through convertible securities).

Cash Collateralize ” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the Administrative Agent, L/C Issuer or Swing Line Lender (as applicable) and the Lenders, as appropriate, as collateral for the L/C Obligations, Obligations in respect of Swing Line Loans, or obligations of the Lenders to fund participations in respect of either thereof (as the context may require), cash or deposit account balances or, if the Administrative Agent, the L/C Issuer or Swing Line Lender benefiting from such collateral shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to (a) the Administrative Agent and (b) the L/C Issuer or the Swing Line Lender (as applicable), in an amount equal to the Minimum Collateral Amount. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

 

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Cash Dominion Event ” means the period (a) commencing on the date that (i) an Event of Default exists or (ii) Excess Availability is less than the greater of (A) 10.0% of the Line Cap and (B) $20,000,000, in either case, for a period of five (5) or more consecutive days and (b) continuing until a period of 30 consecutive days has elapsed during which at all times (i) no Event of Default exists and (ii) Excess Availability is equal to or greater than the greater of (A) 10.0% of the Line Cap and (B) $20,000,000.

Cash Equivalents ” means, as at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of (i) any Lender, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved Bank”), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940 which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a)  through (d) , and (f)  with respect to Foreign Subsidiaries, instruments equivalent to those referred to in clauses (a)  through (e)  above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for cash management purposes in any jurisdiction outside the United States.

Cash Management Services ” means services relating to operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.

Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, 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) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of more than fifty percent (50%) of the Capital Stock of AFI entitled to vote for members of the board of directors or equivalent governing body on a fully diluted basis; or

(b) during any period of twelve consecutive months, a majority of the members of the board of directors or other equivalent governing body of AFI 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, (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, or (iv) who were members of that board or equivalent governing body on the Closing Date.

Civil Code ” means the Civil Code of Québec , or any successor statute, as amended from time to time, and includes all regulations thereunder.

Claims” means all claims, liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind (including remedial response costs, reasonable attorneys’ fees (which shall be limited to the fees, disbursements and other charges of one primary counsel and one local counsel in each relevant jurisdiction for the Indemnitees (unless there is an actual or perceived conflict of interest or the availability of different claims or defenses in which case each such Indemnitee may retain its own counsel)) and Extraordinary Expenses) at any time (including after Full Payment of the Obligations or replacement of the Administrative Agent or any Lender) incurred by any Indemnitee or asserted against any Indemnitee by any Loan Party or other Person, in any way relating to (a) any Loans, Letters of Credit, Loan Documents, Borrower Materials, or the use thereof or transactions relating thereto, (b) any action taken or omitted in connection with any Loan Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral, (d) exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure by any Loan Party to perform or observe any terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration, settlement (which settlement costs will be subject to consultation with the Borrowers) or other proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a party thereto.

Closing Date ” means the date hereof.

Closing Date Dividend ” has the meaning specified in the recitals hereof.

Code ” means the Internal Revenue Code of 1986, as amended.

Collateral ” means a collective reference to all Property with respect to which Liens in favor of the Collateral Agent are purported to be granted pursuant to and in accordance with the terms of the Collateral Documents.

Collateral Agent ” means Bank of America in its capacity as collateral agent for the holders of the secured obligations identified in the Collateral Documents, and its successors and assigns in such capacity.

 

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Collateral Documents ” means a collective reference to the Security Agreement, each Pledge Agreement, each Collateral Joinder Agreement and other security documents as may be executed and delivered by the Loan Parties pursuant to the terms of Section 7.14 .

Collateral Joinder Agreement ” means a joinder agreement by which an additional pledgor or guarantor may be added to a Pledge Agreement or the Security Agreement.

Commitment ” means, as to each Revolving Lender, its obligation to (a) make Revolving Loans pursuant to Section 2.01(a) , (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans and Protective Advances. The amount of the initial aggregate Commitments is equal to the Aggregate Committed Amount as of the Closing Date.

Commitment Percentage ” means, for each Revolving Lender, a fraction (expressed as a percentage carried to the ninth decimal place), the numerator of which is such Revolving Lender’s Revolving Committed Amount and the denominator of which is the Revolving Committed Amount of all Lenders. The initial Commitment Percentages are set out in Schedule 2.01 .

Commitment Termination Date ” means the earliest of (a) the Maturity Date, (b) the date on which AFI terminates or reduces to zero the Commitments pursuant to Section 2.06 , and (c) the date on which the Commitments are terminated pursuant to Section 9.02 .

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.

Consolidated EBITDA ” means, for any period, for AFI and its Subsidiaries on a consolidated basis, an amount equal to (i) Consolidated Operating Income for such period plus (ii) the amount of depreciation and amortization expense for such period, as determined in accordance with GAAP, plus (iii) to the extent relating to the applicable period, (A) all extraordinary, nonrecurring or one-time charges, (B) pro forma cost savings for acquisitions in an aggregate amount of up to the greater of (i) $10 million or (ii) 10% of Consolidated EBITDA, as yet unrealized, projected in good faith over the next twelve months, (C) all non-cash charges (other than non-cash charges relating to Collateral included in the Borrowing Base or pensions, and provided that for any such non-cash charges resulting in a cash payment or cash outlay in a subsequent period, Consolidated EBITDA will be reduced by the amount of the cash payment or cash outlay in the period made), (D) cash restructuring charges limited to $10 million in any period of four consecutive fiscal quarters, (E) cost initiative charges embedded in cost of goods sold (cash and non-cash charges) and which taken together with cost initiative charges embedded in selling, general and administrative expenses shall be limited to $5 million in any period of four consecutive fiscal quarters, (F) cost initiative charges embedded in selling, general and administrative expenses (cash and non-cash charges) and which taken together with cost initiative charges embedded in cost of goods sold shall be limited to $5 million in any period of four consecutive fiscal quarters, and (G) losses on sales of assets (cash and non-cash), minus (iv) gains on sales of assets (cash and non-cash); provided that, notwithstanding the foregoing, for purposes of calculating Consolidated EBITDA for the fiscal quarters ended June 30, 2016, September 30, 2016 and December 31, 2016, Consolidated EBITDA for the quarters predating the Closing Date shall be as shown on Schedule 8.11 .

 

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Consolidated Operating Income ” means, for any period, for AFI and its Subsidiaries on a consolidated basis, the operating income of AFI and its Subsidiaries (before deductions for interest and taxes) for that period, as determined in accordance with GAAP.

Consolidated Total Assets ” means, on any date, total assets of AFI and its Subsidiaries on a consolidated basis determined in accordance with GAAP as of the last day of the fiscal quarter immediately preceding the date of determination.

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 ” has the meaning specified in the definition of “Affiliate”.

Corporate Rating ” means, as of any date of determination, the rating as determined by either S&P or Moody’s (collectively, the “ Corporate Ratings ”) of the corporate credit rating or corporate family rating of any Person.

Credit Extension ” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

Creditor Representative ” means under any Applicable Law, a receiver, manager, controller, interim receiver, receiver and manager, trustee (including any trustee in bankruptcy), custodian, conservator, administrator, examiner, sheriff, monitor, assignee, liquidator, provisional liquidator, sequestrator, administrative receiver, judicial manager, statutory manager or similar officer or fiduciary.

Debt Rating ” means, as of any date of determination, the rating as determined by either S&P or Moody’s (collectively, the “Debt Ratings”) of the Loans and Credit Extensions under this Agreement.

Debt Transactions ” means, with respect to AFI and its Subsidiaries, any sale, issuance, placement, assumption or guaranty of Funded Indebtedness, whether or not evidenced by a promissory note or other written evidence of Indebtedness, other than Indebtedness permitted under subsections (a)  through (f) , inclusive, and (h)  through (u) , inclusive, of Section 8.03 .

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

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 (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided , however , that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus two percent (2%) per annum, in each case to the fullest extent permitted by applicable Laws and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum, in all cases to the fullest extent permitted by applicable Laws.

 

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Defaulting Lender ” means, subject to Section 2.15(b ), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder, unless such Lender notifies the Administrative Agent and the Borrowers in writing that such failure is a result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the L/C Issuer, 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 Letters of Credit or Swing Line Loans) within two Business Days of the date when due, (b) has notified the Borrowers, the Administrative Agent, the L/C Issuer 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 (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrowers, to confirm in writing to the Administrative Agent and the Borrowers that it will comply with its prospective funding obligations hereunder ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrowers), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (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 or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.15(b )) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrowers, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.

Deposit Account ” means (i) any “deposit account” as such term is defined in Article 9 of the UCC and in any event shall include all accounts and sub-accounts relating to any of the foregoing and (ii) with respect to any such Deposit Account located outside of the U.S., any bank account with a deposit function.

Deposit Account Control Agreement ” means a control agreement reasonably satisfactory to Administrative Agent executed by an institution maintaining a Deposit Account for a Loan Party, to perfect the Administrative Agent’s Lien on such account.

Designated Jurisdiction ” means, at any time, a country, region or territory that is itself the subject or target of any comprehensive territorial Sanctions (at the date of this Agreement, Crimea, Cuba, Iran, North Korea, Sudan and Syria).

Dilution Percent ” means the percent, determined for each Applicable Borrower and for all Borrowers in the aggregate for the most recent Fiscal Quarter, equal to (a) bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive items with respect to the applicable Borrower’s Accounts, divided by (b) gross sales of the Applicable Borrower.

 

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Dilution Reserve ” means the aggregate amount of reserves, as established by the Administrative Agent from time to time, in an amount equal to the Value of the Eligible Accounts multiplied by 1.0% for each percentage point (or portion thereof) that the Borrowers’ Dilution Percent exceeds 5.0%, or such other calculation procedure as may be agreed by the Administrative Agent and AFI.

Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction) of any Property by AFI or any of its Subsidiaries (including the Capital Stock of any Subsidiary), 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, but excluding (i) the Permitted Dispositions, (ii) the sale, lease, license, transfer or other disposition of inventory or other Property in the ordinary course of business, (iii) the sale, lease, license, transfer or other disposition of machinery, equipment or other Property no longer used or useful in the conduct of business, (iv) any sale, lease, license, transfer or other disposition of Property to any Loan Party, (v) any Disposition to the extent constituting a Permitted Investment, (vi) any sale, lease, license, transfer or other disposition of Property by any Foreign Subsidiary to AFI or any of its Subsidiaries, (vii) dispositions of equipment or real property to the extent that (a) such property is exchanged for credit against the purchase price of similar replacement equipment or property or (b) the proceeds of such disposition are reasonably promptly applied to the purchase price of such replacement equipment or property; (viii) licenses, sublicenses, leases and subleases not interfering in any material respect with the business of AFI or its Subsidiaries, (ix) sales or discounts of accounts receivable in connection with the compromise or collection thereof and (x) dispositions set forth on Schedule 8.05 .

Distribution ” means any declaration or payment of a distribution, interest or dividend on any Capital Stock (other than payment-in-kind); or purchase, redemption, or other acquisition or retirement for value of any Capital Stock.

Distribution Reserve ” means a reserve equal to the amount of any dividends or distributions declared in accordance with Section 8.06 but not yet paid.

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

Dollar Equivalent ” means on any date, with respect to any amount denominated in Dollars, such amount in Dollars, and with respect to any stated amount in a currency other than Dollars, the amount of Dollars that the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) would be necessary to be sold on such date at the applicable Spot Rate to obtain the stated amount of the other currency.

Domestic In-Transit Inventory ” means Inventory that has been purchased by a Borrower and that is in-transit from a Vendor from a location within the United States to such Borrower or a Permitted Inventory Location.

Domestic Pledge Agreement ” means that certain Amended and Restated Pledge Agreement dated as of the Closing Date given by AFI and certain of its Domestic Subsidiaries, as pledgors, to the Administrative Agent to secure the Secured Obligations.

Domestic Subsidiary ” means any Subsidiary that is organized under the laws of any State of the United States or the District of Columbia, other than (a) a Subsidiary which is a disregarded entity for U.S. Federal income tax purposes and directly or indirectly holds any interest in a Subsidiary not organized under the laws of any state of the United States or the District of Columbia or (b) any other Subsidiary which is a Subsidiary of an entity described in the foregoing clause (a) .

 

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Dominion Account ” means each special account established by the Loan Parties at Bank of America or another bank acceptable to the Administrative Agent, over which the Administrative Agent may exercise exclusive control for withdrawal purposes and which is not a disbursement account.

EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

Eligible Accounts ” means an Account owing to a Borrower that arises in the Ordinary Course of Business from the sale of goods or rendition of services, is payable in Dollars and is deemed by the Administrative Agent, in its Permitted Discretion, to be a Eligible Account. Without limiting the foregoing, no Account shall be a Eligible Account if (a) it is unpaid for more than sixty (60) days after the original due date, or more than ninety (90) days after the original invoice date; (b) 50% or more of the Accounts owing by the Account Debtor are not Eligible Accounts under the foregoing clause; (c) (i) except with respect to Accounts of Home Depot, Lowes Home Improvement and JJ Haines & Co., when aggregated with other Accounts owing by the Account Debtor, it exceeds 10% of the aggregate Eligible Accounts (or such higher percentage as the Administrative Agent may establish for the Account Debtor from time to time), (ii) with respect to Accounts of Home Depot or Lowes Home Improvement, when the Accounts owing by such Account Debtors are aggregated with all other Accounts, it exceeds 35% of the aggregate Eligible Accounts and (iii) with respect to Accounts of JJ Haines & Co., when the Accounts owing by JJ Haines & Co. are aggregated with all other Accounts, it exceeds 15% of the aggregate Eligible Accounts; (d) it does not conform with a covenant or representation herein; (e) it is owing by a creditor or supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be limited to the amount thereof); (f) an Insolvency Proceeding has been commenced by or against the Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, is not Solvent, or is subject to any Sanction or on any specially designated nationals list maintained by OFAC; or the applicable Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (g) the Account Debtor has its principal offices or assets outside of the United States, unless the Account is supported by a letter of credit (delivered to and directly drawable by the Administrative Agent) or credit insurance satisfactory in all respects to the Administrative Agent; (h) it is owing by a Governmental Authority, unless (i) the Account Debtor is the U.S. or any department, agency or instrumentality thereof and the Account has been assigned to the Administrative Agent in compliance with the federal Assignment of Claims Act or (ii) such Account is backed by a letter of credit reasonably acceptable to the Administrative Agent and which is in the possession of the Administrative Agent; (i) it is not subject to a duly perfected, first priority Lien in favor of the Administrative Agent, or is subject to any other Lien; (j) the goods giving rise to it have not been delivered to the Account Debtor, the services giving rise to it have not been accepted

 

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by the Account Debtor, or it otherwise does not represent a final sale; (k) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (l) its payment has been extended or the Account Debtor has made a partial payment; (m) it arises from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or from a sale for personal, family or household purposes; (n) it represents a progress billing or retainage, or relates to services for which a performance, surety or completion bond or similar assurance has been issued; (o) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof; or (p) it constitutes a “memo billing” or similar arrangement for Inventory or other goods shipped to a distributor (regardless of whether such distributor, Home Depot or Lowes Home Improvement or other Person is listed as the Account Debtor) resulting in an offset against receivables on the balance sheet of AFI or any other Borrower for all or any portion of the Inventory or goods so shipped. In calculating delinquent portions of Accounts under clauses (a) and (b), (i) credit balances of Home Depot and Lowes Home Improvement of more than 120 days after the original invoice date shall be excluded and (ii) with respect to any other Account Debtors, credit balances of more than 90 days after the original invoice date shall be excluded.

Eligible Assignee ” means any Person that meets the requirements to be an assignee under Section 11.06(b)(iii ) and ( v ) (subject to such consents, if any, as may be required under Section 11.06(b)(iii )).

Eligible In-Transit Inventory ” means on any date, Inventory owned by a Borrower that would be Eligible Inventory it were not subject to a Document and not In-Transit Inventory, and that Administrative Agent, in its Permitted Discretion, deems to be Eligible In-Transit Inventory. Without limiting the foregoing, no Inventory shall be Eligible In-Transit Inventory unless (i) under the terms of sale, title and risk of loss with respect to such Inventory have passed from the Vendor to a Borrower; (ii) such Inventory is fully insured in a manner satisfactory to Administrative Agent; (iii) the Vendor with respect to such Inventory is an Eligible Vendor; (iv) such Inventory is in the possession of a common carrier or an Eligible NVOCC that has issued an Acceptable BOL; (iv) all original counterparts of the Acceptable BOL in respect of such Inventory (whether issued by a carrier or an NVOCC) are in the United States; (v) with respect to Foreign In-Transit Inventory, all original counterparts of the Acceptable BOL are in the possession of Administrative Agent or an agent thereof that is party to an Imported Goods Agreement or in the possession of a Borrower as a result of Administrative Agent’s (or such agent’s) delivery to such Borrower to facilitate offloading of such Inventory at the port of entry; and (vi) such Inventory is being handled by a NVOCC, customs broker, freight-forwarder or other handler that has delivered an Imported Goods Agreement or other Lien Waiver acceptable to Administrative Agent.

Eligible Inventory ” means Inventory (excluding Eligible Supplies Inventory) owned by Borrowers that the Administrative Agent, in its Permitted Discretion, elects to include as Eligible Inventory. Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is goods that are first quality work-in-process approved by the Administrative Agent, finished goods or raw materials, and not packaging or shipping materials, labels, samples, display items or bags; (b) is not held on consignment, nor subject to any deposit or down payment; (c) is in new and saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, has not been acquired from a Person subject to any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein and in the other Loan Documents; (g) is subject to the Administrative Agent’s duly perfected, first priority Lien, and no other Lien; (h) except as otherwise expressly permitted in clause (m) of this definition, is at a Permitted Inventory Location within the United States (including any state or commonwealth thereof) and is not consigned to any Person; (i) except as otherwise expressly permitted in clause (m) of this definition,

 

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is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts Borrowers’ or the Administrative Agent’s right to dispose of such Inventory, unless the Administrative Agent has received an appropriate consent to use; (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; (l) with respect to work-in-process, has not been approved by the Administrative Agent; and (m) is not In-Transit Inventory except between Permitted Inventory Locations of the Borrowers or In-Transit Inventory that constitutes Eligible In-Transit Inventory; provided , that in no event shall Eligible In-Transit Inventory constitute more than $15,000,000 of Eligible Inventory included in the Borrowing Base.

Eligible Machinery and Equipment ” means all Equipment of the Borrowers reflected in the most recent Borrowing Base Certificate, except any Equipment with respect to which any of the exclusionary criteria set forth below applies (unless the Administrative Agent in its Permitted Discretion elects to include such Equipment). No Equipment shall be Eligible Machinery and Equipment if:

(a) such Borrower does not have good, valid and marketable title thereto; or

(b) such Equipment is not located in the United States; or

(c) such Equipment is located in a public warehouse or in possession of a bailee or in a facility leased by any Borrower; provided , that Equipment situated at a location not owned by a Loan Party will be Eligible Machinery and Equipment if the Administrative Agent has received a Collateral Access Agreement with respect to such location (and, if no such Collateral Access Agreement has been received with respect to such location, such Equipment may nevertheless be Eligible Machinery and Equipment in the Permitted Discretion of the Administrative Agent but the Administrative Agent may impose Rent and Charges Reserves with respect to such location); or

(d) it is not at all times subject to the Collateral Agent’s duly perfected first-priority security interest or is subject to a Lien that is not a Permitted Lien; or

(e) it is obsolete, unmerchantable or is not in good working condition; or

(f) it is damaged or defective and is not repairable; or

(g) it is located at an outside repair facility (unless payables in respect thereof are reserved); or

(h) it is not serviced or maintained in accordance with industry standards; or

(i) it does not conform in all material respects to any covenants, warranties and representations set forth in this Agreement; or

(j) it does not meet in all material respects all standards imposed by any applicable Governmental Authority; or

(k) it is not used or held for sale in the ordinary course of the applicable U.S Borrower’s business;

(j) it is not covered by casualty insurance reasonably acceptable to the Administrative Agent; or

(l) it constitutes a “Fixture” under the applicable laws of the jurisdiction in which such Equipment is located.

 

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If any Equipment at any time ceases to be Eligible Machinery and Equipment for any reason (including any permitted Disposition thereof), such Equipment shall promptly be excluded from the calculation of the Borrowing Base.

Eligible NVOCC ” means with respect to any Foreign In-Transit Inventory, an NVOCC in respect of such Inventory that (i) is not an Affiliate of any Borrower or the applicable Vendor and is otherwise acceptable to the Administrative Agent; (ii) is engaged by such Borrower as freight forwarder with respect to such Inventory; (iii) has received from the carrier a tangible bill of lading with respect to such Inventory that names such NVOCC as consignee and, if so requested by Administrative Agent, has granted Administrative Agent a security interest in such bill of lading as security for the Obligations; (iv) has issued an Acceptable BOL with respect to such Inventory; (v) has entered into an Imported Goods Agreement; and (vi) has not asserted any adverse claim or Lien against any such Inventory.

Eligible Pledged Cash ” means at any date of determination thereof, 100% of the unrestricted cash of the applicable Borrower at such date that (a) does not constitute operating cash of each such Borrower, (b) is segregated from operating and other cash of AFI and its Subsidiaries, (c) is on deposit in one or more Eligible Pledged Cash Accounts, and (d) is subject to a duly perfected first priority Lien in favor of the Administrative Agent.

Eligible Pledged Cash Account ” means each special account established in the United States by a Borrower at Bank of America and which is designated as an “Eligible Pledged Cash Account” on Schedule 1.01 or otherwise designated by the Administrative Agent as an “Eligible Pledged Cash Account” in its Permitted Discretion; provided that not more frequently than once per month, each Borrower may, upon not less than two (2) Business Days prior written notice to the Administrative Agent, decrease the amount of Eligible Pledged Cash by withdrawing cash from its respective Eligible Pledged Cash Account(s), if (a) immediately before such withdrawal no Default or Event of Default exists or would exist after giving effect thereto, (b) prior to and after giving effect to such withdrawal, Availability shall not be less than zero, (c) the applicable Borrower(s) deliver a Borrowing Base Certificate to the Administrative Agent reflecting solely the change in the Borrowing Base, after giving effect to such withdrawal, and (d) the Borrowing Base shall be reduced immediately upon such withdrawal.

Eligible Supplies Inventory ” means supplies Inventory (which, for avoidance of doubt, shall not include raw materials) owned by Borrowers that the Administrative Agent, in its Permitted Discretion, deems to be Eligible Supplies Inventory. Without limiting the foregoing, no Inventory shall be Eligible Supplies Inventory unless it (a) is replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or down payment; (c) is in new and saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, has not been acquired from a Person subject to any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein and in the other Loan Documents; (g) is subject to the Administrative Agent’s duly perfected, first priority Lien, and no other Lien; (h) is within the United States (including any state or commonwealth thereof) or such other jurisdictions determined by the Administrative Agent in its Reasonable Discretion, is not In-Transit Inventory and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts Borrowers’ or the Administrative Agent’s right to dispose of such Inventory, unless the Administrative Agent has received an appropriate Lien Waiver; and (k) is not located on leased premises or in the possession of a

 

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warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established.

Eligible Vendor ” means a Vendor which (i) is located in the United States, China or any other country acceptable to the Administrative Agent in its sole discretion, (ii) has received timely payment or performance of all Indebtedness and other obligations at any time owed to it by the Borrowers (whether such Debts or other obligations arise from any such Borrower’s purchase of goods or otherwise), (iii) has not asserted (and has no right to assert) any reclamation, repossession, diversion, stoppage in transit, Lien or title retention rights in respect of such In-Transit Inventory, and (iv) if so requested by Administrative Agent in its sole discretion, has entered into a Vendor Agreement.

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

Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrowers, 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 of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

Equipment ” means all machinery, apparatus, equipment, fittings, furniture, fixtures, motor vehicles and other fixed assets owned by any Borrower and used or held for sale by such Borrower in the ordinary course of its business, whether now owned or hereafter acquired by a Borrower and wherever located, and all parts, accessories and special tools and all increases and accessions thereto and substitutions and replacements therefore.

Equipment Appraisal ” means as of any date of determination (a) the Equipment appraisal delivered to the Administrative Agent on or prior to the Closing Date or (b) a replacement Equipment appraisal delivered pursuant to Section 7.10 hereof, whichever is in effect as of such date.

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

ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by AFI or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by AFI or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization pursuant to Section 418 of the Code; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of

 

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ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon AFI or any ERISA Affiliate.

EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time. 1

Eurodollar Rate ” means the per annum rate of interest (rounded up to the nearest 1/100th of 1% and in no event less than zero) determined by the Administrative Agent at or about 11:00 a.m. (London time) two Business Days prior to an interest period, for a term equivalent to such period, equal to the London Interbank Offered Rate, or comparable or successor rate approved by the Administrative Agent, as published on the applicable Reuters screen page (or other commercially available source designated by the Administrative Agent from time to time); provided , that any comparable or successor rate shall be applied by the Administrative Agent, if administratively feasible, in a manner consistent with market practice.

Eurodollar Rate Loan ” means a Loan that bears interest at a rate based on the Eurodollar Rate.

Event of Default ” has the meaning specified in Section 9.01 .

Excess Availability ” means as of any date of determination, an amount equal to (a) the Line Cap minus (b) the principal balance of all Total Revolving Outstandings.

Excluded Accounts ” means (a) Deposit Accounts that are zero balance disbursement accounts, (b) Deposit Accounts used solely to fund payroll, payroll Taxes and similar employment Taxes or employee benefits in the Ordinary Course of Business and (c) other Deposit Accounts with an amount on deposit of less than $1,000,000 at any time in the aggregate for all such Deposit Accounts.

Excluded Property ” means, with respect to any Loan Party, (a) any owned or leased personal Property which is located outside of the United States, (b) any real Property of the Loan Parties and any personal Property (including, without limitation, motor vehicles and aircraft) in respect of which perfection of a Lien is not either (i) governed by the Uniform Commercial Code or (ii) effected by appropriate evidence of the Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, (c) the Capital Stock of any First-Tier Foreign Subsidiary to the extent not required to be pledged to secure the Obligations pursuant to Section 7.14(b) , (d) any personal Property which, subject to the terms of Section 8.09 , is subject to a Lien of the type described in Section 8.01(i) pursuant to documents which prohibit such Loan Party from granting any other Liens in such Property, provided, that no such personal Property shall be included in the Borrowing Base and in any such case the prohibition would not be rendered ineffective by the Uniform Commercial Code (including the provisions of Sections 9-407 and 9-408 thereof) or other applicable Law (including Debtor Relief Laws), (e) except as expressly provided in Section 9.04 , any permit, lease, license, contract or instrument, now or hereafter in effect of a Loan Party, or rights relating thereto, if the grant of a security interest in such permit, lease, license, contract or instrument, or rights relating thereto, in a manner contemplated by the Loan Documents, under the terms thereof or under applicable Law, is prohibited and would result in the termination thereof or give the other parties thereto the right to terminate, accelerate or otherwise

 

1   The EU Bail-In Legislation Schedule may be found at http://www.lma.eu.com/uploads/files/EU%20BAIL-IN%20LEGISLATION%20SCHEDULE%2022-Dec-2015%2010-46%20.pdf

 

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materially and adversely alter such Loan Party’s rights, titles and interests thereunder (including upon the giving of notice or the lapse of time or both), provided that in any such case the prohibition, termination or rights to terminate, accelerate or materially and adversely alter such Loan Party’s rights, titles and interests would not be rendered ineffective by the Uniform Commercial Code (including the provisions of Sections 9-407 and 9-408 thereof) or other applicable Law (including Debtor Relief Laws), and (f) any Property listed in Schedule 1.02 under the heading “Excluded Property”.

Excluded Subsidiary ” means (a) any Subsidiary that is not a Domestic Subsidiary, (b) HHW, so long as the aggregate book value of all the assets of HHW and all other Subsidiaries included in the following clause (c) do not exceed, in the aggregate, $15,000,000, and (c) any Domestic Subsidiary (other than HHW) that is not a Material Domestic Subsidiary; provided, that the aggregate book value of all assets of all such Material Domestic Subsidiaries that constitute Excluded Subsidiaries at any time under this definition shall not exceed $5,000,000.

Excluded Swap Obligation ” means, with respect to any Guarantor, any Swap Obligation incurred after the date hereof, if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant under a Loan Document by such Guarantor 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 Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 4.08 hereof and any and all guarantees of such Guarantor’s Swap Obligations by other Loan Parties) at the time the Guaranty of such Guarantor, or grant by such Guarantor 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 Commitment pursuant to a Law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrowers under Section 11.13 ) 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 U.S. federal withholding Taxes imposed pursuant to FATCA.

Existing Letters of Credit ” means the letters of credit outstanding on the Closing Date and identified on Schedule 2.03 .

Extraordinary Expenses ” means all costs, expenses or advances that the Administrative Agent or any security trustee may incur during a Default or Event of Default, or during the pendency of an Insolvency Proceeding of AFI or any Subsidiary, including those relating to (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other

 

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proceeding (whether instituted by or against the Administrative Agent, any security trustee, any L/C Issuer, any Lender, any Loan Party, any representative of creditors of any Loan Party or any other Person) in any way relating to any Collateral (including the validity, perfection, priority or avoidability of the Administrative Agent’s or any security trustee’s Liens with respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender liability or other Claims; (c) the exercise of any rights or remedies of the Administrative Agent or any security trustee in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; and (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations. Such costs, expenses and advances include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’ and auctioneers’ fees and commissions, accountants’ fees, environmental study fees, wages and salaries paid to employees of any Loan Party or independent contractors in liquidating any Collateral, and travel expenses.

Facilities ” means, at any time, a collective reference to the facilities and real properties owned, leased or operated by AFI or any of its Subsidiaries.

FASB ASC ” means the Accounting Standards Codification of the Financial Accounting Standards Board.

FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code or any intergovernmental agreement entered into between the United States and the government of another country in order to implement the requirements of Sections 1471 through 1474 of the Code.

Federal Funds Rate ” means (a) the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on the applicable Business Day (or on the preceding Business Day, if the applicable day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if no such rate is published on the next Business Day, the average rate (rounded up, if necessary, to the nearest 1/100 of 1%) charged to Bank of America on the applicable day on such transactions, as determined by Agent.

Fee Letters ” means those certain letter agreements, each dated February 22, 2016, among the Borrowers and each of the Administrative Agent and each of the Arrangers.

FILO Credit Facility ” has the meaning set forth in Section 2.01(b)(ii) .

FILO Incremental Amendment ” an amendment establishing a FILO Credit Facility in form and substance satisfactory to the Administrative Agent, the US Borrowers and each FILO Lender, the terms and conditions of which shall satisfy all the FILO Incremental Conditions.

FILO Incremental Conditions ” means the collective reference to the following conditions, or any of them, as the context may require:

 

  (1) the aggregate principal amount of all loans under the FILO Credit Facility shall not exceed Fifteen Million Dollars ($15,000,000);

 

  (2)

the establishment thereof shall result in an amendment of the payment waterfall in Section 9.03 (without the requirement of the consent of the Lenders under Section 11.01 )

 

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  to include payment of accrued and unpaid interest of Obligations under the FILO Credit Agreement as a new clause “Eighth” and unpaid payment of principal of Obligations under the FILO Credit Agreement as a new clause “Ninth”, and renumbering the existing clauses “Eighth” and “Ninth” as clauses “Tenth” and “Eleventh,” respectively;

 

  (3) subject to other express limitations set forth in Section 2.01 , the FILO Credit Facility shall be on terms and conditions as determined by AFI, the Administrative Agent and the FILO Lenders, it being understood and agreed that such terms and conditions may include, without limitation, FILO Credit Facility-specific borrowing base, advance rate, eligibility criteria, availability reserves (including reserves implemented against the Borrowing Base with respect to obligations owing to the FILO Lenders), representations, warranties, covenants and Events of Default, interest rates, fees, final maturity date, amortization, mandatory and voluntary prepayment and commitment termination provision as to the FILO Credit Facility or any other provision of the Loan Documents related to cash dominion, and amendment and waiver provisions (including modifications to Section 11.01 to provide for customary or market provisions in favor of the FILO Lenders, which may include voting rights in favor of the FILO Lenders relating to modifications of the Borrowing Base that would affect the FILO Credit Facility or the FILO Lenders) in respect of or relating to the FILO Credit Facility and other customary or market terms and conditions for asset-based “first in, last out” credit facilities of this nature;

 

  (4) subject to amortization or mandatory FILO Credit Facility reduction terms and conditions, the stated maturity date of the FILO Credit Facility shall not be later than the then Maturity Date;

 

  (5) the advance rates in respect of the incremental borrowing base under FILO Credit Facility shall not exceed five percent (5.0%) on Eligible Accounts or ten percent (10.0%) on Eligible Inventory;

 

  (6) the arrangement of the FILO Credit Facility, and any upfront, underwriting, arrangement or similar fees in respect of the FILO Credit Facility, shall be agreed to solely by AFI, the Administrative Agent and the FILO Lenders;

 

  (7) the FILO Credit Facility shall be subject to closing conditions as may be determined by the Administrative Agent, the FILO Lenders and AFI; and

 

  (8) the FILO Incremental Amendment and all documentation in respect of the FILO Credit Facility shall be consistent with the foregoing and in form and substance reasonably satisfactory to the Administrative Agent and the FILO Lenders.

FILO Lender ” means any Lender or Eligible Assignee that satisfies the applicable conditions of Section 2.01 and becomes a Lender under the FILO Credit Facility, if any, as may be established from time to time in accordance herewith.

Financial Covenant Trigger Period ” means the period (a) commencing on the date that Excess Availability is less than the greater of (i) 10.0% of the Line Cap and (ii) $20,000,000, and (b) continuing until a period of 30 consecutive days has elapsed during which at all times Excess Availability is equal to or greater than the greater of (i) 10.0% of the Line Cap and (ii) $20,000,000.

 

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First-Tier Foreign Subsidiary ” means each Foreign Subsidiary that is owned directly by a Loan Party.

Fixed Charge Coverage Ratio ” means the ratio, determined on a consolidated basis for AFI and its Subsidiaries for the most recent 12 months, of (a) Consolidated EBITDA minus Capital Expenditures (except those financed with Funded Indebtedness other than Revolving Loans), to (b) Fixed Charges.

Fixed Charges ” means the sum of interest expense paid in cash (other than payment-in-kind), scheduled principal payments made on Funded Indebtedness, cash taxes paid and Distributions made in accordance with Section 8.06(h) .

Foreign In-Transit Inventory ” means Inventory that has been purchased by a Borrower and that is in-transit from a Vendor from a location outside the United States to a Borrower or a Permitted Inventory Location.

Foreign Lender ” means any Lender that is organized under the laws of a jurisdiction other than that in which any of the Borrowers are resident for tax purposes (including such a Lender when acting in the capacity of the L/C Issuer). For purposes of this definition, the United States, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

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

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

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

Full Payment ” with respect to any Obligations, (a) the full and indefeasible cash payment thereof, including any interest, fees and other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding); and (b) if such Obligations are L/C Obligations or inchoate or contingent in nature, Cash Collateralization thereof (or delivery of a standby letter of credit acceptable to Administrative Agent in its discretion, in the amount of required Cash Collateral). No Loans shall be deemed to have been paid in full unless all Commitments related to such Loans have terminated.

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.

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

 

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(a) all obligations for borrowed money, whether current or long-term (including the Obligations) and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) all purchase money Indebtedness;

(c) the principal portion of all obligations under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business);

(d) all obligations arising under standby letters of credit and similar obligations that back obligations that would constitute Indebtedness (but specifically excluding those that support performance obligations);

(e) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and other than obligations with respect to compensation);

(f) all Attributable Indebtedness;

(g) all preferred stock or other equity interests providing for mandatory redemptions, sinking fund or like payments prior to the Maturity Date;

(h) all Funded Indebtedness of others secured by (or for which the holder of such Funded Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed;

(i) all Guarantees with respect to Funded Indebtedness of the types specified in clauses (a) through (h) above of another Person; and

(j) all Funded Indebtedness of the types referred to in clauses (a) through (h) above 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 joint venturer and has liability for such obligations, but only to the extent there is recourse to such Person for payment thereof.

For purposes hereof, except as provided in clause (d)  above, obligations arising under letters of credit and similar instruments shall not constitute Funded Indebtedness.

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, consistently applied and as in effect from time to time.

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).

 

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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 payable 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, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness, (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 (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness 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 of any other Person, whether or not such Indebtedness is assumed by such Person. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

Guaranteed Obligations ” has the meaning set forth in Section 4.01 .

Guarantors ” means with respect to any Obligations, (a) the Borrowers (for purposes of obligations of Subsidiaries under Swap Contracts and Treasury Management Agreements and any Swap Obligation of a Specified Loan Party (determined before giving effect to Section 4.01 and 4.08) under the Guaranty), and (b) each Material Domestic Subsidiary of AFI (other than Excluded Subsidiaries) identified as a “Guarantor” on the signature pages hereto and each other Person that joins as a Guarantor pursuant to Section 7.12 , together with their successors and permitted Assigns.

Guaranty ” means (a) the Guaranty made by the Guarantors in favor of the Administrative Agent and the Lenders pursuant to Article IV hereof and (b) any guaranty established in connection with the Australian Incremental Credit Facility or the Canadian Incremental Credit Facility, if either is established from time to time, or any of them, as the context may require.

Guaranty Joinder Agreement ” means a joinder agreement by which a Domestic Subsidiary of AFI or other Person may become a Guarantor hereunder. A form of Guaranty Joinder Agreement is attached as Exhibit F .

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

HHW ” means HomerWood Hardwood Flooring Company, a Delaware corporation.

Honor Date ” has the meaning set forth in Section 2.03(c)(i) .

Impacted Loan ” has the meaning set forth in Section 3.03 .

Imported Goods Agreement ” means an agreement among any Borrower, Administrative Agent and a NVOCC or customs broker or other handler that is in form and substance satisfactory to Administrative Agent in its Permitted Discretion and pursuant to which, among other things, the parties have agreed upon their relative rights with respect to In-Transit Inventory of such Borrower.

Incremental Credit Facilitie s” has the meaning specified in Section 2.01(b) .

 

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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 Funded Indebtedness;

(b) the Swap Termination Value of any Swap Contract;

(c) all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) and (b) above of any other Person; and

(d) all Indebtedness of the types referred to in clauses (a)  through (c)  above 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 joint venturer, and has liability for such obligations, but only to the extent there is recourse to such Person for payment thereof.

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 set forth in Section 11.04(b) .

Insolvency Proceeding ” means any case or proceeding, application, meeting convened, resolution passed, proposal, corporate action or any other proceeding commenced by or against a Person under any state, provincial, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the U.S. Bankruptcy Code, or any other insolvency, debtor relief, bankruptcy, receivership, debt adjustment law or other similar law (whether state, provincial, federal or foreign), including foreign insolvency laws specified in any Australian Incremental Amendment or Canadian Incremental Amendment; (b) the appointment of a Creditor Representative or other custodian for such Person or any part of its Property; (c) an assignment or trust mortgage for the benefit of creditors; (d) the winding up or strike off the Person; (e) the proposal or implementation of a scheme of arrangement; or (f) a suspension of payment, moratorium of any debts, official assignment, composition or arrangement with a Person’s creditors.

Insurance Subsidiary ” means a Subsidiary established by AFI or any of its Subsidiaries for the purpose of, and to be engaged solely in the business of, insuring the businesses or facilities owned or operated by AFI or any of its Subsidiaries or joint ventures or to insure unrelated businesses, provided that such unrelated business premiums do not exceed 35% of the annual premiums collected by such Subsidiary.

Interest Payment Date ” means, (a) as to any Base Rate Loan (including Swing Line Loans), the first (1 st ) Business Day occurring after the end of each March, June, September and December, the Maturity Date and, in the case of any Swing Line Loan, any other dates as may be mutually agreed upon by the Borrowers and the Swing Line Lender, and (b) as to any Eurodollar Rate Loan, the last Business Day of each Interest Period for such Loan, the date of repayment of principal of such Loan, the Maturity Date, and in addition, where the applicable Interest Period exceeds three months, the date every three months after the beginning of such Interest Period. If an Interest Payment Date falls on a date that is not a Business Day, such Interest Payment Date shall be deemed to be the next Business Day.

 

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Interest Period ” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six, and, if available to all of the relevant Lenders, twelve months thereafter, as selected by the applicable 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; and

(iii) no Interest Period shall extend beyond the Maturity Date (or the Commitment Termination Date, if earlier).

In-Transit Inventory ” means Inventory of Borrowers that is either Domestic In-Transit Inventory or Foreign In-Transit Inventory.

Inventory ” has the meaning set forth in the UCC or any other Applicable Law, as applicable, including all goods intended for sale, lease, display or demonstration; all goods provided under a contract for services; all work in process; and all raw materials, and other materials and supplies of any kind that are or could be used in connection with the manufacture, transformation, printing, packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or consumed in a Loan Party’s business (but excluding Equipment).

Inventory Appraisal ” means (a) on the Closing Date, Hilco Valuation’s report dated January 4, 2016 (as of September 30, 2015), and (b) thereafter, the most recent Inventory appraisal conducted by an independent appraisal firm and delivered pursuant to Section 7.10 hereof.

Inventory Reserve ” means the aggregate amount of reserves, as established by the Administrative Agent from time to time in its Permitted Discretion, to reflect factors that may negatively impact the value of Eligible Inventory and/or Eligible Supplies Inventory, including, without duplication of eligibility criteria, changes in salability, slow moving, obsolescence, shrinkage, theft, imbalance, change in composition or mix, markdowns and vendor chargebacks.

Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Capital Stock 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 equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) an Acquisition. For purposes of covenant compliance, the amount of any Investment at any time shall be the amount actually invested, as determined at the time of each such Investment, without adjustment for subsequent increases or decreases in the value of such Investment, net of (i) any return representing a return of capital with respect to such Investment and (ii) any dividend, distribution or other return on capital with respect to such Investment.

Involuntary Disposition ” means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any Property of any of the Borrowers or any of their respective Subsidiaries.

IP Rights ” has the meaning set forth in Section 6.17 .

 

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IRS ” means the United States Internal Revenue Service.

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

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

Joinder Agreements ” means a Guaranty Joinder Agreement, a Lender Joinder Agreement and/or a Collateral Joinder Agreement, as appropriate.

Judgment Currency ” has the meaning set forth in Section 1.08(b).

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, in each case whether or not having the force of law.

L/C Advance ” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.

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

L/C Commitment ” means, with respect to any L/C Issuer, the commitment of such L/C Issuer to issue and to honor payment obligations under Letters of Credit in accordance with Section 2.03 .

L/C Conditions ” means the following conditions satisfaction of all of which is necessary for issuance of a Letter of Credit: (a) each of the conditions set forth in Article V ; (b) after giving effect to such issuance, total L/C Obligations do not exceed the Letter of Credit Sublimit, no Overadvance exists, and Revolver Usage does not exceed the Line Cap; (c) such Letter of Credit and payments thereunder are denominated in Dollars; and (d) the purpose and form of the proposed Letter of Credit are satisfactory to the Administrative Agent and applicable L/C Issuer in their reasonable discretion.

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

L/C Issuer ” means with respect to a particular Letter of Credit (a) as to Existing Letters of Credit, the Lenders identified on Schedule 2.03 , (b) Bank of America in its capacity as issuer of such Letter of Credit or (c) such other Lender selected by the Applicable Borrower (with the consent of such Lender and the Administrative Agent) from time to time to issue such Letter of Credit, or any successor issuer of Letters of Credit hereunder.

L/C Obligations ” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including

 

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

Lender ” means each of the Persons identified as a “Lender” on the signature pages hereto (and, as appropriate, includes the Revolving Lenders and Swing Line Lender) and each Person who joins as a Lender pursuant to the terms hereof, together with their respective successors and assigns.

Lender Joinder Agreement ” means a joinder agreement by which a Lender is joined under this Agreement to provide additional commitments in respect of an Incremental Credit Facility or otherwise.

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

Letter of Credit ” means any Existing Letter of Credit and each letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit.

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

Letter of Credit Expiration Date ” means the day that is thirty (30) days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

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

Letter of Credit Sublimit ” has the meaning specified in Section 2.03(a)(i) . The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Committed Amount.

Lien ” means any mortgage, pledge, hypothecation, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing).

Lien Waiver ” means an agreement, in form and substance satisfactory to Administrative Agent, by which (a) for any material Collateral located on leased premises or premises subject to a mortgage, the lessor or mortgagee, as applicable, waives or subordinates any Lien it may have on the Collateral, and agrees to permit the Administrative Agent to enter upon the premises and remove the Collateral or to use the premises to store or dispose of the Collateral; (b) for any Collateral held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the Collateral, agrees to hold any documents in its possession relating to the Collateral as agent for Administrative Agent, and agrees to deliver the Collateral to Administrative Agent upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Administrative Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver the Collateral to Administrative Agent upon request; and (d) for any Collateral subject to a licensor’s intellectual property rights, the licensor grants to Administrative Agent the right, vis-à-vis such licensor, to enforce Administrative Agent’s Liens with respect to the Collateral, including the right to dispose of it with the benefit of the intellectual property, whether or not a default exists under any applicable license.

 

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Line Cap ” means, as of any date of determination, an amount equal to the lesser of (a) the Borrowing Base as of such date and (b) the Aggregate Commitments as of such date.

Liquidity ” means, at any time, the sum of (i) unrestricted cash and Cash Equivalents on hand, plus (ii) the aggregate unused amount of Commitments hereunder.

Loan ” means any Revolving Loan or Swing Line Loan, any Protective Advance, any Overadvance Loan, and the Base Rate Loans and Eurodollar Rate Loans comprising such Loans.

Loan Documents ” means this Agreement, each Note, each Letter of Credit, each Letter of Credit Application, each Joinder Agreement, the Collateral Documents and each Fee Letter.

Loan Notice ” means a notice of (a) a Borrowing of Revolving Loans or Swing Line Loans, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(b) , which, if in writing, shall be substantially in the form of Exhibit A-1 or Exhibit A-2 , with respect to Revolving Loans, and Exhibit B , with respect to Swing Line Loans, or such other form, as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of AFI.

Loan Parties ” means, collectively, the Borrowers and each Guarantor.

Loan Party Representative ” has the meaning specified in Section 10.13 .

London Banking Day ” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

M&E Availability Period ” means the period commencing on the Closing Date and ending on the first to occur of (a) the Maturity Date and (b) the date that AFI has delivered irrevocable notice to the Administrative Agent of its election to cancel 100% of the portion of the Borrowing Base based on Eligible Machinery and Equipment.

M&E Cap ” means $50,000,000, as such amount is reduced quarterly after the Closing Date amortizing on a seven year straight-line basis; provided , however , that if a new Equipment Appraisal is obtained in accordance with Section 7.10 , the M&E Cap shall be reset to reflect the results of such appraisal and such amount shall thereafter reduce quarterly after such appraisal date amortizing on a seven year straight-line basis

M&E Sublimit ” means, as of any date of determination, the lesser of (a) 85% of the M&E Value as of such date and (b) the M&E Cap as of such date.

M&E Value ” means the Value of Eligible Machinery and Equipment based upon the Equipment Appraisal delivered on or prior to the Closing Date, as such amount is reduced quarterly after the Closing Date amortizing on a seven year straight-line basis; provided , however , that if a new Equipment Appraisal is obtained in accordance with Section 7.10 , the M&E Value shall be reset to reflect the results of such appraisal and such amount shall thereafter reduce quarterly after such appraisal date amortizing quarterly on a seven year straight-line basis.

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

 

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Material Adverse Effect ” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of AFI and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Borrowers and their respective Subsidiaries taken as a whole to perform their obligations under any Loan Document to which they are a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrowers and their respective Subsidiaries taken as a whole of any Loan Document to which they are a party.

Material Domestic Subsidiary ” means any Domestic Subsidiary of AFI that individually, or together with its Subsidiaries on a consolidated basis, has assets of more than $1,000,000; provided , that in no event shall any Insurance Subsidiary constitute a Material Domestic Subsidiary.

Material First-Tier Foreign Subsidiary ” means any other First-Tier Foreign Subsidiary that individually, or together with its Subsidiaries on a consolidated basis, has assets of more than $5,000,000; provided , however , that notwithstanding the foregoing, the following Foreign Subsidiaries shall not constitute Material First-Tier Foreign Subsidiaries: (i) any Foreign Subsidiary organized under the laws of the People’s Republic of China or any state or other political subdivision thereof; (ii) any Insurance Subsidiary; and (iii) any other Foreign Subsidiary if a pledge of such Foreign Subsidiary’s Capital Stock violates any Law or could reasonably be expected to have an adverse effect on the business of such Foreign Subsidiary.

Maturity Date ” means April 1, 2021.

Maximum Rate ” has the meaning specified in Section 11.09 .

Minimum Collateral Amount ” means, at any time, (i) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during the existence of a Defaulting Lender or in accordance with Section 9.03 , an amount equal to 105% of the Fronting Exposure of the L/C Issuer with respect to Letters of Credit issued and outstanding at such time, (ii) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.14(a)(i ),( a)(ii ) or ( a)(iii ), an amount equal to 105% of the Outstanding Amount of all L/C Obligations, and (iii) otherwise, an amount determined by the Administrative Agent and the L/C Issuer in their sole discretion of the amount that is due or could become due, including all fees, expenses, indemnifications and other amounts relating to such Obligations

MNPI ” has the meaning specified in clause (3)  of the proviso to Section 2.05(a)(ii)(A) .

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 AFI or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

Net Cash Proceeds ” means the aggregate cash or Cash Equivalents proceeds (including insurance proceeds and condemnation awards) received by AFI or any of its Subsidiaries, net of (a) direct costs incurred in connection therewith (including, without limitation, legal, accounting and investment banking fees, and sales commissions), (b) taxes paid or payable as a result thereof, (c) the amount necessary to retire any Indebtedness secured by a Permitted Lien on the related Property, (d) amounts paid or reserved to fund any liabilities in connection with any Disposition and (e) for Debt Transactions, the “Net Cash Proceeds” subject to mandatory prepayment under Section 2.05(b)(iii ) will be reduced by the portion thereof used or to be used for a Permitted Acquisition or to refinance other permitted

 

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Indebtedness, in each case, in the period beginning two month prior to the date of the Debt Transaction and ending two months after the date of the Debt Transaction; understood and agreed that “Net Cash Proceeds” shall include, without limitation, any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by the Borrowers or any Subsidiary in any Disposition or Involuntary Disposition when and as received.

NOLV Percentage ” means the net orderly liquidation value of Inventory or Equipment, expressed as a percentage of Value, expected to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent Inventory Appraisal or Equipment Appraisal, as applicable, approved by the Administrative Agent.

Non-Consenting Lender ” has the meaning specified in Section 11.13 .

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

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

Notes ” means the Revolving Notes and the Swing Line Note.

Notice of Continuation/Conversion ” means the written notice of continuation or conversion in substantially the form of Exhibit A-2.

NVOCC ” means with respect to any Foreign In-Transit Inventory, a non-vessel operating common carrier engaged as a freight forwarder or otherwise to assist in the importation of such In-Transit Inventory.

Obligations ” means with respect to the Borrowers and each Guarantor (a) all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) all Secured Bank Product Obligations; provided that the “Obligations” of a Guarantor shall exclude any Excluded Swap Obligations with respect to such Guarantor.

OFAC ” means the Office of Foreign Assets Control of the U.S. Treasury Department.

Ordinary Course of Business ” means the ordinary course of business of any Borrower or Subsidiary, consistent with Applicable Law and past practices.

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; and (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.

 

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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 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 ).

Outstanding Amount ” means (a) 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 Revolving Loans and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the aggregate outstanding amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrowers of Unreimbursed Amounts.

Overadvance ” has the meaning specified in Section 2.17 (a).

Overadvance Loan ” means a Base Rate Loan made to a Borrower when an Overadvance exists or is caused by the funding thereof.

Overnight Rate ” means, for any day, the greater of (a) the Federal Funds Rate and (b) an overnight rate determined by the Administrative Agent, the applicable L/C Issuer, or the Swing Line Lender, as the case may be, in accordance with banking industry rules on interbank compensation.

Participant ” has the meaning specified in Section 11.06(d) .

Participant Register ” has the meaning specified in Section 11.06(d) .

Patriot Act ” has the meaning specified in Section 11.16 .

Payment Item ” means each check, draft or other item of payment payable to a Loan Party, including those constituting proceeds of any Collateral.

PBGC ” means the Pension Benefit Guaranty Corporation.

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

Permitted Acquisitions ” means Investments consisting of an Acquisition by a Loan Party, provided that (i) immediately after giving effect to such Acquisition, such Loan Party would be in compliance with Section 8.07 , (ii) in the case of an Acquisition of all or substantially all of the Capital Stock of another Person, the board of directors (or other comparable governing body) of such other

 

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Person shall have duly approved such Acquisition, (iii) either (A) both (1) Excess Availability on a Pro Forma Basis for the thirty (30) day period ending on and including the date of such Acquisition is not less than the greater of (I) 12.5% of the Line Cap and (II) $25,000,000 and (2) the Loan Parties will be in compliance with the financial covenant under Section 8.11 after giving effect thereto on Pro Forma Basis or (B) Excess Availability on a Pro Forma Basis for the thirty (30) day period ending on and including the date of such Acquisition is not less than the greater of (1) 20.0% of the Line Cap and (2) $40,000,000, (iv) no Default or Event of Default shall exist immediately before or immediately after giving effect thereto on a Pro Forma Basis and (v) AFI shall deliver to the Administrative Agent a compliance certificate confirming the foregoing, in form and detail reasonably satisfactory to the Administrative Agent.

Permitted Discretion ” means a determination made in the exercise, in good faith, of reasonable business judgment (from the perspective of a secured, asset-based lender).

Permitted Inventory Locations ” means each location in the United States listed on Schedule 1.01(p) and from time to time each other location within the United States which AFI has notified the Administrative Agent in writing is a location at which Inventory of a Borrower is maintained.

Permitted Investments ” means, at any time, Investments by AFI or any of its Subsidiaries permitted to exist at such time pursuant to the terms of Section 8.02 .

Permitted Liens ” means, at any time, Liens in respect of Property of AFI or any of its Subsidiaries permitted to exist at such time pursuant to the terms of Section 8.01 .

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

Plan ” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by AFI or, with respect to any such plan that is subject to Section 412 of the Internal Revenue Code or Title IV of ERISA, any ERISA Affiliate.

Platform ” has the meaning specified in Section 7.02 .

Pledge Agreements ” means (a) the Domestic Pledge Agreement and (b) any other pledge agreement given by any Person to the Collateral Agent to secure the Obligations, including in connection with any Australian Incremental Credit Facility or Canadian Incremental Credit Facility, in each case as amended and modified.

Prime Rate ” means the rate of interest announced by Bank of America from time to time as its prime rate. Such rate is set by Bank of America on the basis of various factors, including its 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 rate. Any change in such rate publicly announced by Bank of America shall take effect at the opening of business on the day specified in the announcement.

Priority Payables Reserve ” means on any date of determination, a reserve in such amount as the Administrative Agent may determine in its Permitted Discretion which reflects amounts secured by any Liens, choate or inchoate, which are or may be senior to the Administrative Agent’s and/or the Secured Parties’ Liens or that may be required to be paid to permit or facilitate exercise of rights or remedies with respect to the Collateral including, without limitation, any such amounts due and not paid for wages or vacation pay, amounts due and not paid under any legislation relating to workers’ compensation or to employment insurance, and amounts currently or past due and not paid for real estate, municipal or similar Taxes (to the extent impacting any Collateral).

 

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Protective Advance ” has the meaning specified in Section 2.17(b) .

Pro Forma Basis ” means, for purposes of calculating the financial covenant set forth in Section 8.11 and for purposes of determining the Applicable Rate, that any Disposition, Involuntary Disposition, Acquisition or incurrence or assumption of Indebtedness pursuant to subsections (e) , ( g)  or ( h)  of Section 8.03 or pursuant to an Incremental Credit Facility shall be deemed to have occurred as of the first day of the most recent four fiscal quarter period preceding the date of such transaction for which AFI has delivered financial statements pursuant to Section 7.01(a) or (b) . In connection with the foregoing, (a) with respect to any Disposition or Involuntary Disposition, (i) income statement and cash flow statement items (whether positive or negative) attributable to the Property disposed of shall be excluded to the extent relating to any period occurring prior to the date of such transaction and (ii) Indebtedness which is retired shall be excluded and deemed to have been retired as of the first day of the applicable period and (b) with respect to any Acquisition, (i) income statement items attributable to the Person or Property acquired shall be included to the extent relating to any period applicable in such calculations to the extent (A) such items are not otherwise included in such income statement items for AFI and its Subsidiaries in accordance with GAAP or in accordance with any defined terms set forth in this Section 1.01 and (B) such items are supported by financial statements or other information reasonably satisfactory to the Administrative Agent and (ii) any Indebtedness incurred or assumed by AFI or any Subsidiary (including the Person or Property acquired) in connection with such transaction and any Indebtedness of the Person or Property acquired which is not retired in connection with such transaction (A) shall be deemed to have been incurred as of the first day of the applicable period and (B) if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination.

Pro Forma Compliance Certificate ” means a certificate of a Responsible Officer of AFI containing reasonably detailed calculations of the financial covenant set forth in Section 8.11 as of the most recent fiscal quarter end for which AFI has delivered financial statements pursuant to Section 7.01(a) or (b)  after giving effect to the applicable transaction on a Pro Forma Basis.

Pro Rata Share ” means, as to each Lender at any time, (a) with respect to the Commitments, such Lender’s Commitment Percentage; provided that if the Commitments shall have expired or been terminated, then such Lender’s Commitment Percentage immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof and (b) with respect to the aggregate amount of Loans and L/C Obligations hereunder, a percentage equal to such Lender’s share of the Aggregate Commitments; provided that if the Commitments shall have expired or been terminated, then a percentage (expressed as a percentage, carried out to the ninth decimal place) equal to such Lender’s share of the aggregate amount of Loans and L/C Obligations outstanding. The initial Pro Rata Shares of each Lender is set forth opposite the name of such Lender on Schedule 2.01 .

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

Protective Advance ” has the meaning specified in Section 2.17(b) .

Public Indenture ” means any indenture executed by the Borrowers pursuant to which Public Notes have been or will be issued.

 

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Public Lender ” has the meaning specified in Section 7.02 .

Public Notes ” means any senior unsecured notes issued by the Borrowers after the Closing Date pursuant to an offering consummated in accordance with the Securities Act of 1933 or pursuant to an offering registered under the Securities Act of 1933.

Qualified ECP Guarantor ” means, at any time, each Loan Party with total assets exceeding $10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act and, in each case, 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 Secured Bank Product Obligations ” means Secured Bank Product Obligations with respect to Swap Contracts.

Recipient ” means the Administrative Agent, any Lender, the L/C Issuer and any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder.

Register ” has the meaning specified in Section 11.06(c) .

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.

Rent and Charges Reserve ” means the aggregate of (a) all past due rent and other past due charges owing by any Borrower to any landlord, bailee, warehouseman or other Person who possesses any Collateral or could assert a Lien on any Collateral; plus (b) a reserve in an amount not to exceed the lesser of three months’ rent or the fair market value of Collateral in such Person’s possession and other charges that could be payable to any such Person, unless such Person has executed a Lien Waiver.

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

Reporting Trigger Period ” means the period (a) commencing on the date that (i) an Event of Default occurs or (ii) Excess Availability under the U.S Revolver Facility is less than the greater of 12.5% of the Line Cap and $25,000,000, in either case, for a period of five (5) or more consecutive days, and (b) continuing until a period of 30 consecutive days has elapsed during which at all times (i) no Event of Default exists and (ii) Excess Availability is equal to or greater than the greater of 12.5% of the Line Cap and $25,000,000.

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

Request for Solicitation ” has the meaning specified in Section 2.05(a)(ii)(B) .

Required Lenders ” means, as of any date of determination, Lenders having more than fifty percent (50%) of the Aggregate Commitments or, if the Commitments shall have expired or been terminated, Lenders having more than fifty percent (50%) of the aggregate remaining Obligations (including, in each case, the aggregate principal amount of each Lender’s participation interests in L/C Obligations and Swing Line Loans); provided that the Commitments of, and the portion of the Obligations held or deemed held by, any Defaulting Lender shall be excluded for purposes of making determinations of Required Lenders.

 

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Responsible Officer ” means the chief executive officer, president, chief financial officer, chief operating officer or vice president and treasurer of a Loan Party and solely for purposes of certifications of corporate documents and incumbency certificates provided hereunder or in connection herewith, the secretary or an assistant secretary, and solely for purposes of notices of borrowing, payments, prepayments and the like under Article II, any other officer or employee so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. 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 the Capital Stock of AFI or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Capital Stock or of any option, warrant or other right to acquire any such Capital Stock.

Revolver Usage ” means (a) the aggregate amount of outstanding Revolving Loans plus (b) the aggregate stated amount of outstanding Letters of Credit, except to the extent Cash Collateralized by Borrowers.

Revolving Loan ” means a loan made pursuant to Article II , and any Overadvance Loan, Swingline Loan or Protective Advance.

Revolving Committed Amount ” means, for each Revolving Lender, the amount of such Revolving Lender’s Commitment. The initial Revolving Committed Amounts are set out in Schedule 2.01 .

Revolving Lenders ” means those Lenders with Commitments, together with their successors and permitted assigns. The initial Revolving Lenders are identified on the signature pages hereto and are set out in Schedule 2.01 .

Revolving Loan ” has the meaning specified in Section 2.01(a) and includes any Swingline Loan, Overadvance or Protective Advance.

Revolving Notes ” has the meaning specified in Section 2.11(a) .

Revolving Obligations ” means Revolving Loans, Swing Line Loans and L/C Obligations.

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

Sale and Leaseback Transaction ” means, with respect to AFI or any Subsidiary, any arrangement, directly or indirectly, with any person whereby AFI or such Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

 

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Sanctions ” means any sanction administered or enforced by the United States Government (including without limitation, OFAC), the United Nations Security Council, the European Union, or Her Majesty’s Treasury (“ HMT ”).

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

Secured Bank Product Obligations ” means Indebtedness, obligations and other liabilities with respect to Bank Products owing by a Loan Party or Affiliate of a Loan Party to a Secured Bank Product Provider that the Loan Party Representative, on behalf of any Loan Party, in a written notice to the Administrative Agent, as expressly requested be treated as Secured Bank Product Obligations and/or a Qualified Secured Bank Product Obligation for purposes hereof, it being understood that such Bank Product obligations shall only constitute Secured Bank Product Obligations up to the maximum amount (or, in the case of Qualified Secured Bank Product Obligations, the Swap Termination Value thereunder) specified by such provider and the Loan Party Representative in writing to the Administrative Agent, which amount may be established and increased further by written notice from such provider to the Administrative Agent from time to time; provided , that Secured Bank Product Obligations of a Loan Party shall not include its Excluded Swap Obligations.

Secured Bank Product Provider ” means (a) Bank of America or any of its Affiliates; and (b) any other Lender or Affiliate or branch of a Lender that is providing a Bank Product; provided , that such provider and the Loan Party Representative delivers written notice to the Administrative Agent, in form and substance satisfactory to the Administrative Agent, within 10 days following the later of the Closing Date or creation of the Bank Product (or such later time as the Administrative Agent and Loan Party Representative may agree in their reasonable discretion), (i) describing the Bank Product and setting forth the maximum amount to be secured by the Collateral (and, if all or any portion of such Secured Bank Product Obligations are to constitute Qualified Secured Bank Product Obligations, the Swap Termination Value of such Qualified Secured Bank Product Obligations), which amount may be increased or decreased from time to time by further written notice from such provider, and the methodology to be used in calculating such amount (if applicable), and (ii) if such provider is not a Lender, agreeing to be bound by Section 10.12 .

Secured Parties ” means (a) the Administrative Agent, any L/C Issuer, the Revolving Lenders and Secured Bank Product Providers of Bank Products for the account of Loan Parties and their Subsidiaries and (b) Lenders under the FILO Credit Facility, Australian Incremental Credit Facility and/or Canadian Incremental Credit Facility, if any, and other Secured Bank Product Providers specified in any FILO Incremental Amendment, Australian Incremental Amendment or Canadian Incremental Amendment as may be in effect from time to time.

Securities Accounts ” means all present and future “securities accounts” (as defined in Article 8 of the UCC or the STA, as applicable), including all monies, “uncertificated securities,” “securities entitlements” and other “financial assets” (as defined in Article 8 of the UCC or the STA, as applicable) contained therein.

Security Agreement ” means the security agreement dated as of the Closing Date executed in favor of the Collateral Agent by each of the Loan Parties.

Solvent ” or “ Solvency ” means, with respect to any Person as of a particular date, that on such date (a) such Person is generally able to pay its debts and other liabilities, contingent obligations and other commitments as they mature, (b) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s Property would constitute

 

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unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (c) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (d) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay all liabilities of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

Specified Loan Party ” has the meaning specified in Section 4.08 .

Spin-Off ” means the spin-off of AFI and its Subsidiaries from AWI to occur immediately following the Closing Date and the Closing Date Dividend.

Spot Rate ” means the exchange rate, as determined by the Administrative Agent, that is applicable to conversion of one currency into another currency, which is (a) the exchange rate reported by Bloomberg (or other commercially available source designated by the Administrative Agent) as of the end of the preceding business day in the financial market for the first currency; or (b) if such report is unavailable for any reason, the spot rate for the purchase of the first currency with the second currency as in effect during the preceding business day in the Administrative Agent’s principal foreign exchange trading office for the first currency.

STA ” means the Securities Transfer Act, 2006 (Ontario) (or any successor statute) and the regulations thereunder.

Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of Capital Stock having ordinary voting power for the election of directors or other governing body (other than Capital Stock having such power only by reason of the happening of a contingency) are at the time beneficially owned, 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 AFI.

Super-Majority Lenders ” means at any date of determination thereof, Lenders having Commitments representing more than 66  2 3 % of the aggregate Commitments at such time; provided , however , that for so long as any Lender shall be a Defaulting Lender, the term “Super-Majority Lenders” shall mean Lenders (excluding such Defaulting Lender) having Commitments representing more than 66  2 3 % of the aggregate Commitments (excluding the Commitments of each Defaulting Lender) at such time; provided further , however , that if any of the Commitments have been terminated, the term “Super-Majority Lenders” shall be calculated based on the Dollar Equivalent thereof using (a) in lieu of such Lender’s terminated Commitment, the outstanding principal amount of the Loans by such Lender to, and (if applicable) participation interests in L/C Obligations and/or Protective Advances owing by, all Borrowers and (b) in lieu of the aggregate Commitments to all Borrowers, the aggregate outstanding Loans to, and (if applicable) L/C Obligations owing by all Borrowers.

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

 

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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 Obligation ” means with respect to any Guarantor 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 Commitment ” means, with respect to the Swing Line Lender, the commitment of the Swing Line Lender to make Swing Line Loans in accordance with Section 2.04 .

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 2.04(a) .

Swing Line Loan Notice ” means a notice of a Borrowing of Swing Line Loans pursuant to Section 2.04(b) , which, if in writing, shall be substantially in the form of Exhibit B or such other form as approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of AFI.

Swing Line Note ” has the meaning specified in Section 2.11(a) .

Swing Line Sublimit ” has the meaning specified in Section 2.04(a) . The Swing Line Sublimit is part of, and not in addition to, the Aggregate Committed Amount.

Synthetic Lease ” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing arrangement whereby the arrangement is considered borrowed money indebtedness for tax purposes but is classified as an operating lease or does not otherwise appear on a balance sheet under GAAP.

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.

Total Revolving Outstandings ” means the aggregate Outstanding Amount of all Revolving Loans, all Swing Line Loans and all L/C Obligations.

 

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Transfer ” has the meaning specified in Section 2.17(b)(iii) .

Transfer Date ” has the meaning specified in Section 2.17(b)(iii) .

Treasury Management Agreement ” means any agreement governing the provision of treasury or cash management services, including deposit accounts, funds transfer, automated clearinghouse, zero balance accounts, returned check concentration, controlled disbursement, lockbox, purchasing card, travel card, account reconciliation and reporting and trade finance services.

Type ” means, with respect to any Revolving Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

UCP ” means, with respect to any commercial Letter of Credit, the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the time of issuance).

Uniform Commercial Code ” or “ UCC ” means the Uniform Commercial Code in effect in any applicable jurisdiction from time to time.

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) .

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

Value ” means (a) for Inventory, its value determined on the basis of the lower of weighted average cost or market; (b) for an Account, its book value; and (c) for Machinery and Equipment, its net orderly liquidation value.

Vendor ” means a Person that sells In-Transit Inventory to a Borrower.

Vendor Agreement ” means an agreement between Administrative Agent and a Vendor, that is in form and substance satisfactory to Administrative Agent and pursuant to which, among other things, the parties have agreed upon their relative rights with respect to In-Transit Inventory of any Borrower purchased from such Vendor.

Voting Stock ” means, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency.

Warranty Reserve ” means a reserve equal to one quarter of AFI’s annual deferred warranty expense as set forth on its general ledger.

Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

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Section 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 “ hereto ”, “ herein ,” “ hereof ” and “ hereunder ,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory, rules, regulations, orders and provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all assets and properties of whatever kind, tangible and intangible, real and personal, including cash, securities, accounts and contract rights.

(b) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.

(c) 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.”

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

(e) To the extent that any of the representations and warranties contained in Article VI under this Agreement or in any of the other Loan Documents is qualified by “Material Adverse Effect”, the qualifier “in all material respects” contained in Section 5.02(a) and the qualifier “in any material respect” contained in Section 9.01(d) shall not apply.

(f) All determinations (including calculations of Borrowing Base and financial covenants) made from time to time under the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing Base calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to the Administrative Agent (and not necessarily calculated in accordance with GAAP).

 

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Section 1.03 Accounting Terms .

(a) Except as otherwise specifically prescribed herein, 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. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the AFI and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

(b) AFI will provide a written summary of material changes in GAAP and in the consistent application thereof with each annual and quarterly Compliance Certificate delivered in accordance with Section 7.02(a) . 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 AFI or the Required Lenders shall so request, the Administrative Agent, the Lenders and AFI 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) AFI shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

(c) All calculations of the financial covenant in Section 8.11 shall be made on a Pro Forma Basis.

Section 1.04 Rounding.

Any financial ratios required to be maintained 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).

Section 1.05 Times of Day.

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

Section 1.06 Letter of Credit Amounts.

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

Section 1.07 Rates . The Administrative Agent does not warrant, nor accept responsibility, nor shall the Administrative Agent have any liability with respect to the administration, submission or any other matter related to the rates in the definition of “Eurodollar Rate” or with respect to any comparable or successor rate thereto.

 

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Section 1.08 Uniform Commercial Code . As used herein, the following terms are defined in accordance with the UCC in effect in the State of New York from time to time: “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,” “Investment Property,” “Letter-of-Credit Right” and “Supporting Obligation.” In addition, other terms relating to Collateral used and not otherwise defined herein that are defined in the UCC shall have the meanings set forth in the UCC as the context requires.

ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS

Section 2.01 Revolving Loans to Borrowers .

(a) Revolving Loans . Subject to the terms and conditions set forth herein, each Revolving Lender severally (and not jointly with the other Revolving Lenders), upon the terms and subject to the conditions set forth herein, agrees to make loans (each such loan, a “ Revolving Loan ”) to any of the Borrowers in Dollars 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 such Revolving Lender’s Commitment; provided , however , that after giving effect to any Borrowing of Revolving Loans, (i) with regard to the Revolving Lenders collectively, the Total Revolving Outstandings shall not exceed the Line Cap, (ii) with regard to each Revolving Lender individually, such Revolving Lender’s Pro Rata Share of Total Revolving Outstandings shall not exceed such Revolving Lender’s Commitment. Within the limits of each Revolving Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01 , prepay under Section 2.05 , and reborrow under this Section 2.01 . Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein. Borrowers shall be jointly and severally liable to pay all of the Revolving Loans. Each Revolving Loan shall be funded and repaid in Dollars. The Revolving Loans made by each Revolving Lender and interest thereon shall be evidenced by the records of the Administrative Agent and such Revolving Lender. At the request of any Revolving Lender, the Borrowers shall deliver promissory note(s) to such Revolving Lender in an amount of such Revolving Lender’s Commitment.

(b) Incremental Credit Facilities . At any time on or after the Closing Date, the Borrowers may, on written notice from AFI to the Administrative Agent, establish additional credit facilities with Lenders or other Eligible Assignees who shall become Lenders (collectively, the “ Incremental Credit Facilities ”) by increasing the Aggregate Committed Amount or establishing other revolving credit commitments in accordance herewith with the following:

(i) The aggregate amount of loans and commitments for all Incremental Credit Facilities established after the Closing Date shall not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000).

(ii) A portion of the Incremental Credit Facilities may be provided to the Borrowers in the form of a “first-in, last-out” credit facility under this Agreement (“ FILO Credit Facility ”) which AFI may by written notice to the Administrative Agent elect to establish with each FILO Lender that agrees to make loans in accordance with the FILO Amendment; provided , that (x) it shall be a condition to the establishment of a FILO Credit Facility that all conditions set forth in this Section 2.01 and all FILO Incremental Conditions shall be satisfied, and (y) notwithstanding

 

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anything in Section 11.01 or any other provision of the Loan Documents to the contrary, (1) the Lenders hereby irrevocably authorize the Administrative Agent to enter into a FILO Incremental Amendment or other amendments, restatements or other supplements or modifications to this Agreement and the other Loan Documents with the applicable Loan Parties and the FILO Lenders as may be necessary or desirable in order to establish the FILO Credit Facility, in each case on terms consistent with the conditions set forth in this Section 2.01 and the FILO Incremental Conditions without the consent or approval of any Lenders (other than the Lenders participating in the FILO Credit Facility), (2) the Lenders hereby consent to the FILO Credit Facility, the FILO Incremental Conditions and other transactions contemplated by this Section 2.01(b)(ii) and hereby waive the requirements of any provision of this Agreement (including, without limitation, any pro rata payment section or amendment or waiver section, but excluding this Section 2.01 and the FILO Incremental Conditions) or any other Loan Document that might otherwise prohibit or restrict the FILO Credit Facility, the FILO Credit Facility Amendment or any other transaction contemplated by this Section 2.01(b)(ii) and (3) the Administrative Agent shall have the right (but not the obligation) to consult with the Required Lenders with respect to the FILO Credit Facility and any matter contemplated by this Section 2.01(b)(ii) .

(iii) A portion of the Incremental Credit Facilities may be provided to Canadian Subsidiaries of AFI in the form of a Canadian Dollar revolving credit facility (a “ Canadian Incremental Credit Facility ”), which AFI may by written notice to the Administrative Agent elect to establish with each Canadian Incremental Lender that agrees to make Canadian Incremental Revolving Loans; provided , that (x) it shall be a condition to the establishment of a Canadian Incremental Credit Facility that all conditions set forth in this Section 2.01 and all Canadian Incremental Conditions shall be satisfied, and (y) notwithstanding anything in Section 11.01 or any other provision of the Loan Documents to the contrary, (1) the Lenders hereby irrevocably authorize the Administrative Agent to enter into a Canadian Incremental Amendment or other amendments, restatements or other supplements or modifications to this Agreement and the other Loan Documents with the applicable Loan Parties and the Canadian Incremental Lenders as may be necessary or desirable in order to establish the Canadian Incremental Credit Facility, in each case on terms consistent with the conditions set forth in this Section 2.01 and the Canadian Incremental Conditions without the consent or approval of any Lenders (other than the Lenders participating in the Canadian Credit Facility), (2) the Lenders hereby consent to the Canadian Incremental Credit Facility, the Canadian Incremental Conditions and other transactions contemplated by this Section 2.01(b)(iii) and hereby waive the requirements of any provision of this Agreement (including, without limitation, any pro rata payment section or amendment or waiver section, but excluding this Section 2.01 and the Canadian Incremental Conditions) or any other Loan Document that might otherwise prohibit or restrict the Canadian Incremental Credit Facility, the Canadian Incremental Credit Facility Amendment or any other transaction contemplated by this Section 2.01(b)(iii) and (3) the Administrative Agent shall have the right (but not the obligation) to consult with the Required Lenders with respect to the Canadian Incremental Credit Facility and any matter contemplated by this Section 2.01(b)(iii) .

(iv) A portion of the Incremental Credit Facilities may be provided to Australian Subsidiaries of AFI in the form of an Australian Dollar revolving credit facility (an “ Australian Incremental Credit Facility ”), which AFI may by written notice to the Administrative Agent elect to establish with each Australian Incremental Lender that agrees to make Australian Incremental Revolving Loans; provided , that (x) it shall be a condition to the establishment of an Australian Incremental Credit Facility that all conditions set forth in this Section 2.01 and all Australian Incremental Conditions shall be satisfied, and (y) notwithstanding anything in Section 11.01 or any other provision of the Loan Documents to the contrary, (1) the Lenders hereby irrevocably authorize the Administrative Agent to enter into an Australian Incremental Amendment or other

 

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amendments, restatements or other supplements or modifications to this Agreement and the other Loan Documents with the applicable Loan Parties and the Australian Incremental Lenders as may be necessary or desirable in order to establish the Australian Incremental Credit Facility, in each case on terms consistent with conditions set forth in this Section 2.01 and the Australian Incremental Conditions without the consent or approval of any Lenders (other than the Lenders participating in the Australian Incremental Credit Facility), (2) the Lenders hereby consent to the Australian Incremental Credit Facility, the Australian Incremental Conditions and other transactions contemplated by this Section 2.01(b)(iv) and hereby waive the requirements of any other provisions of this Agreement (including, without limitation, any pro rata payment section or amendment or waiver section, but excluding this Section 2.01 and the Australian Incremental Conditions) or any other Loan Document that might otherwise prohibit or restrict the Australian Incremental Credit Facility, the Australian Incremental Credit Facility Amendment or any other transaction contemplated by this Section 2.01(b)(iv) and (3) the Administrative Agent shall have the right (but not the obligation) to consult with the Required Lenders with respect to the Australian Incremental Credit Facility and any matter contemplated by this Section 2.01(b)(iv) .

(v) All or a portion of the Incremental Credit Facilities may be provided to the Borrowers in the form of one or more increases in the Commitments, which AFI may by written notice to the Administrative Agent elect to establish with each Revolving Lender that agrees to so increase its Commitments or other Eligible Assignees that agree to provide a Commitment in connection with the establishment of such Incremental Credit Facility; provided , that (w) any such Incremental Credit Facility denominated in Dollars shall be a part of the Revolving Loans and Commitments hereunder subject to the same terms and conditions without distinction from the Revolving Loans and Commitments existing prior to their establishment, except as may be expressly provided in connection therewith (such as any upfront fees, different interest rate or different later final maturity date); (x) any such increase will be in a minimum principal amount of $10,000,000 and integral multiples of $1,000,000 in excess thereof, (y) if any Revolving Loans are outstanding at the time of establishment of the Incremental Credit Facility, the Borrowers will make such payments and adjustments on the U.S Revolving Loans (including payment of any break-funding amounts owing under Section 3.05 ) as may be necessary to give effect to the revised commitment amounts and Pro Rata Shares, it being agreed that the Administrative Agent shall, in consultation with the Borrowers, manage the allocation of the revised Pro Rata Shares to the existing Eurodollar Rate Loans in such a manner as to minimize the break-funding amounts so payable by the Borrowers, and (z) the final maturity date of any such Incremental Credit Facility shall be no earlier than the final maturity date of the then existing Revolving Loans and Commitments.

(c) No Obligation to Arrange or Commit; Schedule 2.01 . In connection with establishment of any Incremental Credit Facility, (1) none of the Lenders or their affiliates shall have any obligation to provide commitments or loans for any Incremental Credit Facility without their prior written approval, (2) neither the Administrative Agent nor any of the Arrangers shall have any responsibility for arranging any such additional commitments without their prior written consent and subject to such conditions, including fee arrangements, as they may provide in connection therewith and (3)  Schedule 2.01 will be deemed to be revised to reflect the Lenders, Loans, Commitments and pro rata shares or percentages after giving effect to the establishment of each such Incremental Credit Facility.

(d) Additional Conditions for Establishment of Incremental Credit Facility . The establishment of any Incremental Credit Facility is subject to the following additional conditions:

(i) after giving effect to such Incremental Credit Facility, the Dollar Equivalent of the aggregate amount of all loans and commitments under all the Incremental Credit Facilities shall not exceed One Hundred Fifty Million Dollars ($150,000,000);

 

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(ii) any new lender providing loans and commitments for the Incremental Credit Facilities in accordance with Section 2.01(b)(v) must be reasonably acceptable to the L/C Issuer and the Swing Line Lender; and

(iii) (A) no Default or Event of Default shall exist immediately before or immediately after giving effect thereto, (B) AFI shall be in compliance with the financial covenant under Section 8.11 after giving effect thereto on a Pro Forma Basis (assuming for purposes hereof that the entire amount of the Incremental Credit Facility is fully drawn and funded), (C) the conditions for Credit Extensions under subsections (a) and (b) of Section 5.02 are or can be satisfied on such date, and (D) AFI shall demonstrate compliance with the sizing condition for the Incremental Credit Facility in clause (i)  hereinabove;

(iv) AFI will provide (A) a compliance certificate from a Responsible Officer confirming satisfaction of the foregoing conditions in clause (iii)  above, and (B) supporting resolutions, legal opinions, promissory notes and other items as may be reasonably required by the Administrative Agent;

(v) lenders providing loans and commitments for such Incremental Credit Facility will provide a Lender Joinder Agreement and such other agreements reasonably acceptable to the Administrative Agent;

(vi) upfront and/or arrangement fees, if any, in respect of the new commitments or loans so established, shall be paid; and

(vii) to the extent necessary in the reasonable judgment of the Administrative Agent, amendments to each of the Collateral Documents, if any, and related documents or agreements shall have been made, in each case in a manner reasonably satisfactory to the Administrative Agent.

(e) Advancing Loans Under Incremental Credit Facilities . Subject to the terms and conditions hereof, loans with respect to any Incremental Credit Facility established in accordance with Section 2.01(b)(v) shall be made in accordance with Section 2.01(a) and all other loans with respect to any other Incremental Credit Facilities shall be made in accordance with the amendment establishing such Incremental Credit Facility.

Section 2.02 Borrowings, Conversions and Continuations of Loans .

 

  (a)

(i) (A) Revolving Loans . Whenever any Borrower desires funding of a Borrowing of U.S. Revolving Loans, a conversion of Revolving Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, AFI shall give irrevocable notice to the Administrative Agent, which may be given by telephone, email or other electronic method approved by the Administrative Agent (each, an “ electronic notice ”). Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (1) three Business Days prior to the requested date of any Borrowing of Eurodollar Rate Loans, and (2) one Business Day prior to the requested date of each Borrowing or conversion of Base Rate Loans (or, in the case of Borrowings on the Closing Date, such shorter period as to which the Administrative Agent may consent). Each electronic notice by AFI

 

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  pursuant to this Section 2.02(a)(i)(A) must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately completed and signed by an authorized officer of the Applicable Borrower. Each Borrowing, conversion or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in Sections 2.03(c) and 2.04(c) , each Borrowing or conversion of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Loan Notice (whether an electronic notice or written notice) shall specify (1) the requested date of the Borrowing, conversion or continuation (which shall be a Business Day), (2) the principal amount of Loans to be borrowed, (3) the Type of Revolving Loans to be borrowed, and (4) if applicable, the duration of the Interest Period with respect thereto. If AFI fails to specify a Type of a Loan in a Loan Notice, then the applicable Loans shall be made as Base Rate Loans. Any automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If AFI requests a Borrowing, conversion or continuation of Eurodollar Rate Loans in any Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

(B) Incremental Revolving Loans . The requirements for funding of loans under any Australian Incremental Credit Facility, Canadian Incremental Credit Facility or FILO Incremental Credit Facility, as the case may be, shall be set forth in the amendment establishing such Incremental Credit Facility.

(ii) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Loans. Each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative 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 5.02 (and, if such Borrowing is the initial Credit Extension, Section 5.01 ), the Administrative Agent shall make all funds so received available to the Applicable Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Applicable 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 (and reasonably acceptable to) the Administrative Agent by the Applicable Borrower; provided , however , that if, on the date of a Borrowing, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings and second , shall be made available to the Applicable Borrower as provided above.

(iii) The Administrative Agent shall promptly notify the Borrowers and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrowers and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

(b) The Borrowers shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (i) except as provided in Section 3.05 , Eurodollar Rate Loans may be converted into Base Rate Loans or extended as Eurodollar Rate Loans for new Interest Periods only on the last day of the Interest Period applicable thereto, (ii) Loans extended as, or converted into, Eurodollar Rate Loans

 

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shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (iii) any request for continuation or conversion of a Eurodollar Rate Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such continuation or conversion shall be effected by the Applicable Borrower by giving a Notice of Extension/Conversion (or electronic notice promptly confirmed in writing) to the office of the Administrative Agent specified in Section 11.02 , or at such other office as the Administrative Agent may designate in writing, prior to 11:00 a.m., on the Business Day of, in the case of the conversion of a Eurodollar Rate Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the continuation of a Eurodollar Rate Loan as, or conversion of a Base Rate Loan into, a Eurodollar Rate Loan, the date of the proposed continuation or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. In the event the Applicable Borrower fails to request continuation or conversion of any Eurodollar Rate Loan in accordance with this Section, or any such conversion or continuation is not permitted or required by this Section, then such Eurodollar Rate Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed continuation or conversion affecting any Revolving Loan.

(c) After giving effect to all Borrowings, conversions and continuations of Revolving Loans, there shall not be more than five (5) Interest Periods in effect with respect to Revolving Loans.

Section 2.03 Letters of Credit .

(a) The Letter of Credit Commitment .

(i) Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.03 , (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit denominated in Dollars for the account of the Applicable Borrower or its Domestic Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b)  below, and (2) to honor drawings under the Letters of Credit issued by it; and (B) the Revolving Lenders severally agree to participate in Letters of Credit hereunder for the account of the Applicable Borrower or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (w) with regard to the Revolving Lenders collectively, the Total Revolving Outstandings shall not exceed the Line Cap, (x) with regard to each Revolving Lender individually, such Revolving Lender’s Pro Rata Share of Total Revolving Outstandings shall not exceed such Revolving Lender’s Commitment and (y) the Outstanding Amount of the L/C Obligations shall not exceed FIFTY MILLION DOLLARS ($50,000,000) (the “ Letter of Credit Sublimit ”). Each request by the Applicable Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by AFI that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers’ ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrowers may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. Existing Letters of Credit shall be deemed to have been issued hereunder and shall be subject to and governed by the terms and conditions hereof.

 

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(ii) An L/C Issuer shall not issue any Letter of Credit if:

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

(B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Lenders have approved such expiry date; or

(C) any of the conditions set forth in Section 2.03(a)(i) and any of the L/C Conditions are not satisfied.

(iii) An L/C Issuer shall be under no obligation to issue any Letter of Credit if:

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

(B) the issuance of such Letter of Credit would violate any Laws or one or more policies of such L/C Issuer;

(C) except (I) as otherwise agreed by the Administrative Agent and such L/C Issuer or (II) in respect of an Existing Letter of Credit and any replacements thereof, such Letter of Credit is in an initial face amount less than $100,000, in the case of a commercial Letter of Credit, or $250,000, in the case of a standby Letter of Credit;

(D) such Letter of Credit is to be denominated in a currency other than Dollars; or

(E) any Lender is at such time a Defaulting Lender, whether on account of a failure to fund its obligations under Section 2.03(c ) or otherwise, unless Adequate Assurance has been provided.

(iv) An L/C Issuer shall not amend any Letter of Credit if such L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.

(v) An L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) such L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(vi) An L/C Issuer shall be under no obligation to issue or amend any Letter of Credit if such L/C Issuer has received written notice from any Lender, the Administrative Agent or any

 

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Loan Party, on or prior to the Business Day prior to the requested date of issuance or amendment of such Letter of Credit, that one or more applicable conditions contained in Section 5.02 shall not then be satisfied.

(vii) Each L/C Issuer shall act on behalf of the Revolving Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and such L/C Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in Article X with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article X included such L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such L/C Issuer.

(viii) If an L/C Lender receives written notice from a Revolving Lender at least two (2) Business Days before issuance of a Letter of Credit that any L/C Condition has not been satisfied, such L/C Issuer shall have no obligation to issue the requested U.S. Letter of Credit (or any other) until such notice is withdrawn in writing by the Required Lenders or until the Required Lenders have waived such condition in accordance with this Agreement. Prior to receipt of any such notice, an L/C Issuer shall not be deemed to have knowledge of any failure of L/C Conditions.

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

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

(ii) Issuance . Promptly after receipt of any Letter of Credit Application, the applicable L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Applicable Borrower and, if not, such L/C Issuer will provide the Administrative Agent with a

 

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copy thereof. Unless the applicable L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one (1) Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Section 5.02 shall not then be satisfied, then, subject to the terms and conditions hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Applicable Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with such L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from such L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Revolving Lender’s Pro Rata Share times the amount of such Letter of Credit.

(iii) Auto-Extension Letters of Credit . If a Borrower so requests in any applicable Letter of Credit Application, the applicable L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “ Auto-Extension Letter of Credit ”); provided that any such Auto-Extension Letter of Credit must permit such L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “ Non-Extension Notice Date ”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the applicable L/C Issuer, the Borrowers shall not be required to make a specific request to such L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Revolving Lenders shall be deemed to have authorized (but may not require) the applicable L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided , however , that such L/C Issuer shall not permit any such extension if (A) such L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clauses (ii)  and (iii)  of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or any Loan Party that one or more of the applicable conditions specified in Section 5.02 is not then satisfied, and in each such case directing such L/C Issuer not to permit such extension.

(iv) Reporting by L/C Issuer . Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable L/C Issuer will also deliver to the Borrowers and the Administrative Agent a true and complete copy of such Letter of Credit or amendment. On a monthly basis, each L/C Issuer shall deliver to the Administrative Agent a complete list of all outstanding Letters of Credit issued by such L/C Issuer as provided in Section 2.03(f ).

(c) Drawings and Reimbursements; Funding of Participations .

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of drawing under such Letter of Credit, the applicable L/C Issuer shall notify the Applicable Borrower and the Administrative Agent thereof. The applicable L/C Issuer shall notify the Applicable Borrower of the amount of the drawing promptly following the determination thereof, and in any event no later than 9:00 a.m. on the Honor Date (as hereafter defined). Not later than 11:00 a.m. on the date of any payment by the applicable L/C Issuer under a Letter of Credit (each such date, an “ Honor Date ”), the Applicable Borrower shall reimburse such L/C Issuer in an

 

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amount equal to the amount of such drawing. If the Applicable Borrower fails to so reimburse the applicable L/C Issuer by such time, such L/C Issuer shall promptly notify the Administrative Agent, whereupon the Administrative Agent shall promptly notify each Revolving Lender of the Honor Date, the amount of the unreimbursed drawing (the “ Unreimbursed Amount ”), and the amount of such Revolving Lender’s Pro Rata Share thereof. In such event, the Applicable Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, the amount of the unutilized portion of the Aggregate Committed Amount or the conditions set forth in Section 5.02 . Any notice given by the applicable L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(ii) Each Revolving Lender (including any Revolving Lender acting as L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the applicable L/C Issuer in Dollars at the Administrative Agent’s Office in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii) , each Revolving Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Applicable Borrower in such amount. The Administrative Agent shall remit the funds so received to the applicable L/C Issuer.

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing of Base Rate Loans for any reason, the Applicable Borrower shall be deemed to have incurred from the applicable L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Lender’s payment to the Administrative Agent for the account of the applicable L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Revolving Lender in satisfaction of its participation obligation under this Section 2.03 .

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

(v) Each Revolving Lender’s obligation to make Revolving Loans or L/C Advances to reimburse the applicable L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c) , shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Revolving Lender may have against such L/C Issuer, the Applicable Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, (C) noncompliance with the conditions set forth in Section 5.02 or (D) any other occurrence, event or condition, whether or not similar to any of the foregoing. No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Applicable Borrower to reimburse the applicable L/C Issuer for the amount of any payment made by such L/C Issuer under any Letter of Credit, together with interest as provided herein.

 

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(vi) If any Revolving Lender fails to make available to the Administrative Agent for the account of the applicable L/C Issuer 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)(ii) , such L/C Issuer shall be entitled to recover from such Revolving Lender (acting through the Administrative 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 such L/C Issuer at a rate per annum equal to the applicable Overnight Rate from time to time in effect. A certificate of the applicable L/C Issuer submitted to any Revolving Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive, absent manifest error.

(d) Repayment of Participations .

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

(ii) If any payment received by the Administrative Agent for the account of the applicable L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 11.05 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), each Revolving Lender shall pay to the Administrative Agent for the account of such L/C Issuer its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Revolving Lender, at a rate per annum equal to the applicable Overnight Rate from time to time in effect. 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) Obligations Absolute . The obligation of the Applicable Borrower to reimburse the applicable L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

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

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

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

 

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

(v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Applicable Borrower or any Subsidiary.

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

(f) Role of L/C Issuer . Each Lender and the Applicable Borrower agree that, in paying any drawing under a Letter of Credit, the applicable L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuers, the Administrative Agent, any of their respective Related Parties nor any of the respective correspondents, participants or assignees of the L/C Issuers shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Applicable Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided , however , that this assumption is not intended to, and shall not, preclude the Applicable Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuers, the Administrative Agent, any of their respective Related Parties nor any of the respective correspondents, participants or assignees of the L/C Issuers, shall be liable or responsible for any of the matters described in clauses (i)  through (v)  of Section 2.03(e) ; provided , however , that anything in such clauses to the contrary notwithstanding, the Applicable Borrower may have a claim against the applicable L/C Issuer, and such L/C Issuer may be liable to the Applicable Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Applicable Borrower which the Applicable Borrower proves were caused by such L/C Issuer’s willful misconduct or gross negligence or such L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, each L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. Each L/C Issuer shall provide to the

 

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Administrative Agent a list of outstanding Letters of Credit (together with amounts) issued by it on a monthly basis (and upon the request of the Administrative Agent); the Administrative Agent shall provide a copy of such list to any Lender upon request.

(g) Cash Collateral . (i) Upon the request of the Administrative Agent, (A) if the applicable L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (B) if, as of the Letter of Credit Expiration Date, any Letter of Credit for any reason remains outstanding and partially or wholly undrawn, the Applicable Borrower shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an amount equal to such Outstanding Amount determined as of the date of such L/C Borrowing or the Letter of Credit Expiration Date, as the case may be).

(i) In addition, if the Administrative Agent notifies the Borrowers at any time that the Outstanding Amount of all L/C Obligations at such time exceeds 105% of the Letter of Credit Sublimit then in effect, then, within two Business Days after receipt of such notice, the Applicable Borrower shall Cash Collateralize the L/C Obligations in an amount equal to the amount by which the Outstanding Amount of all L/C Obligations exceeds the Letter of Credit Sublimit.

(ii) Sections 2.05 , 2.14 , 9.02(c) and 9.03 set forth certain additional requirements to deliver Cash Collateral hereunder.

(h) Applicability of ISP and UCP . Unless otherwise expressly agreed by the applicable L/C Issuer and the Applicable Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of ISP shall apply to each standby Letter of Credit, and (ii) the rules of the UCP shall apply to each commercial Letter of Credit.

(i) Letter of Credit Fees . The Applicable Borrower shall pay to the Administrative Agent for the account of each Revolving Lender in accordance with its Pro Rata Share, in Dollars, a Letter of Credit fee (the “ Letter of Credit Fee ”) (i) for each commercial Letter of Credit equal to the Applicable Rate times the daily amount available to be drawn under such Letter of Credit and (ii) for each standby Letter of Credit equal to the Applicable Rate times the daily amount available to be drawn under such Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06 . Letter of Credit Fees shall be (i) computed on a monthly basis in arrears and (ii) due and payable on the first (1 st ) Business Day occurring after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Rate during any month, the daily maximum amount of each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such month that such Applicable Rate was in effect. Notwithstanding anything to the contrary contained herein, (i) upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate, and (ii) Defaulting Lenders shall not be entitled to the Letter of Credit Fee as provided in Section 2.15 .

(j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer . The Applicable Borrower shall pay directly to the applicable L/C Issuer for its own account, (i) a fronting fee for each commercial Letter of Credit issued by it (other than Existing Letters of Credit) equal to one-eighth of one percent (1/8%) times the amount of such commercial Letter of Credit, due and payable on the first (1 st ) Business Day occurring after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such commercial Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand and (ii) a fronting fee with respect to each

 

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standby Letter of Credit issued by it in an amount equal to one-eighth of one percent (1/8%) per annum on the daily amount available to be drawn thereunder, due and payable on the first (1 st ) Business Day occurring after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such standby Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06 . In addition, the Applicable Borrower shall pay directly to the applicable L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

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

(l) Letters of Credit Issued for Subsidiaries . Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Applicable Borrower shall be obligated to reimburse the applicable L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Applicable Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Applicable Borrower, and that the Applicable Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

(m) Existing Letters of Credit . Notwithstanding anything herein to the contrary, each Existing Letter of Credit shall be deemed to have been issued hereunder.

Section 2.04 Swing Line Loans .

(a) Swing Line Facility . Subject to the terms and conditions set forth herein, the Swing Line Lender, in reliance upon the agreements of the other Lenders set forth in this Section 2.04 , may in its sole discretion make loans (each such loan, a “ Swing Line Loan ”) to the Applicable Borrower in Dollars from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the “ Swing Line Sublimit ”) at any time outstanding, notwithstanding the fact that such Swing Line Loans, when aggregated with the Pro Rata Share of the Outstanding Amount of Revolving Loans and L/C Obligations of the Swing Line Lender in its capacity as a Revolving Lender, may exceed the amount of such Revolving Lender’s Commitment; provided , however , that after giving effect to any Swing Line Loan, (i) with regard to the Revolving Lenders collectively, the Total Revolving Outstandings shall not exceed the Line Cap, and (ii) with regard to each Revolving Lender individually (other than the Swing Line Lender) such Revolving Lender’s Pro Rata Share of Total Revolving Outstandings shall not exceed such Revolving Lender’s Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.04 , prepay under Section 2.05 , and reborrow under this Section 2.04 . Each Swing Line Loan shall bear interest at such rate mutually agreed to between the Applicable Borrower and the Swing Line Lender or, in the absence of such mutual agreement, shall be a Base Rate Loan. 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 Pro Rata Share times the amount of such Swing Line Loan.

(b) Borrowing Procedures . Each Borrowing of Swing Line Loans shall be made upon a Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by electronic notice. Each such notice must be received by the Swing Line Lender and the

 

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Administrative 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 principal amount of $250,000 and integral multiples of $100,000 in excess thereof, and (ii) the requested borrowing date, which shall be a Business Day. Each such electronic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by an authorized officer of the Applicable Borrower. Promptly after receipt by the Swing Line Lender of any electronic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative 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 Administrative Agent (including at the request of any Lender) prior to 2:00 p.m. on the date of the proposed Borrowing of Swing Line Loans (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.04(a) , or (B) that one or more of the applicable conditions specified in Section 5.02 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Applicable Borrower. The Swing Line Lender shall not be under any obligation to make a Swing Line Loan if any Revolving Lender is at such time a Defaulting Lender, whether on account of a failure to fund its obligations under Section 2.04(b)(ii ) or otherwise, unless such Revolving Lender shall have provided Adequate Assurance.

(c) Refinancing of Swing Line Loans .

(i) The Swing Line Lender at any time in its sole and absolute discretion, may, and in any event at least once every two weeks, shall request, on behalf of the Applicable Borrower (which hereby irrevocably requests and authorizes the Swing Line Lender to so request on its behalf), that each Revolving Lender make a Base Rate Loan in an amount equal to such Revolving Lender’s Pro Rata Share 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 Base Rate Loans, the unutilized portion of the Aggregate Committed Amount or the conditions set forth in Section 5.02 . The Swing Line Lender shall furnish the Applicable Borrower with a copy of the applicable Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Lender shall make an amount equal to its Pro Rata Share of the amount specified in such Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Loan Notice (which shall be at least one Business Day after the receipt of such Loan Notice by the Administrative Agent), whereupon, subject to Section 2.04(c)(ii) , each Revolving Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Applicable Borrower in such amount. The Administrative 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 Borrowing of Revolving Loans in accordance with Section 2.04(c)(i) , the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(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 Administrative 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 2.04(c) by the time specified in Section 2.04(c)(i) , the Swing Line Lender shall be entitled to recover from such Revolving Lender (acting through the Administrative 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 applicable Overnight Rate from time to time in effect. A certificate of the Swing Line Lender submitted to any Revolving Lender (through the Administrative 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 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right that such Revolving Lender may have against the Swing Line Lender, the Applicable Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, (C) non-compliance with the conditions set forth in Section 5.02 or (D) any other occurrence, event or condition, whether or not similar to any of the foregoing. No such purchase or funding of risk participations shall relieve or otherwise impair the obligation of the Applicable 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 receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Revolving Lender its Pro Rata Share 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 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 11.05 (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 Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the applicable Overnight Rate. The Administrative 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 Applicable Borrower for interest on the Swing Line Loans. Until each Revolving Lender funds its Revolving Loans that are Base Rate Loans or risk participation pursuant to this Section 2.04 to refinance such Revolving Lender’s Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.

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

 

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(g) Swing Line Notes . The Swing Line Loans made by each Swing Line Lender and interest accruing thereon shall be evidenced by the records of the Administrative Agent and such Swing Line Lender and need not be evidenced by any promissory note.

Section 2.05 Prepayments .

(a) Voluntary Prepayments . Voluntary prepayments may be made on any Loans hereunder selected by the Applicable Borrower on a pro rata basis to the Lenders in accordance with their respective interests therein and, except as set forth in clause (d) below, at par without premium or penalty (except, in the case of Loans other than Base Rate Loans, amounts payable pursuant to Section 3.05 ); provided that:

(i) (A) in the case of Loans other than Swing Line Loans, (x) notice thereof must be received by 11:00 a.m. by the Administrative Agent at least three Business Days prior to the date of prepayment, in the case of Eurodollar Rate Loans and (y) one Business Day prior to the date of prepayment, in the case of Base Rate Loans, and (B) any such prepayment shall be a minimum principal amount of (x) $5,000,000 and integral multiples of $1,000,000 in excess thereof, in the case of Eurodollar Rate Loans and (y) $1,000,000 and integral multiples of $500,000 in excess thereof, in the case of Base Rate Loans, or, in each case, the entire remaining principal amount thereof, if less; and

(ii) in the case of Swing Line Loans, (A) notice thereof must be received by the Swing Line Lender by 1:00 p.m. on the date of prepayment (with a copy to the Administrative Agent), and (B) any such prepayment shall be in the same minimum principal amounts as for advances thereof (or any lesser amount that may be acceptable to the Swing Line Lender).

Each such notice of voluntary prepayment hereunder shall be irrevocable and shall specify the date and amount of prepayment and the Loans and Types of Loans that are being prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans; provided, however, that the Applicable Borrower may rescind any notice of voluntary prepayment hereunder if such prepayment would have resulted from a refinancing of all of the Loans and Commitment, and such refinancing shall not have been consummated or shall otherwise have been delayed. The Administrative Agent will give prompt notice to the applicable Lenders of any prepayment on the Loans and the Lender’s interest therein. Prepayments of Eurodollar Rate Loans hereunder shall be accompanied by accrued interest on the amount prepaid and breakage amounts, if any, under Section 3.05 .

(b) Mandatory Prepayments . Revolving Loans shall be due and payable in full on the Commitment Termination Date, unless payment is sooner required hereunder. Overadvance Loans shall be repaid as and when required in accordance with Section 2.17(a) . If at any time the Total Revolving Outstandings exceed the Aggregate Committed Amount, the amount of such excess shall be payable on demand by the Administrative Agent.

(c) Application of Prepayments . Voluntary prepayments under Section 2.05(a)(i) above shall be applied to such Loans and to such installments of such Loans as specified by the Applicable Borrower.

Section 2.06 Termination or Reduction of Aggregate Committed Amount .

(a) Commitments . Unless sooner terminated in accordance with this Agreement, the Commitments shall terminate on the Commitment Termination Date. Upon at least three (3) Business Days’ prior written notice to the Administrative Agent from AFI, the Borrowers may, at their option, terminate the Commitments in full without premium or penalty (other than funding losses payable pursuant to Section 3.06. If the Borrowers elect to reduce to zero or terminate the Commitments pursuant to the previous sentence, any Incremental Credit Facility Commitments shall automatically terminate concurrently with the termination of the Commitments.

 

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(b) Partial Reductions . The Aggregate Committed Amount may be permanently reduced in whole or in part by notice from the Borrowers to the Administrative Agent; provided that (a) any such notice thereof must be received by 11:00 a.m. at least three Business Days prior to the date of reduction or termination and any such reduction or termination shall be in a minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining amount of the Aggregate Committed Amount); and (b) the Aggregate Committed Amount may not be reduced to an amount less than the Total Revolving Outstandings. The Administrative Agent will give prompt notice to the Revolving Lenders of any such reduction in Aggregate Committed Amount. Any reduction of the Aggregate Committed Amount shall be applied to the Commitments of the Revolving Lenders ratably in accordance with their respective interests therein, except as provided in Section 2.15 . All commitment or other fees accrued until the effective date of any termination of the Aggregate Committed Amount shall be paid on the effective date of such termination.

Section 2.07 Repayment of Obligations .

(a) Revolving Loans . On the Commitment Termination Date, the Borrowers shall repay to the Revolving Lenders all Revolving Obligations outstanding on such date, unless payment of such Obligations is sooner required hereunder.

(b) Swing Line Loans . The Applicable Borrower shall repay each Swing Line Loan on the earlier to occur of (i) demand by the Swing Line Lender and (ii) the Maturity Date.

(c) Incremental Credit Facilities . Loans under any Australian Incremental Credit Facility, Canadian Incremental Credit Facility or FILO Credit Facility shall be repaid on the dates specified in the applicable amendment establishing any such Incremental Credit Facility.

(d) Overadvance Loans . Notwithstanding anything herein to the contrary, if an Overadvance exists, the Borrower owing such Overadvance shall, on the sooner of the Administrative Agent’s demand or the first Business Day after such Borrower has knowledge thereof (or, in the event such Overadvance is the result of fluctuations in Spot Rates, within three (3) Business Days of the Administrative Agent’s demand or of such Borrower’s knowledge thereof), repay the outstanding Loans in an amount sufficient to reduce the principal balance of the related Overadvance Loan to zero.

(e) Other Obligations . Obligations (other than principal and interest of Loans) shall be paid by Borrowers as provided in the Loan Documents or, if no payment date is specified, within ten (10) Business Days of demand by the Administrative Agent therefor.

(f) General Payment Provisions . All payments of Obligations shall be made without offset, counterclaim or defense of any kind, free of (and without deduction for) any Taxes, and in immediately available funds, not later than 1:00 p.m. on the due date. Any payment after such time shall be deemed made on the next Business Day. If any payment under the Loan Documents shall be stated to be due on a day other than a Business Day, the due date shall be extended to the next Business Day and such extension of time shall be included in any computation of interest and fees. Any payment of a Eurodollar Rate Loan prior to the end of its Interest Period shall be accompanied by all amounts due under Section 3.05 . Any prepayment of Loans made by a Borrower shall be applied first to costs and expenses of the Administrative Agent and any security trustees (including any Extraordinary Expenses) relating to such Borrower, second to Base Rate Loans (and the Administrative Agent may, in its discretion, apply such prepayment to Swingline Loans before other Revolving Loans) of such Borrower, and then to Eurodollar

 

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Rate Loans of such Borrower; provided , however , that as long as no Default or Event of Default exists, prepayments of Eurodollar Rate Loans may, at the option of such Borrower and the Administrative Agent, be held by the Administrative Agent as Cash Collateral and applied to such Loans at the end of their Interest Periods (in which case no compensation under Section 3.05 hereof shall be payable with respect to such prepayment). All payments with respect to any Revolving Obligations shall be made in Dollars and all payments with respect to any other Obligation shall be made in the currency of the underlying Obligation.

Section 2.08 Interest .

(a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the sum of (A) the Eurodollar Rate for such Interest Period plus (B) the Applicable Rate; (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 Rate; and (iii) unless otherwise mutually agreed between the Applicable Borrower and the Swing Line Lender, 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 Rate.

(b) (i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such overdue amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(ii) If any amount (other than principal of any Loan) payable by the Applicable Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such overdue amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(iii) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c) 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.

Section 2.09 Fees .

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

(a) Commitment Fee . AFI shall pay to the Administrative Agent for the account of each Revolving Lender in accordance with its Pro Rata Share, a commitment fee in Dollars equal to the amount set forth in clause (b) of the definition of “Applicable Rate”. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Section 5.02 is not met, and shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first (1 st ) Business Day occurring after the end of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable

 

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Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. For purposes of clarification, Swing Line Loans shall not be considered outstanding for purposes of determining the unused portion of the Aggregate Committed Amount. Notwithstanding anything to the contrary contained herein Defaulting Lenders shall not be entitled to the commitment fee as provided in Section 2.15 .

(b) Fee Letters . AFI shall pay to the Arrangers and the Administrative Agent for their own respective accounts, in Dollars, fees in the amounts and at the times specified in the applicable Fee Letter. Such fees shall be fully earned when paid and shall be non-refundable for any reason whatsoever.

Section 2.10 Computation of Interest and Fees .

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

(b) If, as a result of any restatement of or other adjustment to the financial statements of AFI or for any other reason, AFI or the Lenders determine that (i) Excess Availability as calculated by AFI as of any applicable date was inaccurate and (ii) a proper calculation of Excess Availability would have resulted in higher pricing for such period, Applicable Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders and/or the L/C Issuer, as the case may be, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to AFI under the Bankruptcy Code, automatically and without further action by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This subsection shall not limit the rights of the Administrative Agent, any Lender or the L/C Issuer, as the case may be, under Section 2.03(c)(iii) , 2.03(i) , 2.08(b) , 2.09 or under Article IX . The Applicable Borrower’s obligations under this subsection shall survive the termination of the Aggregate Commitments and the repayment of all other Obligations hereunder.

Section 2.11 Evidence of Debt .

(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive, absent manifest error of the amount of the Credit Extensions made by the Lenders to the Applicable 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 Applicable 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 Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon any Lender’s request, the Applicable Borrower shall execute and deliver to such Lender (through the Administrative Agent) a promissory note, which shall evidence such Lender’s Loans

 

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in addition to such accounts or records. Each such promissory note shall be (i) in the case of Revolving Loans, in the form of Exhibit C-1 (a “ Revolving Note ”), and (ii) in the case of Swing Line Loans, in the form of Exhibit C-2 (a “ Swing Line Note ”). Each Lender may attach schedules to a Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

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

Section 2.12 Payments Generally; Administrative Agent’s Clawback .

(a) General . All payments to be made by the Borrowers shall be made free and clear of and without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its pro rata share (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 Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. Subject to the definition of “Interest Period”, if any payment to be made by the Applicable Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

(b) (i) Funding by Lenders; Presumption by Administrative Agent . Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02 ) and may, in reliance upon such assumption, make available to the Applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Applicable Borrower severally agree to pay to the Administrative 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 Applicable Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the Overnight Rate, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Applicable Borrower, the interest rate applicable to Base Rate Loans. If the Applicable Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Applicable Borrower the amount of such interest paid by the Applicable Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Applicable Borrower shall be without prejudice to any claim the Applicable Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

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(ii) Payments by Applicable Borrower; Presumptions by Administrative Agent . Unless the Administrative Agent shall have received notice from the Applicable Borrower prior to the time at which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Applicable Borrower will not make such payment, the Administrative Agent may assume that the Applicable 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 Applicable Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative 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 Administrative Agent, at the Overnight Rate.

A notice of the Administrative Agent to any Lender or the Applicable Borrower with respect to any amount owing under this subsection (b)  shall be conclusive, absent manifest error.

(c) Failure to Satisfy Conditions Precedent . If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II , and such funds are not made available to the Applicable Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Section 5.02 are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(d) Obligations of Lenders Several . The obligations of the Lenders hereunder to make Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 11.05 are several and not joint. The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 11.05 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 under Section 11.05 .

(e) 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.

Section 2.13 Sharing of Payments by Lenders .

If any Lender shall, by exercising any right of setoff pursuant to Section 11.08 or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and subparticipations in L/C Obligations and Swing Line 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 in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, 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 (A) any payment made by or on behalf of the Borrowers 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), (B) any amounts applied by the Swing Line Lender to outstanding Swing Line Loans, (C) any amounts applied to L/C Obligations by the L/C Issuer or Swing Line Loans by the Swing Line Lender, as appropriate, from cash collateral or other Adequate Assurance provided under Section 2.15 , or (D) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than an assignment to the Borrowers or any Subsidiary (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 applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff pursuant to Section 11.08 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.

Section 2.14 Cash Collateral .

(a) Certain Credit Support Events . If (i) the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, (ii) as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, (iii) the Borrowers shall be required to provide Cash Collateral pursuant to Section 9.02(c) , or (iv) there shall exist a Defaulting Lender, the Borrowers shall immediately (in the case of clause (iii) above) or within one Business Day (in all other cases) following any request by the Administrative Agent or the L/C Issuer, provide Cash Collateral in an amount not less than the applicable Minimum Collateral Amount (determined in the case of Cash Collateral provided pursuant to clause (iv) above, after giving effect to Section 2.15(a)(iv) and any Cash Collateral provided by the Defaulting Lender.

(b) Grant of Security Interest. The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.14(c) . If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent or the L/C Issuer as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrowers or the relevant Defaulting Lender will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts at the Collateral Agent. The Borrowers shall pay on demand therefor from time to time all customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.

 

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(c) Application . Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 2.14 or Sections 2.03 , 2.04 , 2.05 , 2.15 or 9.02 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Obligations, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

(d) Release . Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or to secure other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 11.06(b)(vi) )) or (ii) the determination by the Administrative Agent and the L/C Issuer that there exists excess Cash Collateral; provided , however, (x) any such release shall be without prejudice to, and any disbursement or other transfer of Cash Collateral shall be and remain subject to, any other Lien conferred under the Loan Documents and the other applicable provisions of the Loan Documents, and (y) the Person providing Cash Collateral and the L/C Issuer may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.

Section 2.15 Defaulting Lenders .

(a) Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

(i) Waivers and Amendments . Such Defaulting Lender shall not be entitled to vote or participate in amendments, waivers or consents hereunder or in respect of the other Loan Documents, except as expressly provided in the definition of “Required Lenders” and Section 11.01 ;

(ii) Defaulting Lender Waterfall . Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article IX or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 11.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender hereunder; third , to Cash Collateralize the L/C Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.14 ; fourth , as the Borrowers may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , if so determined by the Administrative Agent and the Borrowers, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the L/C Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.14 ; sixth , to the payment of any amounts owing to the Lenders, the L/C Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrowers as a result of any judgment of a court of

 

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competent jurisdiction obtained by the Borrowers against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Borrowings in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 5.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with the 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 or to post Cash Collateral pursuant to this Section 2.15(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees .

(A) No Defaulting Lender shall be entitled to receive any fee payable under Section 2.09(a) for any period during which that Lender is a Defaulting Lender (and the Borrowers shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(B) Each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its pro rata share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.14 .

(C) With respect to any fee payable under Section 2.09(a) or any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A)  or (B)  above, the Borrowers shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure . All or any part of such Defaulting Lender’s participation in L/C Obligations and Swing Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective pro rata share (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 5.02 are satisfied at the time of such reallocation (and, unless the Borrowers shall have otherwise notified the Administrative Agent at such time, the Borrowers shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause any Non-Defaulting Lender’s share of the Outstanding Amount of Revolving Obligations to exceed its Commitment. Subject to Section 11.19 , no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

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(v) Cash Collateral, Repayment of Swing Line Loans . If the reallocation described in clause (a)(iv) above cannot, or can only partially, be effected, the Borrowers shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lenders’ Fronting Exposure and (y) second, Cash Collateralize the L/C Issuers’ Fronting Exposure in accordance with the procedures set forth in Section 2.14 .

(vi) Replacement . The Defaulting Lender may be replaced and its interests assigned as provided in Section 11.13 ;

(vii) Termination of Commitments . So long as no Event of Default shall exist immediately before or immediately after giving effect thereto, the Borrowers may, with the consent of the Administrative Agent, in its discretion, elect to terminate the commitments of the Defaulting Lender, and repay its share of outstanding Loan Obligations (and reallocate its participation interests in L/C Obligations and Swing Line Loans), on a non-pro rata basis.

(b) Defaulting Lender Cure. If the Borrowers (so long as no Default or Event of Default exists), the Administrative Agent, Swing Line Lender and the L/C Issuer agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their pro rata share (without giving effect to Section 2.15(a)(iv) ), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrowers while that Lender was a Defaulting Lender; and provided ; further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

Section 2.16 Joint and Several Liability .

(a) Each Borrower accepts joint and several liability hereunder in consideration of the financial accommodation to be provided by the Administrative Agent and the Lenders under this Agreement and the other Loan Documents, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of each Borrower to accept joint and several liability for the obligations of each Borrower.

(b) Each Borrower shall be jointly and severally liable for all Obligations, regardless of which Borrower actually receives Credit Extensions hereunder or the amount of such Credit Extensions received or the manner in which the Administrative Agent or any Lender accounts for such Credit Extensions on its books and records. Each Borrower’s obligations with respect to Credit Extensions made to it, and each Borrower’s obligations arising as a result of the joint and several liability of such Borrower hereunder, with respect to Credit Extensions made to and other Obligations owing by the other Borrower hereunder, shall be separate and distinct obligations, but all such obligations shall be primary obligations of each Borrower.

 

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(c) Each Borrower’s obligations arising as a result of the joint and several liability of such Borrower hereunder with respect to Credit Extensions made to and other Obligations owing by the other Borrower hereunder shall, to the fullest extent permitted by law, be unconditional irrespective of (A) the validity or enforceability, avoidance or subordination of the obligations of any other Borrower or of any promissory note or other document evidencing all or any part of the obligations of any other Borrower, (B) the absence of any attempt to collect the Obligations from any other Borrower, any other guarantor, or any other security therefor, or the absence of any other action to enforce the same, (C) the waiver, consent, extension, forbearance or granting of any indulgence by the Administrative Agent or any Lender with respect to any provision of any instrument evidencing the obligations of any other Borrower, or any part thereof, or any other agreement now or hereafter executed by any other Borrower and delivered to the Administrative Agent or any Lender, (D) the failure by the Administrative Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the obligations of any other Borrower, (E) the Administrative Agent’s or any Lender’s election, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (F) any borrowing or grant of a security interest by any other Borrower, as Debtor In Possession under Section 364 of the Bankruptcy Code, (G) the disallowance of all or any portion of the Administrative Agent’s or any Lender’s claim(s) for the repayment of the obligations of any other Borrower under Section 502 of the Bankruptcy Code, or (H) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any other Borrower. With respect to each Borrower’s obligations arising as a result of the joint and several liability of such Borrower hereunder with respect to Credit Extensions made to the other Borrower hereunder, such Borrower waives, until the Obligations shall have been paid in full and this Agreement and the other Loan Documents shall have been terminated, any right to enforce any right of subrogation or any remedy which the Administrative Agent or any Lender now has or may hereafter have against such Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to the Administrative Agent or any Lender to secure payment of the Obligations or any other liability of any Borrower to the Administrative Agent or any Lender.

(d) Upon the occurrence and during the continuation of any Event of Default, the Administrative Agent and the Lenders may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against any other Borrower or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that the Administrative Agent and the Lenders shall be under no obligation to marshal any assets in favor of any Borrower or against or in payment of any or all of the Obligations.

(e) Notwithstanding any provision to the contrary contained herein or in any other of the Loan Documents, Swap Contracts or Treasury Management Agreements, the obligations of AFI as Borrower under this Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under the Debtor Relief Laws or any comparable provisions of any applicable state law.

Section 2.17 Overadvances and Protective Advances .

(a) Overadvances.

(i) Mandatory Prepayment of Overadvance Loans . If at any time the aggregate principal balance of all Revolving Loans exceeds the Borrowing Base (a “ Overadvance ”), the excess amount shall, subject to Section 2.07(d) , be payable by the Borrowers on demand by the Administrative Agent. All Overadvance Loans shall constitute Revolving Obligations secured by the Collateral and shall be entitled to all benefits of the Loan Documents.

 

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(ii) Mandatory Prepayment of Incremental Credit Facility Overadvance Loans . If at any time the aggregate principal balance of all Loans under any Incremental Credit Facility (other than Revolving Loans) exceeds the borrowing base established in the relevant amendment establishing such Incremental Credit Facility (unless such amendment expressly provides otherwise), the excess amount shall, subject to Section 2.07(d) , be payable by the applicable Borrowers on demand by the Administrative Agent.

(iii) Funding of Overadvance Loans . The Administrative Agent may require Revolving Lenders to honor requests for Overadvance Loans and to forbear from requiring the applicable Borrower(s) to cure an Overadvance as long as (A) such Overadvance does not continue for more than 30 consecutive days and (B) the aggregate amount of the Overadvances existing at any time, together with the Protective Advances outstanding at any time pursuant to Section 2.17 (b), do not exceed ten percent (10.0%) of the Aggregate Commitments then in effect. In no event shall Overadvance Loans be required that would (A) cause the Revolver Usage to exceed the Aggregate Commitments or (B) violate the terms of any applicable amendment establishing an Incremental Credit Facility. Required Lenders may at any time revoke the Administrative Agent’s authority to make further Overadvance Loans to any or all Borrowers by written notice to the Administrative Agent. Any funding of an Overadvance Loan or sufferance of an Overadvance shall not constitute a waiver by the Administrative Agent or Lenders of the Event of Default caused thereby. In no event shall any Borrower or other Loan Party be deemed a beneficiary of this Section 2.17(a) nor authorized to enforce any of its terms.

(b) Protective Advances .

(i) The Administrative Agent shall be authorized by each Borrower and the Revolving Lenders from time to time in the Administrative Agent’s discretion (but shall have absolutely no obligation to), to make Base Rate Loans to the Borrowers on behalf of the Revolving Lenders (any of such Loans are herein referred to as “ Protective Advances ”) which the Administrative Agent deems necessary or desirable to (A) preserve or protect Collateral or any portion thereof or (B) to enhance the likelihood of, or maximize the amount of, repayment of the Revolving Loans and other Revolving Obligations; provided that no Protective Advance shall cause the aggregate amount of the Revolver Usage at such time to exceed the Aggregate Commitments then in effect. All Protective Advances made by the Administrative Agent constitute Obligations, secured by the Collateral and shall be treated for all purposes as Base Rate Loans.

(ii) The aggregate amount of Protective Advances outstanding at any time pursuant to this Section 2.17(b) shall not exceed ten percent (10.0% percent) of the Aggregate Commitments then in effect, and such Protective Advances, together with the aggregate amount of Overadvances existing at any time pursuant to Section 2.17(a) , shall not exceed ten percent (10.0%) of the Aggregate Commitments then in effect. Protective Advances may be made even if the conditions set forth in Section 5.02 have not been satisfied. Each Revolving Lender shall participate in each Protective Advance on a ratable basis. Required Lenders may at any time revoke the Administrative Agent’s authority to make further Protective Advances to any or all Borrowers by written notice to the Administrative Agent. Absent such revocation, the Administrative Agent’s determination that funding of a Protective Advance is appropriate shall be conclusive. At any time that there is sufficient Availability and the conditions precedent set forth in Section 5.02 have been satisfied, the Administrative Agent may request the Revolving Lenders to make a Loan to repay a Protective Advance. At any other time, the Administrative Agent may require the Revolving Lenders to fund their risk participations described in Section 2.17(d) .

 

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(iii) Transfers . Upon the making of a Protective Advance by the Administrative Agent (whether before or after the occurrence of a Default or Event of Default), each Revolving Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Administrative Agent without recourse or warranty, an undivided interest and participation in such Protective Advance in proportion to its ratable share of such Protective Advance. Each Revolving Lender shall transfer (a “ Transfer ”) the amount of such Revolving Lender’s ratable share of the outstanding principal amount of the applicable Protective Advance with respect to such purchased interest and participation promptly when requested to the Administrative Agent, to such account of the Administrative Agent as the Administrative Agent may designate, but in any case not later than 3:00 p.m. on the Business Day notified (if notice is provided by the Administrative Agent prior to 12:00 p.m. and otherwise on the immediately following Business Day (the “ Transfer Date ”)). Transfers may occur during the existence of a Default or Event of Default and whether or not the applicable conditions precedent set forth in Section 5.02 have then been satisfied. Such amounts transferred to the Administrative Agent shall be applied against the amount of the applicable Protective Advance and, together with Revolving Lender’s ratable share of such Protective Advance, shall constitute Loans of such Revolving Lenders, respectively. If any such amount is not transferred to the Administrative Agent by any Revolving Lender on such Transfer Date, the Administrative Agent shall be entitled to recover such amount on demand from such Revolving Lender together with interest thereon as specified in Section 2.08 . From and after the date, if any, on which any Revolving Lender is required to fund, and funds, its participation in any Protective Advance purchased hereunder, the Administrative Agent shall promptly distribute to such Revolving Lender, such Revolving Lender’s Pro Rata share of all payments of principal and interest and all proceeds of Collateral received by the Administrative Agent in respect of such Protective Advance.

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

Section 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 Loan Parties or the Administrative Agent, as applicable) require the deduction or withholding of any Tax from any such payment by the Administrative Agent or a Loan Party, then the Administrative 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 Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required based upon the information and documentation it has received pursuant to subsection (e)  below, (B) the

 

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Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, 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.

(iii) If any Loan Party or the Administrative 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 Administrative 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 Administrative 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 Loan Parties . Without limiting the provisions of subsection (a)  above, the Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

(c) Tax Indemnification .

(i) Each of the Loan Parties shall, and 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 Borrowers by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive, absent manifest error. Each of the Loan Parties shall, and does hereby, jointly and severally indemnify the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or the L/C Issuer for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 3.01(c)(ii) below.

(ii) Each Lender and the L/C Issuer shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender or the L/C Issuer (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (y) the Administrative Agent and the Loan Parties, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.06(d) relating to the maintenance of a Participant Register and (z) the Administrative Agent and the Loan Parties, as

 

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applicable, against any Excluded Taxes attributable to such Lender or the L/C Issuer, in each case, that are payable or paid by the Administrative 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 Administrative Agent shall be conclusive, absent manifest error. Each Lender and the L/C Issuer hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii) .

(d) Evidence of Payments . Upon request by the Borrowers or the Administrative Agent, as the case may be, after any payment of Taxes by any Loan Party or by the Administrative Agent to a Governmental Authority as provided in this Section 3.01 , the Borrowers shall deliver (or cause the applicable Loan Party to deliver) to the Administrative Agent or the Administrative Agent shall deliver to the Borrowers, 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 Law to report such payment or other evidence of such payment reasonably satisfactory to the Borrowers or the Administrative 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 Borrowers and the Administrative Agent, at the time or times reasonably requested by the Borrowers or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrowers or the Administrative 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 Borrowers or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrowers or the Administrative Agent as will enable the Borrowers or the Administrative 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, if any Borrower is a U.S. Person,

(A) any Lender that is a U.S. Person shall deliver to the Borrowers and the Administrative 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 Borrowers or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

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(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrowers and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrowers or the Administrative 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-E (or W-8BEN, 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-E (or W-8BEN, 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 8 81(c) of the Code, (x) a certificate substantially in the form of Exhibit H-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 8 81(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrowers within the meaning of Section 8 81(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 8 81(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN-E (or W-8BEN, 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-E (or W-8BEN, as applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit H-2 or Exhibit H-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 H-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 Borrowers and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrowers or the Administrative 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 Borrowers or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrowers and the Administrative Agent at the time or times prescribed by

 

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law and at such time or times reasonably requested by the Borrowers or the Administrative Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrowers or the Administrative Agent as may be necessary for the Borrowers and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(iii) Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrowers and the Administrative 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 Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be. If any Recipient determines, 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 indemnification payments or additional amounts giving rise to such refund had never been paid. At the request of the applicable Loan Party, the Recipient shall take reasonable efforts to pursue any refund of Taxes withheld or deducted from funds paid for the account such Recipient, so long as such Recipient determines, in its sole discretion, that such efforts would not result in any additional costs, expense or risks or be otherwise disadvantageous to it. 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 Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the L/C Issuer, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.

Section 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 Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar 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

 

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market, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all of such Lender’s Eurodollar Rate Loans to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted.

Section 3.03 Inability to Determine Rates .

If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof (a) the Required Lenders determine that for any reason that (i) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, or (ii) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan (in each case with respect to clause (a)(i) above, “ Impacted Loans ”), or (b) the Required Lenders determine for any reason the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrowers and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Applicable Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

Notwithstanding the foregoing, if a determination shall have been made as described in clause (a)(i) of this section, the Administrative Agent, in consultation with the Borrowers and the affected Lenders, may establish an alternative interest rate for the Impacted Loans that reflects the all-in-cost of funds for such Loans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (1) the Administrative Agent revokes the notice delivered with respect to the Impacted Loans under clause (a) of the first sentence of this section, (2) the Required Lenders notify the Administrative Agent and the Borrowers that such alternative interest rate does not adequately and fairly reflect the cost to such Lenders of funding the Impacted Loans, or (3) any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides the Administrative Agent and the Borrowers written notice thereof.

Section 3.04 Increased Costs .

(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 Eurodollar Rate) or the L/C Issuer;

 

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(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 L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Eurodollar Rate (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Applicable Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

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

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

(d) Delay in Requests . Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Applicable Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Applicable Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’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) General Policy . Notwithstanding any other provision of this Section, no Lender or L/C Issuer shall demand compensation for any increased cost or reduction pursuant to this Section if it shall not at the time be the general policy and practice of such Lender or L/C Issuer to demand such compensation in similar circumstances under comparable provisions of other credit agreements.

Section 3.05 Compensation for Losses .

Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Applicable 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 Applicable 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 Applicable Borrower; or

(c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Applicable Borrower pursuant to Section 11.13 ;

including any loss of anticipated profits and 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 Applicable 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 Applicable Borrower to the Lenders under this Section 3.05 , each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

Section 3.06 Mitigation of Obligations; Replacement of Lenders .

(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04 , or the Applicable Borrower is required to pay any Indemnified Taxes or additional amount to any Lender, the L/C Issuer, or any Governmental Authority for the account of any Lender or the L/C Issuer pursuant to Section 3.01 , or if any Lender gives a notice pursuant to Section 3.02 , then at the request of the Borrowers, such Lender or the L/C Issuer shall, as applicable, 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 or the L/C Issuer, as applicable, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 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 or the L/C Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or the L/C Issuer, as the case may be. The Applicable Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the L/C Issuer 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 Applicable Borrower is required to pay any Indemnified Taxes or 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 Applicable Borrower may replace such Lender in accordance with Section 11.13 .

Section 3.07 Survival .

All of the Loan Parties’ obligations under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder, and resignation of the Administrative Agent.

ARTICLE IV.

GUARANTY

Section 4.01 The Guaranty .

(a) Each of the Guarantors hereby jointly and severally guarantees to the Administrative Agent and each of the holders of all of the Obligations as hereinafter provided, the prompt payment of the Obligations (the “ Guaranteed Obligations ”) in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Guaranteed Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal.

(b) Notwithstanding any provision to the contrary contained herein or in any other of the Loan Documents, Swap Contracts, Treasury Management Agreements or the other documents relating to the Guaranteed Obligations, (i) the obligations of each Guarantor under this Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under the Debtor Relief Laws or any comparable provisions of any applicable state law and (ii) the Guaranteed Obligations of a Guarantor shall exclude any Excluded Swap Obligations with respect to such Guarantor.

Section 4.02 Obligations Unconditional .

The obligations of the Guarantors under Section 4.01 are joint and several, absolute and unconditional, irrespective of the value, validity, or enforceability of any of the Loan Documents or other documents relating to the Guaranteed Obligations, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable Law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.02 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrowers or any other Guarantor for amounts paid under this Article IV until such time as the

 

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Guaranteed Obligations have been paid in full and the commitments relating thereto have expired or terminated. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder, which shall remain absolute and unconditional as described above:

(a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

(b) any of the acts mentioned in any of the provisions of any of the Loan Documents or other documents relating to the Guaranteed Obligations, or any other agreement or instrument referred to therein, shall be done or omitted;

(c) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Loan Documents or other documents relating to the Guaranteed Obligations, or any other agreement or instrument referred to therein, shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with; or

(d) any Lien granted to, or in favor of, the Administrative Agent or any other holder of the Guaranteed Obligations as security for any of the Guaranteed Obligations shall fail to attach or be perfected.

With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any other holder of the Guaranteed Obligations exhaust any right, power or remedy or proceed against any Person under any of the Loan Documents or other documents relating to the Guaranteed Obligations, or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations.

Section 4.03 Reinstatement .

The obligations of the Guarantors under this Article IV shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each other holder of the Guaranteed Obligations on demand for all reasonable costs and expenses (including fees, charges and disbursements of any law firm or other counsel) incurred by the Administrative Agent or any other such holder of Guaranteed Obligations in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

Section 4.04 Certain Additional Waivers .

Each Guarantor acknowledges and agrees that (a) the guaranty given hereby may be enforced without the necessity of resorting to or otherwise exhausting remedies in respect of any other security or collateral interests, and without the necessity at any time of having to take recourse against the Borrowers hereunder or against any collateral securing the Guaranteed Obligations or otherwise, (b) it will not assert any right to require the action first be taken against the Borrowers or any other Person (including any co-

 

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guarantor) or pursuit of any other remedy or enforcement any other right and (c) nothing contained herein shall prevent or limit action being taken against the Borrowers hereunder, under the other Loan Documents or the other documents and agreements relating to the Guaranteed Obligations or from foreclosing on any security or collateral interests relating hereto or thereto, or from exercising any other rights or remedies available in respect thereof, if neither the Borrowers nor the Guarantors shall timely perform their obligations, and the exercise of any such rights and completion of any such foreclosure proceedings shall not constitute a discharge of the Guarantors’ obligations hereunder unless as a result thereof, the Guaranteed Obligations shall have been paid in full and the commitments relating thereto shall have expired or been terminated, it being the purpose and intent that the Guarantors’ obligations hereunder be absolute, irrevocable, independent and unconditional under all circumstances.

Each Guarantor further agrees that such Guarantor shall have no right of recourse to security for the Guaranteed Obligations, except through the exercise of rights of subrogation pursuant to Section 4.02 and through the exercise of rights of contribution pursuant to Section 4.06 .

Section 4.05 Remedies .

The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Administrative Agent and the other holders of the Guaranteed Obligations, on the other hand, the Guaranteed Obligations may be declared to be forthwith due and payable as provided in Section 9.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.02 ) for purposes of Section 4.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Guaranteed Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Guaranteed Obligations being deemed to have become automatically due and payable), the Guaranteed Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 4.01 . The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Collateral Documents and that the holders of the Guaranteed Obligations may exercise their remedies thereunder in accordance with the terms thereof.

Section 4.06 Rights of Contribution .

The Guarantors agree among themselves that, in connection with payments made hereunder, each Guarantor shall have contribution rights against any other Guarantors as permitted under applicable Law. Such contribution rights shall be subordinate and subject in right of payment to the obligations of such Guarantors under the Loan Documents and no Guarantor shall exercise such rights of contribution until all Guaranteed Obligations have been paid in full and the Commitments have terminated.

Section 4.07 Guarantee of Payment; Continuing Guarantee .

The guarantee in this Article IV is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising.

Section 4.08 Keepwell.

Each Loan Party that is a Qualified ECP Guarantor at the time the Guaranty in this Article IV by any Loan Party that is not then an “eligible contract participant” under the Commodity Exchange Act (a “ Specified Loan Party ”) or the grant of a security interest under the Loan Documents by any such Specified Loan Party, in either case, becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or

 

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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 this Article IV , or otherwise under this Agreement, voidable under applicable Debtor Relief Laws, and not for any greater amount). The obligations and undertakings of each applicable Loan Party under this Section shall remain in full force and effect until the Guaranteed Obligations have been paid in full and the commitments relating thereto have expired or terminated. Each Loan Party intends this Section to constitute, and this Section 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.

ARTICLE V.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

Section 5.01 Conditions of Initial Credit Extension .

The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

(a) Loan Documents . Receipt by the Administrative Agent of executed counterparts of this Agreement, the Security Agreement and the Pledge Agreements, each properly executed by a Responsible Officer of the signing Loan Party and, in the case of this Agreement, by each Lender.

(b) Opinions of Counsel . Receipt by the Administrative Agent of favorable opinions of Morgan, Lewis & Bockius LLP, legal counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, dated as of the Closing Date, and in form and substance satisfactory to the Administrative Agent.

(c) Organization Documents, Resolutions, Etc. Receipt by the Administrative Agent of the following, each of which shall be originals or facsimiles (followed promptly by originals), in form and substance satisfactory to the Administrative Agent and its legal counsel:

(i) copies of the Organization Documents of each Loan Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, where applicable, and certified by a secretary or assistant secretary of such Loan Party to be true and correct as of the Closing Date;

(ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing 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; and

(iii) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, and in good standing in its state of organization or formation.

 

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(d) Perfection and Priority of Liens . Receipt by the Administrative Agent of the following for each Loan Party: (A) completion of searches for Uniform Commercial Code filings in the jurisdiction of organization or formation, (B) the confirmation or filing of financing statements under the Uniform Commercial Code in appropriate jurisdictions to perfect security interests in the personal property collateral, and (C) receipt by the Collateral Agent of the original certificates evidencing certificated Capital Stock (including those evidencing Material First-Tier Foreign Subsidiaries) pledged as collateral to secure the loans and obligations hereunder, together with undated stock powers executed in blank.

(e) Evidence of Insurance . Receipt by the Administrative Agent of certificates of insurance of the Loan Parties evidencing general liability and property insurance meeting the requirements set forth in the Loan Documents, including, but not limited to, naming the Collateral Agent as additional insured (in the case of general liability insurance) or lender’s loss payee for claims in excess of $10,000,000 (in the case of property insurance) on behalf of the Lenders.

(f) Closing Certificate . Receipt by the Administrative Agent of a certificate signed by a Responsible Officer of AFI certifying that (i) the representations and warranties in Article VI are true and correct in all material respects (or in all respects in the case of any representation and warranty modified by materiality or Material Adverse Effect), (ii) no Default or Event of Default shall exist immediately after giving effect to the Credit Extensions on the Closing Date and (iii) after giving pro forma effect to the Closing Date Dividend, the Spin-Off and the other transactions contemplated hereby, the Borrowers and the Guarantors, taken as a whole, are Solvent.

(g) Fees and Expenses . Receipt by the Administrative Agent and the Lenders of any fees required to be paid on or before the Closing Date and all filing and recording fees and Taxes shall have been duly paid or arrangements reasonably satisfactory to the Administrative Agent shall have been made for the payment thereof.

(h) Attorney Costs . Unless waived by the Administrative Agent, the Borrowers shall have paid all Attorney Costs for the Administrative Agent), to the extent invoiced prior to or on the Closing Date, plus such additional Attorney Costs for the Administrative Agent as shall constitute its reasonable estimate of such costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Administrative Agent).

(i) Borrowing Base Certificate . The Administrative Agent shall have received a Borrowing Base Certificate setting forth the Borrowing Base, effective as of January 31, 2016.

(j) Related Transactions . The Administrative Agent shall have received evidence that (i) AFI has obtained all Governmental Authority consents and other third party approvals necessary, or in the reasonable opinion of the Administrative Agent, advisable in connection with the Spin-Off, (ii) the Loan Parties have been released from all Liens and obligations under the AWI Credit Facility, and the Administrative Agent shall have received satisfactory payoff letters, lien release documentation or similar agreements which evidence the foregoing, (iii) the Closing Date Dividend will occur on the Closing Date (after initial funding of Loans) and (iv) the Spin-Off will occur on April 1, 2016.

(k) Excess Availability . Upon giving pro forma effect to the Closing Date Dividend, the Spin-Off, the initial funding of Loans and issuance (or deemed issuance) of Letters of Credit on the Closing Date, and the payment by the Borrowers of all fees and expenses incurred in connection herewith and due on the Closing Date as well as the amount of any payables stretched beyond their customary payment practices, (i) available, unrestricted cash (in Dollars and on deposit in the United States) of the Loan Parties shall equal at least $5,000,000 and (ii) Excess Availability shall be at least $100,000,000.

 

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(l) Deposit Account Control Agreements . The Administrative Agent shall have received evidence of the establishment of each Dominion Account and related lockboxes (or similar arrangements acceptable to the Administrative Agent), together with fully-executed Deposit Account Control Agreements with respect thereto and covering the other Deposit Accounts listed on Schedule 7.16(d) hereto (other than Excluded Accounts).

(m) [ Reserved ].

(n) Lien Searches . The Administrative Agent shall have received UCC Lien searches and other evidence reasonably satisfactory to the Administrative Agent that its Liens are the only Liens upon the Collateral, except Liens permitted under Section 8.01 and Liens being terminated on the Closing Date.

(o) Financial Statements . The Administrative Agent shall have received, in form and substance satisfactory to it, (i) copies of the Audited Financial Statements, and (ii) financial projections for AFI and its Subsidiaries, giving effect to the Spin-Off and the other transactions contemplated hereby, prepared by senior Responsible Officers of AFI.

(p) Transaction Documents . The Administrative Agent shall have received certified copies of each Loan Party’s material agreements governing the Spin-Off, including the Separation and Distribution Agreement, the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Trademark License Agreement and the Campus Lease Agreement.

(q) Perfection Certificate . Each Loan Party shall deliver to the Administrative Agent a completed Perfection Certificate, executed and delivered by a Responsible Officer of such Loan Party, together with all attachments contemplated thereby.

(r) Field Exams and Inventory Appraisals . The Administrative Agent shall have received copies of new field exam reports and inventory appraisals with respect to the Collateral.

(s) No Material Adverse Effect . There shall not have occurred since December 31, 2014, any event or condition that has had or could be reasonably expected, either individually or in the aggregate, to have a Material Adverse Effect.

(t) No Litigation . There shall be no action, suit, investigation, litigation or proceeding pending or, to the knowledge of any Loan Party, threatened in any court or before any arbitrator or Governmental Authority that could reasonably be expected to have a Material Adverse Effect or to materially and adversely affect this Agreement or the transactions contemplated hereby.

(u) Third-Party Consents . The Administrative Agent shall have received a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required or appropriate to be obtained from any Governmental Authority or other third-party in connection with the Spin-Off relating to AFI and its Subsidiaries and the execution, delivery and performance by and the validity against each Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required.

(v) Know Your Customer . Any information reasonably required by a Lender and any other Secured Party to enable it to meet its internal “know your customer” compliance requirements and normal operating procedures shall have been delivered.

 

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Without limiting the generality of the provisions of Section 10.04 , for purposes of determining compliance with the conditions specified in this Section 5.01 , each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

Section 5.02 Conditions to all Credit Extensions .

The obligation of each Lender to honor any Request for Credit Extension is subject to the following conditions precedent:

(a) The representations and warranties of AFI and each other Loan Party contained in Article VI or 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 in all material respects (or in all respects in the case of any representation and warranty modified by materiality or Material Adverse Effect) on and as of the date of such Credit Extension, except 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.

(b) No Default shall exist, or would result from such proposed Credit Extension.

(c) The Administrative Agent and, if applicable, the applicable L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof (other than with respect to the Existing Letters of Credit);

(d) With respect to the issuance of a Letter of Credit, the applicable L/C Conditions shall be satisfied;

(e) Upon giving effect to any such Request for Credit Extension, Excess Availability shall not be less than $0.00.

Each Request for Credit Extension submitted by the Applicable Borrower (or any deemed request, except a deemed request in connection with a Protective Advance) shall be deemed to be a representation and warranty that the conditions specified in Sections 5.02(a) and (b)  have been satisfied on and as of the date of the applicable Credit Extension.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES

AFI represents and warrants to the Administrative Agent and the Lenders that the following are, and after giving effect to the Closing Date Dividend and Spin-Off will be, true, correct and complete:

Section 6.01 Existence, Qualification and Power .

Each Loan Party (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly

 

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qualified and is licensed and 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 (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 6.02 Authorization; No Contravention .

The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under (i) any Contractual Obligation to which such Person is a party or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law (including, without limitation, Regulation U or Regulation X issued by the FRB); except in each case referred to in clause (b) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 6.03 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 other than (i) those that have already been obtained and are in full force and effect and (ii) filings to perfect the Liens created by the Collateral Documents.

Section 6.04 Binding Effect .

This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto. This Agreement and each other Loan Document constitutes a legal, valid and binding obligation of each Loan Party that is party thereto, enforceable against each such Loan Party in accordance with its terms.

Section 6.05 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 AFI 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 AFI and its Subsidiaries as of the date thereof, including liabilities for taxes, commitments and Indebtedness, to the extent required to be shown thereon under GAAP.

(b) From the date of the Audited Financial Statements to and including the Closing Date, there has been no Disposition by AFI or any Subsidiary, or any Involuntary Disposition, of any material part of the business or Property of AFI and its Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of AFI and its Subsidiaries, taken as a whole, in each case, which is not reflected in the foregoing financial statements or in the notes thereto and has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date.

 

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(c) The financial statements delivered pursuant to Section 7.01(a) and (b)  have been prepared in accordance with GAAP (except as may otherwise be permitted under Section 7.01(a) and (b) ) and present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated financial condition, results of operations and cash flows of AFI and its Subsidiaries as of such date and for such periods.

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

Section 6.06 Litigation .

There are no actions, suits, proceedings, investigations, claims or disputes pending or, to the knowledge of the Loan Parties, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrowers or any of their respective Subsidiaries or against any of their properties or revenues that could reasonably be expected to have a Material Adverse Effect.

Section 6.07 No Default .

(a) Neither AFI nor any Subsidiary is in default under or with respect to any Contractual Obligation that could reasonably be expected to have a Material Adverse Effect.

(b) No Default has occurred and is continuing.

Section 6.08 Ownership of Property; Liens .

Each Borrower and Subsidiary has good and marketable title to (or valid leasehold interests in) all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and good title to all of its personal Property, including all Property reflected in any financial statements delivered to Administrative Agent or Lenders, in each case free of Liens except Permitted Liens. All Liens of the Administrative Agent in the Collateral are duly perfected, first priority Liens, subject only to Permitted Liens that are expressly allowed to have priority over the Administrative Agent’s Liens.

Section 6.09 Environmental Compliance .

Except as could not reasonably be expected to have a Material Adverse Effect:

(a) Each of the Facilities and all operations at the Facilities are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the Facilities or the Businesses, and there are no conditions relating to the Facilities or the Businesses that could give rise to liability under any applicable Environmental Laws.

(b) None of the Facilities contains, or has previously contained, any Hazardous Materials at, on or under the Facilities in amounts or concentrations that constitute or constituted a violation of Environmental Laws.

(c) Neither AFI nor any Subsidiary has received any written or verbal notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Facilities or the Businesses, nor does any Responsible Officer of any Loan Party have knowledge or reason to believe that any such notice will be received or is being threatened.

 

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(d) Hazardous Materials have not been transported or disposed of from the Facilities, or generated, treated, stored or disposed of at, on or under any of the Facilities or any other location, in each case by or on behalf AFI or any Subsidiary in violation of, or in a manner that would be reasonably likely to give rise to liability under, any applicable Environmental Law.

(e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Responsible Officers of the Loan Parties, threatened, under any Environmental Law to which AFI or any Subsidiary is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to AFI, any Subsidiary, the Facilities or the Businesses.

(f) There has been no release or, threat of release of Hazardous Materials at or from the Facilities, or arising from or related to the operations (including, without limitation, disposal) of AFI or any Subsidiary in connection with the Facilities or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws.

Section 6.10 Insurance .

The properties of AFI and its Subsidiaries are insured with financially sound and reputable insurance companies which may be Insurance Subsidiaries, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where AFI or the applicable Subsidiary operates. The insurance coverage of the Loan Parties as in effect on the Closing Date is outlined as to carrier, policy number, expiration date, type, amount and deductibles on Schedule 6.10 .

Section 6.11 Taxes .

AFI and its Subsidiaries have filed all federal, state and other material tax returns and reports required to be filed, and have paid all 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 which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP and except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect. There is no proposed tax assessment against AFI or any Subsidiary that would, if made, have a Material Adverse Effect.

Section 6.12 ERISA Compliance .

(a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state Laws, except non-compliance that has not resulted or could not reasonably be expected to result in a Material Adverse Effect. Each Pension Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Loan Parties, nothing has occurred which would prevent, or cause the loss of, such qualification and has resulted or could reasonably be expected to result in a Material Adverse Effect. Each Loan Party and each ERISA Affiliate have timely made all required contributions to each Pension Plan subject to Section 412 of the Internal Revenue Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Internal Revenue Code has been made with respect to any Pension Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

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(b) There are no pending or, to the best knowledge of the Loan Parties, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Pension Plan that could reasonably be expected to have a Material Adverse Effect. There has been no 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 since the Closing Date or is reasonably expected to occur which has resulted or could reasonably be expected to result in a Material Adverse Effect; (ii) no Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA) which has resulted or could reasonably be expected to result in a Material Adverse Effect; and (iii) no Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan, which has resulted or could reasonably be expected to result in a Material Adverse Effect.

Section 6.13 Subsidiaries .

Set forth on Schedule 6.13 is a complete and accurate list as of the Closing Date of each Subsidiary, together with (i) jurisdiction of formation, (ii) with respect to the Loan Parties only, the number of shares of each class of Capital Stock outstanding, (iii) percentage of outstanding shares of each class owned (directly or indirectly) by AFI or any Subsidiary and (iv) number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto. The outstanding Capital Stock of each Subsidiary is validly issued, fully paid and non-assessable and no such Capital Stock is subject to any Lien other than the Lien under the Loan Documents. As of the Closing Date, there are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to Equity Interests of any Loan Party or Subsidiary.

Section 6.14 Margin Regulations; Investment Company Act .

(a) The Borrowers are not engaged and will not engage, 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. Not more than 25% of the value of the assets of the Borrowers and their respective Subsidiaries are comprised of margin stock.

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

Section 6.15 Disclosure .

AFI has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished in writing by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) 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

 

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which they were made, not misleading; provided that, with respect to projected financial information, AFI represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

Section 6.16 Compliance with Laws; OFAC; PATRIOT Act, Etc .

(a) Each of AFI and each Subsidiary is in compliance 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 (i) such requirements of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

(b) Neither the Borrower nor any of its Subsidiaries, nor to the knowledge of the Borrower and the other Loan Parties, any director, officer, employee, agent, affiliate or representative thereof, is an individual or entity that is, or is owned or controlled by, any individual or entity that is (i) currently the subject or target of any Sanctions, (ii) included on OFAC’s List of Specially Designated Nationals, HMT’s Consolidated List of Financial Sanctions Targets and the Investment Ban List, or any similar list enforced by any other relevant sanctions authority or (iii) located, organized or resident in a Designated Jurisdiction.

(c) The Borrower and each of its Subsidiaries, and their Affiliates, officers and directors, have conducted their business in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, and other similar anti-corruption legislation in other jurisdictions, and have instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.

(d) Each Loan Party is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the Patriot Act.

(e) No Borrower nor any of the Loan Parties is an EEA Financial Institution.

(f) No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

Section 6.17 Intellectual Property; Licenses, Etc .

AFI and its Subsidiaries own, or possess the legal right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “ IP Rights ”) that, to the knowledge of the Responsible Officers of the Loan Parties, are reasonably necessary for the operation of their respective businesses. Set forth on Schedule 6.17 is a list of all material IP Rights registered or pending registration with the United States Copyright Office or the United States Patent and Trademark Office and owned by each Loan Party as of the Closing Date. Except for such claims and infringements that could not reasonably be expected to have a Material Adverse Effect, no claim has been asserted and is pending by any Person challenging or questioning the use of any IP Rights or the validity or effectiveness of any IP Rights, nor does any Loan Party know of any such claim, and, to the knowledge of the Responsible Officers of the Loan Parties, the use of any IP

 

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Rights by the Borrowers or any Subsidiary or the granting of a right or a license in respect of any IP Rights from the Borrowers or any Subsidiary does not infringe on the rights of any Person. As of the Closing Date, none of the material IP Rights owned by any of the Loan Parties is subject to any licensing agreement or similar arrangement except as set forth on Schedule 6.17 .

Section 6.18 Solvency .

The Loan Parties are Solvent on a consolidated basis.

Section 6.19 Perfection of Security Interests in the Collateral .

(a) The Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the holders of the secured obligations identified therein, a legal and valid security interest in the Collateral identified therein, and, when Uniform Commercial Code financing statements (or other appropriate notices) in appropriate form are duly filed at the office of the secretary of state of the jurisdiction of incorporation or organization of each Loan Party, the Security Agreement shall create a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral, in each case prior and superior in right to any other Lien other than Permitted Liens to the extent such security interest can be perfected by filing under the Uniform Commercial Code.

(b) Each of the Pledge Agreements is effective to create in favor of the Collateral Agent, for the ratable benefit of the holders of the secured obligations identified therein, a legal and valid security interest in the Collateral identified therein, and each such Pledge Agreement shall create a fully perfected first priority Lien on, and security interest in, all right, title and interest of the pledgors thereunder in such Collateral, in each case prior and superior in right to any other Lien (i) with respect to any such Collateral that is a “security” (as such term is defined in the Uniform Commercial Code) and is evidenced by a certificate, when such Collateral is delivered to the Collateral Agent with duly executed stock powers with respect thereto, (ii) with respect to any such Collateral that is a “security” (as such term is defined in the Uniform Commercial Code) but is not evidenced by a certificate, when Uniform Commercial Code financing statements in appropriate form are filed in the appropriate filing offices in the jurisdiction of organization of the pledgor or when “control” (as such term is defined in the Uniform Commercial Code) is established by the Collateral Agent over such interests in accordance with the provision of Section 8 -106 of the Uniform Commercial Code, or any successor provision, and (iii) with respect to any such Collateral that is not a “security” (as such term is defined in the Uniform Commercial Code), when Uniform Commercial Code financing statements in appropriate form are filed in the appropriate filing offices in the jurisdiction of organization of the pledgor to the extent such security interest can be perfected by filing under the Uniform Commercial Code.

(c) [Reserved].

Section 6.20 Business Locations .

(a) Set forth on (i)  Schedule 6.20(a)(i) is the exact legal name, jurisdiction of organization, chief executive office and organizational identification number of each Loan Party as of the Closing Date and (ii)  Schedule 6.20(a)(ii) is a true, correct and complete list of the real properties owned as of the Closing Date by AFI or any Material Domestic Subsidiary with an individual net book value in excess of $3 million.

(b) Except as set forth on Schedule 6.20(b) , no Loan Party has during the four (4) months preceding the Closing Date (i) changed its legal name, (ii) changed its state of formation, or (iii) been party to a merger, consolidation or other change in structure.

 

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Section 6.21 Labor Matters .

Except as set forth on Schedule 6.21 , there are no collective bargaining agreements or Multiemployer Plans covering the employees of AFI or any Subsidiary as of the Closing Date. Neither AFI nor any Subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years that could reasonably be expected to have a Material Adverse Effect.

Section 6.22 Brokers . There are no brokerage commissions, finder’s fees or investment banking fees payable in connection with any transactions contemplated by the Loan Documents.

Section 6.23 Accounts . The Administrative Agent may rely, in determining which Accounts are Eligible Accounts, on all statements and representations made by Borrowers with respect thereto. Each Borrower warrants with respect to each of its Accounts at the time it is shown as an Eligible Account in a Borrowing Base Certificate, that:

(a) it is genuine and in all respects what it purports to be;

(b) it arises out of a completed, bona fide sale and delivery of goods or rendition of services in the Ordinary Course of Business, and substantially in accordance with any purchase order, contract or other document relating thereto;

(c) it is for a sum certain, maturing as stated in the applicable invoice, a copy of which has been furnished or is available to the Administrative Agent on request;

(d) it is not subject to any offset, Lien (other than the Administrative Agent’s Lien), deduction, defense, dispute, counterclaim or other adverse condition except as arising in the Ordinary Course of Business and disclosed to the Administrative Agent or as to any amount thereof not included as an Eligible Account; and it is absolutely owing by the Account Debtor, without contingency in any respect;

(e) no purchase order, agreement, document or Applicable Law restricts assignment of the Account to the Administrative Agent (regardless of whether, under the UCC or other Applicable Law, the restriction is ineffective), and the applicable Borrower is the sole payee or remittance party shown on the invoice;

(f) no extension, compromise, settlement, modification, credit, deduction or return has been authorized or is in process with respect to the Account, except discounts or allowances granted in the Ordinary Course of Business for prompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to the Administrative Agent hereunder; and

(g) to the best of Borrowers’ knowledge, (i) there are no facts or circumstances that are reasonably likely to impair the enforceability or collectability of such Account; (ii) the Account Debtor had the capacity to contract when the Account arose, continues to meet the applicable Borrower’s customary credit standards, is Solvent, is not contemplating or subject to an Insolvency Proceeding, and has not failed, or suspended or ceased doing business; and (iii) there are no proceedings or actions threatened or pending against any Account Debtor that could reasonably be expected to have a material adverse effect on the Account Debtor’s financial condition.

Section 6.24 Eligible Inventory . As to each item of Inventory that is identified as Eligible Inventory or Eligible Supplies Inventory in a Borrowing Base Certificate submitted to the Administrative Agent, as of the date of such Borrowing Base Certificate, such Inventory is (a) of good and merchantable quality, free

 

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from known defects, and (b) not excluded as ineligible by virtue of one or more of the excluding criteria (other than any such criteria requiring the Administrative Agent’s discretion) set forth in the relevant definitions of Eligible Inventory or Eligible Supplies Inventory, as the case may be.

Section 6.25 Machinery and Equipment . As to each item of Equipment that is identified as Eligible Machinery and Equipment in a Borrowing Base Certificate submitted to the Administrative Agent, as of the date of such Borrowing Base Certificate, such Equipment is (a) of good and merchantable quality, free from known defects, and (b) not excluded as ineligible by virtue of one or more of the excluding criteria (other than any such criteria requiring the Administrative Agent’s discretion) set forth in the relevant definition of Eligible Machinery and Equipment.

Section 6.26 Eligible Pledged Cash . As to any cash that is identified as Eligible Pledged Cash in a Borrowing Base Certificate submitted to the Administrative Agent, as of the date of such Borrowing Base Certificate, such cash is (a) denominated in Dollars, and (b) satisfies all conditions set forth in the definition of Eligible Pledged Cash.

Section 6.27 Burdensome Contracts . No Loan Party or Subsidiary of AFI is a party or subject to any contract, agreement or charter restriction that could reasonably be expected to have a Material Adverse Effect. No Loan Party or Subsidiary is party or subject to any agreement that is, or with the passage of time is reasonably expected to become, and agreement prohibited under Section 8.09 .

ARTICLE VII.

AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, AFI shall and shall cause each Subsidiary (except in the case of the covenants set forth in Sections 7.01 , 7.02 , and 7.03 ) to:

Section 7.01 Financial Statements .

Deliver to the Administrative Agent and each Lender:

(a) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of AFI, a consolidated balance sheet of AFI 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 (i) financial projections (prepared on a monthly basis) and (ii) a report and opinion of KPMG LLP or another independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, 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; and

(b) as soon as available, but in any event within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of AFI, a consolidated balance sheet of AFI 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 AFI’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal

 

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quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of AFI as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of AFI and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.

(c) during any Reporting Trigger Period, as soon as available, but in any event within thirty (30) days after the end of each month each fiscal year of AFI, a consolidated balance sheet of AFI and its Subsidiaries as at the end of such month, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such month and for the portion of AFI’s month then ended, setting forth in each case in comparative form the figures for the previous month, all in reasonable detail and certified by a Responsible Officer of AFI as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of AFI and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes

As to any information contained in materials furnished pursuant to Section 7.02(d) , the Borrowers shall not be separately required to furnish such information under clause (a) , (b)  and (c)  above, but the foregoing shall not be in derogation of the obligation of the Borrowers to furnish the information and materials described in clauses (a) , (b)  and ( c ) above at the times specified therein.

Section 7.02 Certificates; Other Information .

Deliver to the Administrative Agent and each Lender, in form and detail reasonably satisfactory to the Administrative Agent:

(a) concurrently with the delivery of the financial statements referred to in Sections 7.01(a) and (b) , a duly completed Compliance Certificate signed by a Responsible Officer of AFI (which delivery may, unless the Administrative Agent, or a Lender requests executed originals, be by electronic communication, including fax or email and shall be deemed to be an original authentic counterpart thereof for all purposes);

(b) beginning with the fiscal year ending December 31, 2016, an annual business plan and budget of AFI and its Subsidiaries containing, among other things, pro forma financial statements for the fiscal year, when and as available, but in any event within ninety (90) days after the beginning of the fiscal year;

(c) promptly after any request by the Administrative Agent or any Lender through the Administrative Agent, 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 AFI by independent accountants in connection with the accounts or books of AFI or any Subsidiary, or any audit of any of them;

(d) promptly after the same are available, (i) copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of AFI, and copies of all annual, regular, periodic and special reports and registration statements which AFI may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or to a holder of any Indebtedness owed by AFI or any Subsidiary in its capacity as such a holder and not otherwise required to be delivered to the Administrative Agent pursuant hereto and (ii) upon the request of the Administrative Agent, all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration, or any state or local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters;

 

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(e) promptly after any reasonable request of the Administrative Agent, a listing of (i) all applications, if any, for material Copyrights, Patents or Trademarks (each such term as defined in the Security Agreement) made by any Loan Party and (ii) all issuances of registrations or letters on existing applications for material Copyrights, Patents and Trademarks (each such term as defined in the Security Agreement) received by any Loan Party, in each case, after the Closing Date or any such later request by the Administrative Agent; and

(f) promptly, such additional information regarding the business, financial or corporate affairs of AFI or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

Documents required to be delivered pursuant to Section 7.01(a) or (b)  or Section 7.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which AFI posts such documents, or provides a link thereto on AFI’s website on the Internet at the website address listed on Schedule 11.02 ; (ii) on which such documents are posted on AFI’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent) or (iii) on which such documents are filed with the SEC on EDGAR. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above.

The Borrowers hereby acknowledge that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders materials and/or information provided by or on behalf of the Borrowers hereunder (collectively, “ Borrower Materials ”) by posting Borrower Materials on SyndTrak or another similar electronic system (the “ Platform ”) and (b) certain of the Lenders may be “public-side” Lenders ( i.e., Lenders that do not wish to receive material non-public information with respect to AFI or its securities) (each, a “ Public Lender ”). The Borrowers hereby agree that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrowers shall be deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to AFI or its securities for purposes of United States federal and state securities laws ( provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 11.07 ); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor;” and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” Notwithstanding the foregoing, the Borrowers shall not be under any obligation to mark any Borrower Materials “PUBLIC.”

Section 7.03 Notices .

(a) Promptly (and in any event, within two Business Days) notify the Administrative Agent and each Lender of the occurrence of any Default.

(b) Promptly notify the Administrative Agent and each Lender of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

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(c) Promptly notify the Administrative Agent and each Lender of the occurrence of any ERISA Event.

(d) Promptly notify the Administrative Agent and each Lender of any material change in accounting policies or financial reporting practices by AFI or any Subsidiary.

Each notice pursuant to this Section 7.03 shall be accompanied by a statement of a Responsible Officer of AFI setting forth details of the occurrence referred to therein and stating what action AFI has taken and proposes to take with respect thereto. Each notice pursuant to Section 7.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

Section 7.04 Payment of Obligations .

Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all federal and material state and local tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by AFI or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness; and (d) all applicable duties, freight, charges and like fees and charges of the United States Customs and Border Protection, customs brokers, shippers, NVOCCS, freight forwarders, carriers and warehousemen, except in each case in clauses (b) through (d) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 7.05 Preservation of Existence, Etc .

(a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 8 .04 or 8.05.

(b) Preserve, renew and maintain in full force and effect its good standing under the Laws of the jurisdiction of its organization, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(c) 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 the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(d) Preserve or renew all of its material registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

Section 7.06 Maintenance of Properties .

(a) 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 excepted.

(b) 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.

 

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(c) Use the standard of care typical in the industry in the operation and maintenance of its facilities.

Section 7.07 Maintenance of Insurance .

In addition to insurance required hereunder with respect to Collateral, maintain in full force and effect insurance with respect to the Property and business of the Loan Parties and their Subsidiaries (including worker’s compensation insurance, liability insurance, casualty insurance and business interruption insurance) with financially sound and reputable insurance companies (with a Best’s Financial Strength Rating of at least A-VII, unless otherwise approved by the Administrative Agent or which may be Insurance Subsidiaries), in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where AFI or the applicable Subsidiary operate. Business interruption insurance shall be subject to an insurance assignment satisfactory to the Administrative Agent. The Collateral Agent shall be named as lender’s loss payee, with respect to property insurance, and as additional insured, with respect to general liability insurance.

Section 7.08 Compliance with Laws .

(a) Comply with the requirements of all Laws and orders, writs, injunctions and decrees applicable to it and to its business or property, except in such instances in which (i) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect; and

(b) Conduct its business in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, and other similar anti-corruption legislation in other jurisdictions, and maintain policies and procedures designed to promote and achieve compliance with such laws.

Section 7.09 Books and Records .

(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 AFI or such Subsidiary, as the case may be.

(b) Maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over AFI or such Subsidiary, as the case may be.

Section 7.10 Appraisals .

(a) The Borrowers will permit the Administrative Agent (including, without limitation, the Administrative Agent’s employees, agents and designated representatives) and, if reasonably requested by any Lender, each such Lender (at each such Lender’s expense and only in connection with an examination or appraisal by the Administrative Agent) to conduct, and will reimburse the Administrative Agent for all charges, costs and expenses of the Administrative Agent in connection with (i) examinations of any Loan Party’s books and records or any other financial or Collateral matters as Agent deems appropriate; and (ii) appraisals of Inventory, provided , that the Borrowers shall not be obligated to pay the charges, costs and expenses of the Administrative Agent in connection with more than one examination and one appraisal during any calendar year; provided , however , that (x) if an additional examination or appraisal is initiated at any time that Excess Availability under the U.S Revolver Facility falls below the

 

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greater of 20.0% of the Line Cap and $40,000,000 for any period of five days during any twelve (12) month period, all charges, costs and expenses relating thereto shall be reimbursed by the Borrowers without regard to such limits up to one time per Loan Year or (y) additional examinations or appraisals may be initiated at any time during a Default or Event of Default and all charges, costs and expenses relating thereto shall be reimbursed by Borrowers without regard to such limits.

(b) In addition, so long as no Default or Event of Default has occurred and is continuing and the Loan Parties would be in compliance with Section 8.11 on a Pro Forma Basis, the Borrower may request that the Administrative Agent (including, without limitation, the Administrative Agent’s employees, agents and designated representatives) conduct, and will reimburse the Administrative Agent for all charges, costs and expenses of the Administrative Agent in connection with, an updated appraisal of Equipment constituting Eligible Machinery and Equipment; provided , that only one such request may be made prior to the Maturity Date. If such Equipment appraisal, together with customary due diligence delivered by the Borrowers to the Administrative Agent in connection with such appraisal, shall be acceptable to the Administrative Agent in its Reasonable Discretion, then the M&E Sublimit may be updated to reflect the results of such appraisal and thereafter shall amortize quarterly on a seven-year straight-line basis. Borrowers agree to pay Agent’s then standard charges for examination activities, including charges for the Administrative Agent’s internal examination and appraisal groups, as well as the charges of any third party used for such purposes.

(c) No Borrowing Base calculation shall include Collateral acquired in a Permitted Acquisition or otherwise outside the Ordinary Course of Business until completion of applicable field examinations and appraisals (which shall not be included in the limits provided above) satisfactory to the Administrative Agent.

Section 7.11 Use of Proceeds .

Use the proceeds of the Credit Extensions (a) to pay the Closing Date Dividend, (b) to pay any other costs and expenses relating to the Spin-Off and (c) to finance working capital, capital expenditures, Permitted Acquisitions and other lawful corporate purposes; provided that in no event shall the proceeds of the Credit Extensions be used in contravention of any Law or of any Loan Document.

Section 7.12 Additional Subsidiaries .

(a) Material Domestic Subsidiaries . Cause each wholly-owned Material Domestic Subsidiary to become a Guarantor hereunder promptly, but in any event within forty-five (45) days of the Subsidiary becoming a Material Domestic Subsidiary, by execution and delivery of a Guaranty Joinder Agreement or such other documents as the Administrative Agent may deem appropriate for such purpose, together with certified copies of resolutions and Organization Documents and favorable opinions of counsel (including, among other things, due authorization, execution, delivery, and enforceability of the Guaranty Joinder Agreement and related documents), all in form, scope and substance reasonably satisfactory to the Administrative Agent.

(b) Other Domestic Subsidiaries . In addition, cause each Domestic Subsidiary that gives a Guarantee in respect of any Public Notes to become a Guarantor hereunder promptly, but within thirty (30) days of the Subsidiary giving such a Guarantee, by execution and delivery of a Guaranty Joinder Agreement or such other documents as the Administrative Agent may deem appropriate for such purpose, together with certified copies of resolutions and Organization Documents and favorable opinions of counsel (including, among other things, due authorization, execution, delivery, and enforceability of the Guaranty Joinder Agreement and related documents), all in form, scope and substance reasonably satisfactory to the Administrative Agent.

 

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Section 7.13 ERISA Compliance .

Cause, and cause each of its ERISA Affiliates to cause, each Plan that is qualified under Section 401(a) of the Internal Revenue Code to maintain such qualification, and make all required contributions to any Plan subject to Section 412 of the Internal Revenue Code, except where the failure to do so would not result in a Material Adverse Effect.

Section 7.14 Pledged Assets .

(a) Capital Stock of Material Domestic Subsidiaries . Pledge all of the issued and outstanding Capital Stock owned by it of each Loan Party’s Material Domestic Subsidiaries promptly, but in any event within forty-five (45) days of the formation or acquisition thereof, in each case pursuant to a Pledge Agreement or Collateral Joinder Agreement reasonably acceptable to the Administrative Agent, together with such filings and deliveries necessary or appropriate to perfect the security interests therein, and opinions of counsel relating thereto, all in form, scope and substance reasonably satisfactory to the Administrative Agent.

(b) Capital Stock of Material First-Tier Foreign Subsidiaries . Subject to Section 7.15(b) , pledge all of the issued and outstanding Capital Stock owned by it of each Excluded Subsidiary that is a Material First-Tier Foreign Subsidiary but in no event more than 65% of the issued and outstanding Capital Stock of such Material First-Tier Foreign Subsidiaries, promptly, but in any event within ninety (90) days of such Subsidiary becoming a Material First-Tier Foreign Subsidiary, pursuant to a Pledge Agreement or Collateral Joinder Agreement reasonably acceptable to the Administrative Agent, together with such filings and deliveries necessary or appropriate to perfect the security interests therein, and opinions of counsel (including, among other things, opinions regarding execution, notarization and recordation of local pledge agreements, parallel debt agreements and such other acts necessary or appropriate to give effect to the pledge under local law) relating thereto, all in form, scope and substance reasonably satisfactory to the Administrative Agent ; provided that in each such case the Administrative Agent will, in consultation with the Borrowers, do an analysis of the relative benefits associated with the prospective pledge and where, in its reasonable discretion, the Administrative Agent shall make a determination, taking into account local custom and practice, that the costs, circumstances and requirements under local law associated with the pledge out-weigh the relative benefits of the pledge, then in any such case local pledge agreements (and related local law requirements) will not be required.

(c) Domestic Personal Property . Grant a security interest in all of each Loan Party’s personal property (other than Excluded Property). In connection with any grant of security interest under this subsection, the Loan Parties will deliver to the Administrative Agent promptly, but in any event within thirty (30) days (with extensions as deemed necessary by the Administrative Agent) (i) a security agreement or Collateral Joinder Agreement in form and substance reasonably satisfactory to the Administrative Agent, executed in multiple counterparts, (ii) notices of grant of security interest in respect of material intellectual property with the United States Copyright Office or the United States Patent and Trademark Office reasonably satisfactory to the Administrative Agent, executed in multiple counterparts, (iii) such opinions of counsel as the Administrative Agent may deem necessary or appropriate, in form and substance reasonably satisfactory to the Administrative Agent, (iv) evidence of property insurance (consistent with the requirements for insurance hereunder) showing the Collateral Agent as lender’s loss payee (if insurance is provided by a commercial insurer), and (v) such other filings and deliveries as may be necessary or appropriate as determined by the Administrative Agent in its reasonable discretion.

(d) [Reserved] .

 

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(e) Scope of Obligations . Subject to Section 9.03 , the security interests granted under this Section 7.14 will ratably secure the Obligations (including obligations under Swap Contracts (other than Excluded Swap Obligations) between AFI or any of its Subsidiaries and a Lender or its affiliates to the extent permitted hereunder and obligations under Treasury Management Agreements between AFI or any of its Subsidiaries and a Lender or its affiliates).

Section 7.15 Further Assurances . The Borrowers will provide or cause to be provided, the following:

(a) [ Reserved ].

(b) Material First-Tier Foreign Subsidiaries . Within ninety (90) days of the Closing Date (with extensions as deemed necessary by the Collateral Agent), AFI will pledge, or cause to be pledged, the Capital Stock of those of its Material First-Tier Foreign Subsidiaries that have not already been pledged by the Closing Date in accordance with the provisions of Section 7.14(b) .

Section 7.16 Collateral Administration .

(a) Borrowing Base Certificates . As soon as available, but in any event within twenty (20) days after the end of each calendar month, AFI shall deliver to the Administrative Agent Borrowing Base Certificates covering each Borrowing Base and supporting information in connection therewith, provided that (A) AFI will be required to furnish Borrowing Base Certificates and supporting information in connection therewith within three (3) Business Days after the end of each calendar week as of the end of such calendar week during which a Reporting Trigger Period is continuing, (B) within three (3) Business Days after consummation of any sale or disposition of Accounts or Inventory included in the Borrowing Base not in the Ordinary Course of Business resulting in net proceeds exceeding $5,000,000 (individually or in the aggregate for all such sales and dispositions since the date of the most recent Borrowing Base Certificates), AFI shall deliver an updated Borrowing Base Certificate giving effect to any such sale or disposition, (C) AFI shall not be required to deliver to the Administrative Agent the Borrowing Base Certificates for the calendar month ending March 31, 2016 until May 15, 2016 and (D) AFI shall not be not be required to deliver to the Administrative Agent the Borrowing Base Certificates for the calendar months ending April 30, 2016, May 31, 2016, June 30, 2016, July 31, 2016 and August 31, 2016 until thirty (30) days after the end of each such calendar month. All calculations of Availability in any Borrowing Base Certificate shall originally be made by the Borrowers and certified by a Senior Officer of the applicable Borrower, provided that the Administrative Agent may from time to time review and adjust any such calculation (after giving prior notice to the Borrowers of such adjustment) (1) to reflect its reasonable estimate of declines in value of any Collateral, due to collections received in the Dominion Account, any disposition of Accounts or Inventory (which shall result in a reduction in the Borrowing Base equal to the net book value thereof as of the date of such disposition) or Equipment (which shall result in a reduction of the Borrowing Base by the net orderly liquidation value of such Equipment as of the date of such disposition) or otherwise; (2) to adjust advance rates and to impose additional reserves in its Permitted Discretion to reflect changes in dilution, quality, mix and other factors affecting Collateral; and (3) to the extent the calculation is not made in accordance with this Agreement or does not accurately reflect the Reserves.

(b) Administration of Accounts .

(i) Records and Schedules of Accounts . Each Borrower shall keep accurate and complete records of its Accounts, including all payments and collections thereon, and shall submit to the Administrative Agent sales, collection, reconciliation and other reports in form reasonably satisfactory to the Administrative Agent, on such periodic basis as the Administrative Agent may request. Each Borrower shall provide to the Administrative Agent, within thirty (30)

 

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days after the end of each month, a detailed aged trial balance of all Accounts as of the end of such month, specifying each Account’s Account Debtor name and address, amount, invoice date and due date and, upon request by the Administrative Agent, showing any discount, allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment histories, status reports and other information as the Administrative Agent may reasonably request. If Accounts of a Borrower in an aggregate face amount of $10,000,000 or more included in the then existing Borrowing Base cease to be Eligible Accounts, then such Borrower or AFI shall notify the Administrative Agent of such occurrence promptly (and in any event within one Business Day) after such Borrower or AFI has knowledge thereof.

(ii) Taxes . If an Account of any Borrower includes a charge for any Taxes, the Administrative Agent is authorized, in its discretion, if such Borrower has not paid such Taxes when due, to pay the amount thereof to the proper Governmental Authority for the account of such Borrower and to charge the Loan Parties therefor; provided, however , that neither the Administrative Agent nor any other Secured Party shall be liable for any Taxes that may be due from the Loan Parties or with respect to any Collateral.

(iii) Account Verification . During a Default, Event of Default or Cash Dominion Event, the Administrative Agent shall have the right at any time, in the name of the Administrative Agent, any designee of the Administrative Agent or any Borrower, to verify the validity, amount or any other matter relating to any Accounts of the Borrowers by mail, telephone or otherwise. Loan Parties shall cooperate fully with the Administrative Agent in an effort to facilitate and promptly conclude any such verification process.

(iv) Maintenance of Dominion Accounts . Within ninety (90) days (or such longer period as the Administrative Agent may agree in its sole discretion) following the Closing Date, the Loan Parties shall establish and maintain Dominion Accounts pursuant to account control agreements, lockbox or other arrangements with Bank of America or one or more of the other Lenders; provided that lockboxes will not be required in Canada or any other jurisdiction where lockboxes are not available. The Loan Parties shall obtain a Deposit Account Control Agreement from each lockbox servicer (if applicable) and Dominion Account bank, establishing the Administrative Agent’s control over and Lien in the lockbox or Dominion Account, requiring immediate deposit of all remittances received in the lockbox (or otherwise) to a Dominion Account and waiving offset rights of such servicer or bank, except for customary administrative charges and returned items. If a Dominion Account is not maintained with Bank of America, the Administrative Agent may, during the existence of any Cash Dominion Event, require immediate transfer of all cash receipts in such account to a Dominion Account maintained with Bank of America. The Administrative Agent and Lenders assume no responsibility to Loan Parties for any lockbox arrangement or Dominion Account, including any claim of accord and satisfaction or release with respect to any Payment Items accepted by any bank.

(v) Proceeds of Collateral . Loan Parties shall request in writing and otherwise take all necessary steps to ensure that all payments on Accounts or otherwise relating to Collateral are made directly to a Dominion Account (or a lockbox relating to a Dominion Account). If any Loan Party receives cash or Payment Items with respect to any Collateral, it shall hold same in trust for the Administrative Agent and the Security Trustees and within one Business Day deposit same into a Dominion Account.

 

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(c) Administration of Inventory .

(i) Records and Reports of Inventory . Each Borrower shall keep accurate and complete records of its Inventory, including costs and monthly withdrawals and additions, and shall submit to the Administrative Agent inventory and reconciliation reports in form reasonably satisfactory to the Administrative Agent, on such periodic basis as the Administrative Agent may reasonably request. Each Borrower shall conduct periodic cycle counts consistent with historical practices, and shall provide to the Administrative Agent a report based on each such count promptly upon completion thereof, together with such supporting information as the Administrative Agent may reasonably request. The Administrative Agent may participate in and observe each physical count at its own expense or as part of an inspection, audit or field exam under Section 7.10 .

(ii) Returns of Inventory . No Borrower shall return any Inventory to a supplier, vendor or other Person, whether for cash, credit or otherwise, unless (A) such return is in the Ordinary Course of Business; (B) no Default, Event of Default or Overadvance exists or would result therefrom; (C) the Administrative Agent is promptly notified if the aggregate value of all Inventory returned in any month exceeds $15,000,000 in the aggregate for all Borrowers; and (D) during any Cash Dominion Event, any payment received by a Borrower for a return is promptly remitted to the Administrative Agent for application to the Obligations.

(iii) Acquisition, Sale and Maintenance . No Borrower shall acquire or accept any Inventory on consignment or approval except in the Ordinary Course of Business and disclosed to the Administrative Agent in writing (with such further information as the Administrative Agent may reasonably request), and shall take all steps to assure that all Inventory is produced in accordance with the FLSA and otherwise in all material respects with Applicable Law. No Borrower shall sell any Inventory on consignment or approval or any other basis under which the customer may return or require a Borrower to repurchase such Inventory except in the Ordinary Course of Business. Borrowers shall use, store and maintain all Inventory with reasonable care, in accordance with applicable standards of any insurance and in conformity in all material respects with all Applicable Law, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where any material Collateral is located.

(d) Administration of Deposit Accounts . Schedule 7.16(d) sets forth all Deposit Accounts maintained by the Loan Parties as of the date hereof, including all Dominion Accounts. Each Loan Party shall take all commercially reasonable actions necessary to establish the Administrative Agent’s control of each Deposit Account (other than Excluded Accounts) through a Deposit Account Control Agreement. A Loan Party shall be the sole account holder of each Deposit Account and shall not allow any other Person (other than the Administrative Agent) to have control over a Deposit Account or any Property deposited therein. AFI shall promptly notify the Administrative Agent of any opening or closing of a Deposit Account and will amend Schedule 7.16(d) to reflect the same.

(e) Administration of Equipment .

(i) Records and Schedules of Equipment . Each Borrower shall keep accurate and complete records of its Equipment, including kind, quality, quantity, cost, acquisitions and dispositions thereof, and shall submit to the Administrative Agent, on such periodic basis as Agent may request, a current schedule thereof, in form satisfactory to the Administrative Agent. Promptly upon request, Borrowers shall deliver to the Administrative Agent evidence of their ownership or interests in any Equipment.

 

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(ii) Dispositions of Equipment . No Borrower shall sell, lease or otherwise Dispose of any Equipment, without the prior written consent of Agent, other than a Disposition permitted under Section 8.05 .

(iii) Condition of Equipment . The Equipment is in good operating condition and repair, and all necessary replacements and repairs have been made so that the value and operating efficiency of the Equipment is preserved at all times, reasonable wear and tear excepted. Each Borrower shall ensure that the Equipment is mechanically and structurally sound, and capable of performing the functions for which it was designed, in accordance with manufacturer specifications. No Borrower shall permit any Equipment included in the Borrowing Base to become affixed to real Property unless any landlord or mortgagee delivers a Lien Waiver.

(f) General Provisions .

(i) Location of Collateral . All tangible items of Collateral, other than Inventory in transit, shall at all times be kept by the Loan Parties at the Loan Parties’ business locations set forth in Schedule 7.16(f) , except that the Loan Parties may (A) make sales or other Dispositions of Collateral in accordance with Section 8.05 ; (B) move Collateral to another location in the United States. AFI shall promptly notify the Administrative Agent of any new locations of Collateral and (1) upon 15 Business Days’ prior written notice to the Administrative Agent and (2) so long as all actions shall have been taken prior to such move to ensure that the Administrative Agent has a perfected first priority security interest in and Lien on such Collateral, will amend Schedule 7.16(f) to reflect the same.

(ii) Certain Organizational Changes . No Loan Party may change its name or other organizational number, form or jurisdiction of organization without at least 15 days prior written notice to the Administrative Agent (or such lesser period as Agent may agree) and taking such actions (including entering into supplemental documentation) as the Administrative Agent may reasonably request to maintain the perfection and priority of its security interest in the Collateral.

(iii) Insurance of Collateral; Condemnation Proceeds .

(A) Each Loan Party shall maintain insurance with respect to the Collateral, covering casualty, hazard, theft, malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best’s Financial Strength Rating of at least A-VII, unless otherwise approved by the Administrative Agent) reasonably satisfactory to the Administrative Agent. From time to time upon request, Loan Parties shall deliver to the Administrative Agent the originals or certified copies of their insurance policies. Unless the Administrative Agent shall agree otherwise (giving due consideration to what is commercially available in the insurance market for the applicable jurisdiction), each policy shall include satisfactory endorsements (a) showing the Administrative Agent as loss payee, as appropriate; (b) requiring 10 days prior written notice to the Administrative Agent (or such shorter period as agreed to by the Administrative Agent) in the event of cancellation of the policy for any reason whatsoever; and (c) specifying that the interest of the Administrative Agent shall not be impaired or invalidated by any act or neglect of any Loan Party or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are permitted by the policy. If any Loan Party fails to provide and pay for any insurance, the Administrative Agent may, at its option, but shall not be required to, procure the insurance and charge such Loan Party therefor. Each Loan Party agrees to deliver to the Administrative Agent, promptly upon the request of the Administrative Agent, copies of all reports made to insurance companies. While no

 

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Event of Default exists, Loan Parties may settle, adjust or compromise any insurance claim. If an Event of Default exists, only the Administrative Agent shall be authorized to settle, adjust and compromise such claims.

(B) Any proceeds of insurance with respect to Collateral and any awards arising from condemnation of any Collateral shall be paid to the Administrative Agent; provided that if a Cash Dominion Event is not then in effect, the Administrative Agent shall remit such proceeds as directed by the applicable Loan Party. During a Cash Dominion Event, any such proceeds or awards that relate to Inventory shall be applied to payment of the Revolving Loans, and then to any other Obligations outstanding.

(iv) Protection of Collateral . All expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping any Collateral, all Taxes payable with respect to any Collateral (including any sale thereof), and all other payments required to be made by the Administrative Agent to any Person to realize upon any Collateral, shall be borne and paid by Loan Parties. The Administrative Agent shall not be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage thereto (except for reasonable care in its custody while Collateral is in the Administrative Agent’s actual possession), for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be at Loan Parties’ sole risk.

(v) Defense of Title to Collateral . Each Loan Party shall at all times (vi) defend its title to Collateral and the Administrative Agent’s Liens therein against all Persons, claims and demands whatsoever, except Permitted Liens.

(vi) Lien Waivers . Each Loan Party will, upon request, provide Agent with copies of all existing agreements and promptly after execution thereof provide Agent with copies of all future agreements, between a Loan Party and any landlord, warehouseman, processor, shipper, bailee or other Person that owns any premises at which any Collateral may be kept or that otherwise may possess or handle any Collateral. Each Loan Party shall use commercially reasonable efforts to obtain a Lien Waiver with respect to Inventory which is located in any location leased by such Loan Party, located in any third-party warehouse or otherwise in the possession of a bailee or other third-party (including storage yards and mills).

(g) Power of Attorney . Each of the Loan Parties hereby irrevocably constitutes and appoints the Administrative Agent (and all Persons designated by the Administrative Agent) as such Loan Party’s true and lawful attorney (and agent-in-fact), coupled with an interest, for the purposes provided in this Section. The Agent, or the Administrative Agent’s designee, may, without notice and in either its or a Loan Party’s name, but at the cost and expense of such Loan Parties:

(i) Endorse a Loan Party’s name on any Payment Item or other proceeds of Collateral (including proceeds of insurance) that come into the Administrative Agent’s possession or control; and

(ii) During the continuance of an Event of Default, (i) notify any Account Debtors of a Loan Party of the assignment of their Accounts, demand and enforce payment of such Accounts by legal proceedings or otherwise, and generally exercise any rights and remedies with respect to such Accounts; (ii) settle, adjust, modify, compromise, discharge or release any Accounts or other Collateral of the Loan Parties, or any legal proceedings brought to collect Accounts or Collateral of the Loan Parties; (iii) sell or assign any Accounts and other Collateral of the Loan Parties upon such terms, for such amounts and at such times as the Administrative Agent deems advisable; (iv)

 

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collect, liquidate and receive balances in Deposit Accounts or Securities Accounts of the Loan Parties, and take control, in any manner, of proceeds of Collateral of the Loan Parties; (v) prepare, file and sign a Loan Party’s name to a proof of claim or other document in a bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction of Lien or similar document; (vi) receive, open and dispose of mail addressed to a Loan Party, and notify postal authorities to deliver any such mail to an address designated by the Administrative Agent; (vii) endorse any Chattel Paper, Document, Instrument, bill of lading, or other document or agreement relating to any Accounts, Inventory or other Collateral; (viii) use a Loan Party’s stationery and sign its name to verifications of Accounts and notices to Account Debtors of the Loan Parties; (ix) use information contained in any data processing, electronic or information systems relating to Collateral; (x) make and adjust claims under insurance policies of the Loan Parties; (xi) take any action as may be necessary or appropriate to obtain payment under any letter of credit, banker’s acceptance or other instrument for which a Loan Party is a beneficiary; and (xii) take all other actions as the Administrative Agent reasonably deems appropriate to fulfill any Loan Party’s obligations under the Loan Documents.

Section 7.17 Post-Closing Matters . The Closing Date Dividend will occur on the Closing Date (as soon as practicable after the making of the initial Loans). The Spin-Off will occur on April 1, 2016. In addition, each of the Loan Parties will, and will cause each of their respective Subsidiaries to, complete each of the actions applicable to it that is described in Schedule 7.17 as soon as commercially reasonable, but in any event no later than the date set forth in Schedule 7.17 with respect to such action, or such later date as the Administrative Agent may agree.

ARTICLE VIII.

NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, AFI shall not, nor shall it permit any Subsidiary to, directly or indirectly:

Section 8.01 Liens .

Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

(a) Liens securing the Obligations hereunder, including cash collateral and other Adequate Assurance pledged to the L/C Issuer and the Swing Line Lender to secure obligations of Defaulting Lenders as provided in Section 2.15 ;

(b) Liens existing on the date hereof and listed on Schedule 8.01 and any renewals or extensions thereof, provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 8.03(b) ;

(c) Liens for taxes, assessments or governmental charges or levies that are not yet due for a period of more than thirty (30) days and are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

 

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(d) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business,

(e) (i) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, and (ii) pledges and deposits of cash in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to AFI or any Subsidiary;

(f) deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;

(g) easements, rights-of-way, restrictions (including zoning restrictions), encroachments, protrusions and other similar encumbrances and minor title defects affecting real property that, in the aggregate, do not in any case materially interfere with the ordinary conduct of the business of the applicable Person, taken as a whole;

(h) Liens securing judgments for the payment of money (or appeal or other surety bonds relating to such judgments) that do not result in an Event of Default under Section 9.01(h) ;

(i) Liens (other than Liens on than Accounts and Inventory) securing Indebtedness permitted under Section 8.03(e) ; provided that (i) such Liens do not at any time encumber any Property other than the Property financed by such Indebtedness, (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the Property subject to such Lien and (iii) such Liens attach to such Property concurrently with or within two hundred seventy (270) days after the acquisition, construction, replacement, repair or improvement thereof;

(j) leases, licenses, subleases or sublicenses granted to others not interfering in any material respect with the business of AFI or any of its Subsidiaries, taken as a whole;

(k) any interest or title of a lessor, sublessor, licensor or sublicensor or secured by a lessor’s, sublessor’s, licensor’s or sublicensor’s interest under leases or licenses entered into by AFI or any Subsidiary in the ordinary course of business;

(l) [Reserved];

(m) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions;

(n) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business and (iii) in favor of a banking or other financial institution arising as a matter of law encumbering deposits or other funds maintained with a financial institution (including the right of setoff) and which are within the general parameters customary in the banking industry;

(o) Liens (i) of sellers of goods to AFI and any of its Subsidiaries arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable Law in the ordinary course of business,

 

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covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses and (ii) on specific items of goods (but not Inventory included in the Borrowing Base) and the proceeds thereof securing such Person’s obligations in respect of documentary letters of credit or banker’s acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such goods in the ordinary course of business;

(p) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(q) Liens on property or assets acquired in connection with a Permitted Acquisition, provided , that (i) the indebtedness secured by such Liens is permitted under Section 8.03 , and (ii) the Liens are not incurred in connection with, or in contemplation or anticipation of, the acquisition and do not attach or extend to any other property or assets;

(r) [Reserved];

(s) Liens securing Indebtedness or other obligations of (i) any Subsidiary in favor of any Loan Party and (ii) any Subsidiary that is not a Loan Party in favor of any other Subsidiary; provided , that any such Lien shall be expressly junior in priority to the Liens granted to the secure the Obligations and all documentation therefor shall be in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent;

(t) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by AFI or any Subsidiary in the ordinary course of business;

(u) reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts maintained in the ordinary course of business and not for speculative purposes;

(v) Liens that are contractual rights of setoff (i) relating to the establishment of depository relations with banks or other financial institutions not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of AFI or its Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of AFI and the Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of AFI or any of the Subsidiaries in the ordinary course of business;

(w) Liens solely on any cash earnest money deposits made by AFI or any of the Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;

(x) ground leases or subleases, licenses or sublicenses in respect of real property on which facilities owned or leased by AFI or any of its Subsidiaries are located;

(y) Liens arising from precautionary Uniform Commercial Code financing statements or similar filings (or equivalent filings, registrations or agreements in foreign jurisdictions);

(z) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;

(aa) any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of AFI and the Subsidiaries, taken as a whole;

 

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(bb) [Reserved];

(cc) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Section 8.02 to be applied against the purchase price for such Investment and (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 8.05 , in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;

(dd) Liens arising in the ordinary course of business to secure accounts payable or similar trade obligations of AFI or any Subsidiary not constituting Indebtedness;

(ee) Liens deemed to exist by reason of (i) any encumbrance or restriction (including put and call arrangements) with respect to the Capital Stock and Capital Stock Equivalents of any joint venture or similar agreement pursuant to any joint venture or similar arrangement or (ii) any encumbrance or restriction imposed under any contract for the sale by AFI or any Subsidiary of the Capital Stock and Capital Stock Equivalents of any Subsidiary, or any business unit or division of AFI or any Subsidiary permitted under this Agreement; provided that in each case such Liens shall extend only to the relevant Capital Stock and Capital Stock Equivalents;

(ff) the modification, replacement, renewal or extension of any Lien permitted of this Section 8.01 ; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 8.03 (e), and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 8.03 ;

(gg) liens on property of Foreign Subsidiaries of AFI securing Indebtedness of Foreign Subsidiaries permitted under Sections 8.03(s) and (t) ; and

(hh) other Liens not described above, provided that such Liens do not secure obligations in excess of an amount equal to the greater of (i) one percent (1.0%) of Consolidated Total Assets or (ii) $10,000,000, at any one time outstanding.

Notwithstanding anything in this Section 8.01 to the contrary, in no event shall Accounts or Inventory be pledged as collateral to secure any Indebtedness other than the Obligations hereunder.

Section 8.02 Investments .

Make any Investments, except:

(a) Investments held by the Borrowers or such Subsidiary in the form of cash or Cash Equivalents;

(b) Investments existing as of the Closing Date and set forth in Schedule 8 .02 ;

(c) Investments (i) in any Person that is a Loan Party, (ii) by AFI and its wholly-owned Domestic Subsidiaries in and to AFI and its wholly-owned Domestic Subsidiaries (iii) by any Domestic Subsidiary that is not a Guarantor or any Foreign Subsidiary in AFI or any Subsidiary, foreign or domestic, and (iv) by any Loan Party in and to any Domestic Subsidiary that is not a Guarantor, any Foreign Subsidiary or any joint venture to the extent permitted by Section 8.02(g );

 

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

(e) Guarantees permitted by Section 8.03 ;

(f) Permitted Acquisitions;

(g) Investments made after the Closing Date in Domestic Subsidiaries that are not Guarantors, Foreign Subsidiaries and joint ventures, provided that the aggregate principal amount outstanding of all such Investments made by Loan Parties pursuant to this clause (g) shall not exceed on the date any such Investment is made an amount equal to $30,000,000;

(h) to the extent not prohibited by applicable Law, loans or advances to officers, directors and employees of AFI and its Subsidiaries made in the ordinary course of business, (i) for travel, entertainment, relocation and other ordinary business purposes, (ii) so long as no Default or Event of Default has occurred and is continuing, in connection with such Person’s purchase of Capital Stock and Capital Stock Equivalents of AFI in an aggregate principal amount outstanding under this clause (ii) not to exceed $3,000,000 and (iii) for purposes not described in the foregoing clauses (i) and (ii), in an aggregate principal amount outstanding under this clause (iii) not to exceed $1,000,000;

(i) Investments by Foreign Subsidiaries in AFI and any of its Subsidiaries (including other Foreign Subsidiaries);

(j) any Investment (other than an Acquisition) so long as (a) no Event of Default exists prior to or after giving effect to such event, (b) either (i) both (A) pro forma Excess Availability for the thirty (30) day period ending on and including the date of such event is not less than the greater of (x) 12.5% of the Line Cap and (y) $25,000,000 and (B) the Loan Parties are in pro forma compliance with the Financial Covenants, or (ii) pro forma Excess Availability for the thirty (30) day period ending on and including the date of such event is not less than the greater of (x) 20% of the Line Cap and (y) $40,000,000 and (c) AFI delivers to the Administrative Agent a compliance certificate confirming the foregoing, in form and detail reasonably satisfactory to the Administrative Agent;

(k) Investments representing non-cash consideration received in connection with any Disposition permitted hereunder;

(l) Investments by any Foreign Subsidiaries that are not Loan Parties in any joint venture outside of the United States;

(m) Investments in Swap Contracts permitted under Section 8.03 ;

(n) Investments (including debt obligations, Capital Stock and Capital Stock Equivalents) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;

(o) advances of payroll payments to employees in the ordinary course of business;

 

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(p) Investments to the extent that payment for such Investments is made solely with Capital Stock and Capital Stock Equivalents of AFI;

(q) Investments made to repurchase or retire Capital Stock and Capital Stock Equivalents of AFI owned by any employee stock ownership plan or key employee stock ownership plan of AFI;

(r) in the event AFI or any of its Subsidiaries shall establish any Insurance Subsidiary, Investments in an aggregate amount that does not exceed the minimum amount of capital required under the Laws of the jurisdiction in which the Insurance Subsidiary is formed (or any greater amount as may be reasonable and prudent), plus the amount of any reasonable general corporate and overhead expense of such Insurance Subsidiary; and

(s) Investments consisting of Liens, Indebtedness, fundamental changes, Dispositions and Restricted Payments permitted under Sections 8.01 , 8.03 , 8.04 , 8.05 and 8.06 , respectively.

Section 8.03 Indebtedness .

Create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness under the Loan Documents;

(b) Indebtedness of AFI and its Subsidiaries existing on the date hereof and listed on Schedule 8.03 (and renewals, refinancings and extensions thereof on terms and conditions not materially less favorable to the applicable debtor(s) or at then prevailing market terms);

(c) intercompany Indebtedness among AFI and its Subsidiaries to the extent permitted under Section 8.02 ; provided that, if secured, any such Indebtedness shall be expressly subordinated in right of payment to the Obligations, and if evidenced by an intercompany note, such note shall be pledged to the Collateral Agent to secure the Obligations;

(d) obligations (contingent or otherwise) of AFI or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view” and (ii) such Swap Contract is not for speculative purposes;

(e) purchase money Indebtedness (including obligations in respect of Capital Leases or Synthetic Leases, but excluding Indebtedness, if any, with respect to Inventory) hereafter incurred by AFI or any of its Subsidiaries to finance the purchase, acquisition, construction, repair, replacement or improvement of fixed or capital assets, and renewals, refinancings and extensions thereof, provided , that (i) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed, (ii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing, and (iii) at the time of and immediately after giving effect to such incurrence, AFI will be in compliance with the financial covenant in Section 8.11 on a Pro Forma Basis;

 

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(f) [Reserved];

(g) so long as no Event of Default has occurred and is continuing and the Loan Parties are in compliance with Section 8.11 on a Pro Forma Basis, other unsecured Indebtedness of the Borrowers in an aggregate principal amount outstanding at any time not to exceed $25,000,000;

(h) other unsecured Indebtedness of the Borrowers, provided , that (i) the weighted average life to maturity for such Indebtedness is at least 91 days beyond the Maturity Date hereunder, (ii) such Indebtedness will be issued on terms not more onerous that the terms hereof, (iii) no Default or Event of Default shall exist immediately before or immediately after giving effect thereto, (iv) the Borrowers will be in compliance with the financial covenant under Section 8.11 after giving effect thereto on Pro Forma Basis and (v) the Borrowers shall deliver to the Administrative Agent a compliance certificate confirming the foregoing, in form and detail reasonably satisfactory to the Administrative Agent;

(i) Indebtedness acquired or assumed pursuant to a Permitted Acquisition, including such Indebtedness that was incurred in connection with, or in anticipation or contemplation of, such Permitted Acquisition, and, in each case, renewals, refinancings and extensions thereof, provided that (i) no Default or Event of Default shall exist immediately before or immediately after giving effect thereto, (ii) the Borrowers will be in compliance with the financial covenant under Section 8.11 after giving effect thereto on Pro Forma Basis and (iii) the Borrowers shall deliver to the Administrative Agent a compliance certificate confirming the foregoing, in form and detail reasonably satisfactory to the Administrative Agent;

(j) Indebtedness arising under any performance, bid, appeal or surety bond or under any performance or completion guarantee or similar obligations entered into in the ordinary course of business;

(k) [Reserved];

(l) Indebtedness to current or former officers, directors, managers, consultants and employees (or their respective spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees) to finance the purchase or redemption of Capital Stock and Capital Stock Equivalents of AFI or its Subsidiaries permitted by Section 8.06 ;

(m) Indebtedness incurred by AFI or any of its Subsidiaries in a Permitted Acquisition or any other Investment expressly permitted hereunder or any Disposition, in each case to the extent constituting indemnification obligations or obligations in respect of purchase price (including earn-outs) or other similar adjustments;

(n) obligations under any Treasury Management Agreement and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections, employee credit card programs and other cash management and similar arrangements in the ordinary course of business;

(o) Indebtedness consisting of (a) the financing of insurance premiums or (b) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(p) Indebtedness incurred by AFI or any Subsidiary in respect of letters of credit, bank guarantees, bankers’ acceptances, warehouse receipts or similar instruments issued or created in the ordinary course of business, including in 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 upon the drawing of such letter of credit, the reimbursement of obligations in respect of bankers’ acceptances and the incurrence of such Indebtedness, such obligations are reimbursed within thirty (30) days following such drawing, reimbursement obligation or incurrence;

 

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(q) all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (o) above and (q) through (u) below;

(r) Indebtedness incurred in the ordinary course of business in respect of obligations of AFI or any Subsidiary consisting of the deferred purchase price of goods or services or progress payments in connection with such goods and services;

(s) [Reserved];

(t) [Reserved];

(u) Indebtedness of Foreign Subsidiaries of AFI in an aggregate amount not in excess of ten percent (10.0%) of Consolidated Total Assets; and

(v) Guarantees with respect to Indebtedness permitted under this Section 8.03 .

Section 8.04 Fundamental Changes .

Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person; provided that, notwithstanding the foregoing provisions of this Section 8.04 but subject to the terms of Sections 7.12 and 7.14 , (a) a Borrower may merge or consolidate with any of its Subsidiaries provided that, in the case of a Borrower merging or consolidating with any entity that is not a Borrower, such Borrower shall be the continuing or surviving corporation, (b) subject to the proviso in clause (a), any Loan Party may merge or consolidate with any other Loan Party, (c) any Foreign Subsidiary may be merged or consolidated with or into any Loan Party provided that such Loan Party shall be the continuing or surviving corporation, (d) any Foreign Subsidiary may be merged or consolidated with or into any other Foreign Subsidiary, (e) AFI or any Subsidiary may merge with any Person that is not a Loan Party in connection with a Permitted Acquisition provided that, if such Permitted Acquisition involves any entity that is a Borrower, such Borrower shall be the continuing or surviving corporation, (f) any Subsidiary may dissolve, liquidate or wind up its affairs at any time provided that such dissolution, liquidation or winding up, as applicable, could not have a Material Adverse Effect, (g) any Loan Party and any Subsidiary may make any Permitted Investments and (h) any Loan Party and any Subsidiary may make any Disposition permitted under Section 8.05 .

Section 8.05 Dispositions .

Make any Disposition (other than an Involuntary Disposition) other than the following:

(a) any Disposition (i) for which the total consideration shall be in an amount not less than the fair market value of the Property disposed of, (ii) that does not involve a sale or other disposition of receivables, and (iii) for which the aggregate net book value of all of the assets sold or otherwise disposed of by AFI and its Subsidiaries in such Disposition, taken together with all other Dispositions (other than Involuntary Dispositions and the Disposition(s) set forth in clause (a)  above) in any fiscal year of AFI shall not exceed an amount equal to fifteen percent (15%) of the total assets of AFI and its Subsidiaries on a consolidated basis determined in accordance with GAAP as of the last day of the fiscal quarter immediately preceding the date of determination; provided , that no disposition of assets included in the

 

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Borrowing Base outside the Ordinary Course of Business shall be permitted in accordance with this Section 8.05(a) unless (i) no Default or Event of Default shall exist immediately before or immediately after giving effect thereto and (ii) if the net book value of Borrowing Base assets being disposed of in a single transaction or series of related transactions exceeds (A) $25,000,000, if Excess Availability is greater than 50% of the Line Cap or (B) $15,000,000 otherwise, AFI shall have delivered an updated Borrowing Base Certificate to the Administrative Agent giving effect to such disposition prior to the consummation of such disposition; and

(b) Dispositions permitted by Sections 8.02 , 8.04 , 8.06 and Liens permitted by Section 8.01 .

Section 8.06 Restricted Payments .

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

(a) The Borrowers may declare and make the Closing Date Dividend;

(b) each Subsidiary may make Restricted Payments (directly or indirectly) to its parent or to any Loan Party (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to each owner of Capital Stock in such Subsidiary on a pro rata basis based on such owner’s respective ownership interests);

(c) AFI and each Subsidiary may (i) declare and make dividend payments or other distributions payable solely in the Capital Stock of such Person or (ii) redeem in whole or in part any of its Capital Stock for another class of Capital Stock or rights to acquire its Capital Stock or with proceeds from substantially concurrent equity contributions or issuances of new Capital Stock;

(d) to the extent constituting Restricted Payments, AFI and the Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Section 8.02 , 8.03 , 8.04 , 8.05 , or 8.08 ;

(e) repurchases of Capital Stock in AFI deemed to occur upon exercise of stock options or warrants if such Capital Stock represent a portion of the exercise price of such options or warrants;

(f) AFI may pay for the repurchase, retirement or other acquisition or retirement for value of Capital Stock of AFI by any future, present or former employee, director or consultant (or any spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) of AFI or any Subsidiary so long as such purchase is pursuant to and in accordance with the terms of any employee or director equity plan, employee or director stock option plan or any other employee or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee, director or consultant of AFI or any Subsidiary;

(g) AFI or any of the Subsidiaries may (a) pay cash in lieu of fractional equity interests in connection with any dividend, split or combination thereof or any Permitted Acquisition and (b) honor any conversion request by a holder of convertible Indebtedness and make cash payments in lieu of fractional shares in connection with any such conversion and may make payments on convertible Indebtedness in accordance with its terms; and

(h) AFI may declare and make other Restricted Payments on and after the Closing Date; provided that (A) no Default or Event of Default shall exist immediately before or immediately after giving effect thereto, (B) either (1) both (I) pro forma Excess Availability for the 30 day period ending on

 

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and including the date of such event is not less than the greater of (x) 15.0% of the Line Cap and (y) $30,000,000, and (II) the Borrowers are in pro forma compliance with the financial covenant under Section 8.11 after giving effect thereto on a Pro Forma Basis, or (2) Excess Availability calculated on a Pro Forma Basis for the 30 day period ending on and including the date of such event is not less than the greater of (x) 20% of the Line Cap and (y) $40,000,000 after giving effect thereto, and (C) AFI shall deliver to the Administrative Agent a compliance certificate confirming the foregoing, in form and detail reasonably satisfactory to the Administrative Agent;

provided , in each case, that payment of any dividend or distribution pursuant to this Section 8.06 may be made within sixty (60) days after the date of declaration thereof, if at the date of declaration (i) such payment would have complied with the provisions of this Agreement and (ii) no Event of Default occurred and was continuing.

Section 8.07 Change in Nature of Business .

Engage in any material line of business substantially different from those lines of business conducted by AFI and its Subsidiaries on the Closing Date or any business related, incidental, complementary or ancillary thereto or reasonable developments or extensions thereof.

Section 8.08 Transactions with Affiliates .

Enter into or permit to exist any transaction or series of transactions with any Affiliate of such Person other than (a) advances of working capital to any Loan Party, (b) transactions among Loan Parties, (c) intercompany transactions expressly permitted by Section 8.02 , Section 8.03 , Section 8.04 , Section 8.05 or Section 8.06 , (d) transactions among AFI and its wholly-owned Domestic Subsidiaries and (e) except as otherwise specifically limited in this Agreement, other transactions which are entered into in the ordinary course of such Person’s business on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arms-length transaction with a Person other than an officer, director or Affiliate.

Section 8.09 Burdensome Agreements .

(a) Enter into, or permit to exist, any Contractual Obligation that (i) encumbers or restricts on the ability of any such Person to (A) pay dividends or make any other distributions to any Loan Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (B) pay any Indebtedness or other obligation owed to any Loan Party, or (C) make loans or advances to any Loan Party or (ii) prohibits or otherwise restricts the existence of any Lien upon the Property, whether now owned or hereafter acquired, of any Material Domestic Subsidiary in favor of the Administrative Agent (for the benefit of the Lenders) for the purpose of securing the Obligations; provided that the foregoing clauses (i) and (ii) shall not apply to Contractual Obligations which:

(4) arise in connection with this Agreement, the other Loan Documents and any Public Indenture;

(5) arise pursuant to customary restrictions and conditions contained in any agreement relating to the sale of any Property permitted under Section 8.05 pending the consummation of such sale;

(6) are customary restrictions on leases, subleases, licenses or sublicenses or sales otherwise permitted hereby so long as such restrictions relate to the assets subject thereto;

 

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(7) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under this Agreement;

(8) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business;

(9) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business;

(10) relate to cash or other deposits permitted under this Agreement;

(11) (x) exist on the date hereof and (to the extent not otherwise permitted by this Section 8.09 ) are listed on Schedule 8.09 hereto and (y) to the extent Contractual Obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted modification, replacement, renewal, extension or refinancing of such Indebtedness so long as such modification, replacement, renewal, extension or refinancing does not expand the scope of such Contractual Obligation;

(12) are binding on a Subsidiary at the time such Subsidiary first becomes a Subsidiary, so long as such Contractual Obligations were not entered into in contemplation of such Person becoming a Subsidiary;

(13) arise in connection with restrictions and conditions on any Foreign Subsidiary organized under the laws of the People’s Republic of China or any state or other political subdivision thereof;

(14) arise in connection with any document or instrument governing Indebtedness incurred pursuant to Sections 8.03(b), (d) , (e) , (g) , (h) , (j) , (m) , (q)  or (r) , provided that any such restriction contained therein relates only to the asset to which such Indebtedness is related;

(15) arise in connection with any Indebtedness of a Subsidiary which is not a Loan Party which is permitted by Section 8.03 ; and

(16) impose (x) restrictions described in clause (i)  above, but only to the extent that such restrictions do not materially adversely effect the consolidated cash position of the Borrowers and Guarantors or (y) restrictions described in clause (ii) above, but only to the extent that such restrictions do not materially adversely effect the value of the Collateral granted to secure the Obligations.

Section 8.10 Use of Proceeds . Use the proceeds of any Credit Extension, whether directly or indirectly,

(a) whether immediately, incidentally or ultimately, 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;

(b) to fund any activities of or business with any individual or entity, or in any Designated Jurisdiction, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation of by any individual or entity (including any individual or entity participating in the transaction, whether as Lender, Arranger, Administrative Agent, L/C Issuer, Swing Line Lender or otherwise) of Sanctions, or to lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other individual or entity for any such purposes; or

 

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(c) for any purpose which would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, or other similar anti-corruption legislation in other jurisdictions.

Section 8.11 Financial Covenant . Permit the Fixed Charge Coverage Ratio for each trailing four quarter period to be less than 1.0 to 1.0 while a Financial Covenant Trigger Period is in effect, measured for the most recent period for which financial statements were delivered hereunder prior to the Financial Covenant Trigger Period and each period ending thereafter until the Financial Covenant Trigger Period is no longer in effect.

Section 8.12 Prepayment of Other Indebtedness, Etc .

If any Default has occurred and is continuing or shall exist immediately after giving effect thereto, make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due), refund, refinance or exchange of any Indebtedness of AFI or any Subsidiary (other than Indebtedness arising under the Loan Documents).

Section 8.13 Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity .

(a) Amend, modify or change its Organization Documents in a manner materially adverse to the Lenders.

(b) Change its fiscal year.

(c) With respect to any Loan Party, without providing five days’ prior written notice to the Administrative Agent, change its name, state of formation or form of organization.

(d) The Loan Parties will not, and will not permit any of the Subsidiaries to, make any material change in accounting treatment or reporting practices, except as required by GAAP and in accordance with Section 1.03 .

ARTICLE IX.

EVENTS OF DEFAULT AND REMEDIES

Section 9.01 Events of Default .

Any of the following shall constitute an Event of Default:

(a) Non-Payment . The Borrowers or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) so long as no Cash Dominion Event exists, within three Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) so long as no Cash Dominion Event exists, within five Business Days after written notice thereof to the defaulting party by the Administrative Agent of the same becoming due, any other amount payable hereunder or under any other Loan Document; or

 

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(b) Specific Covenants . AFI fails to perform or observe any term, covenant or agreement contained in any of Section 7.01 , 7.03(a) , 7.05 , 7.07 , 7.10 , 7.11 , 7.16(a) , 7.16(b)(iv) , 7.16(f)(iii) , 7.17 or Article VIII , or any term, covenant or agreement relating to creation, priority, perfection or maintenance of Liens, delivery of physical Collateral or voting rights under Capital Stock contained in the Security Agreement or Pledge Agreement; 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 thirty (30) days after written notice to the defaulting party by the Administrative Agent; or

(d) Representations and Warranties . Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of either of the Borrowers or any other 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 (or in all respects in the case of any representation and warranty modified by materiality or Material Adverse Effect) when made or deemed made; or

(e) Cross-Default . (i) Either of the Borrowers or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder, Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $30,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee 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 Indebtedness or the beneficiary or beneficiaries of such Guarantee (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) prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded (other than an event which permits the Loans hereunder to be prepaid prior to or as an alternative to the purchase, payment, defeasance or redemption of such Indebtedness and, in any such case, the Loans hereunder are prepaid prior thereto); or (ii) there occurs under any Swap Contract an early termination resulting from resulting from any default by a Borrower or any Subsidiary under such Swap Contract and the Swap Termination Value owed by such Borrower or such Subsidiary as a result thereof is greater than $30,000,000; or

(f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries 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 any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty calendar days; 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 sixty (60) calendar days, or an order for relief is entered in any such proceeding; or

 

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(g) Inability to Pay Debts; Attachment . (i) Any of the Borrowers or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, 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 thirty (30) days after its issue or levy; or

(h) Judgments . There is entered against any of the Borrowers or any Subsidiary (i) one or more final judgments or orders for the payment of money in an aggregate amount exceeding $30,000,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final 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 ten consecutive days during which a stay of enforcement of such judgment, 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 of the Borrowers under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $30,000,000, or (ii) any of the Borrowers 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 $30,000,000; or

(j) Invalidity of Loan Documents . Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, 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 Loan Document or the perfection or priority of an Lien under the Loan Documents; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or

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

Section 9.02 Remedies Upon Event of Default . If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

(a) declare the commitment of each Lender to make Loans and any obligation of an L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

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

(c) require Loan Parties to Cash Collateralize L/C Obligations, Secured Bank Product Obligations and other Obligations that are contingent or not yet due and payable, and, if Loan Parties fail promptly to deposit such Cash Collateral, the Administrative Agent may (and shall upon the direction of Required Lenders) advance the required Cash Collateral as Revolving Loans (whether or not an Overadvance exists or is created thereby, or the conditions in Section 5.02 are satisfied); and

 

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(d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law; such rights and remedies include the rights to (A) take possession of any Collateral; (B) require Loan Parties to assemble Collateral, at Loan Parties’ expense, and make it available to the Administrative Agent and security trustees at a place designated by any of them; (C) enter any premises where Collateral is located and store Collateral on such premises until sold (and if the premises are owned or leased by a Loan Party, the Loan Parties agree not to charge for such storage); and (D) sell or otherwise dispose of any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale, with such notice as may be required by applicable Law, in lots or in bulk, at such locations, all as the Administrative Agent and any security trustees, in their discretion, deem advisable. Each Loan Party agrees that ten (10) days’ notice of any proposed sale or other disposition of Collateral by the Administrative Agent or any security trustees shall be reasonable, and that any sale conducted on the internet or to a licensor of Intellectual Property shall be commercially reasonable. The Administrative Agent and any security trustees may conduct sales on any Loan Party’s premises, without charge, and any sale may be adjourned from time to time in accordance with applicable Law. The Administrative Agent and any security trustees shall have the right to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination thereof, and the Administrative Agent and any security trustees may purchase any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may credit bid and set off the amount of such price against the Obligations;

provided , however , that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrowers under the Bankruptcy Code, the obligation of each Lender to make Loans and any obligation of each L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrowers to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

Section 9.03 Application of Funds .

(a) Order of Application . Notwithstanding anything herein to the contrary, after the exercise of any remedies provided for in Section 9.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 9.02 ), subject to the provisions of Sections 2.14 and 2.15 any amounts received on account of the Obligations, whether arising from payments by or on behalf of any Loan Party, realization on Collateral, setoff or otherwise, shall be allocated as follows:

(i) first , to all costs and expenses, including Extraordinary Expenses, owing to the Administrative Agent, to the extent owing by any Loan Party;

(ii) second , to all amounts owing to Swingline Lender on Swingline Loans;

(iii) third , to all amounts owing to any L/C Issuer on L/C Obligations;

(iv) fourth , to all Revolving Obligations constituting fees owing by the Loan Parties (exclusive of any Obligations under any Australian Incremental Credit Facility or Canadian Incremental Credit Facility which are guaranteed by the Loan Parties);

(v) fifth , to all Revolving Obligations constituting interest owing by the Loan Parties (exclusive of any Obligations under any Australian Incremental Credit Facility or Canadian Incremental Credit Facility which are guaranteed by the Loan Parties);

 

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(vi) sixth , to Cash Collateralization of L/C Obligations;

(vii) seventh , to (i) the principal amount of all Revolving Loans and (ii) all Qualified Secured Bank Product Obligations of any Loan Party to the extent a Bank Product Reserve has been established with respect thereto up to and including (with respect to Secured Bank Product Providers other than Bank of America and its Affiliates) the amount most recently specified to the Administrative Agent pursuant to the terms hereof;

(viii) eighth , to all other Obligations (exclusive of any Obligations described in clause (ix) below); and

(ix) ninth , to be applied ratably to outstanding Obligations under any Australian Incremental Credit Facility or Canadian Incremental Credit Facility, to the extent there are insufficient funds for the Full Payment of all Obligations thereunder.

(b) Application of Funds . Amounts shall be applied to each category of Obligations set forth within subsection (a) above, as applicable, until Full Payment thereof and then to the next category. If amounts are insufficient to satisfy a category, they shall be applied on a pro rata basis among the Obligations in the category. Amounts distributed with respect to any Secured Bank Product Obligations or Qualified Secured Bank Product Obligations shall be the lesser of the maximum Secured Bank Product Obligations or Swap Termination Value of such Qualified Secured Bank Product Obligations, as the case may be, last reported to the Administrative Agent or the actual Secured Bank Product Obligations or Qualified Secured Bank Product Obligations, as the case may be, as calculated by the methodology reported to the Administrative Agent for determining the amount due. The Administrative Agent shall have no obligation to calculate the amount to be distributed with respect to any Secured Bank Product Obligations or Qualified Secured Bank Product Obligations, and may request a reasonably detailed calculation of such amount from the applicable Secured Party. If a Secured Party fails to deliver such calculation within five days following request by the Administrative Agent, the Administrative Agent may assume the amount to be distributed is zero. The allocations set forth in this Section 9.03 are solely to determine the rights and priorities of the Administrative Agent and Secured Parties as among themselves, and any allocation within subsection (a) of proceeds of the realization of Collateral may be changed by agreement among them without the consent of any Loan Party. This Section 9.03 is not for the benefit of or enforceable by any Borrower.

(c) Erroneous Application . The Agent shall not be liable for any application of amounts made by it in good faith and, if any such application is subsequently determined to have been made in error, the sole recourse of any Lender or other Person to which such amount should have been made shall be to recover the amount from the Person that actually received it (and, if such amount was received by any Lender, such Lender hereby agrees to return it).

Section 9.04 License .

The Administrative Agent and any security trustees are hereby granted an irrevocable, non-exclusive license or other right, effective only upon and during an Event of Default, to use, license or sub-license (without payment of royalty or other compensation to any Loan Party) any or all Intellectual Property of Loan Parties, computer hardware and software, trade secrets, brochures, customer lists, promotional and advertising materials, labels, packaging materials and other property, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights or remedies with respect to, any Collateral. Each Loan Party’s rights and interests under Intellectual Property shall inure to the Administrative Agent’s and such security trustees’ benefit.

 

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Section 9.05 Remedies Cumulative; No Waiver .

(a) Cumulative Rights . All agreements, warranties, guaranties, indemnities and other undertakings of Loan Parties under the Loan Documents are cumulative and not in derogation of each other. The rights and remedies of the Administrative Agent, any security trustees and Lenders are cumulative, may be exercised at any time and from time to time, concurrently or in any order, and are not exclusive of any other rights or remedies available by agreement, by law, at equity or otherwise. All such rights and remedies shall continue in full force and effect until Full Payment of all Obligations.

(b) Waivers . No waiver or course of dealing shall be established by (i) the failure or delay of the Administrative Agent, any security trustee or any Lender to require strict performance by Loan Parties with any terms of the Loan Documents, or to exercise any rights or remedies with respect to Collateral or otherwise; (ii) the making of any Loan or issuance of any Letter of Credit during a Default, Event of Default or other failure to satisfy any conditions precedent; or (iii) acceptance by the Administrative Agent or any Lender of any payment or performance by a Loan Party under any Loan Documents in a manner other than that specified therein. It is expressly acknowledged by Loan Parties that any failure to satisfy a financial covenant on a measurement date shall not be cured or remedied by satisfaction of such covenant on a subsequent date.

ARTICLE X.

ADMINISTRATIVE AGENT

Section 10.01 Appointment and Authority .

(a) Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrowers nor any other Loan Party 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 Administrative 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.

(b) Each of the Lenders hereby irrevocably appoints, designates and authorizes the Collateral Agent to take such action on its behalf under the provisions of this Agreement and each Collateral Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any Collateral Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any Collateral Document, the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein or therein, nor shall the Collateral Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any Collateral Document or otherwise exist against the Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the Collateral Documents with reference to the Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations

 

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arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. The Collateral Agent shall act on behalf of the Lenders with respect to any Collateral and the Collateral Documents, and the Collateral Agent shall have all of the benefits and immunities (i) provided to the Administrative Agent under the Loan Documents with respect to any acts taken or omissions suffered by the Collateral Agent in connection with any Collateral or the Collateral Documents as fully as if the term “Administrative Agent” as used in such Loan Documents included the Collateral Agent with respect to such acts or omissions, and (ii) as additionally provided herein or in the Collateral Documents with respect to the Collateral Agent.

Section 10.02 Rights as a Lender .

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

Section 10.03 Exculpatory Provisions .

The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a 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 Administrative Agent is required to exercise as directed in writing by the Required Lenders or Super-Majority Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

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

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders or Super-Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.01 and 9.02 ) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by

 

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final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given in writing to the Administrative Agent by a Loan Party, a Lender or the L/C Issuer.

The Administrative 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, (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 Collateral Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article V or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

Section 10.04 Reliance by Administrative Agent .

The Administrative 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 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 Administrative 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. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Loan Parties), 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.

Section 10.05 Delegation of Duties .

The Administrative 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 Administrative Agent. The Administrative 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 Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative 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 nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

Section 10.06 Resignation of Administrative Agent .

(a) The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrowers. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrowers (except if an Event of Default has occurred and is

 

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continuing), 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 Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “ Resignation Effective Date ”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d)  of the definition thereof, the Required Lenders may, to the extent permitted by applicable Law, by notice in writing to the Borrowers and such Person remove such Person as Administrative Agent and, with the consent of the Borrowers (except if an Event of Default has occurred and is continuing), appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “ Removal Effective Date ”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

(c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 3.01(g) and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative 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 Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring or removed Administrative Agent’s resignation or removal 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 or removed Administrative 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 or removed Administrative Agent was acting as Administrative Agent.

(d) Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender. If Bank of America resigns as an L/C Issuer, its shall retain all the rights and powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto, including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant Section 2.03(c ). If Bank of America resigns as Swing Line Lender, it shall retain shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective

 

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date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c ). Upon the appointment by the Borrowers of a successor L/C Issuer or Swing Line Lender hereunder (which successor shall in all cases be a Lender other than a Defaulting Lender), (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as applicable, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

Section 10.07 Non-Reliance on Administrative Agent and Other Lenders .

Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative 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 and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative 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.

Section 10.08 No Other Duties; Etc .

Anything herein to the contrary notwithstanding, none of the bookrunners, arrangers, syndication agents, documentation agents or co-agents shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, the Collateral Agent, a Lender or the L/C Issuer hereunder.

Section 10.09 Administrative 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 Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrowers) 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, L/C Obligations and all other Obligations arising under the Loan Documents 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 L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(i) and (j) , 2.09 and 11.04 ) 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 and L/C Issuer to make such payments to the

 

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Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 11.04 .

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

Section 10.10 Collateral and Guaranty Matters .

It is acknowledged that Subsidiaries will be automatically released from their guaranty obligations hereunder and from the security interests pledged by them under the Collateral Documents upon consummation of transactions permitted hereunder (including a merger, consolidation or liquidation or a permitted disposition) and Liens to secure Obligations hereunder will be automatically released upon sales, dispositions or other transfers by Loan Parties permitted hereunder. In the event that any action is required to evidence any such release, the Lenders and L/C Issuer irrevocably authorize the Administrative Agent and the Collateral Agent to take any such action, including,

(a) to release any Lien on any property granted to or held by the Collateral Agent under any Loan Document (i) upon termination of all Commitments and payment in full of all Obligations arising under the Loan Documents (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the L/C Issuer shall have been made), (ii) that is transferred or to be transferred as part of or in connection with any Disposition not prohibited hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing in accordance with Section 11.01 ;

(b) to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary or a Guarantor as a result of a transaction permitted hereunder; and

(c) to subordinate any Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 8.01 (i).

Upon request by the Administrative Agent or the Collateral Agent at any time, the Required Lenders will confirm in writing the Collateral Agent’s authority to release or subordinate its interest in particular types or items of property, and of the Administrative Agent to release any Guarantor from its obligations under the Guaranty, pursuant to this Section 10.10 . In each case as specified in this Section 10.10 , the Collateral Agent will, at the Borrowers’ 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 Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 10.10 .

The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

 

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Section 10.11 Swap Contracts and Treasury Management Agreements . No Lender or any Affiliate of a Lender that is party to any Swap Contract or any Treasury Management Agreement permitted hereunder that obtains the benefits of Section 9.03 or any Collateral by virtue of the provisions hereof or of any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article X to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Swap Contracts and Treasury Management Agreements unless the Administrative Agent has received written notice of such Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Lender or Affiliate of a Lender that is party to such Swap Contract or such Treasury Management Agreement, as the case may be. The Lenders irrevocably authorize the Administrative Agent and the Collateral Agent, in each case at its option and in its discretion, to secure obligations under Swap Contracts and Treasury Management Agreements between a Subsidiary that is not a Loan Party and a Lender or its Affiliate with the Collateral, to the same extent as if such obligations were Obligations.

Section 10.12 Secured Bank Product Providers . Each Secured Bank Product Provider that is not a Lender, by delivery of a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent and AFI, or as otherwise agreed by the Administrative Agent and AFI, shall agree to be bound by Section 9.03 and this Article 10 . Each Secured Bank Product Provider shall indemnify and hold harmless Administrative Agent Indemnitees, to the extent not reimbursed by Loan Parties, against all Claims that may be incurred by or asserted against any Agent Indemnitee in connection with such provider’s Secured Bank Product Obligations (except those Claims determined in a final, non-appealable judgment by a court of competent jurisdiction to result from the gross negligence or willful misconduct of such Administrative Agent Indemnitee).

Section 10.13 Loan Party Representative . Each Loan Party hereby designates AFI as its representative and agent (in such capacity, the “ Loan Party Representative ”) for all purposes under the Loan Documents, including requests for Loans and Letters of Credit, designation of interest rates, delivery or receipt of communications, preparation and delivery of any Borrowing Base and financial reports, receipt and payment of Obligations, requests for waivers, amendments or other accommodations, actions under the Loan Documents (including in respect of compliance with covenants), and all other dealings with the Administrative Agent, any L/C Issuer or any Lender. AFI hereby accepts such appointment. The Administrative Agent, each L/C Issuer and each Lender shall be entitled to rely upon, and shall be fully protected in relying upon, any notice or communication (including any Notice of Borrowing) delivered by AFI on behalf of any Loan Party and, unless otherwise expressly provided in any Australian Incremental Amendment or Canadian Incremental Amendment, any other Loan Party. The Administrative Agent, any L/C Issuer and any Lender may give any notice or communication with a Loan Party and, unless otherwise expressly provided in any Australian Incremental Amendment or Canadian Incremental Amendment, any other Loan Party hereunder to AFI on behalf of such Loan Party. Each of the Administrative Agent, any L/C Issuer and any Lender shall have the right, in its discretion, to deal exclusively with AFI for any or all purposes under the Loan Documents. Each Loan Party agrees that, unless otherwise expressly provided in any Australian Incremental Amendment or Canadian Incremental Amendment, any notice, election, communication, representation, agreement or undertaking made on its behalf by AFI shall be binding upon and enforceable against it.

 

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ARTICLE XI.

MISCELLANEOUS

Section 11.01 Amendments, Etc .

(a) Amendments Generally . Except as expressly provided herein below, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrowers or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders (or by the Administrative Agent on behalf of the Required Lenders upon receipt of a consent and direction letter from the Required Lenders) and the Borrowers or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, 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:

(i) No such amendment, waiver or consent shall be effective without the written consent of all Lenders where the effect would be to:

(A) amend the definition of “Pro Rata Share” or change any provision of this Agreement regarding pro rata sharing or pro rata funding with respect to (i) the making of advances (including participations), (ii) the manner of application of payments or prepayments of principal, interest or fees, (iii) the manner of application of reimbursement obligations from drawings under Letters of Credit, or (iv) the manner of reduction of Commitments and committed amounts, except that nothing contained herein shall limit (A) an “amend and extend” of some, but not all, of the Commitments under a credit facility hereunder and the establishment of differing interest rates or maturities in respect thereof, (B) a termination of Commitments held by a Defaulting Lender, (C) any changes resulting solely from increases or other changes in the Aggregate Commitments permitted hereunder or otherwise approved pursuant to this Section 11.01 and to reflect the addition of any Loans or extensions of credit permitted hereunder or (D) a purchase by the Borrowers at a discount of the loans and obligations hereunder as herein provided or otherwise on terms and conditions acceptable to the Required Lenders;

(B) amend the definitions of “Required Lenders” or “Super-Majority Lenders” to reduce the percentages set forth in such defined terms or amend any provision of this Section 11.01(a) to reduce the percentages of Lenders required to provide any amendment, waiver or consent; and

(C) release all or substantially all of the Collateral, or release all or substantially all of the Guarantors from their guaranty obligations, except as expressly provided herein or in the other Loan Documents, or otherwise appropriate in connection with transactions permitted hereunder, provided that it is understood and agreed that additional tranches or additional extensions of credit established pursuant to the terms of this Agreement may be equally and ratably secured (or secured on a junior basis) by the Collateral securing the loans and obligations hereunder;

 

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(ii) no such amendment, waiver or consent shall be effective without the written consent of each Lender directly affected thereby (whose consent shall be sufficient therefor without the consent of the Required Lenders) where the effect would be to:

(A) extend the scheduled final maturity of any Loan of such Lender;

(B) waive, reduce or postpone any scheduled repayment (but not prepayment) in respect of such Lender’s Loans;

(C) reduce the rate of interest on any Loan or any fee payable hereunder or prepayment of any premium payable hereunder to such Lender, provided that for purposes hereof, neither the amendment or waiver of application of the Default Rate nor the amendment, modification or waiver of the financial covenants or the financial covenant definitions hereunder shall be considered to constitute a reduction in the rate of interest or fees, even if the effect thereof would be to reduce the rate of interest or fees otherwise payable hereunder;

(D) extend the time for payment of any interest or fees or prepayment premium owing to such Lender;

(E) reduce or forgive the principal amount of any Loan of such Lender or any reimbursement obligation in respect of any Letter of Credit (except by virtue of any waiver of a prepayment owing to such Lender);

(F) increase the Commitment of such Lender hereunder; provided that in no event shall an amendment, modification, termination, waiver or consent with respect to any mandatory prepayment, condition precedent, covenant, Default or Event of Default be considered an increase in Commitments and that an increase in the available portion of any Commitment of any Lender or any rescission of the acceleration of the Loans shall not constitute an increase in Commitments;

(G) amend, modify, terminate or waive any provision of, Section 9.03 or clause (a)  of this Section 11.01 as to such Lender (except as expressly provided herein with respect to any Incremental Credit Facility, including technical amendments with respect to the establishment of additional tranches or additional extensions of credit pursuant to this Agreement to provide protective provisions hereunder of substantially the type afforded those tranches and extensions of credit on the Closing Date and except for, solely in respect of clause (a)  of this Section 11.01 , technical amendments which do not adversely affect the rights of any Lender);

(H) amend the definition of “Required Lenders”, “Super-Majority Lenders” or “Pro Rata Share” (except for technical amendments with respect to the establishment of additional tranches or additional extensions of credit pursuant to this Agreement to provide for substantially the same kind of treatment afforded those tranches and extensions of credit on the Closing Date); or

(iii) [Reserved];

(iv) unless also signed by the Super-Majority Lenders, no such amendment, waiver or consent shall be effective that would (A) amend any definition of a Borrowing Base (and the defined terms used in such definitions) if the effect of such amendment is to increase any advance

 

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rate or otherwise make more credit available or to add new types of Collateral thereunder, or (B) amend the definition of Excess Availability or any definition of Availability or any defined term used in such definitions;

(v) unless also consented to in writing by an L/C Issuer, no such amendment, waiver or consent shall affect the rights or duties of such L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it;

(vi) unless also consented to in writing by the Swing Line Lender, no such amendment, waiver or consent shall affect the rights or duties of the Swing Line Lender under this Agreement;

(vii) unless also consented to in writing by the Administrative Agent, no such amendment, waiver or consent shall affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and

(viii) unless also consented to in writing by the Collateral Agent, no such amendment, waiver or consent shall affect the rights or duties of the Collateral Agent under this Agreement or any other Loan Document;

and provided further that, notwithstanding anything to the contrary contained herein, (i) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that:

(A) the Commitment of a Defaulting Lender may not be increased or extended and the principal amount of the Loans or L/C Borrowings of the Defaulting Lender may not be reduced or forgiven, and

(B) the rate of interest for the Defaulting Lender may not be reduced (except as expressly provided in clause (a)(i)(C) above) in a way that would affect a Defaulting Lender more adversely than the other affected Lenders,

without, in any such case, the consent of the Defaulting Lender,

(ix) each Lender is entitled to vote as such Lender sees fit on any bankruptcy or insolvency reorganization plan that affects the Loans, (iii) each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersede the unanimous consent provisions set forth herein, (iv) the Required Lenders may consent to allow a Loan Party to use cash collateral in the context of a bankruptcy or insolvency proceeding, and (v) the Fee Letters may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.

(b) Incremental Credit Facilities . For the avoidance of doubt and notwithstanding provisions to the contrary in this Section 11.01 or elsewhere in this Agreement, this Agreement may be amended (or amended and restated) with the written consent of the applicable Loan Parties, the Administrative Agent and the Lenders providing Incremental Credit Facilities for the purpose of effecting one or more Incremental Credit Facilities as contemplated in Section 2.01(b)-(e) , including by (i) increasing the aggregate amount of Commitments under any of the respective facilities, and (ii) adding one or more additional borrowing tranches hereunder and to provide for the ratable sharing of the benefits of this Agreement and the other Loan Documents with the other commitments and Obligations contemplated herein and therein.

 

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(c) Corrections . Notwithstanding anything in this Section 11.01 to the contrary, if the Administrative Agent shall have identified from time to time an obvious error or any error or omission of a technical nature in any provision of the Loan Documents, then the Administrative Agent shall be permitted to amend such provision, and, in each case, such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders to the Administrative Agent within ten (10) Business Days following receipt of notice thereof.

Section 11.02 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 facsimile transmission 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 Borrowers and other Loan Parties, the Administrative Agent, an L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 11.02 ; and

(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information).

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 transmission 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 Lenders and L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or L/C Issuer pursuant to Article II if such Lender or L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent, the Swing Line Lender, the L/C Issuer or the Borrowers (on behalf of itself and the other Loan Parties) each may, in their 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 Administrative 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

 

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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) The Platform . THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to any Loan Party, Lender, L/C Issuer or other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrowers’, any Loan Party’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided , however , that in no event shall any Agent Party have any liability to any Loan Party, Lender, L/C Issuer or other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

(d) Change of Address, Etc . Each Loan Party, Administrative Agent, L/C Issuer and Swing Line Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the Borrowers, the Administrative Agent, the L/C Issuers and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Loan Parties or their securities for purposes of United States Federal or state securities laws.

(e) Reliance by Administrative Agent, L/C Issuer and Lenders . The Administrative Agent, the L/C Issuers and the Lenders shall be entitled to rely and act upon any notices (including electronic notices of Loan Notices, Letter of Credit Applications and Swing Line Loan Notices) purportedly given by or on behalf of the Borrowers 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 Administrative Agent, each L/C Issuer, 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 Borrowers, except to the extent such losses, costs, expenses or liabilities resulted from the gross negligence or willful misconduct of the applicable Person. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

 

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Section 11.03 No Waiver; Cumulative Remedies; Enforcement .

No failure by any Lender, L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document 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 (including the imposition of the Default Rate) preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided in each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

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 Administrative Agent in accordance with Section 9.02 for the benefit of all the Lenders and the L/C Issuer; provided , however , that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 11.08 (subject to the terms of Section 2.13 ), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided further , that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 9.02 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.13 , 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.

Section 11.04 Expenses; Indemnity; Damage Waiver .

(a) Costs and Expenses . The Borrowers shall pay (i) on the date of the disbursements of any Loan pursuant to Article II all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof, (ii) all reasonable out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or L/C Issuer), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section 11.04 , or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

 

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(b) Indemnification by the Borrowers . The Borrowers shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by either of the Borrowers 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, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents (including in respect of any matters addressed in Section 3.01 ), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by either of the Borrowers or any of their respective Subsidiaries, or any Environmental Liability related in any way to either of the Borrowers or any of their respective Subsidiaries, or (iv) 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 either of the Borrowers or any other Loan Party, 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 nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by either of the Borrowers or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if either of the Borrowers or such other Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. Without limiting the provisions of Section 3.01(e ), this Section 11.04(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) Reimbursement by Lenders . To the extent that the Borrowers for any reason fail to indefeasibly pay any amount required under subsection (a) or  (b) of this Section to be paid by them to the Administrative Agent (or any sub-agent thereof), the L/C Issuer, the Swing Line Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (including any such amount in respect of a claim asserted by such Lender), such payment to be made severally among them based on their respective pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought); provided , further , that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), L/C Issuer or Swing Line Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), L/C Issuer or Swing Line Lender in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d) .

(d) Waiver of Consequential Damages, Etc . To the fullest extent permitted by applicable Law, none of the Loan Parties shall assert, and each hereby waives, 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

 

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Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b)  above 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.

(e) Payments . All amounts due under this Section shall be payable not later than fifteen (15) Business Days after demand therefor.

(f) Survival . The agreements in this Section and the indemnity provisions of Section 11.02(e ) shall survive the resignation of the Administrative Agent , the Collateral Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Commitments hereunder and the repayment, satisfaction or discharge of all the other Obligations.

Section 11.05 Payments Set Aside .

To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off 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 the Administrative Agent, the L/C Issuer or such Lender 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 set-off had not occurred, and (b) each Lender and L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative 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 applicable Overnight Rate from time to time in effect. The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive payment in full of the Obligations and the termination of this Agreement.

Section 11.06 Successors and Assigns .

(a) Successors and Assigns Generally . The provisions of this Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns permitted hereby, except that neither the Borrowers nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or thereunder without the prior written consent of the Administrative 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 subsection (b)  of this Section, (ii) by way of participation in accordance with the provisions of subsection (d)  of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f)  of this Section (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 Administrative Agent, the L/C Issuer and the Lenders) 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 assignees all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b) , participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that (in each case with respect to any facility) 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 revolving commitment under any facility and related revolving loans or, respectively, at the time owing to it under such facility, or contemporaneous assignments to related Approved Funds that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the aggregate, or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the commitment (which for this purpose includes loans outstanding thereunder) or, if the commitment is not then in effect, 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 Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than, for any facility, $5,000,000, in the case of any assignment of revolving commitments (and related revolving loans and obligations thereunder) unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrowers otherwise consent (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 all the assigning Lender’s rights and obligations under this Agreement with respect to the loans or the commitment assigned, except that this clause (ii) shall not (A) apply the Swing Line Lender’s rights and obligations in respect of Swing Line Loans or (B) prohibit any Lender from assigning all or a portion of its rights and obligations in respect of its revolving commitments (and related revolving loans and obligations thereunder) on a non-pro rata basis;

(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 Borrowers (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an 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; provided that the Borrowers shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five Business Days after having received notice thereof;

 

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(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of any revolving commitments (and related revolving loans and obligations thereunder) if such assignment is to a Person that is not a Lender with a Commitment in respect of the applicable facility, an Affiliate of such Lender or an Approved Fund with respect to such Lender;

(C) the consent of the L/C Issuer for a revolving credit facility (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of revolving commitments (and related revolving loans and obligations thereunder) in respect thereof; and

(D) the consent of the Swing Line Lender for a revolving credit facility (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of revolving commitments (and related revolving loans and obligations thereunder) in respect thereof.

(iv) Assignment and Assumption . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided , however , that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v) No Assignment to Certain Persons . No such assignment shall be made (A) to any of the Borrowers, other Loan Parties, or any of their respective Subsidiaries or Affiliates, (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B) , or (C) to a natural person.

(vi) Certain Additional Payments . In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative 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 Borrowers and the Administrative Agent, the applicable pro rata share of 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 Administrative Agent, the L/C Issuer or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all loans and participations in Letters of Credit and Swing Line Loans in accordance with its pro rata share of the revolving commitments relating thereto. 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 Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such

 

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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 11.04 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, a 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 subsection (d) of this Section.

(c) Register . The Administrative Agent, acting solely for this purpose as an agent of the Borrowers (and such agency being solely for tax purposes), shall maintain at the Administrative 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 the Commitments of, and principal amounts (and stated interest) of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive, absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. In addition, the Administrative Agent shall maintain on the Register information regarding the designation, and revocation of designation, of any Lender as a Defaulting Lender. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d) Participations . Any Lender may at any time, without the consent of, or notice to, the Borrowers or the Administrative Agent, sell participations to any Person (other than a natural person, a Defaulting Lender or the Borrowers or any of the Borrowers’ Affiliates or Subsidiaries) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or 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 Borrowers, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 11.04(c ) without regard to the existence of any participation.

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 the first proviso of Section 11.01(a) that affects such Participant. The Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.01 , 3.04 and 3.05 (it being understood that the documentation required under Section 3.01(e) shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 3.06 and 11.14 as if it were an assignee

 

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under paragraph (b) of this Section and (B) shall not be entitled to receive any greater payment under Sections 3.01 or 3.04 , with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrowers to effectuate the provisions of Section 3.06 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrowers, 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 commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit 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 Administrative Agent (in its capacity as Administrative 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 Borrowers’ 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 Borrowers are notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, 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 or any central bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(g) Resignation as L/C Issuer or Swing Line Lender after Assignment . Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its revolving commitments (and related revolving loans and obligations thereunder) pursuant to subsection (b) above, Bank of America may, (i) upon thirty (30) days’ notice to the Borrowers and the Lenders, resign as L/C Issuer and/or (ii) upon thirty (30) days’ notice to the Borrowers, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrowers shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided , however , that no failure by the Borrowers to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c) ). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations

 

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in outstanding Swing Line Loans pursuant to Section 2.04(c) . Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (1) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (2) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

Section 11.07 Treatment of Certain Information; Confidentiality .

Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (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 required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable 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 containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or any Eligible Assignee invited to become a Lender as provided herein, (g) on a confidential basis to (i) any rating agency in connection with rating the Borrowers or their Subsidiaries or the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h) with the consent of the Borrowers or (j) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrowers.

For purposes of this Section, “ Information ” means all information received from the Borrowers or any Subsidiary relating to the Borrowers or any Subsidiary or any of their respective businesses, other than (x) any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrowers or any Subsidiary and (y) any such information received from the Borrowers or any Subsidiary after the date hereof which is clearly identified at the time of delivery as nonconfidential. 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 Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Borrowers 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 applicable Law, including United States federal and state securities Laws.

Section 11.08 Set-off .

If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or

 

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demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrowers or any other Loan Party against any and all of the obligations of the Borrowers or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer or their respective Affiliates, irrespective of whether or not such Lender, the L/C Issuer or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of such Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or the L/C Issuer different from the branch, office or Affiliate 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 Administrative 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 Administrative Agent, the L/C Issuer and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative 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, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Borrowers and the Administrative 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. If any payment by or on behalf of any Borrower or Borrowers is made to the Administrative Agent, any L/C Issuer, or any Lender, or the Administrative Agent, any L/C Issuer or any Lender exercises a 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 the Administrative Agent, such L/C Issuer or such Lender in its discretion) to be repaid to any Person, then to the extent of such recovery, the Obligation originally intended to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred.

Section 11.09 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 applicable Law (the “ Maximum Rate ”). If the Administrative 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 or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

Section 11.10 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, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent or the L/C Issuer, 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 5.01 , this Agreement shall become effective when it shall have been executed by the

 

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Administrative Agent and when the Administrative 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 facsimile or other electronic imaging means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 11.11 Survival of Representations and Warranties .

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 Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

Section 11.12 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 11.12 , 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 Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.

Section 11.13 Replacement of Lenders .

If (i) any Lender requests compensation under Section 3.04 , (ii) the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 , (iii) a Lender (a “ Non-Consenting Lender ”) does not consent to a proposed change, waiver, discharge or termination with respect to any Loan Document that has been approved by the Required Lenders as provided in Section 11.01 , or (iv) any Lender is a Defaulting Lender, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.06 ), all of its interests, rights (other than its existing rights to payments pursuant to Sections 3.01 and 3.04 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(a) the Borrowers shall have paid to the Administrative Agent the assignment fee specified in Section 11.06(b)(iv) , unless waived by the Administrative Agent in its discretion;

(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, 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 Borrowers (in the case of all other amounts);

 

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(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 applicable Laws; and

(e) in the case of any such assignment resulting from a Non-Consenting Lender’s failure to consent to a proposed change, waiver, discharge or termination with respect to any Loan Document, the applicable replacement bank, financial institution or Fund consents to the proposed change, waiver, discharge or termination; provided that the failure by such Non-Consenting Lender to execute and deliver an Assignment and Assumption shall not impair the validity of the removal of such Non-Consenting Lender and the mandatory assignment of such Non-Consenting Lender’s Commitments and outstanding Loans and participations in L/C Obligations and Swing Line Loans pursuant to this Section 11. 13 shall nevertheless be effective without the execution by such Non-Consenting Lender of an Assignment and Assumption.

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 Borrowers to require such assignment and delegation cease to apply.

Section 11.14 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 . ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK, NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS , WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

 

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Section 11.15 Waiver of Right to Trial by Jury .

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE 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.

Section 11.16 USA PATRIOT Act Notice .

Each Lender that is subject to the PATRIOT Act (as hereinafter defined) and the Administrative 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 “ Patriot Act ”), it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of the Loan Parties and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Act. The Loan Parties shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Loan Party requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

Section 11.17 No Advisory or Fiduciary Responsibility .

In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrowers and each other Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent , the Arrangers and the Lenders are arm’s-length commercial transactions between the Borrowers, each other Loan Party and their respective Affiliates, on the one hand, and the Administrative Agent , the Arrangers and the Lenders, on the other hand, (B) each of the Borrowers and the other Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Borrowers and other Loan Parties is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent , the Arrangers and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any of the Borrowers, the other Loan Parties or their respective Affiliates, or any other Person and (B) neither the Administrative Agent , any of the Arrangers nor any of the Lenders has any obligation to any of the Borrowers, the other Loan Parties or their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent , the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrowers, the other Loan Parties and their respective Affiliates, and neither the Administrative Agent , any of the Arrangers nor any of the Lenders has any obligation to disclose any of such interests to any of the Borrowers, the other Loan Parties or their

 

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respective Affiliates. To the fullest extent permitted by law, each of the Borrowers and the other Loan Parties hereby waives and releases any claims that it may have against the Administrative Agent , any of the Arrangers or any of the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

Section 11.18 Electronic Execution of Assignments and Certain Other Documents .

The words “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 Administrative 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.

Section 11.19 Acknowledgement and Consent to Bail-In of EEA Financial Institutions .

Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an EEA Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 

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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written.

 

BORROWERS :
ARMSTRONG FLOORING, INC.,
By:  

/s/ John W. Thompson

Name:   John W. Thompson
Title:   Senior Vice President and
  Chief Financial Officer
ARMSTRONG HARDWOOD FLOORING COMPANY
By:  

/s/ Douglas B. Bingham

Name:   Douglas B. Bingham
Title:   Vice President and Treasurer

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page


GUARANTORS:
ARMSTRONG WOOD PRODUCTS, INC., a Delaware corporation
By:  

/s/ John W. Thompson

Name:   Douglas B. Bingham
Title:   Vice President and Treasurer
AFI LICENSING LLC, a Delaware limited liability company
By:  

/s/ Douglas B. Bingham

Name:   Douglas B. Bingham
Title:   Vice President and Treasurer

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page


BANK OF AMERICA, N.A.,

as Administrative Agent and Collateral Agent

By:  

/s/ William J. Wilson

Name:   William J. Wilson
Title:   Senior Vice President

BANK OF AMERICA, N.A.,

as a Lender

By:  

/s/ William J. Wilson

Name:   William J. Wilson
Title:   Senior Vice President

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page


JPMORGAN CHASE BANK, N.A.,
as a Lender
By:  

/s/ Salvatore P. Demma

Name:   Salvatore P. Demma
Title:   Authorized officer

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page


SUNTRUST BANK,
as a Lender
By:  

/s/ Amanda Watkins

Name:   Amanda Watkins
Title:   Director

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page


HSBC BANK USA, N.A.,
as a Lender
By:  

/s/ Peter Martin

Name:   Peter Martin
Title:   Vice President

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page


MANUFACTURERS AND TRADERS TRUST COMPANY,
as a Lender
By:  

/s/ Sarah Lesser

Name:   Sarah Lesser
Title:   Assistant Vice President

 

Armstrong Flooring, Inc.

CREDIT AGREEMENT

Signature page

Exhibit 10.10

ARMSTRONG FLOORING, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

The Armstrong Flooring, Inc. Nonqualified Deferred Compensation Plan (the “Plan”) was established by the Retirement Committee of Armstrong Flooring, Inc. (the “Company”) and is effective April 1, 2016.

The Plan was established as a spin-off plan from the Armstrong Nonqualified Deferred Compensation Plan (the “Prior Plan”) as sponsored by Armstrong World Industries, Inc. in connection with the spin-off of the Company from Armstrong World Industries, Inc. Deferral and distribution elections and Account balances from the Prior Plan have been carried forward to be effective under the Plan with respect to those employees who have transferred from Armstrong World Industries, Inc. to the Company. No “separation from service” shall be deemed to have occurred solely as a result of a transfer of employment directly from Armstrong World Industries, Inc. to the Company.

The Plan is a nonqualified deferred compensation plan for a select group of management or highly compensated employees. The Plan is intended to meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, to achieve deferral of taxation until deferred amounts are distributed in accordance with the terms of the Plan.

1. DEFINITIONS

1.1 “Account” shall mean an account established on the books of the Company for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains or losses included thereon.

1.2 “Administrator” shall mean the Retirement Committee of the Company.

1.3 “Beneficiary” means the person or persons, trust or other entity designated in writing by a Participant to receive payments under the Plan upon the death of a Participant.

1.4 “Board” means the Board of Directors of the Company.

1.5 “Bonus” means any discretionary performance-based cash bonuses paid for services with the Company.

1.6 “Bonus Deferrals” means the deferrals elected by the Participant pursuant to Section 3.2.

1.7 “Change in Control” means the first to occur of any of the following events: (i) a Change in Ownership of the Company, (ii) a Change in Effective Control of the Company or (iii) a Change in the Ownership of a Substantial Portion of the Assets of the Company.

(a) A “Change in Ownership” of the Company occurs on the date that any one person, or more than one person acting as a group acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.

 

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(b) A “Change in Effective Control” of the Company occurs on the date that either:

(i) Any one person, or more than one person acting as a group, acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 35 percent or more of the total voting power of the stock of the Company; or

(ii) a majority of members of the Company’s board of directors is replaced during any 12 month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors prior to the date of the appointment or election.

(c) A “Change in the Ownership of a Substantial Portion of the Assets of the Company” occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. There is no Change in Control event under this Section 1.6(c) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer.

The determination of whether a Change in Control event has occurred will be made in accordance with the requirements of Code Section 409A and the guidance issued thereunder. The foregoing definition of Change in Control shall exclude the spin-off of the Company from Armstrong World Industries, Inc.

1.8 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

1.9 “Company” shall mean Armstrong Flooring, Inc. and any other subsidiary corporation controlled by the Company that adopts this Plan with the permission of the Administrator.

1.10 “Compensation” shall include a Participant’s annual base salary and any actual bonus payable under the Participant’s employing Company’s short-term bonus plan received by the employee for services with such Company.

1.11 “Deferral Account” means the Account which is maintained with respect to the Salary Deferrals and Bonus Deferrals of the Participant and any hypothetical earnings or losses thereon.

1.12 “Effective Date” means April 1, 2016.

 

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1.13 “Excess Compensation” means the Participant’s Compensation for the Plan Year in excess of 12.5 times the Code Section 402(g) limit in effect for such Plan Year

1.14 “Investment Funds” shall mean the investment alternatives made available by the Administrator from time to time under the Plan.

1.15 “Matching Account” means the Account which is maintained with respect to the Matching Credits of the Participant and any hypothetical earnings or losses thereon.

1.16 “Matching Credits” means the credits allocated to the Participant pursuant to Section 4.1.

1.17 “Participant” shall be each employee who has been selected for participation by the Administrator, who satisfies all conditions of eligibility.

1.18 “Plan” means the Armstrong Flooring, Inc. Nonqualified Deferred Compensation Plan, the Plan set forth herein, as amended from time to time.

1.19 “Plan Year” means a 12-consecutive month period commencing January 1st and ending on the following December 31st.

1.20 “Qualified Plan” means the Armstrong Flooring, Inc. 401(k) Savings Plan and any successor plan thereto.

1.21 “Retirement Supplement Credits” means the credits allocated to the Participant pursuant to Section 4.2.

1.22 “Retirement Supplement Account” means the Account which is maintained with respect to the Retirement Supplement Credits of the Participant and any hypothetical earnings or losses thereon.

1.23 “Salary Deferrals” means the deferrals elected by the Participant pursuant to Section 3.1.

1.24 “Termination” means a Participant’s “separation from service” as defined under Treas. Reg. § 1.409A-1(h).

1.25 “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

1.26 “Valuation Date” means any day on which the New York Stock Exchange or any successor to its business is open for trading.

 

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2. ELIGIBILITY AND PARTICIPATION

2.1 Eligibility for Participation: Participation in the Plan is limited to those individuals who have been selected for participation by the Administrator. No individual shall be eligible for selection unless he/she meets one or more of the following criteria:

(a) To be eligible to make Salary Deferrals or Bonus Deferrals for a Plan Year:

(i) the individual must be a management employee in a position Grade 15 or higher as of the September 1st prior to the Plan Year or, for the Plan Year in which an individual is first hired by or transferred to a Company, the individual must be hired or transferred to a position that is Grade 15 or higher (individuals previously employed by a participating Company who are promoted to a position Grade 15 or higher must be in the eligible position as of the September 1 prior to the Plan Year to participate for that Plan Year), and

(ii) the individual must earn Compensation for the Plan Year in excess of 12.5 times the Code Section 402(g) limit in effect for such Plan Year.

(b) To be eligible to receive Matching Credits, the employee Participants must make a Salary Deferral election or a Bonus Deferral election for the Plan Year and must not be actively accruing any benefit under [the defined benefit plan of the Company].

(c) To be eligible to receive Retirement Supplement Credits, the individual must be a management employee in a position Grade 15 or higher as of his or her crediting date and have been designated to receive Retirement Supplement Credits by the Administrator.

2.2 Commencement of Participation: Each Participant shall be provided an opportunity to designate irrevocably, prior to each Plan Year (or, in the Participant’s first year of eligibility, within 30 days following the date the Participant became eligible), his or her elections pursuant to Article 3. Any such designation must be made in the manner authorized by the Administrator and must be accompanied by, as applicable:

(a) an irrevocable authorization for the Company to make regular deductions to cover the amount of such deferrals elected pursuant to Section 3.1;

(b) an irrevocable authorization to defer receipt of a percentage of future Bonus amounts for any year as elected under Section 3.2;

(c) an investment election with respect to each of the Participant’s Accounts as provided under Section 5.3;

(d) a designation of Beneficiary; and

(e) a designation as to the form and timing of the distribution of each of the Participant’s Accounts as provided under Sections 6.1 and 6.2.

 

4


Each Participant’s deferred elections pursuant to this Section 2.2 shall be automatically renewed for each subsequent Plan Year unless the Participant makes a new deferral election prior to the beginning of the Plan Year, pursuant to this Section 2.2.

2.3 Cessation of Participation: A Participant shall cease to be an active Participant on the earliest of:

(a) the date on which the Plan terminates, or

(b) the date on which he or she ceases to be eligible to participate in the Plan under Section 2.1.

A former active Participant will be deemed a Participant for all purposes except with respect to the right to make deferrals, as long as he or she maintains a Participant Account.

3. DEFERRAL OF COMPENSATION

3.1 Salary Deferrals: Each Participant eligible to make Salary Deferrals may authorize the Company by which he or she is employed, in the manner described in Section 2.2, to have Salary Deferrals made on his or her behalf. Such election shall apply to the Participant’s Excess Compensation attributable to services performed in the Plan Year subsequent to the year of the election (or the year of an automatic renewal of an election, as applicable pursuant to Section 2.2). Such Salary Deferrals shall be a stated percentage of the Participant’s Excess Compensation, up to 25 percent as designated by the Participant. A Participant’s election to make a Salary Deferral or the automatic renewal of such election shall be irrevocable as of the beginning of the applicable Plan Year. A Participant’s new election to make a Salary Deferral shall continue in effect for each subsequent Plan Year unless otherwise elected by the Participant pursuant to Section 2.2.

3.2 Bonus Deferrals: Notwithstanding deferrals made under Section 3.1, by December 31 of each year or such earlier date as the Administrator may determine, each Participant eligible to make Bonus Deferrals may authorize the Company by which he or she is employed, in the manner described in Section 2.2, to defer a percentage of his or her Bonus that is Excess Compensation that would otherwise be payable for services performed in the twelve-month period beginning on the January 1 immediately following such December 31. Such Bonus Deferrals shall be a stated percentage of the Participant’s Excess Compensation, up to 25 percent as designated by the Participant. A Participant’s new election to defer a Bonus shall continue in effect for each subsequent Plan Year unless otherwise elected by the Participant pursuant to Section 2.2.

3.3 First Year of Eligibility: In the case of the first year in which a Participant becomes eligible to participate in the Plan, such Participant’s election with respect to Sections 3.1 may be made with respect to services to be performed subsequent to the election within 30 days following the date the Participant becomes eligible to participate in the Plan.

 

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4. EMPLOYER CONTRIBUTIONS

4.1 Matching Credits: For each pay period that the employee Participant makes Salary Deferrals and/or Bonus Deferrals, the Company shall make Matching Credits on behalf of each Participant eligible for Matching Credits in an amount equal to 100% of the first 4% and 50% of the next 4% of the Participant’s Salary Deferrals and Bonus Deferrals for such pay period. Such Matching Credits shall be fully vested at the same time as the Participant’s matching contributions under the Qualified Plan.

4.2 Retirement Supplement Credits: The Company shall make Retirement Supplement Credits to the Retirement Supplement Account in the manner and at such time as determined by the Administrator. Retirement Supplement Credits shall be fully vested at the same time as the Participant’s matching contributions under the Qualified Plan.

5. INVESTMENT OF CONTRIBUTION

5.1 Establishment of Accounts: The Company shall establish Accounts for each Participant, but only to the extent the Participant has amounts to be allocated to such Account:

(a) a Deferral Account to which shall be credited the Participant’s Salary Deferrals and Bonus Deferrals and any deemed earnings and losses credited thereto;

(b) a Matching Account to which shall be credited the Participant’s Matching Credits and any deemed earnings and losses credited thereto.

(c) a Retirement Supplement Account to which shall be credited the Participant’s Retirement Supplement Credits and any deemed earnings and losses credited thereto.

Each Participant shall receive periodic statements (no less frequently than quarterly) reflecting the balances in his or her Participant Accounts.

5.2 Obligation of the Company: Individual benefits under the Plan are payable as they become due solely from the general assets of the Company. To the extent a Participant, or any person, acquires a right to receive payments under this Plan, such right shall be no greater than the right of any general creditor of the Company. Neither this Plan, nor any action taken pursuant to the terms of this Plan, shall be considered to create a fiduciary relationship between the Company and the Participant, or any other persons, or to require the establishment of a trust in which the assets are beyond the claims of any general creditor of the Company.

5.3 Establishment of Investment Funds: The Administrator will establish multiple deemed Investment Funds which will be maintained for the purpose of determining the investment return to be credited to each Participant’s Accounts. The Administrator may change the number, identity or composition of the Investment Funds from time to time. Each Participant will indicate the Investment Funds based on which amounts allocated in accordance with Articles 3 and 4 are to be adjusted. Each Participant’s Accounts will be increased or decreased by the net amount of investment earnings or losses that it would have achieved had it actually been invested in the deemed investments. The Company is not required to purchase or hold any of the deemed investments. Investment Fund elections must be made in a minimum of 1%

 

6


increments and in such manner as the Administrator will specify. A Participant may make separate Investment Fund elections with respect to each Account (as applicable) set forth in Section 5.1. A Participant may change his or her Investment Fund election periodically in the manner provided by the Administrator. Any such change shall become effective as soon as administratively practicable following the date the Administrator receives notice of such change in the form prescribed by the Administrator.

5.4 Crediting Investment Results: No less frequently than as of each Valuation Date, each Participant Account will be increased or decreased to reflect investment results. Each Participant Account will be credited with the investment return of the Investment Funds in which the Participant elected to be deemed to participate. The credited investment return is intended to reflect the actual performance of the Investment Funds net of any applicable investment management fees or administrative expenses determined by the Administrator. Notwithstanding the above, the amount of any payment of Plan benefits pursuant to Article 6 or upon Plan termination shall be determined as of the Valuation Date preceding the date of payment.

6. PAYMENT AND AMOUNT OF BENEFITS

6.1 Form of Distribution:

(a) Each Participant shall elect the form and timing of the distribution with respect to each of his or her Participant Accounts in the manner authorized by the Administrator. The Participant’s election shall indicate the form of distribution of the amounts credited to each of the Participant’s:

(1) Deferral Account and Matching Account (a single election with respect to these accounts); and

(2) Retirement Supplement Account.

(b) The Participant’s election shall indicate that a payment shall be made in a lump sum or 120 substantially equal monthly installments (over 10 years). If the Participant elects a monthly installment distribution, the amount of each installment shall be determined by multiplying the Participant’s remaining Account balance by a fraction, the numerator of which is one (1) and the denominator of which is the number of months remaining in the installment period. Amounts distributed in installments shall be debited pro rata from each Investment Fund maintained for the respective Account at the time of distribution under Section 5.3.

(c) If the Participant fails to timely make an election with respect to the form of distribution of his or her Account(s) as provided in this Section 6.1, the Participant’s Account(s) shall be distributed in a lump sum.

6.2 Time of Distribution: Each Participant shall elect the timing of the distribution with respect to his or her Participant Account in the manner authorized by the Administrator. A Participant shall make a separate election as to the timing of payment with respect to each Account grouping specified in Section 6.1(a) above. The Participant’s election(s) shall indicate that payment shall be made (in the case of a lump sum election) or shall commence (in the case of an installment election):

(a) within 45 days following the Participant’s Termination; provided, however, if the Participant is a key employee (as defined in Code Section 416(i) without regard to paragraph (5) thereof) and the stock of the Company is publicly traded on an established securities market, distributions shall not commence before the date which is 6 months following the date of Termination (or, if earlier, the death of the Participant); or

 

7


(b) in a specific month and year, but in no event (1) later than the first of the month following the Participant’s 70th birthday, or (2) earlier than the Participant’s Termination. If a Participant elects his or her distribution to be made or commenced in accordance with this paragraph (b), and such date falls before the Participant’s Termination, the distribution shall be made within 45 days following the Participant’s Termination.

If the Participant fails to timely make an election with respect to the timing of distribution of his or her Account(s) as provided in this Section 6.2, the Participant’s Account(s) shall be distributed or commence distribution on or within 45 days following the Participant’s Termination.

6.3 Change in Control Election: Notwithstanding the elections made in accordance with Sections 6.1 and 6.2 above, a Participant may elect that in the event of a Change in Control, an election shall be superseded and that, in the event of the Participant’s Termination within 12 months following the Change in Control, the Account balance shall be paid in a lump sum. If so elected, such lump sum payment shall be made within 45 days following the Participant’s Termination; provided, however, if the Participant is a key employee (as defined in Code Section 416(i) without regard to paragraph (5) thereof) and the stock of the Company is publicly traded on an established securities market, distributions shall not commence before the date which is 6 months following the date of Termination (or, if earlier, the death of the Participant).

6.4 Change in Form or Time of Distribution: A Participant may change his or her form and timing election applicable to the distribution of an Account under Sections 6.1, 6.2 and 6.3, provided that such request for change (i) does not take effect until at least twelve (12) months after the date on which it is made, (ii) with respect to payments made at a specified time or pursuant to a fixed schedule, is made at least twelve (12) months prior to the date on which such distribution would otherwise have been made or commenced and (iii) with respect to elections under Section 6.1 and 6.2, the first payment with respect to such new election is deferred for a period of not less than five (5) years beyond the date such distribution would otherwise have been made.

6.5 Distribution after Death: If a Participant dies prior to receiving the entire amounts credited to his or her Participant Accounts, the remaining amounts shall be paid to the Participant’s Beneficiary designated by the Participant at the time and in the form as previously elected by the Participant under Section 6.1, 6.2 and 6.3 ( i.e. , there are no special distribution elections for distribution upon death). In the case of an election for amounts to be paid as of Termination, the Participant’s death shall be considered a Termination.

 

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6.6 De Minimis Distributions: Notwithstanding the provisions of Sections 6.1, 6.2, 6.3, 6.4 and 6.5 with respect to the form of distribution, if, as of the Participant’s Termination or death and prior to the commencement of installment payments, the value of amounts in all of the Participant’s Accounts (determined as of the Valuation Date immediately preceding such date) is less than $10,000, the entire balance in the Participant’s Accounts shall be distributed to the Participant (or if the Participant is deceased, the Participant’s Beneficiary) as a lump sum payment.

6.7 Distribution Due to Unforeseeable Emergency: Distributions hereunder may commence if the Administrator determines, based upon uniform, established standards consistent with Treas. Reg. § 1.409A-3(i)(3), that the Participant has incurred an Unforeseeable Emergency. The amount distributed under this Section 6.7 shall not exceed the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or maybe relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship.) Distributions under this Section 6.7 shall be distributed from the Participant’s Deferral Account under Section 5.1. Distributions under this Section 6.7 from a Participant’s Deferral Account shall first be debited from the Participant’s Salary Deferrals and then from the Participant’s Bonus Deferrals, and any deemed earnings and losses credited thereto. No distribution under this Section 6.7 shall be made from the Participant’s Matching Account under Section 5.1. Amounts distributed pursuant to this Section 6.7 shall be debited prorata from each Investment Fund maintained for the respective Account at the time of distribution under Section 5.3.

6.8 Termination for Willful, Deliberate or Gross Misconduct: In the event that a Participant (i) is discharged for willful, deliberate, or gross misconduct as determined by the Board or a duly constituted committee thereof; or (ii) if following the Participant’s Termination and, within a period of three years thereafter, the Participant engages in any business or enters into any employment which the Board or a duly constituted committee thereof determines to be either directly or indirectly competitive with the business of the Company or substantially injurious to the Company’s financial interest (the occurrence of an event described in (i) or (ii) shall be referred to as “Injurious Conduct”), all amounts attributable to the Matching Account and Retirement Supplement Account shall be forfeited. Further, the Board or a duly constituted committee thereof, in its discretion, may require the Participant who has engaged in Injurious Conduct to return any amounts attributable to the Matching Account and Retirement Supplement Account previously received by the Participant, provided the right to require repayment under this Section 6.8 must be exercised within ninety (90) days after the Board (or committee, as the case may be) first learns of the Injurious Conduct, but in no event later than twenty-four (24) months after the Participant’s Termination. A Participant may request the Board or a duly constituted committee thereof, in writing, to determine whether any proposed business or employment activity would constitute Injurious Conduct. Such a request shall fully describe the proposed activity and the Board’s (or the committee’s, as the case may be) determination shall be limited to the specific activity so described.

 

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7. FINANCING

No Participant shall have any right or interest in any such policy or the proceeds thereof or in any other specific fund or asset of the Company as a result of the Plan. The rights of Participants to benefit payments hereunder shall be no greater than those of a general creditor.

8. AMENDMENT OR TERMINATION

8.1 Plan Amendment: The Plan may be amended or otherwise modified by the Administrator, in whole or in part, provided that no amendment or modification shall divest any Participant of any amount previously credited to his or her Participant Accounts under Article 3 and 4 or of the amount and method of crediting earnings to such Participant Accounts under Article 5 of the Plan as of the date of such amendment. Notwithstanding the foregoing, this Section 8.1 shall not prohibit a spin-off or transfer of liabilities from this Plan to another plan provided the new plan provides the affected Participant with the same benefits or amounts after the spin-off or transfer as the affected Participant had under this Plan prior to the spin-off or transfer.

8.2 Termination of the Plan: The Administrator reserves the right to terminate the Plan at any time in whole or in part. In the event of any such termination, the Company shall pay a benefit to the Participant or the Beneficiary of any deceased Participant, in lieu of other benefits hereunder, equal to the value of the Participant’s Accounts in the form and at the benefit commencement date elected by the Participant pursuant to Article 6 of the Plan. Earnings shall continue to be allocated under Article 5 of the Plan after the termination of the Plan until the Participant’s benefits have been paid in full notwithstanding the termination of the Plan.

9. ADMINISTRATION

9.1 Administration: Responsibility for establishing the requirements for participation and for administration of the Plan shall be vested in the Administrator, which shall have the full and exclusive discretionary authority to interpret the Plan, to determine all benefits and to resolve all questions arising from the administration, interpretation, and application of their provisions, either by general rules or by particular decisions, including determinations as to whether a claimant is eligible for benefits, the amount, form and timing of benefits, and any other matter (including any question of fact) raised by a claimant or identified by the Administrator. The Administrator may delegate administrative tasks as necessary to persons who are not Administrator members. All decisions of the Administrator shall be conclusive and binding upon all affected persons.

9.2 Plan Expenses: The expenses of administering the Plan shall be borne by the Company. No employee shall receive any remuneration for service in such capacity. However, expenses of the Administrator or its members paid or incurred in connection with administering the Plan shall be reimbursed by the Company.

9.3 Liability: The Company shall indemnify and hold harmless the members of the Administrator against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct.

 

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10. CLAIMS PROCEDURE

10.1 Claim: Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Administrator which shall respond in writing as soon as practicable.

10.2 Denial of Claim: If the claim or request is denied, the written notice of denial shall state:

(a) The reasons for denial, with specific reference to the Plan provisions on which the denial is based.

(b) A description of any additional material or information required and an explanation of why it is necessary.

(c) An explanation of the Plan’s claim review procedure.

10.3 Review of Claim: Any person whose claim or request is denied or who has not received a response within thirty (30) days may request review by notice given in writing to the Administrator. The claim or request shall be reviewed by the Administrator who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.

10.4 Final Decision: The decision on review shall normally be made within sixty (60) days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days. The decision shall be in writing and shall state the reasons and the relevant Plan provisions. All decisions on review shall be final and bind all parties concerned.

10.5 Attorney’s Fees and Expenses: In the event a Participant’s claim for benefits under this Plan is denied and the Participant successfully appeals the denial of such claim under the foregoing procedures, the Company shall pay or reimburse the legal fees and expenses directly incurred by the Participant in connection with his appeal subject to a maximum payment or reimbursement of one-third of the balance of the Participant’s Accounts. Any such legal fees and expenses shall be paid to, or on behalf of, the Participant no later than thirty (30) days following the Participant’s written request for the payment of such legal fees and expenses, provided the Participant supplies the Administrator with evidence of the fees and expenses incurred by the Participant that the Administrator, in its sole discretion, determines is sufficient.

10.6 Interest on Delayed Payments: Further, in the event a Participant’s claim for benefits under this Plan is denied and the Participant successfully appeals the denial of such claim under the foregoing procedures, the Company shall pay to the Participant interest on the portion of the Participant’s benefits that were not otherwise paid when due because of the initial denial of the claim. For purposes of the preceding sentence, interest shall accrue at an annual rate equal to the prime rate as quoted in the Wall Street Journal as of the date the benefits would otherwise have been paid if the claim had not initially been denied, plus five percent (5%), and shall be adjusted as necessary to reflect any partial payment or payments of the amounts owed to the Participant.

 

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11. MISCELLANEOUS

11.1 Non-Alienation of Benefits: No amount payable under the Plan shall be subject to assignment, transfer, sale, pledge, encumbrance, alienation or charge by a Participant or the Beneficiary of a Participant except as may be required by law.

11.2 Limitation of Rights: Neither the establishment of this Plan, nor any modification thereof, nor the creation of an Account, nor the payment of any benefits shall be construed as giving

(a) any Participant, Beneficiary, or any other person whomsoever, any legal or equitable right against the Company unless such right shall be specifically provided for in the Plan or conferred by affirmative action of the Administrator in accordance with the terms and provisions of the Plan; or

(b) any Participant, or other person whomsoever, the right to be retained in the service of the Company, and all Participants and other employees shall remain subject to termination to the same extent as if the Plan had never been adopted.

11.3 Participant’s Rights Unsecured: The right of any Participant or Beneficiary to receive payment under the provisions of the Plan shall be as an unsecured claim against the Company, and no provisions contained in the Plan shall be construed to give any Participant or Beneficiary at any time a security interest in the Participant’s Accounts or any asset of the Company. The liabilities of the Company to any Participant or Beneficiary pursuant to the Plan shall be those of a debtor pursuant to such contractual obligations as are created by the Plan. Accounts, if any, which may be set aside by the Company for accounting purposes shall not in any way be held in trust for, or be subject to the claims of, a Participant or Beneficiary.

11.4 Incapacity: In the event that the Administrator shall find that a Participant or other person entitled to benefits hereunder is unable to care for his or her affairs because of illness or accident, the Administrator may direct that any benefit payment due him or her, unless claim shall have been made therefor by a duly appointed legal representative, be paid to the Participant’s spouse, child, parent or other blood relative, or to a person with whom he or she resides, and any such payment so made shall be a complete discharge of the liabilities of the Company, any employing company and the Plan therefor.

11.5 Withholding: There shall be deducted from all payments under this Plan the amount of any taxes required to be withheld by any Federal, state or local government. The Participants and their Beneficiaries, distributees, and personal representatives will bear any and all Federal, foreign, state, local or other income or other taxes imposed on amounts paid under this Plan.

11.6 Severability: Should any provision of the Plan or any regulations adopted thereunder be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions or regulations unless such invalidity shall render impossible or impractical the functioning of the Plan and, in such case, the appropriate parties shall adopt a new provision or regulation to take the place of the one held illegal or invalid.

 

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11.7 Controlling Law: The Plan shall be governed by the laws of the Commonwealth of Pennsylvania except to the extent preempted by ERISA and any other law of the United States.

 

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SIGNATURE

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized representative as of this 1 st day of April 2016.

 

ARMSTRONG FLOORING, INC.
By:   /s/ Christopher S. Parisi

Title:

  SVP, General Counsel and Secretary

 

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Exhibit 10.11

RETIREMENT BENEFIT EQUITY PLAN

OF

ARMSTRONG FLOORING, INC.

This Retirement Benefit Equity Plan established by the Retirement Committee of Armstrong Flooring, Inc. (the “Company”) effective April 1, 2016 to pay supplemental retirement benefits to certain employees of the Company who have qualified or may qualify for benefits under the Retirement Income Plan for Employees of Armstrong Flooring, Inc.

The Plan was established as a spin-off plan from the Retirement Benefit Equity Plan of Armstrong World Industries, Inc. (the “Prior Plan”) as sponsored by Armstrong World Industries, Inc. in connection with the spin-off of the Company from Armstrong World Industries, Inc. Supplemental benefits and distribution elections from the Prior Plan have been carried forward to be effective under the Plan with respect to those employees who have transferred from Armstrong World Industries, Inc. to the Company. No “separation for service” or “termination of employment” shall be deemed to have occurred under the Prior Plan or this Plan solely as a result of a transfer of employment directly from Armstrong World Industries, Inc. to the Company.

The Retirement Benefit Equity Plan is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986 as amended and the guidance issued thereunder.

All benefits payable under this Plan shall be paid out of the general assets of the Company, or from a trust, if any, established by the Company for the purpose of paying benefits under the Plan, the assets of which shall remain subject to the claims of judgment creditors of the Company in accordance with the provisions of any such trust.

 

Article 1. Definitions

1.01.

  “Actuarial Equivalent Present Value” shall refer to the present value of a Member’s supplemental benefits. With respect to any Member who is eligible to retire or has retired under the Retirement Income Plan, such present value shall be determined using the actuarial assumptions and factors reasonably utilized under the Retirement Income Plan as of the date of determination applied to a single life annuity payable immediately. With respect to any Member who is not eligible to retire or has not retired under the Retirement Income Plan, such present value shall be determined using the actuarial assumptions and factors reasonably utilized under the Retirement Income Plan as of the date of determination applied to an age 65 single life annuity. The determination of Actuarial Equivalent Present Value shall reflect future assumed increases in the limitations under Section 415 of the Internal Revenue Code, with such future assumed increases being based on the interest rate that is used by the Committee to determine the amount of any employment taxes that may be owed under Section 3121(v) of the Internal Revenue Code.

1.02.

  “Board of Directors” shall mean the Board of Directors of the Company.

 

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1.03.

  “Change in Control” shall mean the first to occur of any of the following events: (i) a Change in Ownership of the Company, (ii) a Change in Effective Control of the Company or (iii) a Change in the Ownership of a Substantial Portion of the Assets of the Company.
  (a)   A “Change in Ownership” of the Company occurs on the date that any one person, or more than one person acting as a group acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.
  (b)   A “Change in Effective Control” of the Company occurs on the date that either:
    (i)   Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or
    (ii)   a majority of members of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors prior to the date of the appointment or election.
  (c)   A “Change in the Ownership of a Substantial Portion of the Assets of the Company” occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. There is no Change in Control event under this Section 1.03(c) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer.
  The determination of whether a Change in Control event has occurred will be made in accordance with the requirements of Code Section 409A and the guidance issued thereunder. The foregoing definition of Change in Control shall exclude the spin-off of the Company from Armstrong World Industries, Inc.

1.04.

  “Committee” shall mean the Retirement Committee as provided for in Article 4.

 

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1.05.

  “Company” shall mean Armstrong Flooring, Inc. or any successor by merger, purchase or otherwise, with respect to its employees. The term Company shall also mean any other company participating in the Retirement Income Plan with respect to its employees if such Company adopts this Plan.

1.06.

  “Compensation” shall mean a Member’s “compensation” as determined under the Retirement Income Plan without regard to limitations under Section 401(a)(17) of the Internal Revenue Code, plus amounts deferred by the Member under the Armstrong Flooring, Inc. Nonqualified Deferred Compensation Plan, if any, and amounts contributed by the Company (or its predecessor) to the Bonus Replacement Retirement Plan of Armstrong World Industries, Inc. (the “Bonus Replacement Retirement Plan”) on behalf of the Member in the year in which such contribution is made.

1.07.

  “Effective Date” shall mean April 1, 2016.

1.08.

  “Member” shall mean any person included in the membership of the Plan as provided in Article 2.

1.09.

  “Plan” shall mean the Retirement Benefit Equity Plan of Armstrong Flooring, Inc. as described herein or as hereafter amended.

1.10.

  “Specified Employee” shall mean, as determined pursuant to Section 409A of the Internal Revenue Code and regulations thereunder, a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Company if any stock of the Company is publicly traded on an established securities market or otherwise.

1.11.

  “Retirement Income Plan” shall mean the Retirement Income Plan for Employees of Armstrong Flooring, Inc. as of April 1, 2016 as may be amended from time to time.
Article 2. Membership

2.01.

  Every person whose supplemental benefit was transferred to the Plan effective April 1, 2016 shall remain a Member of the Plan on and after April 1, 2016.

2.02.

  Every other employee of the Company shall become a Member of the Plan on the first day of the calendar year following the calendar year in which the Committee determines that:
  (a)   the employee’s benefit calculated under the Retirement Income Plan exceeds the allowed benefit under Section 415 of the Internal Revenue Code,
  (b)   the employee’s compensation exceeds the maximum allowed under Section 401(a)(17) of the Internal Revenue Code,

 

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  (c)   the employee has compensation deferred under the terms of the Armstrong Nonqualified Deferred Compensation Plan, or
  (d)   the employee is a key executive designated by the Board of Directors, or its delegate, to receive credit for employment prior to his Company employment for purposes of calculating his Retirement Income Plan benefit, as provided under Section 3.01(a)(iii) of this Plan.

2.03.

  Membership under the Plan shall terminate if a Member’s employment with the Company terminates unless at that time the Member is entitled to retirement income payments pursuant to the Retirement Income Plan or benefits described in Section 3.04.
Article 3. Amount and Payment of Supplemental Benefits

3.01.

  The supplemental benefits under this Plan shall be payable by the Company only with respect to a Member who has retired or otherwise terminated his employment with the Company after becoming vested under the Retirement Income Plan. Any such supplemental benefits shall be payable from the general assets of the Company or from a trust, if any, established by the Company for the purpose of paying benefits under the Plan, the assets of which shall remain subject to the claims of judgment creditors of the Company in accordance with the provisions of any such trust.
  The amount of any supplemental benefits payable to a Member pursuant to this Plan, expressed as a single life annuity payable as of the Member’s “normal retirement date” (as that term is defined in the Retirement Income Plan) or in the event the Member defers his retirement beyond his normal retirement date, his “deferred retirement date” (as that term is defined in the Retirement Income Plan), shall be equal to (a) minus (b) minus (c) minus (d), where:
  (a)   is the benefit calculated under the provisions of the Retirement Income Plan, but:
    (i)   disregarding any reduction in the amount of benefits under the Retirement Income Plan attributable to any provision therein incorporating limitations imposed by Section 415 of the Internal Revenue Code or Section 401(a)(17) of the Internal Revenue Code;
    (ii)   disregarding any reduction due to compensation deferred under the Armstrong Nonqualified Deferred Compensation Plan;
    (iii)   including, for purposes of calculating Total Service under the Retirement Income Plan, years of employment for a Member described in Section 2.02(d) which precede his Company employment to the extent so designated by the Board of Directors, or its delegate, at the time such individual is designated as eligible for membership in the Plan;

 

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    (iv)   including, for purposes of determining compensation, any amounts contributed on the Member’s behalf to the Bonus Replacement Retirement Plan; and
    (v)   excluding any amount attributable to (1) an Extraordinary Event (as defined in the Retirement Income Plan) and (2) all retirement enhancements related to past and future service that may become payable due to a job loss following a Change in Control (as defined in the Retirement Income Plan) under the Retirement Income Plan.
  (b)   is the actual amount of benefits payable to or on account of the Member as calculated under the Retirement Income Plan, excluding any amounts attributable to (1) an Extraordinary Event (as defined in the Retirement Income Plan) and (2) all retirement enhancements related to past and future service that may become payable due to a job loss following a Change in Control (as defined in the Retirement Income Plan) under the Retirement Income Plan;
  (c)   is the value of the benefit (excluding the portion of such benefit attributable to employee contributions) which is payable, which has been paid or which will become payable to a Member described in Section 2.02(d) from a qualified defined benefit plan to the extent such plan takes into account the period of employment described in Section 3.01(a)(iii). In the event the Member has received, is receiving, or is scheduled to receive benefits from another such plan in any form other than a single life annuity or at a time other than when benefits commence under this Plan, the benefit to be taken into account under this subsection (c) shall be determined by the Company based on actuarial assumptions and factors reasonably utilized under the Retirement Income Plan as of the date of determination; and
  (d)   is the actuarial equivalent value of any supplemental benefits previously paid to the Member under this Plan, provided that the actuarial equivalent value of any supplemental benefits paid as a single sum shall be determined using the actuarial assumptions and factors reasonably utilized under the Retirement Income Plan as of the date of determination.
  Notwithstanding the preceding provisions of this Section 3.01, in the event a retired or terminated Member’s benefit calculated under the Retirement Income Plan is increased for any reason after the Member’s supplemental benefit payments have commenced in an annuity form, the amount of any supplemental benefits payable to or on account of such Member under this Plan shall be reduced correspondingly on a prospective basis, and in the event such increase is made retroactively resulting in the overpayments of any or all of the Member’s

 

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  supplemental benefits, future benefit payments under this Plan shall be reduced to reflect such prior overpayments in any manner determined by the Committee, in its discretion, and applied on a consistent basis to all similarly situated Members, until an amount equal to the total overpayments in the Member’s supplemental benefit payments are recovered.

3.02.

  Subject to the following rules, an employee of the Company who becomes a Member under this Plan in accordance with Section 2.02 shall elect in writing the form and timing of payment of the supplemental benefits payable on behalf of such Member under this Plan within the thirty (30) day period following the Committee’s determination that such employee has become a Member.
  (a)   The Member may elect to have his supplemental benefits paid in the form of any annuity that is offered under the Retirement Income Plan (other than a level income life annuity or a level income joint and survivor annuity). A Member may initially elect to have his benefit paid in the form of a “life annuity” and then, immediately prior to commencement of payment, elect the specific form of actuarially equivalent life annuity among those offered under the Retirement Income Plan.
  (b)   In no event shall the Member elect to have his supplemental benefits commence or be paid earlier than the later of: (i) the Member’s attainment of age 55, or (ii) the date the Member first becomes eligible to receive his benefits under the Retirement Income Plan and in no event shall the Member elect to have his supplemental benefits commence or be paid later than the Member’s attainment of age 65 or, if later, his actual retirement from the Company.
    In no event shall the Member elect to have his supplemental benefits commence to be paid later than April 1 of the calendar year following the later of (x) the calendar year in which the Member attains age 70   1 2 , or (y) the calendar year in which the Member terminates employment.
  (c)   In the event the Member fails to affirmatively elect the form and timing of payment of his supplemental benefits hereunder, the Member shall be deemed to have elected to have his supplemental benefits paid in the form of a life annuity and at the later of the Member’s attainment of age 55 or termination of employment.
  (d)   Notwithstanding any other provision of the Plan to the contrary, in the event the Member elects to receive a period certain annuity or joint and survivor annuity and either the beneficiary designated by the Member dies prior to the date the Member commences receiving his supplemental benefits or the Member designates his spouse as his beneficiary and the Member is not legally married to such spouse immediately preceding the date the Member commences receiving his supplemental benefits, the Member’s election to receive such period certain annuity or joint and survivor annuity shall automatically be converted to an election to receive a single life annuity.

 

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3.03.

  Notwithstanding the provisions of Section 3.02, a Member who has not commenced receiving payment of his supplemental benefits may request in writing to the Committee to amend the commencement date of his supplemental benefits elected by the Member under Section 3.02, in accordance with the following rules:
  (a)   A Member who has not commenced receiving payment of his supplemental benefits may request to amend the timing and/or form of payment of the supplemental benefits (subject to the limitations of Section 3.02(a)) provided: (i) the commencement date in the absence of such distribution election amendment is not within twelve (12) months of the date of the amendment; (ii) his amended commencement date is at least five (5) years after the date of the distribution election amendment; (iii) such election amendment will not take effect until twelve (12) months after the date it is received by the Committee; and (iv) his amended commencement date is otherwise in conformance with the provisions of Section 3.02(b).

3.04.

  Notwithstanding the provisions of Section 3.01 and Section 3.02, supplemental benefits shall be payable under this Plan to or on account of a Member described in Section 2.02(d) who: (i) is involuntarily terminated after completing one year of service but prior to becoming vested in the Retirement Income Plan, and (ii) receives severance pay benefits under the [Severance Pay Plan for Salaried Employees of Armstrong Flooring, Inc.] or any individual severance agreement. The Member’s supplemental benefits will be calculated using the guaranteed pension schedule for Salaried Employees of Armstrong Flooring, Inc. under the Retirement Income Plan multiplied by the total years of service credited for employment prior to his Company employment, as determined in Section 2.02(d) and his years of Company employment and shall be payable in the form of a single life annuity commencing as of the later of the Member’s attainment of age 62 or the Member’s termination date.

3.05.

  In the event the dollar amount of the maximum benefit under the Retirement Income Plan pursuant to Section 415 of the Internal Revenue Code increases because of adjustments in the cost of living, the supplemental benefits of any Member payable under the Plan, whether or not in pay status, shall be recalculated to take into account the higher maximum benefit payable from the Retirement Income Plan. If payments have already commenced under the Retirement Income Plan and this Plan, benefit amounts under both plans shall be adjusted to reflect the higher maximum benefit, by increasing the amount paid under the Retirement Income Plan and decreasing the amount paid under this Plan, as soon as administratively possible after such a change. Notwithstanding the above, if the Retirement Income Plan is terminated, no adjustments shall be made to benefits payable under this Plan with respect to changes in the maximum benefit after the date of such termination.

 

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3.06.

  In the event a Member dies after becoming vested under the Retirement Income Plan but prior to the date his supplemental benefits under this Plan are scheduled to commence or be paid, a spouse’s benefit shall be payable to the Member’s surviving spouse. The spouse’s benefit shall be paid to the Member’s surviving spouse in a life annuity, beginning as of the first day of the month immediately following the date of the Member’s death or, if later, the date the Member would have attained age 55 if he had lived, under which each payment shall equal one-half (1/2) of the amount that would have been payable to the Member under Section 3.01 if the Member had elected a single life annuity under Section 3.02 with payments commencing as of the same date as the spouse’s benefit.

3.07.

  Notwithstanding any provision of this Plan to the contrary, if the Member is considered a Specified Employee at termination of employment under such procedures as established by the Company in accordance with Section 409A of the Internal Revenue Code, benefit distributions that are made by reason of termination of employment may not commence earlier than six (6) months after the date of such termination of employment. Therefore, in the event this Section 3.07 is applicable to a Member, any distribution that would otherwise be paid to the Member within the first six months following the termination of employment shall be accumulated and paid to the Participant in a lump sum (payable with interest determined based upon the short-term applicable federal rate (AFR) for purposes of Section 1274(d) of the Internal Revenue Code for the November preceding the calendar year of the termination of employment) on the first day of the seventh month following the termination of employment. All subsequent distributions shall be paid in the manner specified.

3.08.

  Notwithstanding any other provision of the Plan to the contrary, a Member may request at any time to receive a lump sum distribution of a portion of his supplemental benefit due to an “Unforeseeable Emergency” as follows:
  (a)   “Unforeseeable Emergency” shall mean any severe financial hardship to the Member resulting from an illness or accident of the Member or his spouse or dependent (as defined in Section 152 of the Internal Revenue Code, without regard to Sections 152(b)(1), (b)(2) and (d)(1)(B) thereof), loss of the Member’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Member.
  (b)   Any distribution pursuant to this provision is limited to the amount necessary to meet the emergency, and any amounts necessary to pay any federal, state, local or foreign income taxes or penalties reasonably anticipated to result from such distribution.

 

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  (c)   The circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship.
  (d)   If the Committee determines that a Participant has demonstrated an Unforeseeable Emergency, the determination to make a distribution pursuant to this Section 3.08 remains in the sole discretion of the Committee.
  (e)   Any distribution due to an Unforeseeable Emergency shall be made by determining the Actuarial Equivalent Present Value of the Member’s supplemental benefits and a lump sum distribution shall not be in excess of such Actuarial Equivalent Present Value. In the event the distribution is less than the Actuarial Equivalent Present Value, the Actuarial Equivalent Present value of the Member’s supplemental benefits shall then be reduced in accordance with Section 3.01(d).
Article 4. Administration

4.01.

  The administration of the Plan and the responsibility for carrying out its provisions are vested in a Retirement Committee which shall be composed of the members of the Retirement Committee provided for under Article IX of the Retirement Income Plan. The provisions of Article IX of the Retirement Income Plan concerning powers of the Committee shall apply under this Plan. The Retirement Committee shall have the full and exclusive discretion and authority to interpret the Plan and to determine all benefits and to resolve all questions arising from the administration, interpretation, and application of Plan provisions, either by general rules or by particular decisions, including determinations as to whether a claimant is eligible for benefits, the amount, form and timing of benefits, and any other matter (including any question of fact) raised by a claimant or identified by the Retirement Committee. All decisions of the Committee shall be conclusive and binding upon all affected persons. The expenses of the Committee shall be paid directly by the Company.
Article 5. General Provisions

5.01.

  The establishment of the Plan shall not be construed as conferring any legal rights upon any person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any employee and to treat him without regard to the effect which such treatment might have upon him as a Member of the Plan. No legal or beneficial interest in any of the Company’s assets is intended to be conferred by the terms of the Plan.

 

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5.02.

  In the event that the Committee shall find that a Member or other person entitled to benefits hereunder is unable to care for his affairs because of illness or accident, the Committee may direct that any benefit payment due him, unless claim shall have been made therefor by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Company and the Plan therefor.

5.03.

  The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.

5.04.

  Subject to any applicable law, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, any attempt so to do shall be void, nor shall any such benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Member. In the event that the Committee shall find that any Member or other person entitled to benefits hereunder has become bankrupt or has made any such attempt with respect to any such benefit, such benefit shall cease and terminate, and in that event the Board shall hold or apply the same to or for the benefit of such Member or other person entitled to benefits.

5.05.

  (a)   In the event that a Member (i) is discharged for willful, deliberate, or gross misconduct as determined by the Board of Directors or a duly constituted committee thereof; or (ii) if following the Member’s termination of employment with the Company and, within a period of three years thereafter, the Member engages in any business or enters into any employment which the Board of Directors or a duly constituted committee thereof determines to be either directly or indirectly competitive with the business of the Company or substantially injurious to the Company’s financial interest (the occurrence of an event described in (i) or (ii) shall be referred to as “Injurious Conduct”), all benefits which would otherwise be payable to him under the Plan shall be forfeited. Further, the Board of Directors or a duly constituted committee thereof, in its discretion, may require the Member who has engaged in Injurious Conduct to return any amounts previously received by the Member, provided the right to require repayment under this subsection (a) must be exercised within ninety (90) days after the Board (or committee, as the case may be) first learns of the Injurious Conduct, but in no event later than twenty-four (24) months after the Member’s termination of employment with the Company. A Member may request the Board of Directors or a duly constituted committee thereof, in writing, to determine whether any proposed business or employment activity would constitute Injurious Conduct. Such a request shall fully describe the proposed activity and the Board’s (or the committee’s, as the case may be) determination shall be limited to the specific activity so described.

 

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  (b)   Notwithstanding the foregoing, benefits shall not cease or be forfeited or be required to be repaid merely because the Member (1) owns publicly traded shares of stock of a corporation which competes with the Company, or (2)(a) acts as a consultant for, (b) has an investment in, or (c) is a Board member of a business where after the Member notifies the Company in writing in advance of his potential involvement under (2)(a), (b) or (c), the Company’s Board of Directors or a duly constituted committee thereof determines that the Member will not be in violation of the Company’s Conflicts of Interest policy, or (3) becomes associated with a business which competes with the Company within two years following a “Change in Control” and is eligible for benefits under any individual severance agreement.

5.06.

  The Plan shall be constructed, regulated and administered under the laws of the Commonwealth of Pennsylvania.

5.07.

  The masculine pronoun shall mean the feminine wherever appropriate.

5.08.

  The Board of Directors may, through written resolutions adopted by the Board of Directors, amend or discontinue the Retirement Benefit Equity Plan at any time; provided, however, that if the Plan is amended to discontinue or reduce the amount of supplemental benefit payments (except as may be required pursuant to any plan arising from insolvency or bankruptcy proceedings) (a) any Member who is being paid his supplemental benefits immediately prior to the effective date of the amendment shall continue to be paid his supplemental benefits in the amount and manner (as provided under Article 3 hereof) as they were being paid at the time of such amendment, and (b) any Member who is not being paid his supplemental benefits immediately prior to the effective date of the amendment shall be entitled to receive (i) the supplemental benefits accrued by such Member as of the effective date of the amendment, with such supplemental benefits being paid at the time elected by the Member under Section 3.02, and (ii) any legal fees and related expenses incurred by the Member in receiving such supplemental benefits (as permitted under Section 5.09(e)) and interest under Section 5.09(f) (to the extent applicable). Notwithstanding the preceding sentence, any written employment agreement between the Executive Committee and any Member described in clause (b) of the preceding sentence shall govern to the extent such agreement either amends or discontinues the Member’s supplemental benefits under the Plan, and Section 5.05 shall govern to the extent any Member engages in Injurious Conduct as defined under that section.
  Notwithstanding the foregoing, this Section 5.08 shall not prohibit a spin-off or transfer of liabilities from this Plan to another plan provided the new plan provides the affected Participant with the same benefits after the spin-off or transfer as the affected Participant had under this Plan prior to the spin-off or transfer.

 

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5.09.

  (a)   Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee which shall respond in writing as soon as practicable.
  (b)   If the claim or request is denied, the written notice of denial shall state:
    (i)   The reasons for denial, with specific reference to the Plan provisions on which the denial is based.
    (ii)   A description of any additional material or information required and an explanation of why it is necessary.
    (iii)   An explanation of the Plan’s claim review procedure.
  (c)   Any person whose claim or request is denied or who has not received a response within thirty (30) days may request review by notice given in writing to the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.
  (d)   The decision on review shall normally be made within sixty (60) days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days. The decision shall be in writing and shall state the reasons and the relevant Plan provisions. All decisions on review shall be final and bind all parties concerned.
  (e)   In the event a Member’s claim for supplemental benefits under this Plan is denied and the Member successfully appeals the denial of such claim under the foregoing procedures, the Company shall pay or reimburse the legal fees and expenses directly incurred by the Member in connection with his appeal subject to a maximum payment or reimbursement of one-third of the Actuarial Equivalent Present Value of the supplemental benefits to which the Member is entitled. For purposes of the preceding sentence, actuarial equivalence shall be determined using the actuarial assumptions and factors reasonably utilized under the Retirement Income Plan as of the date of determination. Any such legal fees and expenses shall be paid by the Company to, or on behalf of, the Member no later than thirty (30) days following the Member’s written request for the payment of such legal fees and expenses, provided the Member supplies the Committee with evidence of the fees and expenses incurred by the Member that the Committee, in its sole discretion, determines is sufficient.
  (f)   Further, in the event a Member’s claim for supplemental benefits under this Plan is denied and the Member successfully appeals the denial of such

 

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    claim under the foregoing procedures, the Company shall pay to the Member interest on the portion of the Member’s supplemental benefits that were not otherwise paid when due because of the initial denial of the claim. For purposes of the preceding sentence, interest shall accrue at an annual rate equal to the prime rate as quoted in the Wall Street Journal as of the date the supplemental benefits would otherwise have been paid if the claim had not initially been denied, plus five percent (5%), and shall be adjusted as necessary to reflect any partial payment or payments of the amounts owed to the Member.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized representative as of this 1 st day of April 2016.

 

ARMSTRONG FLOORING, INC.
By:   /s/ Christopher S. Parisi
Title:   SVP, General Counsel and Secretary

 

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Exhibit 99.2

 

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FOR IMMEDIATE RELEASE

 

Investor Contact:    Media Contact:

Douglas Bingham, VP, Treasury and Investor Relations

717-672-9300

IR@armstrongflooring.com

  

Jason Chudoba

646-277-1249

AFI@icrinc.com

Armstrong Flooring, Inc. Becomes Independent, Publicly Traded Company

Global flooring leader completes its separation from Armstrong World Industries, Inc.

LANCASTER, Pa. – April 4, 2016 – Armstrong Flooring, Inc. (NYSE: AFI), North America’s largest producer of resilient and wood flooring products, today announced the completion of its separation from Armstrong World Industries, Inc. (NYSE: AWI). Armstrong Flooring is now an independent, publicly traded company whose common stock will begin trading ‘regular way’ today on the New York Stock Exchange (NYSE) under the symbol “AFI.”

Armstrong Flooring’s management team consists of highly qualified and experienced executives who possess extensive industry knowledge and strong operational acumen. They include:

 

    Donald R. Maier – President and Chief Executive Officer

 

    John “Jay” W. Thompson – Senior Vice President and Chief Financial Officer

 

    David S. Schulz – Senior Vice President and Chief Operating Officer

 

    Dominic C. Rice – Senior Vice President and North America Commercial

 

    Joseph N. Bondi – Senior Vice President and North America Residential

“The completion of this separation marks an exciting new chapter in Armstrong Flooring’s storied 150-year history,” said Maier. “We bring to the market a distinguished legacy of success and differentiated go-to-market strategy that positions us well to continue to deliver high-quality, innovative flooring products. Looking ahead, we believe that we have a long-term opportunity to enhance shareholder value by successfully executing our strategy to reinvigorate profitable growth across our resilient and wood flooring businesses.”

About Armstrong Flooring

Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the design and manufacture of innovative flooring solutions that inspire spaces where people live, work, learn, heal and play. Headquartered in Lancaster, Pa., Armstrong Flooring is the #1 manufacturer of resilient and wood flooring products across North America. The Company safely and responsibly operates 18 manufacturing facilities in three countries and employs approximately 3,500 individuals, all working together to provide the highest levels of service, quality and innovation to ensure it remains as strong and vital as its 150-year heritage. Learn more at www.armstrongflooring.com.

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Uncertainties Affecting Forward-Looking Statements

Disclosures in this release and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included our reports filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.

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