UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 5, 2014
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 333-124878
American Tire Distributors Holdings, Inc.
(Exact name of registrant as specified in its charter)
A Delaware Corporation | 59-3796143 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
12200 Herbert Wayne Court
Suite 150
Huntersville, North Carolina 28078
(Address of principal executive office)
(704) 992-2000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x *
* | The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the Securities and Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the registrant during the preceding 12 months had it been subject to such filing requirements during the entirety of such period. |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Number of common shares outstanding at May 12, 2014: 1,000
Cautionary Statements on Forward-Looking Information
This Form 10-Q, including the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements relating to our business and financial outlook that are based on our current expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential, continue or other comparable terminology.
These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates and assumptions. Actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and is expressly qualified in its entirety by the cautionary statements included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 28, 2013, particularly under the caption Risk Factors. We undertake no obligation to update any such statement to reflect new information, or the occurrence of future events or changes in circumstances, after we distribute this Form 10-Q, except as required by the federal securities laws. Many factors could cause actual results to differ materially from those indicated by the forward-looking statements or could contribute to such differences including:
| general business and economic conditions in the United States, Canada and other countries, including uncertainty as to changes and trends; |
| our ability to execute key strategies, including pursuing acquisitions and successfully integrating and operating acquired companies; |
| our ability to develop and implement the operational and financial systems needed to manage our operations; |
| the ability of our customers and suppliers to obtain financing related to funding their operations in the current economic market; |
| the financial condition of our customers, many of which are small businesses with limited financial resources; |
| changing relationships with customers, suppliers and strategic partners; |
| changes in laws or regulations affecting the tire industry; |
| changes in capital market conditions, including availability of funding sources and fluctuations in currency exchange rates; |
| impacts of competitive products and changes to the competitive environment; |
| acceptance of new products in the market; and |
| unanticipated expenditures. |
Some of the significant risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described more fully in the Risk Factors section of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 28, 2013. These risks are not the only risks and uncertainties facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Where You Can Find More Information
We file reports and other information with the Securities and Exchange Commission (SEC). You can inspect, read and copy these reports and other information at the SECs Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information regarding the operation of the SECs Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that makes available reports, proxy statements and other information regarding issuers that file electronically.
We make available free of charge at www.atd-us.com (in the Investor Relations section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.atd-us.com, we do not incorporate such website or its contents into this Quarterly Report on Form 10-Q.
2
AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC.
FORM 10-Q
INDEX
Page | ||||||||||
PART I | FINANCIAL INFORMATION | |||||||||
Item 1 | - | Financial Statements (unaudited): | ||||||||
Condensed Consolidated Balance Sheets - As of April 5, 2014 and December 28, 2013 |
4 | |||||||||
5 | ||||||||||
Condensed Consolidated Statement of Stockholders Equity - For the quarter ended April 5, 2014 |
6 | |||||||||
7 | ||||||||||
Notes to Condensed Consolidated Financial Statements | 8 | |||||||||
Item 2 | - | Managements Discussion and Analysis of Financial Condition and Results of Operations | 31 | |||||||
Item 3 | - | Quantitative and Qualitative Disclosures about Market Risk | 44 | |||||||
Item 4 | - | Controls and Procedures | 44 | |||||||
PART II | OTHER INFORMATION | |||||||||
Item 1 | - | Legal Proceedings | 45 | |||||||
Item 1A | - | Risk Factors | 45 | |||||||
Item 2 | - | Unregistered Sales of Equity Securities and Use of Proceeds | 45 | |||||||
Item 3 | - | Defaults Upon Senior Securities | 45 | |||||||
Item 4 | - | Mine Safety Disclosures | 45 | |||||||
Item 5 | - | Other Information | 45 | |||||||
Item 6 | - | Exhibits | 45 | |||||||
SIGNATURES | 47 |
3
PART I FINANCIAL INFORMATION
American Tire Distributors Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
In thousands, except share amounts |
April 5, 2014 |
December 28, 2013 |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 37,824 | $ | 35,760 | ||||
Accounts receivable, net |
440,129 | 305,247 | ||||||
Inventories |
1,044,764 | 772,733 | ||||||
Income tax receivable |
3,478 | 369 | ||||||
Deferred income taxes |
17,297 | 15,719 | ||||||
Assets held for sale |
3,726 | 910 | ||||||
Other current assets |
28,233 | 19,684 | ||||||
|
|
|
|
|||||
Total current assets |
1,575,451 | 1,150,422 | ||||||
|
|
|
|
|||||
Property and equipment, net |
190,787 | 147,856 | ||||||
Goodwill |
664,947 | 504,333 | ||||||
Other intangible assets, net |
1,051,328 | 713,294 | ||||||
Other assets |
53,406 | 43,421 | ||||||
|
|
|
|
|||||
Total assets |
$ | 3,535,919 | $ | 2,559,326 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 694,059 | $ | 563,691 | ||||
Accrued expenses |
78,844 | 47,723 | ||||||
Liabilities held for sale |
436 | | ||||||
Current maturities of long-term debt |
5,502 | 564 | ||||||
|
|
|
|
|||||
Total current liabilities |
778,841 | 611,978 | ||||||
|
|
|
|
|||||
Long-term debt |
1,704,604 | 966,436 | ||||||
Deferred income taxes |
328,356 | 270,576 | ||||||
Other liabilities |
19,850 | 17,362 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, par value $.01 per share; 1,000 shares authorized, issued and outstanding |
| | ||||||
Additional paid-in capital |
809,539 | 758,972 | ||||||
Accumulated earnings (deficit) |
(90,942 | ) | (56,898 | ) | ||||
Accumulated other comprehensive income (loss) |
(14,329 | ) | (9,100 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
704,268 | 692,974 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 3,535,919 | $ | 2,559,326 | ||||
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
4
American Tire Distributors Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
In thousands |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
||||||
Net sales |
$ | 1,075,469 | $ | 839,978 | ||||
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below |
917,314 | 708,156 | ||||||
Selling, general and administrative expenses |
177,918 | 136,504 | ||||||
Transaction expenses |
4,686 | 1,023 | ||||||
|
|
|
|
|||||
Operating income (loss) |
(24,449 | ) | (5,705 | ) | ||||
Other income (expense): |
||||||||
Interest expense |
(24,399 | ) | (17,240 | ) | ||||
Other, net |
(1,802 | ) | (973 | ) | ||||
|
|
|
|
|||||
Income (loss) from operations before income taxes |
(50,650 | ) | (23,918 | ) | ||||
Income tax provision (benefit) |
(16,606 | ) | (7,627 | ) | ||||
|
|
|
|
|||||
Net income (loss) |
$ | (34,044 | ) | $ | (16,291 | ) | ||
|
|
|
|
|||||
Other comprehensive income (loss): |
||||||||
Unrealized gain (loss) on rabbi trust assets, net of tax |
$ | 12 | $ | 67 | ||||
Foreign currency translation |
(5,241 | ) | (1,811 | ) | ||||
|
|
|
|
|||||
Other comprehensive income (loss) |
(5,229 | ) | (1,744 | ) | ||||
|
|
|
|
|||||
Comprehensive income (loss) |
$ | (39,273 | ) | $ | (18,035 | ) | ||
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
American Tire Distributors Holdings, Inc.
Condensed Consolidated Statement of Stockholders Equity
(Unaudited)
Total Stockholders Equity |
Additional Paid-In Capital |
Accumulated Earnings (Deficit) |
Accumulated Other Comprehensive (Loss) Income |
|||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
In thousands, except share amounts |
Shares | Amount | ||||||||||||||||||||||
Balance, December 28, 2013 |
$ | 692,974 | 1,000 | $ | | $ | 758,972 | $ | (56,898 | ) | $ | (9,100 | ) | |||||||||||
Net income (loss) |
(34,044 | ) | | | | (34,044 | ) | | ||||||||||||||||
Unrealized gain (loss) on rabbi trust assets, net of tax |
12 | | | | | 12 | ||||||||||||||||||
Foreign currency translation |
(5,241 | ) | | | | | (5,241 | ) | ||||||||||||||||
Equity contribution |
50,000 | 50,000 | ||||||||||||||||||||||
Stock-based compensation expense |
567 | | | 567 | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, April 5, 2014 |
$ | 704,268 | 1,000 | $ | | $ | 809,539 | $ | (90,942 | ) | $ | (14,329 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
American Tire Distributors Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
In thousands |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | (34,044 | ) | $ | (16,291 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
29,323 | 25,031 | ||||||
Amortization of other assets |
1,170 | 1,033 | ||||||
Provision (benefit) for deferred income taxes |
(4,524 | ) | (5,577 | ) | ||||
Non-cash inventory step-up amortization |
19,183 | 2,194 | ||||||
Provision for doubtful accounts |
790 | 528 | ||||||
Stock-based compensation |
567 | 668 | ||||||
Other, net |
306 | (177 | ) | |||||
Change in operating assets and liabilities (excluding impact from acquisitions): |
||||||||
Accounts receivable |
(32,255 | ) | 966 | |||||
Inventories |
(33,234 | ) | 3,529 | |||||
Income tax receivable |
(3,109 | ) | | |||||
Other current assets |
(1,282 | ) | 5,190 | |||||
Accounts payable and accrued expenses |
(17,030 | ) | (14,440 | ) | ||||
Other, net |
1,514 | (522 | ) | |||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
(72,625 | ) | 2,132 | |||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Acquisitions, net of cash acquired |
(675,343 | ) | (4,225 | ) | ||||
Purchase of property and equipment |
(14,402 | ) | (11,873 | ) | ||||
Purchase of assets held for sale |
(15 | ) | (612 | ) | ||||
Proceeds from sale of property and equipment |
102 | 13 | ||||||
Proceeds from sale of assets held for sale |
415 | | ||||||
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
(689,243 | ) | (16,697 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Borrowings from revolving credit facility |
1,509,324 | 719,993 | ||||||
Repayments of revolving credit facility |
(1,293,067 | ) | (706,949 | ) | ||||
Outstanding checks |
(9,174 | ) | (8,677 | ) | ||||
Payments of deferred financing costs |
(11,391 | ) | (69 | ) | ||||
Payments of other long-term debt |
(392 | ) | (88 | ) | ||||
Proceeds from issuance of long-term debt |
520,313 | | ||||||
Equity contribution |
50,000 | | ||||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
765,613 | 4,210 | ||||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
(1,681 | ) | (513 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
2,064 | (10,868 | ) | |||||
Cash and cash equivalents - beginning of period |
35,760 | 25,951 | ||||||
|
|
|
|
|||||
Cash and cash equivalents - end of period |
$ | 37,824 | $ | 15,083 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash payments for interest |
$ | 10,464 | $ | 3,733 | ||||
Cash payments (receipts) for taxes, net |
$ | 1,586 | $ | 1,239 | ||||
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
7
American Tire Distributors Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. | Nature of Business: |
American Tire Distributors Holdings, Inc. (Holdings) is a Delaware corporation that owns 100% of the issued and outstanding capital stock of American Tire Distributors, Inc. (ATDI), a Delaware corporation. Holdings has no significant assets or operations other than its ownership of ATDI. The operations of ATDI and its subsidiaries constitute the operations of Holdings presented under accounting principles generally accepted in the United States. ATDI is primarily engaged in the wholesale distribution of tires, custom wheels and accessories, and related tire supplies and tools. Its customer base is comprised primarily of independent tire dealers with the remainder of other customers representing various national and corporate accounts. ATDI serves a majority of the contiguous United States, as well as Canada, through one operating and reportable segment. Unless the context otherwise requires, Company herein refers to Holdings and its consolidated subsidiaries.
2. | Basis of Presentation: |
The accompanying condensed consolidated financial statements reflect the consolidated operations of the Company and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) as defined by the Financial Accounting Standards Board (FASB) within the FASB Accounting Standards Codification (FASB ASC). In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the consolidated unaudited results for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in Holdings Annual Report on Form 10-K for the fiscal year ended December 28, 2013.
The Companys fiscal year is based on either a 52- or 53-week period ending on the Saturday closest to each December 31. Therefore, the financial results of 53-week fiscal years, and the associated 14-week quarter, will not be comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. The quarter ended April 5, 2014 contains operating results for 14 weeks while the quarter ended March 30, 2013 contains operating results for 13 weeks. It should be noted that the Company and its recently acquired subsidiaries, The Hercules Tire & Rubber Company (Hercules) and Terrys Tire Town Holdings, Inc. (Terrys Tire), have different year-end and quarter-end reporting dates. Both Hercules and Terrys Tire have calendar year-end and quarter-end reporting dates. There were no significant changes to the business subsequent to their fiscal period ends that would have a material impact on the condensed consolidated balance sheet or condensed consolidated statement of comprehensive income (loss) as of and for the quarter ended April 5, 2014.
On May 28, 2010, pursuant to an Agreement and Plan of Merger, dated as of April 20, 2010, the Company was acquired by TPG Capital, L.P. and certain co-investors (the TPG Merger). Under the guidance provided by the SEC Staff Accounting Bulletin Topic 5J, New Basis of Accounting Required in Certain Circumstances, push-down accounting is required when such transactions result in an entity being substantially wholly-owned. Under push-down accounting, certain transactions incurred by the buyer, which would otherwise be accounted for in the accounts of the parent, are pushed down and recorded on the financial statements of the subsidiary. Therefore, the basis in shares of the Companys common stock has been pushed down from the buyer to the Company.
3. | Recent Accounting Pronouncements |
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 clarifies guidance and eliminates diversity in practice on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective for annual reporting periods beginning on or after December 15, 2013 and subsequent interim periods. The Company adopted this guidance on December 29, 2013 (the first day of its 2014 fiscal year) and its adoption did not have a material impact on the Companys consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, (ASU 2014-08). Under ASU 2014-08, only disposals representing a strategic shift in operations that have a major effect on the companys operations and financial results should be presented as discontinued operations. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The amendments in ASU 2014-08 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. However, ASU 2014-08 should not be applied to a component that is classified as held for sale before the effective date even if the component is disposed of after the effective date. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statement previously issued. The Company is currently assessing the impact, if any, on its consolidated financial statements.
8
4. | Acquisitions: |
2014 Acquisitions
On March 28, 2014, ATDI completed its acquisition of Terrys Tire Town Holdings, Inc., an Ohio corporation (Terrys Tire and such acquisition, the Terrys Tire Acquisition). The Terrys Tire Acquisition was completed pursuant to a Stock Purchase Agreement (the Stock Purchase Agreement) entered into on February 17, 2014 between ATDI and TTT Holdings, Inc., a Delaware corporation. Terrys Tire and its subsidiaries are engaged in the business of purchasing, marketing, distributing and selling tires, wheels and related tire and wheel accessories on a wholesale basis to tire dealers, wholesale distributors, retail chains, automotive dealers and others, retreading tires and selling retread and other commercial tires through commercial outlets to end users and selling tires directly to consumers via the internet. Terrys Tire owned and operated 10 distribution centers across the Northeast, New England and Ohio. The acquisition of Terrys Tire will enhance the Companys market position in these areas and aligns very well with new distribution centers opened by the Company over the past two years in these regions of the United States.
The Terrys Tire acquisition closed for an aggregate purchase price of approximately $378.1 million (the Terrys Tire Purchase Price), consisting of cash consideration of approximately $363.4 million, contingent consideration of $12.5 million and non-cash consideration for debt assumed of $2.2 million. The cash consideration paid for the Terrys Tire Acquisition included estimated working capital adjustments and a portion of consideration contingent on certain events achieved prior to closing. The Terrys Tire Purchase Price was funded by a combination of borrowings under a new senior secured term loan facility, as more fully described in Note 9, and borrowings of approximately $72.5 million under Holdings existing U.S. ABL Facility. The Terrys Tire Purchase Price is subject to certain post-closing adjustments, including but not limited to, working capital adjustments. Of the $363.4 million in cash consideration, $41.4 million is held in escrow pending the resolution of the post-closing adjustments and other escrow release conditions in accordance with the terms of the Stock Purchase Agreement and escrow agreement.
The acquisition of Terrys Tire was recorded using the acquisition method of accounting in accordance with current accounting guidance for business combinations and non-controlling interest. As of the date of these financial statements, the Company is in the process of finalizing intangible asset valuations as well as continuing to evaluate the initial purchase price allocation. Accordingly, management has used its best estimates in the allocation of the purchase price to assets acquired and liabilities assumed based on the estimated preliminary fair market value of such assets and liabilities at the date of acquisition. As additional information is obtained about these assets and liabilities within the measurement period, the Company expects to refine its estimates of fair value to allocate the purchase price more accurately. The preliminary allocation of the Terrys Tire Purchase Price is as follows:
In thousands |
||||
Cash |
$ | 7,238 | ||
Accounts receivable |
42,515 | |||
Inventory |
101,328 | |||
Assets held for sale |
3,321 | |||
Other current assets |
2,203 | |||
Deferred income taxes |
4,947 | |||
Property and equipment |
7,072 | |||
Intangible asset |
201,000 | |||
Other assets |
541 | |||
|
|
|||
Total assets acquired |
370,165 | |||
Accounts payable |
78,488 | |||
Accrued and other liabilities |
3,470 | |||
Liabilities held for sale |
436 | |||
|
|
|||
Total liabilities assumed |
82,394 | |||
Net assets acquired |
287,771 | |||
Goodwill |
90,280 | |||
|
|
|||
Purchase price |
$ | 378,051 | ||
|
|
The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $90.3 million. The premium in the purchase price paid for the acquisition of Terrys Tire primarily reflects the anticipated realization of operational and cost synergies.
9
Cash and cash equivalents, accounts receivable and accounts payable were stated at their historical carrying values, which approximate their fair value, given the short-term nature of these assets and liabilities. Inventory was recorded at fair value, based on computations which considered many factors including the estimated selling price of the inventory, the cost to dispose the inventory as well as the replacement cost of the inventory, where applicable.
The Company recorded a finite-lived customer list intangible asset based on its estimated fair value of $201.0 million. The estimated useful life of the customer list intangible asset is eighteen years based on the Companys internal estimates to be finalized when the third-party intangible asset valuations are completed.
As part of the acquisition of Terrys Tire, the Company acquired Terrys Tires commercial and retread businesses. As the Companys core business does not include commercial and retread operations, the Company decided that it would divest of these businesses. As it is managements intention to divest the commercial and retread businesses during fiscal 2014 and as all held for sale criteria has been met, the related assets and liabilities of the commercial and retread businesses are classified as held for sale within the accompanying condensed consolidated balance sheet. As part of the preliminary purchase price allocation, the estimated fair value of the assets held for sale was $3.3 million, including $2.5 million in current assets and net property and equipment of $0.8 million. The estimated fair value of the liabilities held for sale was $0.4 million of which the entire amount related to current liabilities. As additional information is obtained about these assets and liabilities within the measurement period, the Company expects to refine its estimate of the fair values related to these assets and liabilities.
Terrys Tire contributed net sales of approximately $3.9 million to the Company for the period from March 29, 2014 to April 5, 2014. Net income contributed by Terrys Tire since the acquisition date was immaterial.
On January 31, 2014, pursuant to an Agreement and Plan of Merger, dated January 24, 2014 (the Merger Agreement), among ATD Merger Sub II LLC (Merger Sub), an indirect wholly-owned subsidiary of Holdings, ATDI, Hercules Tire Holdings LLC, a Delaware limited liability company (Hercules Holdings), the equityholders of Hercules Holdings (each a Seller and, collectively the Sellers) and the Sellers Representative, Merger Sub merged with and into Hercules Holdings, with Hercules Holdings being the surviving entity (the Merger). As a result of the Merger, Hercules Holdings became an indirect 100% owned subsidiary of Holdings. Hercules Holdings owns all of the capital stock of The Hercules Tire & Rubber Company, a Connecticut corporation (Hercules). Hercules Holdings has no material assets or operations other than its ownership of Hercules. Hercules is engaged in the business of purchasing, marketing, distributing and selling after-market replacement tires for passenger cars, trucks, and certain off road vehicles to tire dealers, wholesale distributors, retail distributors and others in the United States, Canada and internationally. Hercules owned and operated 15 distribution centers in the United States, 6 distribution centers in Canada and one warehouse in northern China. Hercules also markets the Hercules brand, which is one of the most sought-after proprietary tire brands in the industry. The acquisition of Hercules will strengthen the Companys presence in major markets such as California, Texas and Florida in addition to increasing its presence in Canada. Additionally, Hercules strong logistics and sourcing capabilities, including a long-standing presence in China, will also allow the Company to capitalize on the growing import market, as well as, providing the ability to expand the international sales of the Hercules brand. Finally, this acquisition, will allow the Company to be a brand marketer of the Hercules brand which today has a 2% market share of the passenger and light truck market in North America and a 3% share of highway truck tires in North America.
The Merger closed for an aggregate purchase price of approximately $319.3 million (the Hercules Closing Purchase Price), consisting of net cash consideration of $310.4 million, contingent consideration of $3.5 million and non-cash consideration for debt assumed of $5.4 million. The Hercules Closing Purchase Price includes an estimate for initial working capital adjustments. The Merger Agreement provides for the payment of up to $6.5 million in additional consideration contingent upon the occurrence of certain post-closing events (to the extent payable, the Hercules Additional Purchase Price and, collectively with the Hercules Closing Purchase Price, the Hercules Purchase Price). The cash consideration paid for the Merger was funded by a combination of the issuance of additional Senior Subordinated Notes, as more fully described in Note 9, an equity contribution of $50.0 million from Holdings indirect parent, as more fully described in Note 14 and borrowings under Holdings credit agreement, as more fully described in Note 9. The Hercules Closing Purchase Price is subject to certain post-closing adjustments, including, but not limited to, working capital adjustments.
10
The Merger was recorded using the acquisition method of accounting in accordance with current accounting guidance for business combinations and non-controlling interest. As a result, the Hercules Closing Purchase Price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. The preliminary allocation of the Hercules Closing Purchase Price is as follows:
In thousands |
||||
Cash |
$ | 12,187 | ||
Accounts receivable |
61,610 | |||
Inventory |
156,652 | |||
Other current assets |
5,064 | |||
Property and equipment |
29,970 | |||
Intangible assets |
155,704 | |||
|
|
|||
Total assets acquired |
421,187 | |||
Accounts payable |
95,616 | |||
Accrued and other liabilities |
6,154 | |||
Deferred income taxes |
69,872 | |||
Other liabilities |
2,325 | |||
|
|
|||
Total liabilities assumed |
173,967 | |||
Net assets acquired |
247,220 | |||
Goodwill |
72,082 | |||
|
|
|||
Purchase price |
$ | 319,302 | ||
|
|
The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $72.1 million. The premium in the purchase price for the Merger primarily relates to growth opportunities associated with the Hercules brand and the anticipated realization of operational and cost synergies.
Cash and cash equivalents, accounts receivable and accounts payable were stated at their historical carrying values, which approximate their fair value, given the short-term nature of these assets and liabilities. Inventory was recorded at fair value, based on computations which considered many factors including the estimated selling price of the inventory, the cost to dispose the inventory as well as the replacement cost of the inventory, where applicable.
The Company recorded intangible assets based on their estimated fair value which consisted of the following:
In thousands |
Estimated Useful Life |
Estimated Fair Value |
||||
Customer list |
18 years | $ | 147,216 | |||
Tradenames |
15 years | 8,488 | ||||
|
|
|||||
Total |
$ | 155,704 | ||||
|
|
Hercules contributed net sales of approximately $84.4 million to the Company for the period from February 1, 2014 to April 5, 2014. Net loss contributed by Hercules since the acquisition date was approximately $13.9 million which included non-cash amortization of the inventory step-up of $19.0 million and non-cash amortization expense on acquired intangible assets of $2.6 million.
On January 17, 2014, TriCan Tire Distributors, Inc. (TriCan), an indirect 100% owned subsidiary of Holdings, entered into an Asset Purchase Agreement with Kipling Tire Co. LTD., a corporation governed by the laws of the Province of Ontario (Kipling), pursuant to which TriCan agreed to acquire the wholesale distribution business of Kipling. Kipling has operated as a retail-wholesale business since 1982. Kiplings wholesale business distributes tires from its Etobicoke facilities to approximately 400 retail customers in Southern Ontario. Kiplings retail operations were not acquired by TriCan and will continue to operate under its current ownership. This acquisition will further strengthen TriCans presence in the Southern Ontario region of Canada. The acquisition was completed on January 17, 2014 and was funded through the Companys Canadian ABL Facility. The Company does not believe the acquisition of Kipling is a material transaction, individually or when aggregated with the other non-material acquisitions discussed herein, subject to the disclosures and supplemental pro forma information required by ASC 805 Business Combinations. As a result, the information is not presented.
11
2013 Acquisitions
On December 13, 2013, TriCan entered into a Share Purchase Agreement with Wholesale Tire Distributors Inc., a corporation formed under the laws of the Province of Ontario (WTD), Allan Bishop, an individual resident in the Province of Ontario (Allan) and The Bishop Company Inc., a corporation formed under the laws of the Province of Ontario (BishopCo) (Allan and BishopCo each, a Seller and collectively, the Sellers), pursuant to which TriCan agreed to acquire from the Sellers all of the issued and outstanding shares of WTD. WTD owned and operated two distribution centers serving over 2,300 customers. The acquisition of WTD strengthened the Companys market presence in the Southern Ontario region of Canada. The acquisition was completed on December 13, 2013 and was funded through cash on hand. The Company does not believe the acquisition of WTD is a material transaction, individually or when aggregated with the other non-material acquisitions discussed herein, subject to the disclosures and supplemental pro forma information required by ASC 805 Business Combinations. As a result, the information is not presented.
The acquisition of WTD was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations and non-controlling interest. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. A majority of the net assets acquired relate to a customer list intangible asset, which had an acquisition date fair value of $4.4 million. The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $1.2 million. The premium in the purchase price paid for the acquisition of WTD reflects the anticipated realization of operational and cost synergies.
On August 30, 2013, the Company entered into a Stock Purchase Agreement with Tire Distributors, Inc. (TDI) to acquire 100% of the outstanding capital stock of TDI. TDI owned and operated one distribution center serving over 1,700 customers across Maryland and northeastern Virginia. The acquisition was completed on August 30, 2013 and was funded through the Companys ABL Facility. The Company does not believe the acquisition of TDI is a material transaction, individually or when aggregated with the other non-material acquisitions discussed herein, subject to the disclosures and supplemental pro forma information required by ASC 805 Business Combinations. As a result, the information is not presented.
The acquisition of TDI was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations and non-controlling interest. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. A majority of the net assets acquired relate to a customer list intangible asset, which had an acquisition date fair value of $3.4 million. The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $2.4 million. The premium in the purchase price paid for the acquisition of TDI reflects the anticipated realization of operational and cost synergies.
On March 22, 2013, TriCan and ATDI entered into a Share Purchase Agreement with Regional Tire Holdings Inc., a corporation formed under the laws of the Province of Ontario (Holdco), Regional Tire Distributors Inc. (RTD), a corporation formed under the laws of the Province of Ontario and a 100% owned subsidiary of Holdco, and the shareholders of Holdco, pursuant to which TriCan agreed to acquire from the shareholders of Holdco all of the issued and outstanding shares of Holdco for a purchase price of $62.5 million. Holdco has no significant assets or operations other than its ownership of RTD. The operations of RTD constitute the operations of Holdco. RTD is a wholesale distributor of tires, tire parts, tire accessories and related equipment in the Ontario and Atlantic provinces of Canada. The acquisition of RTD significantly expanded the Companys presence in the Ontario and Atlantic Provinces of Canada and complemented the Companys current operations in Canada.
The acquisition of RTD was completed on April 30, 2013 for aggregate cash consideration of approximately $64.9 million (the Adjusted Purchase Price) which includes initial working capital adjustments. The acquisition of RTD was funded by borrowings under the Companys ABL Facility and FILO Facility, as more fully described in Note 9. The Adjusted Purchase Price was subject to certain post-closing adjustments, including, but not limited to, the finalization of working capital adjustments. Of the $64.9 million Adjusted Purchase Price, $6.3 million is held in escrow pending the resolution of the post-closing adjustments and other escrow release conditions in accordance with the terms of the purchase agreement and escrow agreement. During third quarter 2013, the Company and the shareholders of Holdco agreed on the post-closing working capital adjustments in accordance with the purchase agreement. This adjustment increased the Adjusted Purchase Price by $1.0 million to $65.9 million with a corresponding increase to goodwill of $1.0 million.
12
The acquisition of RTD was recorded using the acquisition method of accounting in accordance with current accounting guidance for business combinations and non-controlling interest. As a result, the Adjusted Purchase Price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. The allocation of the Adjusted Purchase Price is as follows:
In thousands |
||||
Cash |
$ | 904 | ||
Accounts receivable |
10,093 | |||
Inventory |
21,685 | |||
Other current assets |
998 | |||
Property and equipment |
1,050 | |||
Intangible assets |
42,990 | |||
Other assets |
52 | |||
|
|
|||
Total assets acquired |
77,772 | |||
Debt |
| |||
Accounts payable |
7,817 | |||
Accrued and other liabilities |
12,740 | |||
Deferred income taxes |
11,692 | |||
|
|
|||
Total liabilities assumed |
32,249 | |||
Net assets acquired |
45,523 | |||
Goodwill |
20,375 | |||
|
|
|||
Purchase price |
$ | 65,898 | ||
|
|
The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $20.4 million. The premium in the purchase price paid for the acquisition of RTD primarily relates to growth opportunities from expanding the Companys distribution footprint into Eastern Canada and through operating synergies available via the consolidation of certain distribution centers in Eastern Canada.
Cash and cash equivalents, accounts receivable and accounts payable were stated at their historical carrying values, which approximate their fair value, given the short-term nature of these assets and liabilities. Inventory was recorded at fair value, based on computation which considered many factors including the estimated selling price of the inventory, the cost to dispose the inventory as well as the replacement cost of the inventory, where applicable.
The Company recorded intangible assets based on their estimated fair value which consisted of the following:
In thousands |
Estimated Useful Life |
Estimated Fair Value |
||||
Customer list |
16 years | $ | 40,720 | |||
Tradenames |
5 years | 1,900 | ||||
Favorable leases |
4 years | 370 | ||||
|
|
|||||
Total |
$ | 42,990 | ||||
|
|
The following unaudited pro forma supplementary data gives effect to the acquisitions of Hercules and Terrys Tire as if these transactions had occurred on December 30, 2012 (the first day of the Companys 2013 fiscal year) and gives effect to the acquisition of RTD as if this transaction had occurred on January 1, 2012 (the first day of the Companys 2012 fiscal year). The pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of the Companys results of operations had the Hercules, Terrys Tire and RTD acquisitions been consummated on the date assumed or of the Companys results of operations for any future date.
13
Pro Forma | ||||||||
In thousands |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
||||||
Net sales |
$ | 1,223,921 | $ | 1,127,059 | ||||
Net income (loss) |
(43,631 | ) | (40,261 | ) |
The pro forma supplementary data for the quarters ended April 5, 2014 and March 30, 2013 includes $7.4 million and $9.0 million, respectively, as an increase to historical amortization expense as a result of acquired intangible assets. In addition, the pro forma supplementary data for the quarters ended April 5, 2014 and March 30, 2013 includes $3.9 million and $9.5 million, respectively, as an increase to historical interest expense as a result of the issuance of the additional Senior Subordinated Notes and the new senior secured term loan facility, as more fully described in Note 9. For the quarter ended April 5, 2014, the Company has included a reduction in non-recurring historical transaction expenses of $32.2 million. These transaction expenses were incurred prior to the acquisition of Hercules and Terrys Tire and they are directly related to the acquisitions.
5. | Inventories: |
Inventories consist primarily of automotive tires, custom wheels and accessories and tire supplies and tools. Reported amounts are valued at the lower of cost, determined on the first-in, first-out (FIFO) method, or fair market value. The Company performs periodic assessments to determine the existence of obsolete, slow-moving and non-saleable inventories and records necessary provisions to reduce such inventories to net realizable value. A majority of the Companys tire vendors allow for the return of tire products, subject to certain limitations, specified in supply arrangements with the vendors. In addition, the Companys inventory is collateral under the ABL Facility and the FILO Facility. See Note 9 for further information.
As a result of the TriCan, RTD, TDI, WTD, Hercules and Terrys Tire acquisitions, the carrying value of the acquired inventory was increased by $6.3 million, $2.7 million, $0.2 million, $0.5 million, $19.0 million and $12.5 million, respectively, to adjust to estimated fair value in accordance with the accounting guidance for business combinations. The step-up in inventory value for each acquisition was amortized into cost of goods sold over the period of the Companys normal inventory turns, which approximates two months. Amortization of the inventory step-up included in cost of goods sold in the accompanying condensed consolidated statements of comprehensive income (loss) for the quarters ended April 5, 2014 and March 30, 2013 was $19.2 million and $2.2 million, respectively.
6. | Assets Held for Sale: |
In accordance with current accounting standards, the Company classifies assets as held for sale in the period in which all held for sale criteria is met. Assets held for sale are reported at the lower of their carrying amount or fair value less cost to sell and are no longer depreciated. During third quarter 2013, the Company classified a facility located in Georgia as held for sale. The facility was previously used as a distribution center within the Companys operations until its activities were relocated to an expanded facility. The Company is actively marketing this property and anticipates that it will be sold within a twelve-month period. As of April 5, 2014, the carrying value of the facility was $0.4 million.
As part of the Terrys Tire acquisition, the Company acquired Terrys Tires commercial and retread businesses. See Note 4 for additional information regarding this acquisition. As it is managements intention to divest the commercial and retread businesses during fiscal 2014 and as all held for sale criteria has been met, the related assets and liabilities of the commercial and retread businesses are classified as held for sale within the accompanying condensed consolidated balance sheet. As of April 5, 2014, the carrying value of the assets held for sale for these businesses was $3.3 million, including $2.5 million in current assets and net property and equipment of $0.8 million.
7. | Goodwill: |
The Company records as goodwill the excess of the purchase price over the fair value of the net assets acquired. Once the final valuation has been performed for each acquisition, adjustments may be recorded. Goodwill is tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset.
14
The changes in the carrying amount of goodwill are as follows:
In thousands |
||||
Balance, December 28, 2013 |
$ | 504,333 | ||
Purchase accounting adjustments |
128 | |||
Acquisitions |
162,362 | |||
Currency translation |
(1,876 | ) | ||
|
|
|||
Balance, April 5, 2014 |
$ | 664,947 | ||
|
|
At April 5, 2014, the Company has recorded goodwill of $664.9 million, of which approximately $115.9 million of net goodwill is deductible for income tax purposes in future periods. The balance primarily relates to the TPG Merger on May 28, 2010, in which $418.6 million was recorded as goodwill. The Company does not have any accumulated goodwill impairment losses.
On March 28, 2014, ATDI completed its acquisition of Terrys Tire pursuant to a Stock Purchase Agreement entered into on February 17, 2014. The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. As a result, the Company recorded $90.3 million as goodwill. See Note 4 for additional information.
On January 31, 2014, the Company completed its acquisition of Hercules pursuant to an Agreement and Plan of Merger dated January 24, 2014. The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. As a result, the Company recorded $72.1 million as goodwill. See Note 4 for additional information.
On December 13, 2013, TriCan entered into a share Purchase Agreement to acquire all of the issued and outstanding common shares of WTD. The acquisition was funded through cash on hand. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. During first quarter 2014, the Company finalized the post-closing working capital adjustments in accordance with the purchase agreement. This increased goodwill by $0.1 million to a total of $1.2 million at April 5, 2014. See Note 4 for additional information.
8. | Intangible Assets: |
Indefinite-lived intangible assets are tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset. All other intangible assets with finite lives are being amortized on a straight-line or accelerated basis over periods ranging from one to nineteen years.
The following table sets forth the gross amount and accumulated amortization of the Companys intangible assets at April 5, 2014 and March 30, 2013:
April 5, 2014 | December 28, 2013 | |||||||||||||||
In thousands |
Gross Amount |
Accumulated Amortization |
Gross Amount |
Accumulated Amortization |
||||||||||||
Customer lists |
$ | 1,027,448 | $ | 246,109 | $ | 677,062 | $ | 226,614 | ||||||||
Noncompete agreements |
12,285 | 7,217 | 12,007 | 6,400 | ||||||||||||
Favorable leases |
664 | 150 | 688 | 119 | ||||||||||||
Tradenames |
18,791 | 4,277 | 10,531 | 3,754 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total finite-lived intangible assets |
1,059,188 | 257,753 | 700,288 | 236,887 | ||||||||||||
Tradenames (indefinite-lived) |
249,893 | | 249,893 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total intangible assets |
$ | 1,309,081 | $ | 257,753 | $ | 950,181 | $ | 236,887 | ||||||||
|
|
|
|
|
|
|
|
At April 5, 2014, the Company had $1,051.3 million of intangible assets. The balance primarily relates to the TPG Merger on May 28, 2010, in which $781.3 million was recorded as intangible assets. As part of the preliminary purchase price allocation of Terrys Tire, the Company allocated $201.0 million to a finite-lived customer list intangible asset with a useful life of eighteen years. As part of the preliminary purchase price allocation of Hercules, the Company allocated $147.2 million to a finite-lived customer list intangible asset with a useful life of eighteen years and $8.5 million to a finite-lived tradename with a useful life of fifteen years. As part of the purchase price allocation of WTD, the Company allocated $4.4 million to a finite-lived customer list
15
intangible asset with a useful life of sixteen years. As part of the purchase price allocation of TDI, the Company allocated $3.4 million to a finite-lived customer list intangible asset with a useful life of sixteen years. As part of the purchase price allocation of RTD, the Company allocated $40.7 million to a finite-lived customer list intangible asset with a useful life of sixteen years, $1.9 million to a finite-lived tradename with a useful life of five years and $0.4 million to a finite-lived favorable leases intangible asset with a useful life of four years.
Intangible asset amortization expense was $21.3 million and $17.5 million for the quarters ended April 5, 2014 and March 30, 2013 respectively. Estimated amortization expense on existing intangible assets is expected to approximate $85.6 million for the remaining nine months of 2014 and approximately $116.6 million in 2015, $98.7 million in 2016, $84.5 million in 2017 and $71.6 million in 2018.
9. | Long-term Debt: |
The following table presents the Companys long-term debt at April 5, 2014 and at December 28, 2013:
In thousands |
April 5, 2014 |
December 28, 2013 |
||||||
U.S. ABL Facility |
$ | 595,964 | $ | 417,066 | ||||
Canadian ABL Facility |
42,136 | 36,424 | ||||||
U.S. FILO Facility |
74,111 | 51,863 | ||||||
Canadian FILO Facility |
8,501 | | ||||||
Term Loan |
299,252 | | ||||||
Senior Secured Notes |
248,330 | 248,219 | ||||||
Senior Subordinated Notes |
421,181 | 200,000 | ||||||
Capital lease obligations |
12,715 | 12,330 | ||||||
Other |
7,916 | 1,098 | ||||||
|
|
|
|
|||||
Total debt |
1,710,106 | 967,000 | ||||||
Less - Current maturities |
(5,502 | ) | (564 | ) | ||||
|
|
|
|
|||||
Long-term debt |
$ | 1,704,604 | $ | 966,436 | ||||
|
|
|
|
The fair value of the Senior Secured Notes was $264.4 million at April 5, 2014 and $265.0 million at December 28, 2013 and is based upon quoted market values (Level 1). The fair value of the Senior Subordinated Notes was $449.4 million at April 5, 2014 and $212.0 million at December 28, 2013 and is based upon quoted prices for similar liabilities (Level 2). Since the Term Loan was issued on March 28, 2014, the carrying value of the Term Loan of $299.3 million approximates the fair value as of April 5, 2014.
ABL Facility
On January 31, 2014, in connection with the Hercules acquisition, the Company entered into the Second Amendment to Sixth Amended and Restated Credit Agreement (Credit Agreement), which provides for (i) U.S. revolving credit commitments of $850.0 million (of which up to $50.0 million can be utilized in the form of commercial and standby letters of credit), subject to U.S. borrowing base availability (the U.S. ABL Facility) and (ii) Canadian revolving credit commitments of $125.0 million (of which up to $10.0 million can be utilized in the form of commercial and standby letters of credit), subject to Canadian borrowing base availability (the Canadian ABL Facility and, collectively with the U.S. ABL Facility, the ABL Facility). In addition, the Credit Agreement provides (i) the U.S. borrowers under the agreement with a first-in last-out facility (the U.S. FILO Facility) in the aggregate principal amount of up to $80.0 million, subject to a borrowing base specific thereto and (ii) the Canadian borrowers under the agreement with a first-in last-out facility (the Canadian FILO Facility and collectively with the U.S. FILO Facility, the FILO Facility) in an aggregate principal amount of up to $15.0 million, subject to a borrowing base specific thereto. The U.S. ABL Facility is available to ATDI, Am-Pac Tire Dist. Inc., Hercules and any other U.S. subsidiary that the Company designates in the future in accordance with the terms of the agreement. The Canadian ABL Facility is available to TriCan and any other Canadian subsidiaries that the Company designates in the future in accordance with the terms of the agreement. Provided that no default or event of default then exists or would arise therefrom, the Company has the option to request that the ABL Facility be increased by an amount not to exceed $175.0 million (up to $25.0 million of which may be allocated to the Canadian ABL Facility), subject to certain rights of the administrative agent, swingline lender and issuing banks providing commitments for such increase. The maturity date for the ABL Facility is November 16, 2017, provided that if, on March 1, 2017, either (i) more than $50.0 million in aggregate principal amount of ATDIs Senior Secured Notes remains outstanding or (ii) any principal amount of ATDIs Senior Secured Notes remains outstanding with a scheduled maturity date which is earlier than 91 days after November 16, 2017
16
and excess availability under the ABL Facility is less than 12.5% of the aggregate revolving commitments, then the maturity date will be March 1, 2017. The maturity date for the FILO Facility is January 31, 2017. During the quarter ended April 5, 2014, the Company paid $0.7 million in debt issuance costs related to the ABL Facility and FILO Facility.
As of April 5, 2014, the Company had $596.0 million outstanding under the U.S. ABL Facility. In addition, the Company had certain letters of credit outstanding in the aggregate amount of $8.4 million, leaving $209.9 million available for additional borrowings under the U.S. ABL Facility. The outstanding balance of the Canadian ABL Facility at April 5, 2014 was $42.1 million, leaving $38.0 million available for additional borrowings. As of April 5, 2014, the outstanding balance of the U.S. FILO Facility was $74.1 million and the outstanding balance of the Canadian FILO Facility was $8.5 million.
Borrowings under the U.S. ABL Facility bear interest at a rate per annum equal to, at the Companys option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 2.0% as of April 5, 2014 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its prime rate for commercial loans, (2) the federal funds effective rate plus 1⁄2 of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of April 5, 2014. The applicable margins under the U.S. ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
Borrowings under the Canadian ABL Facility bear interest at a rate per annum equal to either (a) a Canadian base rate determined by reference to the highest of (1) the base rate as published by Bank of America, N.A. (acting through its Canada branch) as its base rate, (2) the federal funds rate effective plus 1⁄2 of 1% per annum and (3) the one month-LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of April 5, 2014, (b) a Canadian prime rate determined by reference to the highest of (1) the prime rate as published by Bank of America, N.A. (acting through its Canada branch) as its prime rate, (2) the sum of 1⁄2 of 1% plus the Canadian overnight rate and (3) the sum of 1% plus the rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances as published by Reuters Monitor Money Rates Service for a 30 day interest period, plus an applicable margin of 1.0% as of April 5, 2014, (c) a rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances having an identical or comparable term as the proposed loan amount displayed and identified as such on the display referred to as the CDOR Page of Reuters Monitor Money Rates Service as at approximately 10:00 a.m. Toronto time on such day, plus an applicable margin of 2.0% as of April 5, 2014 or (d) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 2.0% as of April 5, 2014. The applicable margins under the Canadian ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
Borrowings under the U.S. FILO Facility bear interest at a rate per annum equal to, at the Companys option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 3.5% as of April 5, 2014 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its prime rate for commercial loans, (2) the federal funds effective rate plus 1⁄2 of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 2.5% as of April 5, 2014. The applicable margins under the U.S. FILO Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
Borrowings under the Canadian FILO Facility bear interest at a rate per annum equal to either (a) a Canadian base rate determined by reference to the highest of (1) the base rate as published by Bank of America, N.A. (acting through its Canada branch) as its base rate, (2) the federal funds rate effective plus 1⁄2 of 1% per annum and (3) the one month-LIBOR rate plus 1.0% per annum, plus an applicable margin of 2.5% as of April 5, 2014, (b) a Canadian prime rate determined by reference to the highest of (1) the prime rate as published by Bank of America, N.A. (acting through its Canada branch) as its prime rate, (2) the sum of 1⁄2 of 1% plus the Canadian overnight rate and (3) the sum of 1% plus the rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances as published by Reuters Monitor Money Rates Service for a 30 day interest period, plus an applicable margin of 2.5% as of April 5, 2014, (c) a rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances having an identical or comparable term as the proposed loan amount displayed and identified as such on the display referred to as the CDOR Page of Reuters Monitor Money Rates Service as at approximately 10:00 a.m. Toronto time on such day, plus an applicable margin of 3.5% as of April 5, 2014 or (d) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 3.5% as of April 5, 2014. The applicable margins under the Canadian FILO Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
The U.S. and Canadian borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:
| 85% of eligible accounts receivable of the U.S. or Canadian loan parties, as applicable; plus |
| The lesser of (a) 70% of the lesser of cost or market value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable and (b) 85% of the net orderly liquidation value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable; plus |
| The lesser of (a) 50% of the lower of cost or market value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable and (b) 85% of the net orderly liquidation value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable. |
17
The U.S. FILO and the Canadian FILO borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:
| 5% of eligible accounts receivable of the U.S. or Canadian loan parties, as applicable; plus |
| 10% of the net orderly liquidation value of the eligible tire and non-tire inventory of the U.S. or Canadian loan parties, as applicable. |
All obligations under the U.S. ABL Facility and the U.S. FILO Facility are unconditionally guaranteed by Holdings and substantially all of ATDIs existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp. The Canadian ABL Facility and the Canadian FILO Facility are unconditionally guaranteed by the U.S. loan parties, TriCan and any future, direct and indirect, wholly-owned, material restricted Canadian subsidiaries. Obligations under the U.S. ABL Facility and the U.S. FILO Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties, subject to certain exceptions. Obligations under the Canadian ABL Facility and the Canadian FILO Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties and the Canadian loan parties, subject to certain exceptions.
The ABL Facility and FILO Facility contain customary covenants, including covenants that restricts the Companys ability to incur additional debt, grant liens, enter into guarantees, enter into certain mergers, make certain loans and investments, dispose of assets, prepay certain debt, declare dividends, modify certain material agreements, enter into transactions with affiliates or change the Companys fiscal year. If the amount available for additional borrowings under the ABL Facility is less than the greater of (a) 10.0% of the lesser of (x) the aggregate commitments under the ABL Facility and (y) the aggregate borrowing base and (b) $25.0 million, then the Company would be subject to an additional covenant requiring them to meet a fixed charge coverage ratio of 1.0 to 1.0. As of April 5, 2014, the Companys additional borrowing availability under the ABL Facility was above the required amount and the Company was therefore not subject to the additional covenants.
Senior Secured Term Loan
In connection with the acquisition of Terrys Tire, on March 28, 2014, ATDI entered into a credit agreement that provided for a senior secured term loan facility in the aggregate principal amount of $300.0 million (the Term Loan). The Term Loan was issued at a discount of 0.25% which, combined with certain debt issuance costs paid at closing, resulted in net proceeds of approximately $290.9 million. The Term Loan will accrete based on an effective interest rate of 6% to an aggregate accreted value of $300.0 million, the full principal amount at maturity. The net proceeds from the Term Loan were used to finance a portion of the Terrys Tire Purchase Price. The maturity date for the Term Loan is June 1, 2018. During the quarter ended April 5, 2014, the Company paid $9.4 million in debt issuance cost related to the Term Loan.
Borrowings under the Term Loan bear interest at a rate per annum equal to, at the Companys option, initially, either (a) a Eurodollar rate determined by reference to LIBOR, plus an applicable margin of 4.75% at April 5, 2014 or (b) a base rate determined by reference to the highest of (1) the federal funds rate plus 1⁄2 of 1%, (2) the prime commercial lending rate published by the Bank of America, N.A. as its prime rate for commercial loans and (3) the one month Eurodollar rate plus 1.0%, plus an applicable margin of 3.75% as of April 5, 2014. The Eurodollar rate is subject to an interest rate floor of 1.0%. The applicable margins under the Term Loan are subject to a step down based on a consolidated net leverage ratio, as defined in the agreement.
All obligations under the Term Loan are unconditionally guaranteed by Holdings and, subject to certain customary exceptions, all of ATDIs existing and future, direct and indirect, wholly-owned domestic material subsidiaries. Obligations under the Term Loan are secured by a first-priority lien on substantially all property, assets and capital stock of ATDI except accounts receivable, inventory and related intangible assets and a second-priority lien on all accounts receivable and related intangible assets.
The Term Loan contains customary covenants, including covenants that restrict the Companys ability to incur additional debt, create liens, enter into guarantees, enter into certain mergers, make certain loans and investments, dispose of assets, prepay certain debt, declare dividends, modify certain material agreements, enter into transactions with affiliates, change the nature of the Companys business or change the Companys fiscal year.
Subject to certain exceptions, the Company is required to repay the Term Loan in certain circumstances, including with 50% (which percentage will be reduced to 25% and 0%, as applicable, subject to attaining certain senior secured net leverage ratios) of its annual excess cash flow, as defined in the Term Loan agreement. The Term Loan also contains repayments provisions related to non-ordinary course asset or property sales when certain conditions are met, and related to the incurrence of debt that is not permitted under the agreement.
18
Senior Secured Notes
On May 28, 2010, ATDI issued Senior Secured Notes (Senior Secured Notes) due June 1, 2017 in an aggregate principal amount at maturity of $250.0 million. The Senior Secured Notes were issued at a discount from their principal amount at maturity and generated net proceeds of approximately $240.7 million after debt issuance costs (which represents a non-cash financing activity of $9.3 million). The Senior Secured Notes will accrete based on an effective interest rate of 10% to an aggregate accreted value of $250.0 million, the full principal amount at maturity. The Senior Secured Notes bear interest at a fixed rate of 9.75% per annum. Interest on the Senior Secured Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010. The Senior Secured Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 107.313% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 104.875% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015, 102.438% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016 and 100.0% of the principal amount if the redemption date occurs between June 1, 2016 and May 31, 2017.
The Senior Secured Notes are unconditionally guaranteed by Holdings and substantially all of ATDIs existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp, subject to certain exceptions. The Senior Secured Notes are also collateralized by a second-priority lien on accounts receivable and related assets and a first-priority lien on substantially all other assets (other than inventory), in each case of Holdings, ATDI and the guarantor subsidiaries, subject to certain exceptions.
The indenture governing the Senior Secured Notes contains covenants that, among other things, limits ATDIs ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDIs or repurchase or redeem ATDIs capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDIs subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens; consolidate, merge or sell all or substantially all of ATDIs assets; enter into certain transactions with ATDIs affiliates; and designate ATDIs subsidiaries as unrestricted subsidiaries.
Senior Subordinated Notes
On May 28, 2010, ATDI issued $200.0 million in aggregate principal amount of its 11.50% Senior Subordinated Notes due 2018 (the Initial Subordinated Notes). Interest on the Initial Subordinated Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010.
In connection with the consummation of the Hercules acquisition, on January 31, 2014, ATDI completed the sale to certain purchasers of an additional $225.0 million in aggregate principal amount of its 11.50% Senior Subordinated Notes due 2018 (the Additional Subordinated Notes and, collectively with the Initial Subordinated Notes, the Senior Subordinated Notes). The Additional Subordinated Notes were issued at a discount from their principal amount at maturity and generated net proceeds of approximately $221.1 million. The Additional Subordinated Notes will accrete based on an effective interest rate of 12% to an aggregate accreted value of $225.0 million, the full principal amount at maturity. During the quarter ended April 5, 2014, the Company paid $1.2 million in debt issuance cost related to the Additional Subordinated Notes.
The Additional Subordinated Notes have identical terms to the Initial Subordinated Notes except the Additional Subordinated Notes will accrue interest from January 31, 2014. The Additional Subordinated Notes and the Initial Subordinated Notes are treated as a single class of securities for all purposes under the indenture. The Senior Subordinated Notes will mature on June 1, 2018.
The Senior Subordinated Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 104.0% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 102.0% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015 and 100.0% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016.
The Senior Subordinated Notes are unconditionally guaranteed by Holdings and substantially all of ATDIs existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp, subject to certain exceptions.
The indenture governing the Senior Subordinated Notes contains covenants that, among other things, limits ATDIs ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDIs or repurchase or redeem ATDIs capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDIs subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens without securing the Senior Subordinated Notes; consolidate, merge or sell all or substantially all of ATDIs assets; enter into certain transactions with ATDIs affiliates; and designate ATDIs subsidiaries as unrestricted subsidiaries.
19
10. | Derivative Instruments: |
In the normal course of business, the Company is exposed to the risk associated with exposure to fluctuations in interest rates on our variable rate debt. These fluctuations can increase the cost of financing, investing and operating the business. The Company has used derivative financial instruments to help manage this risk and reduce the impacts of these exposures and not for trading or other speculative purposes. All derivatives are recognized on the condensed consolidated balance sheet at their fair value as either assets or liabilities. Changes in the fair value of contracts that qualify for hedge accounting treatment are recorded in accumulated other comprehensive income (loss), net of taxes, and are recognized in the statement of comprehensive income (loss) at the time earnings are affected by the hedged transaction. For other derivatives, changes in the fair value of the contract are recognized immediately in net income (loss) in the statement of comprehensive income (loss).
On September 4, 2013, the Company entered into a spot interest rate swap and two forward-starting interest rate swaps (collectively the 3Q 2013 Swaps) each of which are used to hedge a portion of the Companys exposure to changes in its variable interest rate debt. The spot interest rate swap in place covers a notional amount of $100.0 million at a fixed interest rate of 1.145% and expires in September 2016. The forward-starting interest rate swaps in place cover an aggregate notional amount of $100.0 million, of which $50.0 million becomes effective in September 2014 at a fixed interest rate of 1.464% and will expire in September 2016 and $50.0 million becomes effective in September 2015 at a fixed interest rate of 1.942% and will expire in September 2016. The counterparty to each swap is a major financial institution. The 3Q 2013 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in net income (loss) in the condensed consolidated statement of comprehensive income (loss).
On August 1, 2012, the Company entered into two interest rate swap agreements (3Q 2012 Swaps) used to hedge a portion of the Companys exposure to changes in its variable interest rate debt. The swaps in place cover an aggregate notional amount of $100.0 million, with each $50.0 million contract having a fixed rate of 0.655% and expiring in June 2016. The counterparty to each swap is a major financial institution. The 3Q 2012 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in net income (loss) in the condensed consolidated statement of comprehensive income (loss).
On September 23, 2011, the Company entered into two interest rate swap agreements (3Q 2011 Swaps) used to hedge a portion of the Companys exposure to changes in its variable interest rate debt. The swaps in place cover an aggregate notional amount of $100.0 million, of which $50.0 million is at a fixed rate of 0.74% and will expire in September 2014 and $50.0 million is at a fixed rate of 1.0% and will expire in September 2015. The counterparty to each swap is a major financial institution. The 3Q 2011 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in net income (loss) in the condensed consolidated statement of comprehensive income (loss).
On February 24, 2011, the Company entered into two interest rate swap agreements (1Q 2011 Swaps) used to hedge a portion of the Companys exposure to changes in its variable interest rate debt. The swaps in place covered an aggregate notional amount of $75.0 million, of which $25.0 million was at a fixed interest rate of 0.585% and expired in February 2012. The remaining swap covered an aggregate notional amount of $50.0 million at a fixed interest rate of 1.105% and expired in February 2013. The counterparty to each swap was a major financial institution. Neither swap met the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract were recognized in net income (loss) in the condensed consolidated statement of comprehensive income (loss).
The following tables present the fair values of the Companys derivative instruments included within the condensed consolidated balance sheets as of April 5, 2014 and December 28, 2013:
Liability Derivatives | ||||||||||
In thousands |
Balance Sheet Location |
April 5, 2014 |
December 28, 2013 |
|||||||
Derivatives not designated as hedges: |
||||||||||
3Q 2011 swaps - $100 million notional |
Accrued expenses | $ | 705 | $ | 792 | |||||
3Q 2012 swaps - $100 million notional |
Accrued expenses | 328 | 280 | |||||||
3Q 2013 swaps - $200 million notional |
Accrued expenses | 1,915 | 1,880 | |||||||
|
|
|
|
|||||||
Total |
$ | 2,948 | $ | 2,952 | ||||||
|
|
|
|
20
The pre-tax effect of the Companys derivative instruments on the condensed consolidated statement of comprehensive income (loss) was as follows:
(Gain) Loss Recognized | ||||||||||
In thousands |
Location of (Gain) Loss Recognized |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
|||||||
Derivatives not designated as hedges: |
||||||||||
1Q 2011 swap - $50 million notional |
Interest Expense | $ | | $ | (149 | ) | ||||
3Q 2011 swaps - $100 million notional |
Interest Expense | (86 | ) | (156 | ) | |||||
3Q 2012 swaps - $100 million notional |
Interest Expense | 47 | (131 | ) | ||||||
3Q 2013 swaps - $200 million notional |
Interest Expense | 35 | | |||||||
|
|
|
|
|||||||
Total |
$ | (4 | ) | $ | (436 | ) | ||||
|
|
|
|
11. | Fair Value of Financial Instruments: |
The accounting standard for fair value measurements establishes a framework for measuring fair value that is based on the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy is comprised of three levels that are described below:
| Level 1 Inputs Inputs based on quoted prices in active markets for identical assets or liabilities. |
| Level 2 Inputs Inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. |
| Level 3 Inputs Unobservable inputs based on little or no market activity and that are significant to the fair value of the assets and liabilities, therefore requiring an entity to develop its own assumptions. |
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following table presents the fair value and hierarchy levels for the Companys assets and liabilities, which are measured at fair value on a recurring basis as of April 5, 2014:
Fair Value Measurements | ||||||||||||||||
In thousands |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: |
||||||||||||||||
Benefit trust assets |
$ | 3,359 | $ | 3,359 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 3,359 | $ | 3,359 | $ | | $ | | ||||||||
Liabilities: |
||||||||||||||||
Contingent consideration |
$ | 16,000 | $ | | $ | | $ | 16,000 | ||||||||
Derivative instruments |
2,948 | | 2,948 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 18,948 | $ | | $ | 2,948 | $ | 16,000 | ||||||||
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|
|
|
|
|
|
ASC 820 Fair Value Measurements and Disclosures defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines fair value of its financial assets and liabilities using the following methodologies:
| Benefit trust assets These assets include money market and mutual funds that are the underlying for deferred compensation plan assets, held in a rabbi trust. The fair value of the assets is based on observable market prices quoted in readily accessible and observable markets. |
21
| Contingent consideration As part of the preliminary purchase price allocation of Terrys Tire and Hercules, the Company recorded $12.5 million and $3.5 million, respectively, in contingent consideration. The fair value was estimated using a discounted cash flow technique with significant inputs that are not observable, including discount rates and probability-weighted cash flows and represents managements best estimate of the amounts to be paid, however, the Company is in the process of obtaining third-party appraisals of the fair value of the acquired assets and liabilities and will continue to evaluate amounts recorded until the appraisals are finalized. The contingent consideration includes $12.3 million related to the retention of certain key members of management as employees of the Company and $3.7 million related to securing the rights to continue to distribute certain tire brands previously distributed by Terrys Tire and Hercules. The Company believes the probable outcome could range from approximately $8.0 million to $16.0 million. The recorded contingent consideration is included in Accrued Expenses in the condensed consolidated balance sheet as of April 5, 2014. |
| Derivative instruments These instruments consist of interest rate swaps. The fair value is based upon quoted prices for similar instruments from a financial institution that is counterparty to the transaction. |
The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to the short-term nature of these instruments. The methodologies used by the Company to determine the fair value of its financial assets and liabilities at April 5, 2014 are the same as those used at December 28, 2013. As a result, there have been no transfers between Level 1 and Level 2 categories.
12. | Stock-Based Compensation: |
The Company accounts for stock-based compensation awards in accordance with ASC 718 Compensation, which requires a fair-value based method for measuring the value of stock-based compensation. Fair value is measured once at the date of grant and is not adjusted for subsequent changes. The Companys stock-based compensation plans include programs for stock options and restricted stock units.
Stock Options
In August 2010, the Companys indirect parent company adopted a Management Equity Incentive Plan (the 2010 Plan), pursuant to which the indirect parent company will grant options to selected employees and directors of the Company. The 2010 Plan, which includes both time-based and performance-based awards, provides that a maximum of 52.1 million shares of common stock of the indirect parent company are available for grant. As of April 5, 2014, the Company has 2.5 million shares available for future incentive awards. See Note 16 regarding a recent amendment to the 2010 Plan and the issuance of stock options subsequent to the quarter ended April 5, 2014.
Changes in options outstanding under the 2010 Plan are as follows:
Number of Shares |
Weighted Average Exercise Price |
|||||||
Outstanding - December 28, 2013 |
49,516,503 | $ | 1.02 | |||||
Granted |
| | ||||||
Exercised |
| | ||||||
Cancelled |
| | ||||||
|
|
|
|
|||||
Outstanding - April 5, 2014 |
49,516,503 | $ | 1.02 | |||||
|
|
|
|
|||||
Exercisable - April 5, 2014 |
27,861,510 | $ | 1.01 | |||||
|
|
|
|
Options granted under the 2010 Plan expire no later than 10 years from the date of grant and vest based on the passage of time and/or the achievement of certain performance targets in equal installments over three or five years. The weighted-average remaining contractual term for options outstanding and exercisable at April 5, 2014 was 6.7 years and 6.6 years, respectively. The fair value of each of the Companys time-based stock option awards is expensed on a straight-line basis over the requisite service period, which is generally the three or five-year vesting period of the options. However, for options granted with performance target requirements, compensation expense is recognized when it is probable that both the performance target will be achieved and the requisite service period is satisfied. At April 5, 2014, unrecognized compensation expense related to non-vested options granted under the 2010 Plan totaled $7.0 million and the weighted-average period over which this expense will be recognized is 1.1 years.
22
No stock options were granted during the quarter ended April 5, 2014. The weighted average fair value of stock options granted during the quarter ended March 30, 2013 was $0.54 using the Black-Scholes option pricing model. The following weighted average assumptions were used:
Quarter Ended March 30, 2013 |
||||
Risk-free interest rate |
1.38 | % | ||
Dividend yield |
| |||
Expected life |
6.0 years | |||
Volatility |
45.39 | % |
As the Company does not have sufficient historical volatility data for the Companys own common stock, the stock price volatility utilized in the fair value calculation is based on the Companys peer group in the industry in which it does business. The risk-free interest rate is based on the yield-curve of a zero-coupon U.S. Treasury bond on the date the award is granted with a maturity equal to the expected term of the award. Because the Company does not have relevant data available regarding the expected life of the award, the expected life is derived from the Simplified Method as allowed under SAB Topic 14.
Restricted Stock Units (RSUs)
In October 2010, the Companys indirect parent company adopted the Non-Employee Director Restricted Stock Plan (the 2010 RSU Plan), pursuant to which the indirect parent company will grant restricted stock units to non-employee directors of the Company. Upon vesting, these awards entitle the holder to receive one share of common stock for each restricted stock unit granted. The 2010 RSU Plan provides that a maximum of 0.8 million shares of common stock of the indirect parent may be granted to non-employee directors of the Company, of which 0.3 million remain available at April 5, 2014 for future incentive awards. See Note 16 regarding the issuance of RSUs subsequent to the quarter ended April 5, 2014.
The following table summarizes RSU activity under the 2010 RSU Plan for the three months ended April 5, 2014:
Number of Shares |
Weighted Average Exercise Price |
|||||||
Outstanding and unvested at December 28, 2013 |
87,719 | $ | 1.14 | |||||
Granted |
| | ||||||
Vested |
(87,719 | ) | 1.14 | |||||
Cancelled |
| | ||||||
|
|
|
|
|||||
Outstanding and unvested at April 5, 2014 |
| $ | | |||||
|
|
|
|
The fair value of each of the RSU awards is measured as the grant-date price of the common stock and is expensed on a straight-line basis over the requisite service period, which is generally the two-year vesting period. At April 5, 2014, all RSUs granted under the 2010 RSU Plan are fully vested and accordingly, the Company has recognized all compensation expense related these RSUs.
Compensation Expense
Stock-based compensation expense is included in selling, general and administrative expenses within the condensed consolidated statement of comprehensive income (loss). The amount of compensation expense recognized during a period is based on the portion of the granted awards that are expected to vest. Ultimately, the total expense recognized over the vesting period will equal the fair value of the awards as of the grant date that actually vest. The following table summarizes the compensation expense recognized:
In thousands |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
||||||
Stock Options |
$ | 567 | $ | 626 | ||||
Restricted Stock Units |
| 42 | ||||||
|
|
|
|
|||||
Total |
$ | 567 | $ | 668 | ||||
|
|
|
|
23
13. | Income Taxes: |
The tax provision for the quarter ended April 5, 2014, was calculated on a national jurisdiction basis. The Company accounts for its provision for income taxes in accordance with ASC 740 Income Taxes, which requires an estimate of the annual effective tax rate for the full year to be applied to the respective interim period. However, the authoritative guidance allows the use of the discrete method when, in certain situations, the actual interim period effective tax rate provides a better estimate of the income tax provision. For the quarter ended April 5, 2014, the discrete method was used to calculate the Companys U.S. and Canadian interim tax expense as management determined that it provided a more reliable estimate of year-to-date income tax expense.
Based on the reported loss before income taxes for the quarter ended April 5, 2014, the Company had an income tax benefit of $16.6 million, consisting of a $14.3 million U.S. tax benefit and a $2.3 million foreign tax benefit, and an effective tax benefit rate under the discrete method of 32.8%. For the quarter ended March 30, 2013, the Company had an income tax benefit of $7.6 million, consisting of a $6.4 million U.S. tax benefit and a $1.2 million foreign tax benefit, and an effective tax benefit rate of 31.9%. The effective rate of the year-to-date tax benefit is lower than the statutory income tax rate primarily due to earnings in a foreign jurisdiction taxed at rates lower than the statutory U.S. federal rate which lowered the effective tax rate by 1.5%.
At April 5, 2014, the Company has a net deferred tax liability of $311.1 million, of which, $17.3 million was recorded as a current deferred tax asset and $328.4 million was recorded as a non-current deferred tax liability. The net deferred tax liability primarily relates to the expected future tax liability associated with the non-deductible, identified, intangible assets that were recorded during the TPG Merger, assuming an effective tax rate of 39.6%. It is the Companys intention to indefinitely reinvest all undistributed earnings of non-U.S. subsidiaries.
At April 5, 2014, the Company had unrecognized tax benefits of $1.1 million, of which $0.4 million is included within accrued expenses and $0.7 million is included within other liabilities within the accompanying condensed consolidated balance sheet. The total amount of unrecognized tax benefits that, if recognized, would affect the Companys effective tax rate is $0.1 million as of April 5, 2014. In addition, $1.0 million is related to temporary timing differences. During the next 12 months, management does not believe that it is reasonably possible that any of the unrecognized tax benefits will be recognized.
While the Company believes that it has adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than the Companys accrued position. Accordingly, additional provisions of federal and state-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved. The Company files federal income tax returns, as well as multiple state jurisdiction tax returns. The tax years 2010 2012 remain open to examination by the Internal Revenue Service. The tax years 2009 2012 remain open to examination by other major taxing jurisdictions to which the Company is subject (primarily Canada and other state and local jurisdictions).
In September 2013, the Internal Revenue Service released final Tangible Property Regulations (the Final Regulations). The Final Regulations provide guidance on applying Section 263(a) of the Code to amounts paid to acquire, produce or improve tangible property, as well as rules for materials and supplies (Code Section 162). These regulations contain certain changes from the temporary and proposed tangible property regulations that were issued on December 27, 2011. The Final Regulations are generally effective for taxable years beginning on or after January 1, 2014. During 2012, the Company filed a change in tax methodology related to a section of the Final Regulations, specifically the methodology for repairs and maintenance deductions. The Company does not expect any additional adjustments related to the Final Regulations.
14. | Stockholders Equity: |
On January 31, 2014, TPG and certain co-investors contributed $50.0 million through the purchase of 33.3 million shares of common stock in Holdings indirect parent company, Accelerate Parent Corp. The proceeds from this equity contribution were used to fund a portion of the Hercules Closing Purchase Price. Accordingly, the Company recorded the basis in these shares in additional paid-in capital.
24
15. | Commitments and Contingencies: |
The Company is involved from time to time in various lawsuits, including class action lawsuits as well as various audits and reviews regarding its federal, state and local tax filings, arising out of the ordinary conduct of its business. Management does not expect that any of these matters will have a material adverse effect on the Companys business or financial condition. As to tax filings, the Company believes that the various tax filings have been made in a timely fashion and in accordance with applicable federal, state and local tax code requirements. Additionally, the Company believes that it has adequately provided for any reasonably foreseeable resolution of any tax disputes, but will adjust its reserves if events so dictate in accordance with FASB authoritative guidance. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in accordance with the accounting standards for income taxes.
Guaranteed Lease Obligations
The Company remains liable as a guarantor on certain leases related to the Winston Tire Company, which was sold in 2001. As of April 5, 2014, the Companys total obligations are $1.8 million extending over five years. However, the Company has secured assignments or sublease agreements for the vast majority of these commitments with contractual assigned or subleased rentals of $1.6 million. A provision has been made for the net present value of the estimated shortfall.
16. | Subsequent Event: |
On April 28, 2014, the board of directors of the Companys indirect parent, Accelerate Parent Corp., amended the Management Equity Incentive Plan, or the 2010 Plan, to increase the maximum number of shares of common stock of the indirect parent company for which stock options may be granted under the 2010 Plan from 52.1 million to 54.4 million. In addition to the increase in the maximum number of shares, on April 28, 2014 the board of directors of Accelerate Parent Corp. approved the issuance of stock options to certain members of management and the issuance of restricted stock units to the non-employee directors of the Company. The approved stock options are for the purchase of up to 4.5 million shares of common stock, have an exercise price of $1.50 per share and vest over a two-year vesting period. The approved restricted stock units are for the issuance of up to 0.1 million shares of common stock, have a grant date fair value of $1.50 per share and vest over a two-year vesting period.
17. | Subsidiary Guarantor Financial Information: |
ATDI is the issuer of $250.0 million in aggregate principal amount of Senior Secured Notes and $425.0 million in aggregate principal amount of Senior Subordinated Notes. The Senior Secured Notes and the Senior Subordinated Notes (collectively, the Notes) are fully and unconditionally guaranteed, jointly and severally, by Holdings, Am-Pac, Tire Wholesalers, Inc. (Tire Wholesalers), Terrys Tire and by the U.S. operations of Hercules. ATDI is a direct 100% owned subsidiary of Holdings and Am-Pac, Tire Wholesales, Terrys Tire and Hercules are indirect 100% owned subsidiaries of Holdings. None of the Companys other subsidiaries guarantees the Notes. The guarantees can be released in certain customary circumstances.
In accordance with Rule 3-10 of Regulation S-X, the following presents condensed consolidating financial information for:
| Holdings, under the column heading Parent Company; |
| ATDI, under the column heading Subsidiary Issuer; |
| Am-Pac, Tire Wholesalers, Terrys Tire and Hercules U.S. subsidiary, on a combined basis, under the column heading Guarantor Subsidiaries; and |
| The Companys other subsidiaries, on a combined basis, under the column heading Non-Guarantor Subsidiaries; |
| Consolidating entries and eliminations, under the column heading Eliminations; and |
| Holdings, ATDI and their subsidiaries on a consolidated basis, under the column heading Consolidated. |
At the beginning of fiscal 2014, the Company merged a subsidiary that previously was a non-guarantor of the Notes, Tire Distributors, Inc., into ATDI. As a result of this merger, the consolidating balance sheet as of December 28, 2013, the consolidating statement of comprehensive income (loss) for the quarter ended March 30, 2013 and the consolidating statement of cash flow for the quarter ended March 30, 2013 have been retroactively adjusted to reflect the post-merger legal entity structure. Terrys Tire and Hercules U.S. subsidiary became guarantors of the Notes in the first quarter of 2014.
25
The condensed consolidating financial information for the Company is as follows:
As of April 5, 2014 | ||||||||||||||||||||||||
In thousands |
Parent Company |
Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 13,278 | $ | 19,535 | $ | 5,011 | $ | | $ | 37,824 | ||||||||||||
Accounts receivable, net |
| 306,115 | 94,055 | 39,959 | | 440,129 | ||||||||||||||||||
Inventories |
| 726,359 | 195,598 | 122,807 | | 1,044,764 | ||||||||||||||||||
Assets held for sale |
| 405 | 2,166 | 1,155 | | 3,726 | ||||||||||||||||||
Income tax receivable |
| 593 | 441 | 2,444 | | 3,478 | ||||||||||||||||||
Intercompany receivables |
95,051 | | 68,766 | | (163,817 | ) | | |||||||||||||||||
Other current assets |
| 26,920 | 13,751 | 4,859 | | 45,530 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
95,051 | 1,073,670 | 394,312 | 176,235 | (163,817 | ) | 1,575,451 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
| 145,779 | 35,018 | 9,990 | | 190,787 | ||||||||||||||||||
Goodwill and other intangible assets, net |
418,592 | 654,797 | 540,396 | 102,149 | 341 | 1,716,275 | ||||||||||||||||||
Investment in subsidiaries |
190,625 | 858,343 | (123 | ) | | (1,048,845 | ) | | ||||||||||||||||
Other assets |
| 51,346 | 1,420 | 940 | (300 | ) | 53,406 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 704,268 | $ | 2,783,935 | $ | 971,023 | $ | 289,314 | $ | (1,212,621 | ) | $ | 3,535,919 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Stockholders Equity | ||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | 506,432 | $ | 145,583 | $ | 42,044 | $ | | $ | 694,059 | ||||||||||||
Accrued expenses |
| 57,205 | 11,761 | 9,878 | | 78,844 | ||||||||||||||||||
Liabilities held for sale |
| | 126 | 310 | | 436 | ||||||||||||||||||
Current maturities of long-term debt |
| 3,567 | 1,935 | | | 5,502 | ||||||||||||||||||
Intercompany payables |
| 122,536 | | 41,240 | (163,776 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
| 689,740 | 159,405 | 93,472 | (163,776 | ) | 778,841 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt |
| 1,648,516 | 5,451 | 50,637 | | 1,704,604 | ||||||||||||||||||
Deferred income taxes |
| 241,789 | 65,032 | 21,535 | | 328,356 | ||||||||||||||||||
Other liabilities |
| 13,265 | 1,995 | 4,590 | | 19,850 | ||||||||||||||||||
Stockholders equity: |
||||||||||||||||||||||||
Intercompany investment |
| 280,622 | 754,696 | 160,253 | (1,195,571 | ) | | |||||||||||||||||
Common stock |
| | | | | | ||||||||||||||||||
Additional paid-in capital |
809,539 | 15,274 | | | (15,274 | ) | 809,539 | |||||||||||||||||
Accumulated earnings (deficit) |
(90,942 | ) | (90,942 | ) | (15,557 | ) | (26,458 | ) | 132,957 | (90,942 | ) | |||||||||||||
Accumulated other comprehensive income (loss) |
(14,329 | ) | (14,329 | ) | 1 | (14,715 | ) | 29,043 | (14,329 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total stockholders equity |
704,268 | 190,625 | 739,140 | 119,080 | (1,048,845 | ) | 704,268 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and stockholders equity |
$ | 704,268 | $ | 2,783,935 | $ | 971,023 | $ | 289,314 | $ | (1,212,621 | ) | $ | 3,535,919 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
26
The condensed consolidating financial information for the Company is as follows:
As of December 28, 2013 | ||||||||||||||||||||||||
In thousands |
Parent Company |
Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 22,352 | $ | | $ | 13,408 | $ | | $ | 35,760 | ||||||||||||
Accounts receivable, net |
| 265,551 | | 39,696 | | 305,247 | ||||||||||||||||||
Inventories |
| 714,235 | | 58,498 | | 772,733 | ||||||||||||||||||
Assets held for sale |
| 910 | | | | 910 | ||||||||||||||||||
Income tax receivable |
| 369 | | | | 369 | ||||||||||||||||||
Intercompany receivables |
45,052 | | 60,188 | 12,086 | (117,326 | ) | | |||||||||||||||||
Other current assets |
| 24,495 | 4,877 | 6,031 | | 35,403 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
45,052 | 1,027,912 | 65,065 | 129,719 | (117,326 | ) | 1,150,422 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Property and equipment, net |
| 140,712 | 343 | 6,801 | | 147,856 | ||||||||||||||||||
Goodwill and other intangible assets, net |
418,592 | 667,996 | 1,450 | 129,589 | | 1,217,627 | ||||||||||||||||||
Investment in subsidiaries |
229,330 | 196,624 | | | (425,954 | ) | | |||||||||||||||||
Other assets |
| 42,468 | 308 | 645 | | 43,421 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 692,974 | $ | 2,075,712 | $ | 67,166 | $ | 266,754 | $ | (543,280 | ) | $ | 2,559,326 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Stockholders Equity | ||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | 527,080 | $ | 2,255 | $ | 34,356 | $ | | $ | 563,691 | ||||||||||||
Accrued expenses |
| 43,375 | 48 | 4,300 | | 47,723 | ||||||||||||||||||
Current maturities of long-term debt |
| 558 | 6 | | | 564 | ||||||||||||||||||
Intercompany payables |
| 85,172 | 1,110 | 31,044 | (117,326 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
| 656,185 | 3,419 | 69,700 | (117,326 | ) | 611,978 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt |
| 930,012 | 3 | 36,421 | | 966,436 | ||||||||||||||||||
Deferred income taxes |
| 246,897 | 587 | 23,092 | | 270,576 | ||||||||||||||||||
Other liabilities |
| 13,288 | 18 | 4,056 | | 17,362 | ||||||||||||||||||
Stockholders equity: |
||||||||||||||||||||||||
Intercompany investment |
| 280,622 | 64,935 | 160,253 | (505,810 | ) | | |||||||||||||||||
Common stock |
| | | | | | ||||||||||||||||||
Additional paid-in capital |
758,972 | 14,706 | | | (14,706 | ) | 758,972 | |||||||||||||||||
Accumulated earnings (deficit) |
(56,898 | ) | (56,898 | ) | (1,796 | ) | (17,294 | ) | 75,988 | (56,898 | ) | |||||||||||||
Accumulated other comprehensive income (loss) |
(9,100 | ) | (9,100 | ) | | (9,474 | ) | 18,574 | (9,100 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total stockholders equity |
692,974 | 229,330 | 63,139 | 133,485 | (425,954 | ) | 692,974 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and stockholders equity |
$ | 692,974 | $ | 2,075,712 | $ | 67,166 | $ | 266,754 | $ | (543,280 | ) | $ | 2,559,326 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
27
Condensed consolidating statements of comprehensive income (loss) for the quarters ended April 5, 2014 and March 30, 2013 are as follows:
For the Quarter Ended April 5, 2014 | ||||||||||||||||||||||||
In thousands |
Parent Company |
Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
Net sales |
$ | | $ | 929,620 | $ | 71,791 | $ | 75,052 | $ | (994 | ) | $ | 1,075,469 | |||||||||||
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below |
| 777,893 | 78,983 | 61,436 | (998 | ) | 917,314 | |||||||||||||||||
Selling, general and administrative expenses |
| 140,615 | 13,198 | 24,105 | | 177,918 | ||||||||||||||||||
Transaction expenses |
| 3,598 | | 1,088 | | 4,686 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
| 7,514 | (20,390 | ) | (11,577 | ) | 4 | (24,449 | ) | |||||||||||||||
Other (expense) income: |
||||||||||||||||||||||||
Interest expense |
| (23,574 | ) | (225 | ) | (600 | ) | | (24,399 | ) | ||||||||||||||
Other, net |
| (1,014 | ) | (98 | ) | (690 | ) | | (1,802 | ) | ||||||||||||||
Equity earnings of subsidiaries |
(34,044 | ) | (22,802 | ) | (123 | ) | | 56,969 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from operations before income taxes |
(34,044 | ) | (39,876 | ) | (20,836 | ) | (12,867 | ) | 56,973 | (50,650 | ) | |||||||||||||
Income tax provision (benefit) |
| (5,830 | ) | (7,075 | ) | (3,703 | ) | 2 | (16,606 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (34,044 | ) | $ | (34,046 | ) | $ | (13,761 | ) | $ | (9,164 | ) | $ | 56,971 | $ | (34,044 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (39,273 | ) | $ | (39,275 | ) | $ | (13,760 | ) | $ | (14,405 | ) | $ | 67,440 | $ | (39,273 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 30, 2013 | ||||||||||||||||||||||||
In thousands |
Parent Company |
Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||||
Net sales |
$ | | $ | 813,009 | $ | | $ | 26,969 | $ | | $ | 839,978 | ||||||||||||
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below |
| 683,226 | | 24,930 | | 708,156 | ||||||||||||||||||
Selling, general and administrative expenses |
| 128,274 | 236 | 7,994 | | 136,504 | ||||||||||||||||||
Transaction expenses |
| 988 | | 35 | | 1,023 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
| 521 | (236 | ) | (5,990 | ) | | (5,705 | ) | |||||||||||||||
Other (expense) income: |
||||||||||||||||||||||||
Interest expense |
| (17,003 | ) | | (237 | ) | | (17,240 | ) | |||||||||||||||
Other, net |
| (710 | ) | | (263 | ) | | (973 | ) | |||||||||||||||
Equity earnings of subsidiaries |
(16,291 | ) | (4,834 | ) | | | 21,125 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from operations before income taxes |
(16,291 | ) | (22,026 | ) | (236 | ) | (6,490 | ) | 21,125 | (23,918 | ) | |||||||||||||
Income tax provision (benefit) |
| (5,735 | ) | (78 | ) | (1,814 | ) | | (7,627 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (16,291 | ) | $ | (16,291 | ) | $ | (158 | ) | $ | (4,676 | ) | $ | 21,125 | $ | (16,291 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (18,035 | ) | $ | (18,035 | ) | $ | (158 | ) | $ | (6,487 | ) | $ | 24,680 | $ | (18,035 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
28
Condensed consolidating statements of cash flows for the quarters ended April 5, 2014 and March 30, 2013 are as follows:
In thousands |
For the Quarter Ended April 5, 2014 | |||||||||||||||||||||||
Parent Company |
Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net cash provided by (used in) operations |
$ | (50,000 | ) | $ | (8,929 | ) | $ | 7,365 | $ | (21,061 | ) | $ | | $ | (72,625 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Acquisitions, net of cash acquired |
| (689,761 | ) | 13,455 | 963 | | (675,343 | ) | ||||||||||||||||
Purchase of property and equipment |
| (11,825 | ) | (1,071 | ) | (1,506 | ) | | (14,402 | ) | ||||||||||||||
Purchase of assets held for sale |
| (15 | ) | | | | (15 | ) | ||||||||||||||||
Proceeds from sale of property and equipment |
| 34 | | 68 | | 102 | ||||||||||||||||||
Proceeds from disposal of assets held for sale |
| 415 | | | | 415 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by (used in) investing activities |
| (701,152 | ) | 12,384 | (475 | ) | | (689,243 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Borrowings from revolving credit facility |
| 1,485,157 | | 24,167 | | 1,509,324 | ||||||||||||||||||
Repayments of revolving credit facility |
| (1,284,010 | ) | | (9,057 | ) | | (1,293,067 | ) | |||||||||||||||
Outstanding checks |
| (9,174 | ) | | | | (9,174 | ) | ||||||||||||||||
Payments of other long-term debt |
| (178 | ) | (214 | ) | | | (392 | ) | |||||||||||||||
Payments of deferred financing costs |
| (11,101 | ) | | (290 | ) | | (11,391 | ) | |||||||||||||||
Proceeds from issuance of long-term debt |
| 520,313 | | | | 520,313 | ||||||||||||||||||
Equity contribution |
50,000 | | | | | 50,000 | ||||||||||||||||||
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Net cash provided by (used in) financing activities |
50,000 | 701,007 | (214 | ) | 14,820 | | 765,613 | |||||||||||||||||
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Effect of exchange rate changes on cash |
| | | (1,681 | ) | (1,681 | ) | |||||||||||||||||
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Net increase (decrease) in cash and cash equivalents |
| (9,074 | ) | 19,535 | (8,397 | ) | | 2,064 | ||||||||||||||||
Cash and cash equivalents - beginning of period |
| 22,352 | | 13,408 | | 35,760 | ||||||||||||||||||
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Cash and cash equivalents - end of period |
$ | | $ | 13,278 | $ | 19,535 | $ | 5,011 | $ | | $ | 37,824 | ||||||||||||
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29
In thousands |
For the Quarter Ended March 30, 2013 | |||||||||||||||||||||||
Parent Company |
Subsidiary Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net cash provided by (used in) operations |
$ | | $ | 18,144 | $ | 2 | $ | (16,014 | ) | $ | | $ | 2,132 | |||||||||||
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Cash flows from investing activities: |
||||||||||||||||||||||||
Acquisitions, net of cash acquired |
| | | (4,225 | ) | | (4,225 | ) | ||||||||||||||||
Purchase of property and equipment |
| (11,204 | ) | | (669 | ) | | (11,873 | ) | |||||||||||||||
Purchase of assets held for sale |
| (612 | ) | | | | (612 | ) | ||||||||||||||||
Proceeds from sale of property and equipment |
| 8 | | 5 | | 13 | ||||||||||||||||||
Proceeds from disposal of assets held for sale |
| | | | | | ||||||||||||||||||
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Net cash provided by (used in) investing activities |
| (11,808 | ) | | (4,889 | ) | | (16,697 | ) | |||||||||||||||
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Cash flows from financing activities: |
||||||||||||||||||||||||
Borrowings from revolving credit facility |
| 660,348 | | 59,645 | | 719,993 | ||||||||||||||||||
Repayments of revolving credit facility |
| (658,128 | ) | | (48,821 | ) | | (706,949 | ) | |||||||||||||||
Outstanding checks |
| (8,677 | ) | | | | (8,677 | ) | ||||||||||||||||
Payments of other long-term debt |
| (86 | ) | (2 | ) | | | (88 | ) | |||||||||||||||
Payments of deferred financing costs |
| (69 | ) | | | | (69 | ) | ||||||||||||||||
|
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|
|
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|
|
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|
|
|
|||||||||||||
Net cash provided by (used in) financing activities |
| (6,612 | ) | (2 | ) | 10,824 | | 4,210 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Effect of exchange rate changes on cash |
| | | (513 | ) | (513 | ) | |||||||||||||||||
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|
|
|
|
|
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|
|
|
|
|||||||||||||
Net increase (decrease) in cash and cash equivalents |
| (276 | ) | | (10,592 | ) | | (10,868 | ) | |||||||||||||||
Cash and cash equivalents - beginning of period |
| 12,346 | | 13,605 | | 25,951 | ||||||||||||||||||
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Cash and cash equivalents - end of period |
$ | | $ | 12,070 | $ | | $ | 3,013 | $ | | $ | 15,083 | ||||||||||||
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30
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Unless the context otherwise requires, the terms American Tire Distributors, ATD, the Company, we, us, our and similar terms in this report refer to American Tire Distributors Holdings, Inc. and its consolidated subsidiaries, the term Holdings refers only to American Tire Distributors Holdings, Inc., a Delaware Corporation, and the term ATDI refers only to American Tire Distributors, Inc., a Delaware corporation. The terms TPG and Sponsor relate to TPG Capital, L.P. and/or certain funds affiliated with TPG Capital, L.P.
The following discussion and analysis of our consolidated results of operations, financial condition and liquidity should be read in conjunction with our consolidated financial statements and the related notes included in Item 1 of this report. The following discussion contains forward-looking statements that reflect our current expectations, estimates, forecasts and projections. These forward-looking statements are not guarantees of future performance, and actual outcomes and results may differ materially from those expressed in these forward-looking statements. See Cautionary Statements on Forward-Looking Information.
Company Overview
We are the leading replacement tire distributor in North America. We provide a full range of products and services to customers in each of the key market channels to enable tire retailers to more effectively service and grow sales to consumers. Through our network of 164 distribution centers in the United States and Canada, we offer access to an extensive breadth and depth of inventory, representing approximately 40,000 stock-keeping units (SKUs) to approximately 80,000 customers (approximately 73,000 in the Unites States. and 7,000 in Canada). The critical range of services that we make available includes frequent and timely delivery of inventory as well as business support services such as credit, training, access to consumer market data and the administration of tire manufacturer affiliate programs. In addition, our United States customers have access to a leading online ordering and reporting system as well as a website that enables our tire retailer customers to participate in the Internet marketing of tires to consumers. We estimate that as of our year-ending December 28, 2013, our share of the replacement passenger and light truck tire market in the U.S. is approximately 10%, up from approximately 1% in 1996. Our estimated share of the replacement passenger and light truck tire market in Canada as of our year-ending December 28, 2013, is approximately 12%. During fiscal 2013, our largest customer and top ten customers accounted for less than 3.1% and 11.3%, respectively, of our net sales.
We believe we distribute the broadest product offering in our industry, supplying our customers with the top ten leading passenger and light truck tire brands. We carry the flagship brands from each of the four largest tire manufacturers Bridgestone, Continental, Goodyear and Michelin as well as the Hankook, Kumho, Nexen, Nitto and Pirelli brands. We also sell lower price point associate and proprietary brands of these and many other tire manufacturers, and through our acquisition of The Hercules Tire & Rubber Company we also own and market our proprietary Hercules brand. In addition, we sell custom wheels and accessories and related tire supplies and tools. Our revenues are primarily generated from sales of passenger car and light truck tires, which represented 83.2% of our net sales for the quarter ended April 5, 2014. The remainder of our net sales is derived from other tire sales (14.6%), custom wheels (1.8%) and tire supplies, tools and other products (0.4%). We believe our large, diverse product offering allows us to better penetrate the replacement tire market across a broad range of price points.
Industry Overview
The U.S. and Canadian replacement tire markets have historically experienced stable growth and favorable pricing dynamics. However, these markets are susceptible to changes in consumer confidence and the economic conditions that impact tire customers. As a result, our customers may opt to defer replacement tire purchases or purchase less costly brand tires during challenging economic periods where macro-economic factors such as unemployment, persistently high fuel costs and weakness in the housing market impact their financial health.
From 1955 through 2013, U.S. replacement tire unit shipments increased by an average of approximately 2.7% per year. The recession led to negative growth during 2008 and 2009. The economic environment showed signs of stabilization during 2010 and 2011, although slow economic growth, persistently high fuel cost and a decrease in miles driven continued to impact the market. Despite an increase in miles driven during 2012, the U.S. and Canadian replacement tire markets continued their negative growth trend as replacement tire unit shipments decreased 1.8% and 5.5%, respectively, from 2011. During 2013, replacement tire unit shipments were up 4.4% in the United States and 0.7% in Canada as compared to 2012 as a rebound in the housing market, a decline in unemployment rates and increases in vehicle sales and vehicle miles driven impacted the U.S. and Canadian replacement tire market favorably. Substantially all of the industry unit growth in 2013 was driven by an increased level of shipments of lower priced import product, predominately from China, as most domestic tire manufacturers reported continued replacement tire unit shipment reductions in 2013 as compared to 2012. Our market outlook for 2014 reflects nominal market improvement, particularly in the value tire segment of the replacement market for which we believe we are well positioned to gain market share and we expect to continue to follow our historic trend and outperform market expectations.
31
Going forward, we believe that growth in the U.S. and Canadian replacement tire markets will continue to be driven by favorable underlying dynamics, including:
| increases in the number and average age of passenger cars and light trucks; |
| increases in the number of miles driven; |
| increases in the number of licensed drivers as the U.S. population continues to grow; |
| increases in the number of replacement tire SKUs; |
| growth of the high performance tire segment; and |
| shortening tire replacement cycles due to changes in product mix that increasingly favor high performance tires, which have shorter average lives. |
We have a solid infrastructure, an extensive and efficient distribution network and a broad product offering. Our growth strategy, coupled with our access to capital and our scalable platform, enables us to continue to expand in existing markets as well as in new geographic areas. In addition, we are investing in technology and new sales channels which we expect will help fuel our future growth. As a result, we believe that we are well positioned to continue to achieve above market results in both contracting and expanding market demand cycles.
Recent Developments
As part of our ongoing business strategy, we intend to expand in existing markets as well as enter into previously underserved markets and new geographic areas. From the second half of 2010 through December 2013, we opened new distribution centers in 22 locations throughout the contiguous United States. During the first three months of 2014, we continued to execute our plan of expansion by opening a new distribution center in Columbus, OH.
On March 28, 2014, we completed the acquisition of Terrys Tire Town Holdings, Inc., an Ohio corporation (Terrys Tire and such acquisition, the Terrys Tire Acquisition). Terrys Tire and its subsidiaries are engaged in the business of purchasing, marketing, distributing and selling tires, wheels and related tire and wheel accessories on a wholesale basis to tire dealers, wholesale distributors, retail chains, automotive dealers and others, retreading tires and selling retread and other commercial tires through commercial outlets to end users and selling tires directly to consumers via the internet. Terrys Tire owned and operated 10 distribution centers across the Northeast, New England and Ohio. The acquisition of Terrys Tire will enhance our market position in these areas and aligns very well with new distribution centers that we opened over the past two years in these regions of the United States.
The Terrys Tire acquisition closed for an aggregate purchase price of approximately $378.1 million (the Terrys Tire Purchase Price), consisting of cash consideration of approximately $363.4 million, contingent consideration of $12.5 million and non-cash consideration for debt assumed of $2.2 million. The cash consideration paid for the Terrys Tire Acquisition included estimated working capital adjustments and a portion of consideration contingent on certain events achieved prior to closing. The Terrys Tire Purchase Price was funded by a combination of borrowings under a new senior secured term loan facility, as more fully described under Liquidity and Capital Resources, and borrowings of approximately $72.5 million under Holdings existing U.S. ABL Facility. The Terrys Tire Purchase Price is subject to certain post-closing adjustments, including but not limited to, working capital adjustments.
On January 31, 2014, we completed the acquisition of Hercules Tire Holdings LLC (Hercules Holdings) pursuant to an Agreement and Plan of Merger, dated January 24, 2014 (the Merger Agreement). Hercules Holdings owns all of the capital stock of The Hercules Tire & Rubber Company (Hercules). Hercules is engaged in the business of purchasing, marketing, distributing, and selling after-market replacement tires for passenger cars, trucks, and certain off road vehicles to tire dealers, wholesale distributors, retail distributors and others in the United States, Canada and internationally. Hercules owned and operated 15 distribution centers in the United States., 6 distribution centers in Canada and one warehouse in northern China. Hercules also markets the Hercules brand, which is one of the most sought-after proprietary tire brands in the industry. The acquisition of Hercules will strengthen our presence in major markets such as California, Texas and Florida in addition to increasing our presence in Canada. Additionally, Hercules strong logistics and sourcing capabilities, including a long-standing presence in China, will also allow us to capitalize on the growing import market, as well as, providing the ability to expand the international sales of the Hercules brand. Finally, this acquisition will allow us to be a brand marketer of the Hercules brand which today has a 2% market share of the passenger and light truck market in North America and a 3% market share of highway truck tires in North America.
The Hercules acquisition closed for an aggregate purchase price of approximately $319.3 million (the Hercules Closing Purchase Price), consisting of net cash consideration of $310.4 million, contingent consideration of $3.5 million and non-cash consideration for debt assumed of $5.4 million. The Hercules Closing Purchase Price also includes an estimate for initial working capital adjustments. The Merger Agreement provides for the payment of up to $6.5 million in additional consideration contingent
32
upon the occurrence of certain post-closing events (to the extent payable, the Hercules Additional Purchase Price and, collectively with the Hercules Closing Purchase Price, the Hercules Purchase Price). The cash consideration paid for the Hercules acquisition was funded by a combination of the issuance of additional Senior Subordinated Notes, as more fully described under Liquidity and Capital Resources, an equity contribution of $50.0 million from Holdings indirect parent and borrowings under Holdings credit agreement, as more fully described under Liquidity and Capital Resources The Hercules Closing Purchase Price is subject to certain post-closing adjustments, including, but not limited to, working capital adjustments.
On January 17, 2014, TriCan Tire Distributors, Inc. (TriCan) entered into an Asset Purchase Agreement with Kipling Tire Co. LTD (Kipling) pursuant to which TriCan agreed to acquire the wholesale distribution business of Kipling. Kipling has operated as a retail-wholesale business since 1982. Kiplings wholesale business distributes tires from its Etobicoke facilities to approximately 400 retail customers in Southern Ontario. Kiplings retail operations were not acquired by TriCan and will continue to operate under its current ownership. This acquisition further strengthened TriCans presence in the Southern Ontario region of Canada.
33
Results of Operations
Our fiscal year is based on either a 52- or 53-week period ending on the Saturday closest to each December 31. Therefore, the financial results of 53-week fiscal years, and the associated 14-week quarter, will not be comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. The quarter ended April 5, 2014 contains operating results for 14 weeks while the quarter ended March 30, 2013 contains operating results for 13 weeks. It should be noted that our year-end and quarter-end reporting dates are different from our recently acquired subsidiaries Hercules and Terrys Tire. Both Hercules and Terrys Tire have calendar year-end and quarter-end reporting dates. There were no significant changes to the business subsequent to their fiscal period ends that would have a material impact on the condensed consolidated balance sheet or condensed consolidated statement of comprehensive income (loss) as of and for the quarter ended April 5, 2014.
Quarter Ended April 5, 2014 Compared to the Quarter Ended March 30, 2013
The following table sets forth the period change for each category of the statements of operations, as well as each category as a percentage of net sales:
Quarter Ended |
Quarter Ended |
Period Over Period Change |
Period Over Period % Change |
Percentage of Net Sales For the Respective Period Ended |
||||||||||||||||||||
In thousands |
April 5, 2014 |
March 30, 2013 |
Favorable (unfavorable) |
Favorable (unfavorable) |
April 5, 2014 |
March 30, 2013 |
||||||||||||||||||
Net sales |
$ | 1,075,469 | $ | 839,978 | $ | 235,491 | 28.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of goods sold |
917,314 | 708,156 | (209,158 | ) | (29.5 | %) | 85.3 | % | 84.3 | % | ||||||||||||||
Selling, general and administrative expenses |
177,918 | 136,504 | (41,414 | ) | (30.3 | %) | 16.5 | % | 16.3 | % | ||||||||||||||
Transaction expenses |
4,686 | 1,023 | (3,663 | ) | (358.1 | %) | 0.4 | % | 0.1 | % | ||||||||||||||
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Operating income (loss) |
(24,449 | ) | (5,705 | ) | (18,744 | ) | (328.6 | %) | (2.3 | %) | -0.7 | % | ||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest expense |
(24,399 | ) | (17,240 | ) | (7,159 | ) | (41.5 | %) | (2.3 | %) | (2.1 | %) | ||||||||||||
Other, net |
(1,802 | ) | (973 | ) | (829 | ) | (85.2 | %) | (0.2 | %) | (0.1 | %) | ||||||||||||
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Income (loss) from operations before income taxes |
(50,650 | ) | (23,918 | ) | (26,732 | ) | (111.8 | %) | (4.7 | %) | (2.8 | %) | ||||||||||||
Provision (benefit) for income taxes |
(16,606 | ) | (7,627 | ) | 8,979 | 117.7 | % | (1.5 | %) | (0.9 | %) | |||||||||||||
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Net income (loss) |
$ | (34,044 | ) | $ | (16,291 | ) | $ | (17,753 | ) | (109.0 | %) | (3.2 | %) | (1.9 | %) | |||||||||
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|
Net Sales
Net sales for the quarter ended April 5, 2014 were $1,075.5 million, a $235.5 million, or 28.0%, increase, as compared with the quarter ended March 30, 2013. The increase in net sales was primarily driven by the combined results of new distribution centers as well as the acquisitions of Hercules and Terrys Tire and our 2013 acquisitions of Wholesale Tire Distributors (WTD), Tire Distributors, Inc. (TDI) and Regional Tire Distributors Inc. (RTD). These growth initiatives added $167.5 million of incremental sales in the first quarter of 2014. In addition, we experienced an increase in comparable tire unit sales of $98.9 million primarily driven by an overall stronger sales unit environment and the inclusion of five additional selling days in our first quarter of 2014 which contributed approximately $47.0 million to the unit increase. However, these increases were partially offset by lower net tire pricing of $30.2 million, primarily driven by manufacturer marketing specials, competitive pricing positions in certain U.S. markets, as well as a shift in product mix in our lower priced point offerings.
Cost of Goods Sold
Cost of goods sold for the quarter ended April 5, 2014 were $917.3 million, a $209.2 million, or 29.5%, increase, as compared with the quarter ended March 30, 2013. The increase in cost of goods sold was primarily driven by the combined results of new distribution centers as well as the acquisitions of Hercules, Terrys Tire, RTD, WTD and TDI. These growth initiatives added $138.6 million of incremental costs in the first quarter of 2014. Cost of goods sold for the quarter ended April 5, 2014 also includes $19.2 million related to the non-cash amortization of the inventory step-up recorded in connection with the acquisition of Hercules and WTD as compared to $2.2 million during the quarter ended March 30, 2013. In addition, the inclusion of five additional selling days in our first quarter of 2014 and an overall stronger sales unit environment increased cost of goods sold by $83.7 million (of which approximately $41.0 million was due to the five additional selling days). These increases were partially offset by lower net tire pricing of $27.5 million.
34
Cost of goods sold as a percentage of net sales was 85.3% for the quarter ended April 5, 2014, an increase compared with 84.3% for the quarter ended March 30, 2013. The increase in cost of goods sold as a percentage of net sales was primarily driven by the $19.2 million non-cash amortization of the inventory step-up recorded in connection with the Hercules and WTD acquisitions. This increase had a 2.0% impact on cost of goods sold as a percentage of net sales. Excluding the non-cash amortization of the inventory step-up, the decrease in cost of goods sold as a percentage of net sales was primarily driven by the margin contribution of the Hercules brand, a lower level of manufacturer price repositioning this year as compared to the prior year, and an incremental benefit from manufacturer programs during the current year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter ended April 5, 2014 were $177.9 million, a $41.4 million, or 30.3%, increase as compared with the quarter ended March 30, 2013. The increase in selling, general and administrative expenses was primarily related to incremental costs associated with our new distribution centers as well as the acquisitions of Hercules, Terrys Tire, RTD, WTD and TDI. Combined, these factors added $32.8 million of incremental costs to the first quarter of 2014. In addition, we also experienced an $8.1 million increase in salaries and wage expense primarily related to higher incentive and commission compensation and the inclusion of five additional selling days in our first quarter of 2014, which contributed approximately $3.8 million to the year-over-year increase. Additionally, occupancy expense increased $0.8 million due to higher cost as we expanded several of our distribution centers to better service our existing customers.
Selling, general and administrative expenses as a percentage of net sales was 16.5% for the quarter ended April 5, 2014; an increase compared with 16.3% for the quarter ended March 30, 2013. The increase in selling, general and administrative expenses as a percentage of net sales were primarily driven by an increase in costs associated with our growth expansion of recently opened and acquired distribution centers, as our consolidation of some of the Hercules distribution centers only commenced during the latter part of the first quarter.
Transaction Expenses
Transaction expenses for the quarter ended April 5, 2014 were $4.7 million and were primarily related to costs associated with our acquisitions of Hercules and Terrys Tire, as well as with expenses related to potential future acquisitions and other corporate initiatives. During the quarter ended March 30, 2013, transaction expenses of $1.0 million primarily related to costs associated with our acquisition of TriCan Tire Distributors (TriCan) in November 2012, as well as with expenses related to potential future acquisitions and other corporate initiatives.
Interest Expense
Interest expense for the quarter ended April 5, 2014 was $24.4 million, a $7.2 million, or 41.5%, increase, compared with the quarter ended March 30, 2013. This increase was due to higher debt levels associated with our ABL Facility, FILO Facility Additional Subordinated Notes and Term Loan, all as defined under Liquidity and Capital Resources, which were driven by our acquisitions of Hercules and Terrys Tire. In addition, changes in the fair value of our interest rate swaps resulted in a $0.4 million increase in interest expense.
Provision (Benefit) for Income Taxes
Our income tax benefit for the quarter ended April 5, 2014 was $16.6 million, based on pre-tax loss of $50.7 million; our effective tax rate under the discrete method was 32.8%. For the quarter ended March 30, 2013, our income tax benefit was $7.6 million, based on a pre-tax loss of $23.9 million; our effective tax rate was 31.9%. The effective rate of the year-to-date tax provision is lower than the statutory income tax rate primarily due to earnings in a foreign jurisdiction taxed at rates lower from the statutory U.S. federal rate and the impact of several non-deductable tax items as well as our state effective tax rate, a result based on our legal entity tax structure and individual state tax filing requirements.
35
Liquidity and Capital Resources
Overview
The following table contains several key measures that we think are relevant to our financial condition and liquidity:
In thousands |
April 5, 2014 |
December 28, 2013 |
||||||
Cash and cash equivalents |
$ | 37,824 | $ | 35,760 | ||||
Working capital |
796,610 | 538,444 | ||||||
Total debt |
1,710,106 | 967,000 | ||||||
Total stockholders equity |
704,268 | 692,974 | ||||||
Debt-to-capital ratio |
70.8 | % | 58.3 | % |
Debt-to-capital ratio = total debt / (total debt plus total stockholders equity)
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and income tax rates. Our cash requirements consist primarily of the following:
| Debt service requirements |
| Funding of working capital |
| Funding of capital expenditures |
Our primary sources of liquidity include cash flows from operations and availability under our ABL Facility and FILO Facility. We currently do not intend nor foresee a need to repatriate funds from our Canadian subsidiaries to the United States, and no provision for U.S. income taxes has been made with respect to such earnings. We expect our cash flow from U.S. operations, combined with availability under our U.S. ABL Facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending in the United Stated during the next twelve month period and for the foreseeable future. We expect cash flows from our Canadian operations, combined with availability under our Canadian ABL Facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending in Canada during the next twelve month period and thereafter for the foreseeable future.
We are significantly leveraged. Accordingly, our liquidity requirements are significant, primarily due to our debt service requirements. As of April 5, 2014, our total indebtedness was $1,710.1 million with a debt-to-capital ratio of 70.8%. Cash interest payments for the quarters ended April 5, 2014 and March 30, 2013 amounted to $10.5 million and $3.7 million, respectively. The increase in cash interest payments is primarily related to higher levels of indebtedness incurred in connection with our acquisitions. As of April 5, 2014, we have an additional $209.9 million of availability under our U.S. ABL Facility and an additional $38.0 million of availability under our Canadian ABL Facility. The availability under our U.S. and Canadian ABL Facilities is determined in accordance with a borrowing base which can decline due to various factors. Therefore, amounts under our ABL Facilities may not be available when we need them.
Our liquidity and our ability to fund our capital requirements is dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control, many of which are described under Item 1A Risk Factors in our most recently filed Annual Report on Form 10-K. If those factors significantly change or other unexpected factors adversely affect us, our business may not generate sufficient cash flow from operations or we may not be able to obtain future financings to meet our liquidity needs. We anticipate that, to the extent additional liquidity is necessary to fund our operations, it would be funded through borrowings under our ABL Facility, the incurrence of other indebtedness, additional equity financings or a combination of these potential sources of liquidity. We may not be able to obtain this additional liquidity on terms acceptable to us or at all.
36
Cash Flows
The following table sets forth the major categories of cash flows:
In thousands |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
||||||
Cash provided by (used in) operating activities |
$ | (72,625 | ) | $ | 2,132 | |||
Cash provided by (used in) investing activities |
(689,243 | ) | (16,697 | ) | ||||
Cash provided by (used in) financing activities |
765,613 | 4,210 | ||||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
(1,681 | ) | (513 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
2,064 | (10,868 | ) | |||||
Cash and cash equivalents - beginning of period |
35,760 | 25,951 | ||||||
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|
|
|
|||||
Cash and cash equivalents - end of period |
$ | 37,824 | $ | 15,083 | ||||
|
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|
|||||
Cash payments for interest |
$ | 10,464 | $ | 3,733 | ||||
Cash payments (receipts) for taxes, net |
$ | 1,586 | $ | 1,239 | ||||
|
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|
|
Operating Activities
Net cash used in operating activities for the quarter ended April 5, 2014 was $72.6 million compared with cash provided by operating activities of $2.1 million during the quarter ended March 30, 2013. During the current period, working capital requirements resulted in a cash outflow of $85.4 million, primarily driven by an increase in customer accounts receivable of $32.3 million and an increase in inventory levels as a result of stocking new distribution centers opened and as a result of building out the product offering provided through the Hercules acquisition. Additionally, changes in accounts payable associated with the timing of vendor payments, including payments associated with winter product purchases, resulted in a cash outflow during the period of $34.4 million. These cash outflows were partially offset by cash earnings during the current period and changes in accrued expenses associated with accrued interest on our senior notes.
Net cash provided by operating activities for the quarter ended March 30, 2013 was $2.1 million. During the quarter, working capital requirements resulted in a cash outflow of $5.3 million, primarily driven by a $14.4 million cash outflow in accounts payable and accrued expenses that was associated with the timing of vendor payments related to winter tire programs. This cash outflow was offset by cash earnings during the period.
Investing Activities
Net cash used in investing activities for the quarter ended April 5, 2014 was $689.2 million, compared with $16.7 million during the quarter ended March 30, 2013. The change was primarily associated with cash paid for acquisitions, which resulted in a $671.1 million increase in the current period. In addition, we invested $14.4 million and $11.9 million in property and equipment purchases during the quarters ended April 5, 2014 and March 30, 2013, respectively, which included information technology upgrades, information technology application development and warehouse racking.
Financing Activities
Net cash provided by financing activities for the quarter ended April 5, 2014 was $765.6 million, compared with $4.2 million during the quarter ended March 30, 2013. The change was primarily related to proceeds received from the issuance of our Additional Subordinated Notes and Term Loan during the quarter ended April 5, 2014. These proceeds were used to finance a portion of the Hercules and Terrys Tire acquisitions. In addition, higher net borrowings from our ABL Facility and FILO Facility, specifically our U.S. ABL Facility, contributed to the period-over-period increase. The higher net borrowings under our ABL Facility and FILO Facility were due to the increase in cash outflow for working capital requirements between periods and cash paid for acquisitions. Also, the Company received an equity contribution of $50.0 million from TPG and certain co-investors during the quarter ended April 5, 2014.
Supplemental Disclosures of Cash Flow Information
Cash payments for interest during the quarter ended April 5, 2014 were $10.5 million, compared with $3.7 million paid during the quarter ended March 30, 2013. The increase is primarily due to the timing of our quarter end on April 5, 2014, and as such, included an additional quarterly interest payment on our ABL Facility and FILO Facility as compared to the prior year. Additionally, higher levels of indebtedness incurred in connection with our acquisitions also contributed to the year-over-year increase.
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Net cash payments for taxes during the quarter ended April 5, 2014 were $1.6 million, compared with $1.2 million during the quarter ended March 30, 2013. The difference between the periods primarily relates to the balance and timing of income tax extension payments and income tax payments due with returns.
Indebtedness
The following table summarizes our outstanding debt at April 5, 2014:
In thousands |
Matures | Interest Rate (1) |
Outstanding Balance |
|||||||||
U.S. ABL Facility |
2017 | 3.4 | % | $ | 595,964 | |||||||
Canadian ABL Facility |
2017 | 4.3 | 42,136 | |||||||||
U.S. FILO Facility |
2017 | 5.8 | 74,111 | |||||||||
Canadian FILO Facility |
2017 | 6.0 | 8,501 | |||||||||
Term Loan |
2018 | 5.8 | 299,252 | |||||||||
Senior Secured Notes |
2017 | 9.75 | 248,330 | |||||||||
Senior Subordinated Notes |
2018 | 11.50 | 421,181 | |||||||||
Capital lease obligations |
2014 - 2027 | 2.7 - 13.9 | 12,715 | |||||||||
Other |
2014 - 2021 | 2.3 - 10.6 | 7,916 | |||||||||
|
|
|||||||||||
Total debt |
1,710,106 | |||||||||||
Less - Current maturities |
(5,502 | ) | ||||||||||
|
|
|||||||||||
Long-term debt |
$ | 1,704,604 | ||||||||||
|
|
(1) | Interest rates for each of the U.S. ABL Facility and the Canadian ABL Facility are the weighted average interest rates at April 5, 2014. |
ABL Facility
On January 31, 2014, in connection with the Hercules acquisition, we entered into the Second Amendment to Sixth Amended and Restated Credit Agreement (Credit Agreement), which provides for (i) U.S. revolving credit commitments of $850.0 million (of which up to $50.0 million can be utilized in the form of commercial and standby letters of credit), subject to U.S. borrowing base availability (the U.S. ABL Facility) and (ii) Canadian revolving credit commitments of $125.0 million (of which up to $10.0 million can be utilized in the form of commercial and standby letters of credit), subject to Canadian borrowing base availability (the Canadian ABL Facility and, collectively with the U.S. ABL Facility, the ABL Facility). In addition, the Credit Agreement provides (i) the U.S. borrowers under the agreement with a first-in last-out facility (the U.S. FILO Facility) in the aggregate principal amount of up to $80.0 million, subject to a borrowing base specific thereto and (ii) the Canadian borrowers under the agreement with a first-in last-out facility (the Canadian FILO Facility and collectively with the U.S. FILO Facility, the FILO Facility) in an aggregate principal amount of up to $15.0 million, subject to a borrowing base specific thereto. The U.S. ABL Facility is available to ATDI, Am-Pac Tire Dist. Inc., Hercules and any other U.S. subsidiary that the Company designates in the future in accordance with the terms of the agreement. The Canadian ABL Facility is available to TriCan and any other Canadian subsidiaries that the Company designates in the future in accordance with the terms of the agreement. Provided that no default or event of default then exists or would arise therefrom, we have the option to request that the ABL Facility be increased by an amount not to exceed $175.0 million (up to $25.0 million of which may be allocated to the Canadian ABL Facility), subject to certain rights of the administrative agent, swingline lender and issuing banks providing commitments for such increase. The maturity date for the ABL Facility is November 16, 2017, provided that if, on March 1, 2017, either (i) more than $50.0 million in aggregate principal amount of ATDIs Senior Secured Notes remains outstanding or (ii) any principal amount of ATDIs Senior Secured Notes remains outstanding with a scheduled maturity date which is earlier than 91 days after November 16, 2017 and excess availability under the ABL Facility is less than 12.5% of the aggregate revolving commitments, then the maturity date will be March 1, 2017. The maturity date for the FILO Facility is January 31, 2017.
As of April 5, 2014, we had $596.0 million outstanding under the U.S. ABL Facility. In addition, we had certain letters of credit outstanding in the aggregate amount of $8.4 million, leaving $209.9 million available for additional borrowings under the U.S. ABL Facility. The outstanding balance of the Canadian ABL Facility at April 5, 2014 was $42.1 million, leaving $38.0 million available for additional borrowings. As of April 5, 2014, the outstanding balance of the U.S. FILO Facility was $74.1 million and the outstanding balance of the Canadian FILO Facility was $8.5 million.
Borrowings under the U.S. ABL Facility bear interest at a rate per annum equal to, at our option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 2.0% as of April 5, 2014
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or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its prime rate for commercial loans, (2) the federal funds effective rate plus 1⁄2 of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of April 5, 2014. The applicable margins under the U.S. ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
Borrowings under the Canadian ABL Facility bear interest at a rate per annum equal to either (a) a Canadian base rate determined by reference to the highest of (1) the base rate as published by Bank of America, N.A. (acting through its Canada branch) as its base rate, (2) the federal funds rate effective plus 1⁄2 of 1% per annum and (3) the one month-LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of April 5, 2014, (b) a Canadian prime rate determined by reference to the highest of (1) the prime rate as published by Bank of America, N.A. (acting through its Canada branch) as its prime rate, (2) the sum of 1⁄2 of 1% plus the Canadian overnight rate and (3) the sum of 1% plus the rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances as published by Reuters Monitor Money Rates Service for a 30 day interest period, plus an applicable margin of 1.0% as of April 5, 2014, (c) a rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances having an identical or comparable term as the proposed loan amount displayed and identified as such on the display referred to as the CDOR Page of Reuters Monitor Money Rates Service as at approximately 10:00 a.m. Toronto time on such day, plus an applicable margin of 2.0% as of April 5, 2014 or (d) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 2.0% as of April 5, 2014. The applicable margins under the Canadian ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
Borrowings under the U.S. FILO Facility bear interest at a rate per annum equal to, at our option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 3.5% as of April 5, 2014 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its prime rate for commercial loans, (2) the federal funds effective rate plus 1⁄2 of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 2.5% as of April 5, 2014. The applicable margins under the U.S. FILO Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
Borrowings under the Canadian FILO Facility bear interest at a rate per annum equal to either (a) a Canadian base rate determined by reference to the highest of (1) the base rate as published by Bank of America, N.A. (acting through its Canada branch) as its base rate, (2) the federal funds rate effective plus 1⁄2 of 1% per annum and (3) the one month-LIBOR rate plus 1.0% per annum, plus an applicable margin of 2.5% as of April 5, 2014, (b) a Canadian prime rate determined by reference to the highest of (1) the prime rate as published by Bank of America, N.A. (acting through its Canada branch) as its prime rate, (2) the sum of 1⁄2 of 1% plus the Canadian overnight rate and (3) the sum of 1% plus the rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances as published by Reuters Monitor Money Rates Service for a 30 day interest period, plus an applicable margin of 2.5% as of April 5, 2014, (c) a rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers acceptances having an identical or comparable term as the proposed loan amount displayed and identified as such on the display referred to as the CDOR Page of Reuters Monitor Money Rates Service as at approximately 10:00 a.m. Toronto time on such day, plus an applicable margin of 3.5% as of April 5, 2014 or (d) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 3.5% as of April 5, 2014. The applicable margins under the Canadian FILO Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.
The U.S. and Canadian borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:
| 85% of eligible accounts receivable of the U.S. or Canadian loan parties, as applicable; plus |
| The lesser of (a) 70% of the lesser of cost or market value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable and (b) 85% of the net orderly liquidation value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable; plus |
| The lesser of (a) 50% of the lower of cost or market value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable and (b) 85% of the net orderly liquidation value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable. |
The U.S. FILO and the Canadian FILO borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:
| 5% of eligible accounts receivable of the U.S. or Canadian loan parties, as applicable; plus |
| 10% of the net orderly liquidation value of the eligible tire and non-tire inventory of the U.S. or Canadian loan parties, as applicable. |
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All obligations under the U.S. ABL Facility and the U.S. FILO Facility are unconditionally guaranteed by Holdings and substantially all of ATDIs existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp. The Canadian ABL Facility and the Canadian FILO Facility are unconditionally guaranteed by the U.S. loan parties, TriCan and any future, direct and indirect, wholly-owned, material restricted Canadian subsidiaries. Obligations under the U.S. ABL Facility and the U.S. FILO Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties, subject to certain exceptions. Obligations under the Canadian ABL Facility and the Canadian FILO Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties and the Canadian loan parties, subject to certain exceptions.
The ABL Facility and FILO Facility contain customary covenants, including covenants that restricts our ability to incur additional debt, grant liens, enter into guarantees, enter into certain mergers, make certain loans and investments, dispose of assets, prepay certain debt, declare dividends, modify certain material agreements, enter into transactions with affiliates or change our fiscal year. If the amount available for additional borrowings under the ABL Facility is less than the greater of (a) 10.0% of the lesser of (x) the aggregate commitments under the ABL Facility and (y) the aggregate borrowing base and (b) $25.0 million, then we would be subject to an additional covenant requiring us to meet a fixed charge coverage ratio of 1.0 to 1.0. As of April 5, 2014, our additional borrowing availability under the ABL Facility was above the required amount and we were therefore not subject to the additional covenants.
Senior Secured Term Loan
In connection with the acquisition of Terrys Tire, on March 28, 2014, ATDI entered into a credit agreement that provided for a senior secured term loan facility in the aggregate principal amount of $300.0 million (the Term Loan). The Term Loan was issued at a discount of 0.25% which, combined with certain debt issuance costs paid at closing, resulted in net proceeds of approximately $290.9 million. The Term Loan will accrete based on an effective interest rate of 6% to an aggregate accreted value of $300.0 million, the full principal amount at maturity. The net proceeds from the Term Loan were used to finance a portion of the Terrys Tire Purchase Price. The maturity date for the Term Loan is June 1, 2018.
Borrowings under the Term Loan bear interest at a rate per annum equal to, at our option, initially, either (a) a Eurodollar rate determined by reference to LIBOR, plus an applicable margin of 4.75% at April 5, 2014 or (b) a base rate determined by reference to the highest of (1) the federal funds rate plus 1⁄2 of 1%, (2) the prime commercial lending rate published by the Bank of America, N.A. as its prime rate for commercial loans and (3) the one month Eurodollar rate plus 1.0%, plus an applicable margin of 3.75% as of April 5, 2014. The Eurodollar rate is subject to an interest rate floor of 1.0%. The applicable margins under the Term Loan are subject to a step down based on a consolidated net leverage ratio, as defined in the agreement.
All obligations under the Term Loan are unconditionally guaranteed by Holdings and, subject to certain customary exceptions, all of ATDIs existing and future, direct and indirect, wholly-owned domestic material subsidiaries. Obligations under the Term Loan are secured by a first-priority lien on substantially all property, assets and capital stock of ATDI except accounts receivable, inventory and related intangible assets and a second-priority lien on all accounts receivable and related intangible assets.
The Term Loan contains customary covenants, including covenants that restrict our ability to incur additional debt, create liens, enter into guarantees, enter into certain mergers, make certain loans and investments, dispose of assets, prepay certain debt, declare dividends, modify certain material agreements, enter into transactions with affiliates, change the nature of our business or change our fiscal year.
Subject to certain exceptions, we are required to repay the Term Loan in certain circumstances, including with 50% (which percentage will be reduced to 25% and 0%, as applicable, subject to attaining certain senior secured net leverage ratios) of our annual excess cash flow, as defined in the Term Loan agreement. The Term Loan also contains repayments provisions related to non-ordinary course asset or property sales when certain conditions are met, and related to the incurrence of debt that is not permitted under the agreement.
Senior Secured Notes
On May 28, 2010, ATDI issued Senior Secured Notes (Senior Secured Notes) due June 1, 2017 in an aggregate principal amount at maturity of $250.0 million. The Senior Secured Notes were issued at a discount from their principal amount at maturity and generated net proceeds of approximately $240.7 million after debt issuance costs (which represents a non-cash financing activity of $9.3 million). The Senior Secured Notes will accrete based on an effective interest rate of 10% to an aggregate accreted value of $250.0 million, the full principal amount at maturity. The Senior Secured Notes bear interest at a fixed rate of 9.75%. Interest on the Senior Secured Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010. The Senior Secured Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 107.313% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 104.875% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015, 102.438% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016 and 100.0% of the principal amount if the redemption date occurs between June 1, 2016 and May 31, 2017.
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The Senior Secured Notes are unconditionally guaranteed by Holdings and substantially all of ATDIs existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp, subject to certain exceptions. The Senior Secured Notes are also collateralized by a second-priority lien on accounts receivable and related assets and a first-priority lien on substantially all other assets (other than inventory), in each case of Holdings, ATDI and the guarantor subsidiaries, subject to certain exceptions.
The indenture governing the Senior Secured Notes contains covenants that, among other things, limits ATDIs ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDIs or repurchase or redeem ATDIs capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDIs subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens; consolidate, merge or sell all or substantially all of ATDIs assets; enter into certain transactions with ATDIs affiliates; and designate ATDIs subsidiaries as unrestricted subsidiaries.
Senior Subordinated Notes
On May 28, 2010, ATDI issued $200.0 million in aggregate principal amount of its 11.50% Senior Subordinated Notes due 2018 (the Initial Subordinated Notes). Interest on the Initial Subordinated Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010.
In connection with the consummation of the Hercules acquisition, on January 31, 2014, ATDI completed the sale to certain purchasers of an additional $225.0 million in aggregate principal amount of its 11.50% Senior Subordinated Notes due 2018 (the Additional Subordinated Notes and, collectively with the Initial Subordinated Notes, the Senior Subordinated Notes). The Additional Subordinated Notes were issued at a discount from their principal amount at maturity and generated net proceeds of approximately $221.1 million. The Additional Subordinated Notes will accrete based on an effective interest rate of 12% to an aggregate accreted value of $225.0 million, the full principal amount at maturity.
The Additional Subordinated Notes have identical terms to the Initial Subordinated Notes except the Additional Subordinated Notes accrues interest from January 31, 2014. The Additional Subordinated Notes and the Initial Subordinated Notes are treated as a single class of securities for all purposes under the indenture. The Senior Subordinated Notes will mature on June 1, 2018.
The Senior Subordinated Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 104.0% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 102.0% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015 and 100.0% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016.
The Senior Subordinated Notes are unconditionally guaranteed by Holdings and substantially all of ATDIs existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp, subject to certain exceptions.
The indenture governing the Senior Subordinated Notes contains covenants that, among other things, limits ATDIs ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDIs or repurchase or redeem ATDIs capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDIs subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens without securing the Senior Subordinated Notes; consolidate, merge or sell all or substantially all of ATDIs assets; enter into certain transactions with ATDIs affiliates; and designate ATDIs subsidiaries as unrestricted subsidiaries.
Adjusted EBITDA
We report our financial results in accordance with Generally Accepted Accounting Principles in the United States (GAAP). In addition, we present Adjusted EBITDA as a supplemental financial measure in order to provide a more complete understanding of the factors and trends affecting our business. Adjusted EBITDA is a non-GAAP financial measure that should be considered supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. It has limitations in that it does not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. In addition, this measure may not be comparable to non-GAAP financial measures reported by other companies. We believe that Adjusted EBITDA provides important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition. As a result, one should not consider Adjusted EBITDA in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as on a non-GAAP basis, predominantly disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results.
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The following table shows a reconciliation of Adjusted EBITDA from the most directly comparable GAAP measure, net income (loss) in order to show the differences in these measures of operating performance:
In thousands |
Quarter Ended April 5, 2014 |
Quarter Ended March 30, 2013 |
||||||
Net income (loss) |
$ | (34,044 | ) | $ | (16,291 | ) | ||
Depreciation and amortization |
29,323 | 25,031 | ||||||
Interest expense |
24,399 | 17,240 | ||||||
Income tax provision (benefit) |
(16,606 | ) | (7,627 | ) | ||||
Management fee |
608 | 991 | ||||||
Stock-based compensation |
567 | 668 | ||||||
Transaction fees |
4,686 | 1,023 | ||||||
Non-cash inventory step up |
19,183 | 2,194 | ||||||
Other |
894 | 682 | ||||||
|
|
|
|
|||||
Adjusted EBITDA |
$ | 29,010 | $ | 23,911 | ||||
|
|
|
|
Off-Balance Sheet Arrangements
We have no significant off balance sheet arrangements, other than liabilities related to leases of Winston Tire Company (Winston Tire) that we guaranteed when we sold Winston Tire in 2001. As of April 5, 2014, our total obligations as guarantor on these leases are approximately $1.8 million extending over five years. However, we have secured assignments or sublease agreements for the vast majority of these commitments with contractually assigned or subleased rentals of approximately $1.6 million as of April 5, 2014. A provision has been made for the net present value of the estimated shortfall. The accrual for lease liabilities could be materially affected by factors such as the credit worthiness of lessors, assignees and sublessees and our success at negotiating early termination agreements with lessors. These factors are significantly dependent on general economic conditions. While we believe that our current estimates of these liabilities are adequate, it is possible that future events could require significant adjustments to those estimates.
Critical Accounting Polices and Estimates
Managements Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with those accounting principles requires management to use judgments in making estimates and assumptions based on the relevant information available at the end of each period. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain. Actual results may differ from estimates.
Management believes there have been no significant changes during the quarter ended April 5, 2014, to the items that we disclosed as our critical accounting policies and estimates in Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 28, 2013.
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 clarifies guidance and eliminates diversity in practice on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective for annual reporting periods beginning on or after December 15, 2013 and subsequent interim periods. We adopted this guidance on December 29, 2013 (the first day of our 2014 fiscal year) and the adoption did not have a material impact on our consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, (ASU 2014-08). Under ASU 2014-08, only disposals representing a strategic shift in operations that have a major effect on a companys operations and financial results should be presented as discontinued operations. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The amendments in ASU 2014-08 are
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effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. However, ASU 2014-08 should not be applied to a component that is classified as held for sale before the effective date even if the component is disposed of after the effective date. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statement previously issued. We are currently assessing the impact, if any on our consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Our ABL Facility, FILO Facility and Term Loan are exposed to fluctuations in interest rates which could impact our results of operations and financial condition. Interest on the ABL Facility, FILO Facility and Term Loan are tied to, at our option, either a base rate, or a prime rate, or LIBOR. At April 5, 2014, the total amount outstanding under our ABL Facility, FILO Facility and Term Loan that was subject to interest rate changes was $1,020.0 million.
To manage this exposure, we use interest rate swap agreements in order to hedge the changes in our variable interest rate debt. Interest rate swap agreements utilized by us in our hedging programs are viewed as risk management tools, involve little complexity and are not used for trading or speculative purposes. To minimize the risk of counterparty non-performance, interest rate swap agreements are made only through major financial institutions with significant experience in such instruments.
At April 5, 2014, $620.0 million of the total outstanding balance of our ABL Facility, FILO Facility and Term Loan that was not hedged by an interest rate swap agreement and thus subject to interest rate changes. Based on this amount, a hypothetical increase of 1% in such interest rate percentages would result in an increase to our annual interest expense by $6.2 million.
The financial position and results of operations for TriCan, our 100% owned subsidiary acquired during 2012 are impacted by movements in the exchange rates between the Canadian dollar and the U.S. dollar. As of April 5, 2014, we did not have any foreign currency derivatives in place.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
(a) | We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. |
(b) | As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level. |
Changes in Internal Control Over Financial Reporting
During the quarter ended April 5, 2014, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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We are involved from time to time in various lawsuits, including alleged class action lawsuits arising out of the ordinary conduct of our business. Although no assurances can be given, we do not expect that any of these matters will have a material adverse effect on our business or financial condition. We are also involved in various litigation proceedings incidental to the ordinary course of our business. We believe, based on consultation with legal counsel, that none of these will have a material adverse effect on our financial condition or results of operations.
There have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 28, 2013.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
2.1 | Agreement and Plan of Merger, dated as of January 24, 2014, by and among ATD Merger Sub II LLC, American Tire Distributors, Inc., Hercules Tire Holdings LLC and the Equityholders of Hercules Tire Holdings LLC. | |
2.2 | Stock Purchase Agreement, dated as of February 17, 2014, by and among American Tire Distributors, Inc. and TTT Holding, Inc. | |
4.1 | Sixth Supplemental Indenture, dated as of January 31, 2014, among American Tire Distributors, Inc., American Tire Distributors Holdings, Inc., Am-Pac Tire Dist. Inc., Tire Wholesalers, Inc., and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 11.50% Senior Subordinated Notes due 2018. | |
4.2 | Seventh Supplemental Indenture, dated as of January 31, 2014, among American Tire Distributors, Inc., American Tire Distributors Holdings, Inc., Am-Pac Tire Dist. Inc., Tire Wholesalers, Inc., and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 11.50% Senior Subordinated Notes due 2018. | |
10.1 | Second Amendment to Sixth Amended and Restated Credit Agreement, dated as of January 31, 2014, among American Tire Distributors, Inc., Am-Pac Tire Dist. Inc., Trican Tire Distributors Inc., American Tire Distributors Holdings, Inc., Tire Wholesalers, Inc., Lenders party thereto and Bank of America, N.A. as Administrative and Collateral Agent and Lender. | |
10.2 | Credit Agreement, dated as of March 28, 2014, among American Tire Distributors Holdings, Inc., American Tire Distributors, Inc., the guarantors form time to time party thereto, Bank of America, N.A., as administrative agent, and each lender from time to time party thereto. | |
31.1 | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
45
31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following materials from the Companys Quarterly Report on Form 10-Q for the quarter ended April 5, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Statement of StockholdersEquity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
46
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, thereunto duly authorized.
Date: May 16, 2014 | AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC. | |||||
By: | /s/ JASON T. YAUDES | |||||
Jason T. Yaudes | ||||||
Executive Vice President and | ||||||
Chief Financial Officer | ||||||
(On behalf of the registrant and as Principal Financial Officer) |
47
Exhibit 2.1
Execution Version
AGREEMENT AND PLAN OF MERGER
AMONG
ATD MERGER SUB II LLC,
HERCULES TIRE HOLDINGS LLC,
THE EQUITYHOLDERS THAT ARE PARTIES HERETO,
AND, SOLELY FOR THE PURPOSES OF ARTICLE V AND SECTION 11.18, AMERICAN TIRE DISTRIBUTORS, INC.
January 24, 2014
TABLE OF CONTENTS
Page | ||||||
ARTICLE I DEFINITIONS | 1 | |||||
ARTICLE II MERGER; PURCHASE PRICE; CLOSING TRANSACTIONS | 1 | |||||
2.1 |
Merger |
1 | ||||
2.2 |
Effective Time |
1 | ||||
2.3 |
Certificate of Formation and Limited Liability Company Agreement |
1 | ||||
2.4 |
Managers and Officers |
1 | ||||
2.5 |
Effect on Units of Target |
2 | ||||
2.6 |
Options of Hercules |
2 | ||||
2.7 |
No Further Rights |
3 | ||||
2.8 |
Payment and Exchange Procedures |
3 | ||||
2.9 |
Payment Directions |
3 | ||||
2.10 |
Closing |
4 | ||||
2.11 |
Purchase Price |
4 | ||||
2.12 |
Closing Statement |
6 | ||||
2.13 |
Adjusted Closing Payment |
7 | ||||
2.14 |
Additional Payments |
7 | ||||
2.15 |
Withholding |
8 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS | 8 | |||||
3.1 |
Organization and Authority |
8 | ||||
3.2 |
Equity Ownership |
8 | ||||
3.3 |
No Conflicts |
8 | ||||
3.4 |
Litigation |
8 | ||||
3.5 |
No Brokers Fees |
8 | ||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES | 9 | |||||
4.1 |
Organization, Qualification and Corporate Power |
9 | ||||
4.2 |
Capitalization; Subsidiaries |
9 | ||||
4.3 |
Authority |
9 | ||||
4.4 |
No Conflicts |
10 | ||||
4.5 |
Financial Statements |
10 | ||||
4.6 |
Franchise Matters |
10 | ||||
4.7 |
Absence of Certain Changes |
11 | ||||
4.8 |
No Undisclosed Liabilities |
12 | ||||
4.9 |
Title to and Sufficiency of Assets |
12 | ||||
4.10 |
Tangible Personal Property; Condition of Assets |
13 | ||||
4.11 |
Accounts Receivable |
13 | ||||
4.12 |
Inventory |
13 | ||||
4.13 |
Real Property |
13 | ||||
4.14 |
Contracts |
14 | ||||
4.15 |
Intellectual Property |
15 | ||||
4.16 |
Tax |
16 | ||||
4.17 |
Legal Compliance |
18 | ||||
4.18 |
Litigation |
19 | ||||
4.19 |
Product and Service Warranties |
20 | ||||
4.20 |
Environmental |
20 |
i
4.21 |
Employees |
20 | ||||
4.22 |
Employee Benefits |
21 | ||||
4.23 |
Customers and Suppliers |
23 | ||||
4.24 |
Related Party Transactions |
24 | ||||
4.25 |
Indebtedness and Guaranties |
24 | ||||
4.26 |
No Retail Sales |
24 | ||||
4.27 |
Insurance |
24 | ||||
4.28 |
No Acceleration of Rights and Benefits |
24 | ||||
4.29 |
Capital Expenditures |
25 | ||||
4.30 |
Ethical Practices |
25 | ||||
4.31 |
No Brokers Fees |
25 | ||||
4.32 |
No Other Representations |
25 | ||||
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BUYER | 26 | |||||
5.1 |
Organization and Authority |
26 | ||||
5.2 |
No Conflicts |
26 | ||||
5.3 |
Litigation |
26 | ||||
5.4 |
No Brokers Fees |
26 | ||||
5.5 |
Investment Intent |
26 | ||||
5.6 |
Solvency |
26 | ||||
ARTICLE VI CERTAIN COVENANTS | 27 | |||||
6.1 |
Efforts to Close |
27 | ||||
6.2 |
Consents |
27 | ||||
6.3 |
Competition Act Approval |
27 | ||||
6.4 |
Operation of the Business |
27 | ||||
6.5 |
Full Access |
28 | ||||
6.6 |
Notice of Developments |
28 | ||||
6.7 |
401(k) Plan |
28 | ||||
6.8 |
Exclusivity |
28 | ||||
6.9 |
Termination of Related Party Arrangements |
29 | ||||
6.10 |
Supplement to Disclosure Schedule |
29 | ||||
6.11 |
Litigation Support |
29 | ||||
6.12 |
Name Change |
29 | ||||
6.13 |
Press Releases and Announcements |
29 | ||||
6.14 |
Confidentiality |
29 | ||||
6.15 |
WARN Act Notice |
30 | ||||
6.16 |
Directors and Officers Indemnification |
30 | ||||
6.17 |
Documents and Information |
30 | ||||
6.18 |
Additional Payment Covenants |
30 | ||||
6.19 |
Code § 280G Approval |
31 | ||||
ARTICLE VII CLOSING CONDITIONS | 31 | |||||
7.1 |
Conditions to Buyers Obligations |
31 | ||||
7.2 |
Conditions to Sellers and Targets Obligations |
33 | ||||
ARTICLE VIII INDEMNIFICATION | 34 | |||||
8.1 |
Indemnification by the Sellers |
34 | ||||
8.2 |
Indemnification by Buyer |
34 | ||||
8.3 |
Survival and Time Limitations |
34 | ||||
8.4 |
Limitations on Indemnification |
34 |
ii
8.5 |
Claims Against the Companies |
35 | ||||
8.6 |
Manner of Payment |
35 | ||||
8.7 |
Third-Party Claims |
36 | ||||
8.8 |
Other Indemnification Matters |
37 | ||||
8.9 |
Exclusive Remedy |
38 | ||||
ARTICLE IX TAX MATTERS | 38 | |||||
9.1 |
Tax Indemnification |
38 | ||||
9.2 |
Income Tax Returns for Periods Ending on or Before the Closing Date |
39 | ||||
9.3 |
Other Pre-Closing Tax Returns |
39 | ||||
9.4 |
Cooperation on Tax Matters |
39 | ||||
9.5 |
Certain Taxes |
40 | ||||
9.6 |
Tax Sharing Agreements |
40 | ||||
9.7 |
Refunds and Other Tax Benefits |
40 | ||||
9.8 |
Transaction Tax Deductions |
41 | ||||
9.9 |
Optionholder Payments |
42 | ||||
9.10 |
Tax Contests |
42 | ||||
ARTICLE X TERMINATION | 42 | |||||
10.1 |
Termination Events |
42 | ||||
10.2 |
Effect of Termination |
43 | ||||
ARTICLE XI MISCELLANEOUS | 43 | |||||
11.1 |
Further Assurances |
43 | ||||
11.2 |
No Third-Party Beneficiaries |
43 | ||||
11.3 |
Entire Agreement |
43 | ||||
11.4 |
Successors and Assigns |
43 | ||||
11.5 |
Counterparts |
44 | ||||
11.6 |
Notices |
44 | ||||
11.7 |
JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL |
45 | ||||
11.8 |
Governing Law |
45 | ||||
11.9 |
Amendments and Waivers |
45 | ||||
11.10 |
Severability |
45 | ||||
11.11 |
Expenses |
45 | ||||
11.12 |
Construction |
45 | ||||
11.13 |
Specific Performance |
46 | ||||
11.14 |
Time Is of the Essence |
46 | ||||
11.15 |
Disclosure Schedule |
46 | ||||
11.16 |
Sellers Representative |
46 | ||||
11.17 |
Attorney-Client Privilege and Conflict Waiver |
48 | ||||
11.18 |
Parent Guaranty |
48 |
EXHIBITS AND SCHEDULES
Exhibits
Exhibit A | Definitions | |
Exhibit B | Certificate of Merger | |
Exhibit C | Letter of Transmittal | |
Exhibit D | Indemnification Escrow Agreement |
iii
Exhibit E | Working Capital Escrow Agreement | |
Exhibit F | Noncompete Agreements | |
Exhibit G | Transition Services Agreement |
Schedules
Schedule 2.12(a) | Working Capital Example and Exceptions | |
Schedule 2.14 | Additional Payments | |
Schedule 6.2 | Consents | |
Schedule 6.9 | Termination of Related Party Agreements | |
Schedule 9.7(b)(ii) | State Tax Refunds and Carrybacks | |
Schedule P-1 | Permitted Encumbrances | |
Disclosure Schedule |
iv
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this Agreement) is entered into as of January 24, 2014, among ATD Merger Sub II LLC, a Delaware limited liability company (Buyer), Hercules Tire Holdings LLC, a Delaware limited liability company (the Target), the Equityholders that are listed on the signature pages hereto or that execute a Letter of Transmittal agreeing to be bound by the terms of this Agreement (each a Seller and, collectively, the Sellers), the Sellers Representative, and solely for the purposes of Article V and Section 11.18, American Tire Distributors, Inc., a Delaware corporation (Parent).
STATEMENT OF PURPOSE
The Sellers collectively own a majority of the outstanding Units of the Target. The Target owns all of the capital stock of The Hercules Tire & Rubber Company, a Connecticut corporation (Hercules). The Companies (other than the Target and the Companies listed as inactive on Section 4.2 of the Disclosure Schedule) are engaged in the business of purchasing, marketing, distributing and selling after-market replacement tires for passenger cars, trucks, and certain off road vehicles to tire dealers, wholesale distributors, retail distributors and others in the United States, Canada and internationally (collectively, as conducted by the Companies, the Business). Pursuant to this Agreement, Buyer will be merged with and into the Target, with the Target as the entity surviving after the merger (the Surviving Entity) for the consideration and on the terms and subject to the conditions set forth in this Agreement.
ARTICLE I
DEFINITIONS
All capitalized terms used throughout this Agreement and not otherwise defined herein shall have the meanings given them in Exhibit A
ARTICLE II
MERGER; PURCHASE PRICE; CLOSING TRANSACTIONS
2.1 Merger. At the Effective Time, upon the terms and subject to the satisfaction or written waiver of the conditions contained in this Agreement and the applicable provisions of the Delaware Limited Liability Company Act (DLLCA), Buyer shall be merged with and into the Target, the separate legal existence of Buyer shall cease, and the Target shall continue as the Surviving Entity (the Merger).
2.2 Effective Time. At the Effective Time, the effects of the Merger shall be as provided in the applicable provisions of the DLLCA and this Agreement. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, powers and franchises of the Target and Buyer shall vest in the Surviving Entity, and all debts, liabilities and duties of the Target and Buyer shall become the debts, liabilities and duties of the Surviving Entity.
2.3 Certificate of Formation and Limited Liability Company Agreement. At the Effective Time, by virtue of the Merger, the limited liability company agreement of Buyer as in effect immediately prior to the Effective Time shall be the limited liability company agreement of the Surviving Entity. The certificate of formation of the Target as in effect immediately prior to the Effective Time shall be the certificate of formation of the Surviving Entity.
2.4 Managers and Officers. The managers of Buyer immediately prior to the Effective Time shall be the managers of the Surviving Entity immediately after the Effective Time. The officers of Buyer immediately prior to the Effective Time shall be the officers of the Surviving Entity immediately after the Effective Time.
1
2.5 Effect on Units of Target. At the Effective Time, by virtue of the Merger and without any further action on the part of Buyer, the Target, or the Equityholders, each unit (other than any Post-Exercise Units) representing ownership interests in the Target issued and outstanding immediately prior to the Effective Time (each an Existing Unit) will be canceled and extinguished and be converted automatically into the right to receive the Per Unit Payment and a Pro Rata Share of any amounts to be delivered to the Sellers Representative under this Agreement for disbursements to the Equityholders subject to compliance with Section 2.8.
2.6 Options of Hercules.
(a) On or promptly following the execution of this Agreement, but in no event later than two Business Days thereafter, Target shall cause Hercules to deliver a Letter of Transmittal to each Optionholder.
(b) At the Effective Time, each outstanding Vested Option held by any U.S. Optionholder will either be (i) exercised as evidenced by delivery of an executed Letter of Transmittal completed to Sellers Representatives satisfaction prior to or at the Effective Time or (ii) deemed to be exercised at the Effective Time (subject to the conditions set forth in Section 2.8), unless otherwise mutually agreed by Buyer and Sellers Representative; provided, that after January 25, 2015 any outstanding Vested Option held by any Optionholder who has not delivered an executed Letter of Transmittal completed to Sellers Representatives satisfaction may be treated as forfeited at the Sellers Representatives option. Upon exercise or deemed exercise of any Vested Option held by an U.S. Optionholder and without any further action by the Target, Hercules or any other Person, Hercules will be deemed to have issued a number of common shares of Hercules equal to the number of common shares attributed to such Vested Option and the holder thereof will be deemed to have immediately contributed and assigned such common shares of Hercules to the Target in exchange for the issuance by the Target of a number of Units in the Target equal to the number of common shares of Hercules contributed by such holder to the Target (each a Post-Exercise Unit). At the Effective Time, the Vested Option Units with respect to each Vested Option exercised (or deemed exercised) of a U.S. Optionholder will be cancelled and converted into the right to receive the Option Payment with respect to such Vested Option Units and a Pro Rata Share of any amounts to be delivered to the Sellers Representative under this Agreement for disbursements to the Equityholders (in each case subject to all applicable U.S. federal, state, local and foreign (including Canadian provincial and municipal) Taxes and Tax withholdings) subject to compliance with Section 2.8.
(c) Immediately prior to the Effective Time, each outstanding Vested Option held by any Canadian Optionholder will be cancelled and upon such Canadian Optionholders execution and delivery of a Letter of Transmittal completed to the Sellers Representatives satisfaction in compliance with Section 2.8 on or before the Effective Time or such longer time period as determined in accordance with Section 2.8 will be converted into the right to receive the Option Payment with respect to such Vested Option and a Pro Rata Share of any amounts to be delivered to the Sellers Representative under this Agreement for disbursements to the Equityholders (in each case subject to all applicable U.S. federal, state, local and foreign (including Canadian provincial and municipal) Taxes and Tax withholdings). The payments in Section 2.11(d)(iv) provided by Buyer will be treated by all Parties as having been advanced to Hercules for the purposes of making the above payments to the Canadian Optionholders.
2
(d) At the Effective Time, all outstanding Options that are not Vested Options or which are not exercised (or deemed exercised) or cancelled in accordance with subparagraphs (b) and (c) of this Section 2.6 will be forfeited.
2.7 No Further Rights. The right to receive the consideration to be paid in accordance with the terms hereof shall constitute full satisfaction of all rights pertaining to the Units and Options, and, from and after the Effective Time, the holders of Units, Options or agreements representing ownership or grant of Units or Options shall cease to have any rights with respect thereof, except as otherwise expressly provided for in this Agreement, the Indemnification Escrow Agreement, or the Working Capital Escrow Agreement.
2.8 Payment and Exchange Procedures. As condition to payment, each Equityholder shall execute and deliver to the Sellers Representative a Letter of Transmittal completed to the Sellers Representatives satisfaction surrendering such Equityholders Units or Options, as the case may be. Without limiting the generality of the foregoing, in the case of any U.S. Optionholder whose Vested Options are deemed exercised pursuant to Section 2.6(b)(ii) or any Canadian Optionholder that has not timely delivered a Letter of Transmittal prior to or at the Effective Time, such Optionholders receipt of any consideration to be paid hereunder in respect of such Vested Options or Vested Option Units, as applicable, shall be conditioned upon the Sellers Representatives subsequent receipt of an executed Letter of Transmittal on or before January 25, 2015 (or such later time as determined by the Sellers Representative), unless the Sellers Representative and Buyer mutually agree that such executed Letter of Transmittal must be delivered on an earlier date. If the consideration provided for herein is to be delivered in the name of a Person other than the Person in whose name is listed as the owner of record on the Targets books and records immediately prior to the Effective Time, it shall be a condition of such delivery that all such Units or Options held by such Person be properly assigned by the owner of record and the Person requesting such payment (x) pays any transfer Tax required by reason of the payment to a Person other than the registered holder of such Units or Options or (y) establishes to the satisfaction of the Surviving Entity and the Sellers Representative that any such Tax has been paid or is otherwise not applicable. In making any payments hereunder, each of the Sellers Representative, the Surviving Entity, and the Companies shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Units or Options such amounts as may be required to be deducted or withheld with respect to the making of such payment under the Code or any applicable Tax provision (including any employment Taxes and Tax withholding in connection with the exercise or cancellation of any Vested Options). To the extent that amounts are so deducted or withheld and paid over to the appropriate Taxing authority by the Sellers Representative, the Surviving Entity, or the Companies, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.
2.9 Payment Directions. Notwithstanding anything to the contrary contained in this Agreement or otherwise, in lieu of payments to the Sellers Representative for disbursement to the holders of Existing Units in accordance with this Agreement, the Sellers Representative shall have the right from time to time to direct the Surviving Entity or any other payor of any amounts under this Agreement (or any other agreement executed in connection herewith) to make any such payments directly to the Equityholders (or any one of them) in accordance with such payment instructions approved in writing by the Sellers Representative. Except as otherwise set forth in the proviso in Section 2.11(d)(iv) or as otherwise requested by the Sellers Representative, any payments to be made in respect of exercised Vested Options that are converted into Post-Exercise Units shall be paid to Hercules (in lieu of making such payments directly to the Sellers Representative) to be further distributed to the holders thereof in accordance with such written payment instructions from the Sellers Representative. Except as otherwise set forth in the proviso in Section 2.11(d)(iv) or as otherwise requested by the Sellers Representative, any payments to be made in respect of cancelled Vested Options held by Canadian Optionholders shall be
3
paid to Hercules or to Hercules Canada as Hercules may direct (in lieu of making such payments directly to the Sellers Representative) to be further distributed to the holders thereof in accordance with such written payment instructions from the Sellers Representative. In connection with the foregoing payment and as directed in writing by the Sellers Representative and Buyer, Hercules and Hercules Canada, as the case may be, shall withhold all necessary Taxes in connection therewith and remit all required amounts (including both the employer and employee portion of employment Taxes) to the appropriate Taxing authorities in a timely manner. Notwithstanding the foregoing, the Sellers Representative shall have the right at any time to appoint an exchange agent reasonably acceptable to Buyer, at Sellers expense (in accordance with their Pro Rata Share), to hold any funds delivered to Sellers Representative in respect of Vested Options for which an Optionholder has failed to deliver a timely executed Letter of Transmittal in accordance with Section 2.6 and to disburse such funds in accordance with such directions as provided by Sellers Representative following a subsequent delivery by such Optionholders of an executed Letter of Transmittal during such time period as determined in accordance with Section 2.8.
2.10 Closing. Subject to the satisfaction of the conditions set forth in Sections 7.1 and 7.2 (or the waiver thereof by the Party entitled to waive any such condition), the Parties hereto will be required to complete the closing of the Merger (the Closing) at the offices of K&L Gates LLP, 214 North Tryon Street, Charlotte, North Carolina 28202 as soon as practicable, and no later than the fifth Business Day after satisfaction or waiver of each condition to the Closing set forth in Sections 7.1 and 7.2 (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions); provided that the Closing shall not be required to occur in any case prior to January 31, 2014. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, Buyer and the Target shall file the Certificate of Merger (the Certificate of Merger) in substantially the form attached hereto as Exhibit B with the Secretary of State of the State of Delaware, executed in accordance with the applicable provisions of the DLLCA (the time that such filing is accepted by the Secretary of State of the State of Delaware, or such later time as may be agreed upon in writing by Buyer and the Target and specified in the Certificate of Merger, shall be referred to herein as the Effective Time). The closing time will be deemed effective as of 12:01 a.m. Eastern Time (the Closing Time) on the Closing Date for all other purposes, including determining the Estimated Closing Payment and Adjusted Closing Payment.
2.11 Purchase Price.
(a) The aggregate merger consideration (the Purchase Price) will be (i) $310,000,000 (the Base Amount), as adjusted pursuant to Sections 2.11(c) and 2.13, plus (ii) up to $10,000,000 in Additional Payments, pursuant to Section 2.14.
(b) Not later than three (3) Business Days prior to the Closing Date, the Target shall deliver to Buyer good faith, written estimates of the Cash as of the Closing Time but without giving effect to the Closing (the Estimated Cash), the Indebtedness of the Companies as of the Closing Time but without giving effect to the Closing (the Estimated Indebtedness), the Working Capital as of the Closing Time but without giving effect to the Closing (the Estimated Working Capital) and the Transactions Costs as of the Closing Time but without giving effect to the Closing (the Estimated Transaction Costs). The estimates in the preceding sentence shall be subject to the written approval of Buyer prior to the Closing, which approval shall not be unreasonably withheld or delayed.
(c) The estimated closing payment (the Estimated Closing Payment) will be an amount equal to the Base Amount:
(i) plus, the amount of the Estimated Cash;
4
(ii) minus, the amount of the Estimated Indebtedness;
(iii) plus, if the Estimated Working Capital exceeds the Working Capital Target, the amount of such excess;
(iv) minus, if the Estimated Working Capital is less than the Working Capital Target, the amount of such deficit; and
(v) minus, the Estimated Transaction Costs.
(d) At Closing, Buyer will pay (or cause to be paid):
(i) an amount equal to $9,300,000 (the Indemnification Escrow Amount), which represents payment of a portion of the Purchase Price, to the Escrow Agent by wire transfer of immediately available funds to a single bank account designated by the Escrow Agent to be held pursuant to the terms of the Indemnification Escrow Agreement;
(ii) an amount equal to $1,000,000 (the Working Capital Escrow Amount), which represents payment of a portion of the Purchase Price, to the Escrow Agent by wire transfer of immediately available funds to a single bank account designated by the Escrow Agent to be held pursuant to the terms of the Working Capital Escrow Agreement;
(iii) an amount equal to $2,000,000 (the Sellers Representative Expense Fund) to the Sellers Representative, for the purposes of satisfying costs, expenses, and/or liabilities incurred by the Sellers Representative in its capacity as Sellers Representative or as otherwise permitted to be used for the benefit of the Equityholders in accordance with this Agreement, by wire transfer of immediately available funds to a single bank account designated by the Sellers Representative;
(iv) an amount equal to the Option Payments attributed to all Vested Option Units (the Closing Option Payment), to Hercules, Hercules Canada or Hercules payroll agent, as directed by Sellers Representative or Hercules, by wire transfer of immediately available funds to such accounts designated by Sellers Representative to be paid in accordance with Section 2.11(e) (provided, that if any Option Payments are attributed to either (a) Vested Options that were deemed exercised pursuant to Section 2.6(b)(ii)(x) or, (ii) Vested Options held by a Canadian Optionholder that has not timely delivered a Letter of Transmittal completed to the Sellers Representatives satisfaction on or before the Closing, then all Option Payments attributed to such Vested Option Units will be paid directly to Sellers Representative to be later disbursed (either directly or indirectly pursuant to Section 2.9) to such Optionholders upon compliance with Section 2.6 and Section 2.8 and if such Optionholders do not comply with Section 2.6 and Section 2.8, then such Option Payments may disbursed to the Sellers in accordance with their Pro Rata Shares);
(v) an amount equal to (a) the Per Unit Payment, multiplied by (b) the number of Existing Units, pursuant to the written payment directions of the Sellers Representative for the benefit of the holders of Existing Units, by wire transfer of immediately available funds to such accounts designated by the Sellers Representative;
(vi) on behalf of the Companies, an amount equal to the Repayment Indebtedness in accordance with the applicable pay-off letters, by wire transfer of immediately available funds to the bank accounts designated by the holders of the Repayment Indebtedness; and
(vii) on behalf of the Companies and the Sellers, an amount equal to the Estimated Transaction Costs by wire transfer of immediately available funds to the bank accounts designated by the payees for such Estimated Transaction Costs.
5
(e) Upon receipt by Hercules, Hercules Canada, as applicable, or Hercules payroll agent of any portion of the Closing Option Payment and Sellers Representatives satisfaction with the conditions set forth in Section 2.8, Buyer shall cause Hercules, Hercules Canada, as applicable, or Hercules payroll agent, as applicable, to pay such received amounts to the holders of Vested Option Units in accordance with the written payment directions provided by Sellers Representative to Buyer, minus any applicable Taxes and Tax withholdings (which shall be paid to the appropriate Taxing authorities by the Surviving Entity, Hercules, or Hercules Canada, as the case may be).
2.12 Closing Statement.
(a) After the Closing, Buyer will prepare a closing statement (the Closing Statement) showing its calculations of the Cash, Indebtedness, Working Capital and Transaction Costs, in each case as of the Closing Time but without giving effect to the Closing (collectively, the PP Components) and the Adjusted Closing Payment. The PP Components will be calculated pursuant to their definitions herein and, as applicable, in accordance with GAAP applied on a basis consistent with the application of GAAP in the preparation of the Companies audited Financial Statements for the fiscal year ending on October 31, 2013, including with respect to the nature, inclusion, exclusion and classification of accounts (or sub-accounts), and the inclusion or exclusion, and the methodology for determining the level or amount of, reserves, accruals or materiality and otherwise in a manner consistent with the calculation of Working Capital on Schedule 2.12(a). Within 90 days after the Closing Date, Buyer will deliver to the Sellers Representative the Closing Statement, together with reasonable supporting documentation therefor.
(b) The Sellers Representative and its accounting and legal representatives will be entitled to examine the work papers related to the preparation of the Closing Statement and the relevant books and records of the Companies and to discuss the preparation of the Closing Statement with Buyer, the Target, and any employees or advisors of Buyer who are involved in preparing the PP Components or the Closing Statement.
(c) If the Sellers Representative disagrees with Buyers calculation of the Adjusted Closing Payment, the Sellers Representative must deliver to Buyer, within 30 days after the date Buyer delivered the Closing Statement to the Sellers Representative, a written description of such disagreement (the Notice of Disagreement). Buyer and the Sellers Representative will negotiate in good faith to resolve any such disagreements. If, after a period of 30 days following the date on which such written description is delivered, Buyer and the Sellers Representative have not resolved each such disagreement, then either Buyer or the Sellers Representative will be entitled to submit such disagreements to the Resolution Accountants, with prior written notice regarding such submission to the nonsubmitting party.
(d) Within five Business Days after receipt of such written notice, Buyer and, on behalf of the Sellers, the Sellers Representative will each deliver to the Resolution Accountants a written settlement offer setting forth its calculations of the PP Components and the Adjusted Closing Payment (each, a Settlement Offer); provided, that neither Buyer nor Sellers Representative may submit a Settlement Offer that contains a proposal as to any PP Component that, in the case of a proposal by Buyer, is more adverse to the Sellers when compared to the Closing Statement, or, in the case of a
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proposal by the Sellers Representative, is more adverse to Buyer when compared to the Notice of Disagreement. Buyer will cause the Companies to grant to the Resolution Accountants reasonable access to the Companies books and records relating to the calculation of the PP Components. The Resolution Accountants will resolve such remaining disagreements within 30 days after the date on which the Resolution Accountants are engaged or as soon thereafter as possible, and the calculation of the Adjusted Closing Payment by the Resolution Accountants will be binding upon the Parties. The cost of the services of the Resolution Accountants will be borne by Buyer, on the one hand, or the Sellers (severally in accordance with their Pro Rata Share), on the other hand, based on whose Settlement Offer differs the most from the Adjusted Closing Payment as finally determined by the Resolution Accountants. If both Settlement Offers differ equally, such cost will be borne half by Buyer, on the one hand, and half by the Sellers (severally in accordance with their Pro Rata Share), on the other hand.
2.13 Adjusted Closing Payment.
(a) The adjusted closing payment (the Adjusted Closing Payment) will be an amount equal to the Base Amount:
(i) plus, the amount of the Cash as of the Closing Time but without giving effect to the Closing;
(ii) minus, the amount of the Indebtedness of the Companies as of the Closing Time but without giving effect to the Closing;
(iii) plus, if the Working Capital as of the Closing Time but without giving effect to the Closing exceeds the Working Capital Target, the amount of such excess;
(iv) minus, if the Working Capital as of the Closing Time but without giving effect to the Closing is less than the Working Capital Target, the amount of such deficit; and
(v) minus, the Transaction Costs as of the Closing Time but without giving effect to the Closing.
(b) Within ten Business Days after the final determination of the Adjusted Closing Payment in accordance with Section 2.12:
(i) if the Adjusted Closing Payment exceeds the Estimated Closing Payment, Buyer will pay to the Sellers Representative, by wire transfer of immediately available funds to the bank accounts designated by the Sellers Representative for the benefit of the Equityholders in accordance with this Agreement the amount of such excess; or
(ii) if the Adjusted Closing Payment is less than the Estimated Closing Payment, the Sellers Representative and Buyer will deliver joint written instructions to the Escrow Agent to deliver such deficit to Buyer from the available balance of the Working Capital Escrow Amount and if the balance of the Working Capital Escrow Amount is insufficient to cover such payment, then such additional deficiency shall be satisfied in accordance with Section 8.6(b).
2.14 Additional Payments. The Purchase Price will be subject to potential increase in accordance with Schedule 2.14 (the Additional Payments). Subject to Sellers Representatives rights under Section 2.9, all Additional Payments will be paid to the Sellers Representative for the benefit of the Equityholders in accordance with the terms of this Agreement (in accordance with their Pro Rata Share).
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2.15 Withholding. Notwithstanding anything to the contrary in Article II, to the extent required by the Code or applicable Law, Buyer or the Companies shall be permitted to deduct and withhold any amounts required by Law to be deducted and withheld from the Purchase Price. Any amounts so deducted or withheld shall, to the extent remitted to the proper Governmental Body, be treated as if paid to the Sellers for whom the deduction or withholding was required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS
Each Seller, severally and not jointly, represents and warrants to Buyer as of the date hereof and as of the Closing as follows:
3.1 Organization and Authority. Such Seller has full power, authority and legal capacity to execute and deliver each Transaction Document to which such Seller is a party and to perform such Sellers obligations thereunder. Upon the execution and delivery by such Seller of each Transaction Document to which such Seller is a party, such Transaction Document will constitute the valid and legally binding obligation of such Seller, enforceable against such Seller in accordance with the terms of such Transaction Document, subject to the Enforceability Exceptions. No ultimate shareholder or beneficial owner of such Seller is a resident of the Peoples Republic of China whose indirect investment in the Target is subject to PRC foreign exchange registration (foreign exchange registration in respect of PRC residents round-trip investment).
3.2 Equity Ownership. Such Seller owns of record and beneficially the Interests set forth next to such Sellers name on Section 4.2 of the Disclosure Schedule, free and clear of any Encumbrance or restriction on transfer (other than any restriction under any securities Law and any Encumbrance listed on Section 4.2 of the Disclosure Schedule that is being terminated on the Closing Date). Except as set forth on Section 4.2 of the Disclosure Schedule, such Seller is not a party to (a) any option, warrant, purchase right, right of first refusal, call, put or other Contract (other than this Agreement) that could require such Seller to sell, transfer or otherwise dispose of any Interests or (b) any voting trust, proxy or other Contract relating to the voting of any Interests.
3.3 No Conflicts. Neither the execution and delivery of the Transaction Documents to which such Seller is a party nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (a) violate any Law to which such Seller or any of such Sellers Interest is subject; (b) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any material Contract to which such Seller is a party or by which such Seller is bound or to which any of such Sellers Interest is subject or the performance of which is guaranteed by such Seller; or (c) result in the imposition of any Encumbrance on any of such Sellers Interest. Such Seller is not required to notify, make any filing with, or obtain any Consent of, any Person in order to perform the Transactions.
3.4 Litigation. There is no Proceeding pending or threatened in writing against such Seller relating to the Transactions.
3.5 No Brokers Fees. Such Seller does not have any Liability for any fee, commission or payment to any financial advisor, investment banker, broker or finder or similar agent with respect to the Transactions for which Buyer or any Company could be liable.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
Except as set forth in the Disclosure Schedule, the Target represents and warrants to Buyer as of the date hereof and as of the Closing as follows:
4.1 Organization, Qualification and Corporate Power.
(a) Each Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation. Each Company is duly qualified to do business and is in good standing under the laws of each jurisdiction where the failure to so qualify could reasonably result in a material adverse effect. Each Company has the requisite company power and authority to conduct the business in which it is engaged, to own and use the properties and assets that it purports to own or use and to perform its obligations.
(b) Section 4.1(b) of the Disclosure Schedule sets forth each Companys jurisdiction of incorporation or formation, the other jurisdictions in which it is qualified to do business, and its officers. The Target has delivered or made available to Buyer correct and complete copies of the Organizational Documents of each Company. No Company is in violation of any of its Organizational Documents. Except as set forth on Section 4.1(b) of the Disclosure Schedule, within the last three years, no Company has (a) used any trade names or assumed names or (b) operated any business other than the Business.
4.2 Capitalization; Subsidiaries. The entire authorized, issued and outstanding Equity of the Target is set forth on Section 4.2 of the Disclosure Schedule. Such Equity is owned of record and, to the Companies Knowledge, beneficially by the Persons and in the amounts set forth on Section 4.2 of the Disclosure Schedule. All of the outstanding Equity of each Company has been duly authorized and is validly issued, fully paid and nonassessable. Section 4.2 of the Disclosure Schedule lists each Company, its Equity outstanding, the record and beneficial owner of such Equity, and whether such entity is active or inactive. For each Company listed as inactive, such Company has no operations and, to the Companies Knowledge, has no Liabilities (other than Liabilities under leases in the name of any inactive Subsidiaries as set forth on the Disclosure Schedule). Except as set forth on Section 4.2 of the Disclosure Schedule, there are no outstanding securities convertible or exchangeable into Equity of any Company or any options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other Contracts that could require any Company to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem Equity of any Company. No Company has violated any securities Law in connection with the offer, sale or issuance of any of its capital stock or other equity or debt securities. Except as set forth on Section 4.2 of the Disclosure Schedule, there are no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to any Company. Except as set forth on Section 4.2 of the Disclosure Schedule, there are no voting trusts, proxies or other Contracts relating to the voting of the capital stock or Equity of any Company. Except as set forth on Section 4.2 of the Disclosure Schedule, no Company directly or indirectly controls or owns, or has any rights to control, acquire or own, any capital stock or other equity or debt securities or interest of or in any Person that is not a Subsidiary. Other than its ownership of a majority of the Units, Holdings has no assets or operations that relate to the Business or the Companies.
4.3 Authority. The Target has the requisite limited liability company power and authority to execute and deliver each Transaction Document to which it is a party and to perform its obligations thereunder. The execution and delivery by the Target of each Transaction Document to which it is a party and the performance by the Target of the Transactions have been duly authorized by all requisite limited liability company action of the Target. This Agreement constitutes the valid and legally binding obligations of the Target, enforceable against the Target in accordance with the terms of this Agreement, subject to the Enforceability Exceptions.
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4.4 No Conflicts. Except as set forth on Section 4.4 of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (a) violate any Law to which any Company or any asset owned or used by any Company is subject; (b) violate any Permit held by any Company or give any Governmental Body the right to terminate, revoke, suspend or modify any Permit held by any Company; (c) violate any Organizational Document of any Company; (d) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any Material Contract to which any Company is a party or by which any Company is bound or to which any asset of any Company is subject or under which any Company has any rights or the performance of which is guaranteed by any Company; (e) cause Buyer or any Company to have any Liability for any Tax; or (f) result in the imposition of any Encumbrance upon any asset owned or used by any Company. Except as set forth on Section 4.4 of the Disclosure Schedule, no Company is required to notify, make any filing with, or obtain any Consent of, any Person in order to perform the Transactions.
4.5 Financial Statements.
(a) Attached to Section 4.5(a)(i) of the Disclosure Schedule are the following financial statements (collectively, the Financial Statements): (i) audited, consolidated balance sheets of the Companies (other than the Target) as of October 31, 2012 and October 31, 2013 and statements of operations, stockholders equity, and cash flow for each of the fiscal years then ended, together with the notes thereto and the reports thereon of Plante & Moran, PLLC, independent certified public accountants; and (ii) an unaudited, consolidated balance sheet (the Interim Balance Sheet) of the Companies (other than the Target) as of December 31, 2013 (the Interim Date) and statement of operations for the two-month period then ended (the Interim Period). Except as set forth on Section 4.5(a)(ii) of the Disclosure Schedule, the Financial Statements have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered thereby, and present fairly in all material respects the financial condition of the Companies as of and for their respective dates; provided, however, that the interim financial statements described in clause (ii) above are subject to normal, recurring year-end adjustments (which will not be, individually or in the aggregate, materially adverse) and lack notes (which, if presented, would not differ materially from the notes accompanying the Balance Sheet). The Target has had no liabilities or income (other than in connection with its ownership of the capital stock of Hercules) and, other than its ownership of the capital stock of Hercules, the Target does not have any assets.
(b) Each Companys financial books and records (i) are complete and correct in all material respects and all material transactions to which such Company is or has been a party are accurately reflected therein in all material respects and (ii) form the basis for the Financial Statements.
(c) Each Company maintains a system of internal accounting controls that has been adequate to insure that such Company maintains no off-the-books accounts. To the Companies Knowledge, there are no events of fraud that involve management or other employees of any Company who have a role in any Companys financial reporting.
4.6 Franchise Matters. No Company (a) has offered, sold or granted franchises of any type, nor engaged in any action, conduct, operation or practice which constitutes, or reasonably could be construed as constituting, a franchise business or system, (b) has filed any application seeking registration, exemption, and/or approval to do any of the foregoing or (c) is currently a party to any
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Contract which relates to a franchise or business opportunity as defined by the Federal Trade Commission or under any Law that governs, regulates or otherwise affects the offer or sale of franchises or business opportunities.
4.7 Absence of Certain Changes. Except as set forth on Section 4.7 of the Disclosure Schedule, since the Audit Date:
(a) no Company has sold, leased, transferred or assigned any asset with a value of more than $150,000, other than for fair consideration in the Ordinary Course of Business;
(b) no Company has sold, leased, transferred or assigned any of its assets, tangible or intangible, with a value of more than $150,000, other than the sale or transfer of Inventory or immaterial assets for fair consideration in the Ordinary Course of Business;
(c) no Company has experienced any unreimbursed damage, destruction or loss in an amount exceeding $150,000 other than ordinary wear and tear (whether or not covered by insurance) to its property;
(d) other than in the Ordinary Course of Business, no Company has made any material change in the manner in which products or services of the Business are marketed or any material change in the manner in which the Business extends discounts or credits to customers;
(e) No Company has accelerated, terminated, modified or cancelled any Contract or Permit (or series of reasonably related Contracts and Permits) involving more than $300,000 annually to which any Company is a party or by which it is bound, and no Company has received any written notice that any other party to such a Contract or Permit (or series of reasonably related Contracts and Permits) has accelerated, terminated, modified or cancelled the same;
(f) no Company has imposed any Encumbrances (excluding Permitted Encumbrances) upon any of its assets, tangible or intangible;
(g) no Company has (i) made any unbudgeted capital expenditure (or series of related capital expenditures) either involving more than $150,000 or outside the Ordinary Course of Business, (ii) failed to make any scheduled capital expenditures or investments when due, or (iii) made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans or acquisitions) involving more than $300,000;
(h) no Company has delayed or postponed the payment of accounts payable or other Liabilities or accelerated the collection of accounts receivable, in either case outside the Ordinary Course of Business, or altered any accounting method or practice;
(i) the Companies have not issued, created, incurred or assumed Indebtedness involving more than $250,000 in the aggregate (excluding any Indebtedness incurred under the existing credit facilities);
(j) no Company has canceled, compromised, waived or released any right or claim (or series of related rights or claims) or any Indebtedness (or series of related Indebtedness) owed to it, in any case involving more than $250,000;
(k) no Company has issued, sold or otherwise disposed of any of its Equity or granted any options, warrants or other rights to acquire (including upon conversion, exchange or exercise)
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any of its Equity or declared, set aside, made or paid any dividend or distribution with respect to its Equity (whether in cash or in kind) or redeemed, purchased or otherwise acquired any of its Equity or amended any of its Organizational Documents;
(l) no Company has (i) conducted the Business outside the Ordinary Course of Business, (ii) made any loan to, or entered into any other transaction with, any of its officers or employees on terms that would not have resulted from an arms-length transaction, (iii) entered into any written employment Contract or modified the terms of any existing written employment Contract, (iv) granted any increase in the compensation of any of its officers or employees (including any increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) for any employees earning annual compensation in excess of $150,000, or (v) adopted, amended, modified or terminated any Employee Benefit Plan or other Contract for the benefit of any of its officers or employees;
(m) no Company has made, rescinded or changed any Tax election, changed any Tax accounting period, adopted or changed any material accounting method, filed any amended Tax Return, entered into any closing agreement, settled any Tax claim, assessment or Liability, surrendered any right to claim a refund of Taxes, consented to any extension or waiver of the limitation period applicable to any Tax claim or assessment, or taken any other similar action relating to the filing of any Tax Return or the payment of any Tax;
(n) there has not been any Proceeding commenced nor threatened in writing relating to or affecting any Company, the Business or any asset owned or used by any Company;
(o) there has not been any loss of any material customer, distribution channel, sales location or source of supply of Inventory, utilities or contract services or the receipt of any written notice that such a loss may be pending,
(p) there has not been any Material Adverse Effect; and
(q) no Company has not agreed or committed to any of the foregoing.
4.8 No Undisclosed Liabilities. No Company has any material Liability based on facts, events, or circumstances existing as of immediately prior to the Closing Time (and no basis exists for any material Liability) that would be required to be disclosed on the financial statements of such Company in accordance with GAAP (applied on a basis consistent with the preparation of the Companies audited Financial Statements for the fiscal year ending on October 31, 2013), except for (a) Liabilities under executory Contracts that are either listed on Section 4.14 of the Disclosure Schedule or are not required to be listed thereon, excluding Liabilities for any breach of any executory Contract, (b) Liabilities disclosed on the Disclosure Schedule, (c) Liabilities reflected or reserved against on the Interim Balance Sheet (rather than in the notes thereto), (d) current Liabilities incurred in the Ordinary Course of Business since the Interim Date (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement or violation of Law), and (e) Liabilities to the extent included in the final calculation of Transaction Costs, Indebtedness, or Working Capital.
4.9 Title to and Sufficiency of Assets. The Companies will have good and marketable title to, or a valid leasehold interest in, every property or asset purported to be leased or owned by them as of the Closing (the Assets), free and clear of any Encumbrances except Permitted Encumbrances. The Assets comprise all of the tangible and intangible properties, assets and interests in properties required for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to Closing.
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4.10 Tangible Personal Property; Condition of Assets. Section 4.10 of the Disclosure Schedule lists all machinery, equipment, parts, tools, fixtures, furniture, office equipment, computer hardware, supplies, motor vehicles, fork-lift trucks and other rolling stock, tire racks, storage containers and tangible personal property (other than Inventory) owned by the Companies (the Tangible Personal Property) that has a net book value in excess of $100,000 and its net book value. Except as set forth on Section 4.10 of the Disclosure Schedule, the buildings, plants, structures and Tangible Personal Property used by the Business that are owned or leased by any Company are structurally sound, free from material defects, in good operating condition and repair (subject to normal wear and tear and ordinary routine maintenance) and suitable for the uses for which they are used in the Business. Except as set forth on Section 4.10 of the Disclosure Schedule, none of such buildings, plants, structures, or Tangible Personal Property is in need of maintenance or repairs, except as is budgeted (and disclosed on Section 4.29 of the Disclosure Schedule) or that otherwise is for ordinary, routine maintenance and repairs that are not material in nature or cost to such building, plant, structure, or Tangible Personal Property. Except as set forth on Section 4.10 of the Disclosure Schedule, all of the Tangible Personal Property is located on the Real Property (except for those in transit in the Ordinary Course of Business).
4.11 Accounts Receivable. Section 4.11 of the Disclosure Schedule lists all Accounts Receivable as of the Interim Date and the aging of such Accounts Receivable. All Accounts Receivable represent valid obligations arising from products or services actually sold by a Company in the Ordinary Course of Business. The Accounts Receivables reserves to be reflected in the accounting records of the Companies as of the Closing Date (and reflected in Working Capital) will have been calculated consistent with past practices. To the Companies Knowledge, there is no contest, claim, or right to set-off, other than returns in the Ordinary Course of Business, under any Contract with any obligor of an Account Receivable relating to the amount or validity of such Account Receivable.
4.12 Inventory. Subject to the reserves related to Inventory to the extent included in the calculation of Working Capital, the Inventory consists of finished goods and is good and merchantable, of a quality and quantity useable and saleable for the needs of the Business in accordance with past practice, and fit for the purpose for which it was procured or manufactured. Except as set forth on Section 4.12 of the Disclosure Schedule, other than Inventory in transit in the Ordinary Course of Business, all of the Inventory is located on the Real Property.
4.13 Real Property.
(a) Section 4.13(a) of the Disclosure Schedule lists all of the real property and interests therein owned by any Company (with all easements and other rights appurtenant to such property, the Owned Real Property) and, relative to each such property or interest, the Company that owns it. The Companies have good and marketable fee simple title to the Owned Real Property, free and clear of any Encumbrances, except Permitted Encumbrances. No Company is a lessor of any parcel of Owned Real Property or any portion thereof or interest therein.
(b) Section 4.13(b) of the Disclosure Schedule lists all of the real property and interests therein leased, subleased or otherwise occupied or used by any Company (with all easements and other rights appurtenant to such property, the Leased Real Property). For each item of Leased Real Property, Section 4.13(b) of the Disclosure Schedule also lists the lessor, the lessee, and the lease, sublease, or other Contract pursuant to which the applicable Company holds a possessory interest in the Leased Real Property and all amendments, renewals, or extensions thereto (each, a Lease). With respect to each item of Leased Real Property, the leasehold interest of the applicable Company is free and clear of any Encumbrances, except Permitted Encumbrances. Except as set forth on Section 4.13(b) of the Disclosure Schedule, no Company is a sublessor of, or has assigned any lease covering, any item of Leased Real Property. Except as set forth on Section 4.13(b) of the Disclosure Schedule, leasing commissions or other brokerage fees due from or payable by any Company with respect to any Lease have been paid in full.
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(c) The Owned Leased Property and the Leased Real Property (collectively, the Real Property) constitute all interests of the Companies in real property currently used in connection with the Business. The Real Property is not subject to any rights of way, building use restrictions, title exceptions, variances, reservations or limitations of any kind or nature, except (i) those that in the aggregate do not impair the current use, occupancy, value or marketability of title to the Real Property and (ii) with respect to each item of Leased Real Property, as set forth in the Lease relating to such item: All buildings, plants, structures and other improvements owned or used by any Company lie wholly within the boundaries of the Real Property and do not encroach upon the property, or otherwise conflict with the property rights, of any other Person. The Real Property complies in all material respects with all Laws, including zoning requirements, the Companies have received and there remains in place a valid certificate of occupancy or the equivalent by the applicable Governmental Bodies having jurisdiction thereof authorizing the Companies use and occupancy, and no Company has received any written notifications from any Governmental Body or insurance company recommending improvements to the Real Property or any other actions relative to the Real Property. No Company is a party to or bound by any Contract (including any option) for the purchase or sale of any real estate interest or any Contract for the lease to or from any Company of any real estate interest not currently in possession of any Company.
4.14 Contracts.
(a) Section 4.14 of the Disclosure Schedule lists the following Contracts (other than purchase orders entered into in the Ordinary Course of Business) to which any Company is a party or by which any Company is bound or to which any asset of any Company is subject or under which any Company has any rights or the performance of which is guaranteed by any Company (collectively, with the Leases, Licenses and Insurance Policies, the Material Contracts): (i) each Contract (or series of related Contracts) that involves delivery or receipt of products or services that involves expenditures or receipts in any fiscal year in excess of $250,000; (ii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments in any fiscal year of less than $250,000), including each Lease and License; (iii) each joint venture, partnership or Contract involving a sharing of profits, losses, costs or Liabilities with any other Person; (iv) each Contract containing any covenant that purports to restrict the business activity of any Company or limit the freedom of any Company to engage in any line of business or to compete with any Person; (v) each Contract providing for payments to or by any Person based on sales, purchases or profits, other than direct payments for goods; (vi) each written warranty, guaranty or other similar undertaking with respect to contractual performance other than in the Ordinary Course of Business; (vii) each Contract for Indebtedness; (viii) each Contract to which any Seller or, to the Companies Knowledge, any Related Party of any Seller or of any Company is a party or otherwise has any rights, obligations or interests; and (ix) each Contract by virtue of which any Company owns any interest, directly or indirectly, in any joint venture, partnership, limited liability company, association, or other entity.
(b) The Target has delivered or made available to Buyer a correct and complete copy of each written Material Contract. Each Material Contract, with respect to any Company, is legal, valid, binding, enforceable against such Company, in full force and effect. Each Material Contract, with respect to the other parties to such Material Contract, to the Companies Knowledge, is legal, valid, binding, enforceable, in full force and effect. No Company is in breach or default, and, to the Companies Knowledge, no event has occurred that with notice or lapse of time would constitute a breach or default, or permit termination, modification or acceleration, under any Material Contract. To the Companies
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Knowledge, no other party is in breach or default, and no event has occurred that with notice or lapse of time would constitute a breach or default, or permit termination, modification or acceleration, under any Material Contract. To the Companies Knowledge, no party to any Material Contract has repudiated any provision of any Material Contract.
(c) No Company is currently a party to, has been a party to within the last three years, or presently contemplates being a party to, any Government Contract.
4.15 Intellectual Property.
(a) Each Company owns or has the right to use all Intellectual Property necessary or prudent for the operation of the Business as presently conducted. Each item of Intellectual Property owned, licensed or used by any Company immediately prior to the Closing will be owned, licensed or available for use by any Company on identical terms and conditions immediately following the Closing. Each item of Intellectual Property owned, licensed or used by any Company that is material to the Business is valid and enforceable and otherwise complies in all material respects with all Laws applicable to the enforceability thereof.
(b) To the Companies Knowledge, no Company has violated or infringed upon or otherwise come into conflict with any Intellectual Property of third parties, and no Company has received any written notice alleging any such violation, infringement or other conflict. To the Companies Knowledge, during the last three years, no third party has infringed upon or otherwise come into conflict with any Intellectual Property of any Company (other than as set forth on Section 4.15(c) of the Disclosure Schedule).
(c) Section 4.15(c) of the Disclosure Schedule identifies each pending or registered patent, trademark, service mark and copyright with respect to any of its Intellectual Property and identifies each current license, agreement or other permission that any Company has granted to any third party with respect to any of its Intellectual Property. The Target has delivered to Buyer correct and complete written reports of all such patents, trademarks, services marks, copyrights, licenses, agreements and permissions and have made available to Buyer correct and complete copies of all other written documentation evidencing ownership of each such item. Section 4.15(c) of the Disclosure Schedule also identifies each trade name or unregistered trademark or service mark owned by any Company. With respect to each item of Intellectual Property identified in Section 4.15(c) of the Disclosure Schedule: (i) the applicable Company possess all right, title and interest in and to the item, free and clear of any Encumbrance (other than Permitted Encumbrances); (ii) the item is not subject to any Order; (iii) except as set forth on Section 4.15(c) of the Disclosure Schedule, no Proceeding is pending or threatened in writing that challenges the legality, validity, enforceability, use or ownership of the item; and (iv) such Company has not agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to the item.
(d) Section 4.15(d) of the Disclosure Schedule identifies each item of Intellectual Property that any Person other than any Company owns and that any Company uses pursuant to license, agreement or permission (a License). With respect to each item of Intellectual Property required to be identified in Section 4.15(d) of the Disclosure Schedule: (i) to the Companies Knowledge, such item is not subject to any Order; (ii) to the Companies Knowledge, no Proceeding is pending or is threatened in writing that challenges the legality, validity or enforceability of such item; and (iii) the applicable Company has not granted any sublicense or similar right with respect to the License relating to such item.
(e) Each Company has taken commercially reasonable actions to maintain and protect its Intellectual Property that is material to the Business so as not to adversely affect the validity or enforceability thereof. This Section 4.15 contains all of the Companies representations and warranties with respect to the Intellectual Property matters addressed herein.
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4.16 Tax.
Except as set forth on Section 4.16(a) of the Disclosure Schedule,
(a) Each Company has timely filed with the appropriate Governmental Body all Tax Returns that such Company was required to have filed. All Tax Returns filed by each Company are true, correct and complete in all material respects. All Taxes owed by each Company (whether or not shown on any Tax Return, including all installments on account of Taxes for the current Tax year) have been paid to the proper Governmental Body. No written claim has been made by any Governmental Body in a jurisdiction where any Company does not file Tax Returns that such Company is or may be subject to the payment, collection or remittance of any Tax of that jurisdiction or is otherwise subject to taxation by that jurisdiction. There are no Encumbrances (other than Permitted Encumbrances) on any of the assets of any Company that arose in connection with any failure (or alleged failure) to pay any Tax. Section 4.16(a)(i) of the Disclosure Schedule contains a list of all states, territories and other jurisdictions (whether domestic or foreign) in which each Company has filed a franchise, income, employment, sale or use Tax Return at any time during the six-year period ending on the Closing Date, (ii) identifies those Tax Returns that have been audited, (iii) identifies those Tax Returns that currently are the subject of audit, and (iv) lists all governmental rulings and similar determinations with respect to Taxes requested or received by each Company. The Target has delivered or made available to Buyer true, correct and complete copies of all franchise, income, employment, sales or use, and property Tax Returns filed by, and all examination reports, and statements of deficiencies assessed against or agreed to by, each Company during the six-year period ending on the Closing Date.
(b) Each Company has withheld or collected, and paid to the proper Governmental Body, all Taxes required to have been withheld or collected and remitted, and complied in all material respects with all information reporting and back-up withholding requirements, and has maintained all required records with respect thereto, in connection with amounts paid or owing to any employee, customer, creditor, equityholder, independent contractor, or other third party.
(c) Since the Interim Date, no Company has incurred any Liability for Taxes outside the Ordinary Course of Business.
(d) To the Companies Knowledge, there is no basis for any Governmental Body to, and neither Seller nor any officer (or employee responsible for Tax matters) of any Company has been notified in writing that any Governmental Body intends to, assess any additional Taxes for any period for which Tax Returns have been filed. There is no investigation, audit, dispute or claim concerning any Liability for Taxes paid, collected or remitted by any Company either (i) claimed or raised by any Governmental Body in writing or (ii) as to which any Seller or any Company has Knowledge.
(e) No Company has waived any statute or period of limitations (which has not since closed) with respect to any Tax or agreed, or been requested by any Governmental Body to agree, to any extension of time (which has not since expired) with respect to any Tax. No extension of time within which to file any Tax Return of any Company is currently in effect.
(f) No Company has filed a consent under Code § 341(f), as in effect prior to the Jobs and Growth Tax Reconciliation Act of 2003, concerning collapsible corporations. No Company has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code § 280G or
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Code § 162(m). No Company has been a United States real property holding corporation within the meaning of Code § 897(c)(2) during the applicable period specified in Code § 897(c)(1)(A)(ii). Each Company has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of U.S. federal income Tax within the meaning of Code § 6662. No Company is a party to any agreement the principal subject matter of which is the allocation, sharing or reimbursement of Taxes (a Tax Sharing Agreement), excluding (for the avoidance of doubt) any lease, purchase order, supply agreement or other similar contract entered into in the Ordinary Course of Business. No Company has been a member of any Affiliated Group filing a consolidated U.S. federal, state, local or foreign (including Canadian provincial or municipal) income Tax Return (other than a group the common parent of which was the Target). No Company has any Liability for Taxes of any Person (other than any Company) under Treasury Regulation § 1.1502-6 (or any similar provision of any other Law), as a transferee or successor, or otherwise by operation of law. No Company has participated in an international boycott within the meaning of Code § 999. No asset of any Company (i) is property required to be treated as being owned by another Person pursuant to the provisions of § 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986, or (ii) constitutes tax-exempt use property or tax-exempt bond financed property within the meaning of Code § 168. No Company has been a distributing company within the meaning of Code § 355(c)(2) with respect to a transaction described in Code § 355 within the six-year period ending on the Closing Date.
(g) No Company has, directly or indirectly, participated in any transaction (including, the Transactions) that would constitute (i) a reportable transaction or listed transaction as defined in Treasury Regulation § 1.6011-4 or (ii) a tax shelter as defined in Code § 6111 and the Treasury Regulations thereunder.
(h) No Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (A) change in method of accounting for a taxable period ending on or prior to the Closing Date; (B) closing agreement as described in Code § 7121 (or any corresponding or similar provision of state, local or foreign (including Canadian provincial or municipal) Tax Law) executed on or prior to the Closing Date; (C) intercompany transactions occurring at or prior to the Closing or any excess loss account in existence at Closing described in Treasury Regulations under Code § 1502 (or any corresponding or similar provision of state, provincial, municipal, local or foreign Tax Law); (D) installment sale or open transaction disposition made, prepaid amount received, on or prior to the Closing Date, except to the extent that such sale, disposition or prepayment results in an offsetting liability which is taken into account in the determination of Working Capital (as in the case, for example, a deposit or deferred revenue); or (E) election under Code § 108(i).
(i) Each Company (other than the Target and Hercules) is, and has been at all times since its inception, either a corporation under subchapter C of the Code or a disregarded entity owned by a corporation under subchapter C of the Code for U.S. federal, and, as applicable, state and local income Tax purposes. Hercules is, and has been at all times since its inception, a corporation under subchapter C of the Code for U.S. federal, state and local income Tax purposes. The Target has been a partnership for U.S. federal, and, as applicable, state and local income Tax purposes from its inception until December 31, 2009, as of which date Target elected to be (and since such date has been) classified as a corporation for U.S. federal, state and local income Tax purposes. No Company owns an interest, directly or indirectly, in any joint venture, partnership, limited liability company, association, or other entity that is treated as a partnership for U.S. federal, state or local income tax purposes.
(j) No Company is subject to Tax in any country other than its place of incorporation or formation by virtue of having a permanent establishment or other fixed place of business
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in such other country. No Company is a passive foreign investment company within the meaning of Code § 1297. No Company is, nor at any time has been, subject to (i) the dual consolidated loss provisions of Code § 1503(d) or (ii) the recharacterization provisions of Code § 952(c)(2).
(k) None of sections 78, 80, 80.01, 80.02, 80.03 or 80.04 of the Income Tax Act (Canada), or any equivalent provision of the Tax legislation of any province have applied or will apply to any Canadian Resident Company at any time up to and including the Closing Date.
(l) No Canadian Resident Company has acquired property from a non-arms length Person, within the meaning of the Income Tax Act (Canada), for consideration, the value of which is less than the fair market value of the property acquired, in circumstances which could subject it to a liability under section 160 of the Income Tax Act (Canada).
(m) For all transactions between any Canadian Resident Company and any non-resident Person with whom such Company was not dealing at arms length during a taxation year commencing after 1998 and ending on or before the Closing Date, each Company has made or obtained records or documents that meet the requirements of paragraphs 247(4)(a) to (c) of the Income Tax Act (Canada).
(n) Each Company that carries on business in Canada is duly registered under subdivision (d) of Division V of Part IX of the Excise Tax Act (Canada) with respect to the goods and services tax and harmonized sales tax and, if applicable, under Division I of Chapter VIII of Title I of the Quebec Sales Tax Act with respect to the Quebec sales tax.
(o) The Interests are not taxable Canadian property for purposes of section 116, and within the meaning, of the Income Tax Act (Canada).
(p) Sections 4.16 and 4.22 contain all of the Companies representations and warranties with respect to the matters relating to Tax addressed in such sections. For the sake of clarity, the preceding sentence does not apply to Article IX.
4.17 Legal Compliance.
(a) Except as set forth on Section 4.17(a) of the Disclosure Schedule, each Company is, and for the last three years has been, in compliance in all material respects with all applicable Laws and Permits. Except as set forth on Section 4.17(a) of the Disclosure Schedule, no Proceeding is pending, nor has been filed or commenced within the last three years, against any Company, alleging any failure to comply with any applicable Law or Permit. Except as set forth on Section 4.17(a) of the Disclosure Schedule, no Company has received any written notice or other written communication from any Person regarding any actual, alleged or potential violation by any Company of any Law or Permit or any cancellation, termination or failure to renew any Permit held by any Company.
(b) None of the Companies, nor, to the Companies Knowledge, any of their managers, stockholders, directors, officers, employees, or agents are, or, at any time since January 1, 2009, were a Person that is or was: (i) identified on any U.S. Restricted Person List; (ii) identified on any other comparable list of Persons subject to trade restrictions and/or sanctions imposed or administered by any Governmental Body in any jurisdiction in which any Company operates; or (iii) organized, incorporated, established, located, resident of, or born in, or a citizen, national, or the government or a government instrumentality of, Cuba, Iran, Libya (during the period between February 25, 2011 and December 16, 2011), Myanmar (f/k/a Burma), North Korea, Sudan, Syria, or any other country embargoed or subject to substantial trade restrictions by the Governmental Body in any jurisdiction in
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which any Company operates. Except as set forth on Section 4.17(b) of the Disclosure Schedule, each Company and, to the Companies Knowledge, its stockholders, managers, directors, officers, employees and agents (to the extent any such agents have acted and/or are acting for or on behalf of a Company) are, and for the last five years have been, in compliance in all material respects with all applicable U.S. Trade Laws and foreign export and import Laws, and there are no claims, complaints, charges, investigations or proceedings pending or threatened in writing to any Companys Knowledge by any Governmental Body that implicate any Company, its stockholders, managers, directors, officers, employees or agents under any such Laws. Except as set forth on Section 4.17(b) of the Disclosure Schedule, all Taxes, and fees owed by each Company have been paid in full by each Company in connection with all imports and exports.
(c) Section 4.17(c) of the Disclosure Schedule contains a complete and accurate list of each material Permit held by any Company or that otherwise relates to the Business or any asset owned or leased by any Company and states whether each such Permit is transferable. Each Permit listed or required to be listed on Section 4.17(c) of the Disclosure Schedule is valid and in full force and effect. The Permits listed on Section 4.17(c) of the Disclosure Schedule constitute all of the material Permits necessary to allow any Company to lawfully conduct and operate the Business as currently conducted and operated and to own and use its assets as currently owned and used.
(d) Each Company has prepared and timely applied for all import and export Permits required in accordance with U.S. and foreign export and import Laws for the conduct of the Business. The Target has made available to Buyer true and complete copies of issued and pending import and export Permits, and all documentation required by, and necessary to evidence compliance with, all U.S. and foreign export and import Laws.
(e) Section 4.17(e) of the Disclosure Schedule lists (i) each recall that any Company is currently, or for the last ten (10) years has been, subject to, including any mandatory recall instituted by the NHTSA, Transport Canada or any other Governmental Body and any voluntary recall instituted by any Company or any other Person pursuant to the National Traffic Motor Vehicle Safety Act or any similar Law (each recall disclosed pursuant to this clause (i), a Recall) and (ii) each category of tire or other product manufactured, distributed or sold by any Company that is or was subject to a Recall. With respect to each Recall, the Companies: (A) for the last three years have complied in all materials respects with the requirements of the TREAD Act, NHTSA, Transport Canada and any other Governmental Body; and (B) have no continuing obligations, other than obligations required under the TREAD Act for periods of time after Closing. Other than the Recalls listed on Section 4.17(e) of the Disclosure Schedule, to the Companies Knowledge, there is no recall threatened in writing relating to or affecting any Company.
4.18 Litigation. Except as set forth in Section 4.18 of the Disclosure Schedule, there is no Proceeding pending or threatened in writing relating to (a) any Company or the Business or any asset owned or used by it or (b) the Transactions. All Liabilities arising directly in connection with the Proceedings set forth on Section 4.18 of the Disclosure Schedule will either be (i) the ultimate obligation of a third party supplier under the terms of a contract with such supplier or (ii) covered by the Companies insurance policies (subject to applicable reserves, deductibles, and policy limits). There is no outstanding Order to which any Company or any asset owned or used by it is subject. Section 4.18 of the Disclosure Schedule lists all Proceedings pending at any time within the last three years in which any Company has been named as a defendant (whether directly, by counterclaim or as a third-party defendant) and all Proceedings pending at any time within the last three years in which any Company has been a plaintiff. Section 4.18 of the Disclosure Schedule lists all Orders in effect at any time within the last three years to which any Company has been subject or any asset owned or used by any Company is subject, in each case excluding workers compensation and unemployment Proceedings in the Ordinary Course of Business.
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4.19 Product and Service Warranties. Except as set forth in Section 4.19 of the Disclosure Schedule, each product manufactured, sold, leased or delivered and each service provided by any Company has been in conformity with all applicable contractual commitments. Except as set forth in Section 4.19 of the Disclosure Schedule, no product manufactured, sold, leased or delivered or any service provided by any Company is subject to any guaranty, warranty or indemnity beyond the applicable standard terms and conditions imposed by the manufacturer of the product. Attached to Section 4.19 of the Disclosure Schedule are copies of the standard terms and conditions of sale or lease for each Company that related to the Business (containing applicable guaranty, warranty and indemnity provisions). No Company has engaged in or received written notice of any unfair or deceptive acts or practices related to the marketing, sale, delivery or provision of its products or services.
4.20 Environmental. Each Company is, and for the past three years has been, in material compliance with all Environmental Laws. Each Company has obtained and is, and for the past three years has been, in material compliance with all Permits that are required pursuant to any Environmental Law for the occupation of its facilities and the operation of the Business. All such Permits possessed by each Company are set forth on Section 4.20 of the Disclosure Schedule. Within the past three years, no Company has received any written notice, report or other written information regarding any actual or alleged violation of any Environmental Law, or any Liabilities or potential Liabilities, including any investigatory, remedial or corrective obligations, relating to it or its facilities arising under any Environmental Law. Except as set forth on Section 4.20 of the Disclosure Schedule, none of the following exists at any property or facility currently owned or operated by any Company and none of the following existed at any property or facility previously owned or operated by any Company at or before the time any Company ceased to own or operate such property or facility: (a) underground storage tanks, (b) asbestos-containing material in any form or condition, (c) materials or equipment containing polychlorinated biphenyls, or (d) landfills, surface impoundments or disposal areas. Except as set forth on Section 4.20 of the Disclosure Schedule, none of the Companies have treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, including any Hazardous Substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would reasonably be expected to give rise to any Liability, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any Environmental Law. Except as set forth on Section 4.20 of the Disclosure Schedule, no Company has engaged in fueling, refueling, or vehicle maintenance operations involving the use of Hazardous Substances on any Real Property. Neither this Agreement nor the Transactions will result in any Liability for site investigation or cleanup, or notification to or Consent of any Person, pursuant to any transaction-triggered or responsible property transfer Environmental Laws. No Company has, either expressly or by operation of law, assumed or undertaken any Liability, including any obligation for corrective or remedial action, of any other Person relating to any Environmental Law. This Section 4.20 contains all of the Companies representations and warranties with respect to the matters relating to Hazardous Substances, environmental conditions, or Environmental Laws addressed herein.
4.21 Employees.
(a) Section 4.21 of the Disclosure Schedule sets forth, as of the Interim Date, the name, job title, current rate of base salary and annual bonus potential, date of commencement of employment, any change in compensation since the Interim Date and sick and vacation leave that is accrued and unused with respect to each Active Employee whose rate of direct compensation (including wages, salaries and actual or anticipated bonuses), plus the annual value of other benefits not made available to the applicable Companys other employees generally that are not otherwise set forth on the Disclosure Schedule, either exceeded $150,000 during the previous calendar year or is reasonably likely to exceed $150,000 during the current calendar year (determined, for such purposes, without regard to the
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Transactions). No Company is or has been a party to or bound by any collective bargaining agreement and no labor union has bargaining rights with respect to any of the Companies. Within the last three years, no Company has experienced any strike, slowdown, picketing, work stoppage, employee grievance process, claim of unfair labor practice or other collective bargaining dispute or, to the Companies Knowledge, been threatened with any dispute by or on behalf of any labor union. There is no lockout of any employees by any Company, and no such action is contemplated by any Company. Within the last three years, no Company has committed any unfair labor practice under the National Labor Relations Act or any other applicable Employment Laws. To the Companies Knowledge, (i) no event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute and (ii) there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of any Company. To the Companies Knowledge, no employee or officer of any Company is a party to or bound by any agreement that (i) could reasonably be expected to adversely affect the performance of his or her duties as an employee or officer other than for the benefit of the Companies, (ii) could reasonably be expected to adversely affect the ability of any Company to conduct the Business, (iii) restricts or limits in any way the scope or type of work in which he or she may be engaged other than for the benefit of the Companies or (iv) requires him or her to transfer, assign or disclose information concerning his or her work to anyone other than any Company.
(b) Each Company is, and for the last three years has been, in compliance in all material respects with all applicable Employment Laws. With respect to each current or former employee, consultant, independent contractor or director of each Company, such Company: (i) has withheld and reported all amounts required by Law or by Contract to be withheld and reported with respect to wages, salaries and other payments; (ii) is not liable for any arrears of wages, severance pay or any Taxes or any penalty for failure to comply with any of the foregoing; and (iii) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the Ordinary Course of Business). There are no Proceedings pending or threatened in writing against any Company relating to any employee of any Company. Except as set forth on Section 4.21 of the Disclosure Schedule, there are no pending or threatened in writing Proceedings against any Company or any Company trustee under any workers compensation policy. No Company has been subject to any additional or penalty assessments under any workers compensation policy which has not been paid. To the Companies Knowledge, there are no pending nor potential assessments, experience rating charges that could adversely affect any Companys premium payments or accident cost experience or result in any additional payments. No Company has any Liability with respect to any misclassification of (i) any Person or employee as an independent contractor rather than as an employee, (ii) any employee leased from another employer or (iii) any employee currently or formerly classified as exempt from overtime wages. No Company has received any correspondence from the Social Security Administration advising of a no-match between an employees name and Social Security number. Within the past year, no Company has incurred any liability or obligation under the WARN Act or any similar state or local Law that remains unsatisfied, and no terminations prior to the Closing Date shall result in unsatisfied liability or obligation under the WARN Act or any similar state or local Law. No Company employee has experienced an employment loss, as defined by the WARN Act or any similar applicable state or local Law, requiring notice to employees in the event of a closing or layoff, within ninety (90) days prior to the date of this Agreement.
4.22 Employee Benefits.
(a) Section 4.22 of the Disclosure Schedule lists each Employee Benefit Plan that any Company maintains or to which any Company contributes, has any obligation to contribute or has any other Liability:
(i) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in all material respects with the applicable requirements of ERISA, the Code, the terms of such Employee Benefit Plan and other applicable Laws.
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(ii) All required reports and descriptions (including Form 5500 Annual Reports, summary annual reports, PBGC-1s and summary plan descriptions) have been timely filed and distributed appropriately with respect to each such Employee Benefit Plan. The requirements of COBRA, where applicable, have been met with respect to each such Employee Benefit Plan that is an Employee Welfare Benefit Plan.
(iii) All contributions (including all employer contributions and employee salary reduction contributions) that are due have been paid to each such Employee Benefit Plan that is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date that are not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Companies. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan that is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan that is an Employee Pension Benefit Plan (other than a registered retirement savings plan as defined in the Income Tax Act (Canada)) meets the requirements of a qualified plan under Code § 401(a), has received a favorable determination letter from the IRS, or may rely upon an opinion or advisory letter issued by the IRS, that it is such a qualified plan, and, to the Companies Knowledge, there are no facts or circumstances that could result in the revocation of such determination letter, or the inability to rely upon such opinion or advisory letter.
(v) No Company has any commitment, intention or understanding to modify or terminate any such Employee Benefit Plan, except as required by Buyer in connection with the Closing or as may be mandated by operation of law.
(vi) The execution of the Transaction Documents and the performance of the Transactions will not constitute a triggering event under any such Employee Benefit Plan that (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment, parachute payment (as defined in Code § 280G), acceleration, vesting or increase in benefits to any employee or former employee of any Company.
(vii) The Target has delivered to Buyer correct and complete copies of the plan documents and summary plan descriptions or employee booklets prepared for employees and former employees and their beneficiaries concerning each Employee Benefit Plan, the most recent determination letter received from the IRS, the Form 5500 Annual Reports and non-discrimination testing results for the two most recent plan years, and all related trust agreements, insurance contracts and other funding agreements that implement each such Employee Benefit Plan.
(viii) To the Companies Knowledge, all data necessary to administer each Employee Benefit Plan is in the possession of the Companies or their agents and is in a form which is sufficient for the proper administration of each Employee Benefit Plan in accordance with its terms and all Laws and such data is complete and correct.
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(b) With respect to each Employee Benefit Plan that any Company (or any entity treated as a single employer with Seller for purposes of Code § 414) maintains or has maintained or to which it contributes, has contributed, or has been required to contribute or had any Liability:
(i) There has been no material prohibited transaction (as defined in ERISA § 406 or Code § 4975) with respect to any such Employee Benefit Plan. No fiduciary (as defined in ERISA § 3(21) or within the meaning of applicable Canadian Law) has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No Proceeding with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or threatened in writing. To the Companies Knowledge, there is no basis for any such Proceeding. There are no pending or threatened in writing claims with respect to any such Employee Benefit Plan other than routine claims for benefits.
(c) No Company nor any other entity, trade or business that, along with such Company, is a member of a group described in Code § 414(b), (c), (m) or (o) or ERISA § 4001(a)(14) (ERISA Affiliate) contributes, has contributed to, has been required to contribute, or as a result of the Transactions will be required to contribute to any Multiemployer Plan or has any Liability (including withdrawal liability as defined in ERISA § 4201) under any Multiemployer Plan. No Company maintains or has maintained or contributes, has contributed, has been required to contribute, or as a result of the Transactions will be required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses or their dependents (other than in accordance with COBRA). None of the Employee Benefit Plans is a Canadian Pension Plan. There are no entities other than the Companies that participate in any Employee Benefit Plan that is maintained for the Companies employees in Canada.
(d) No Company nor any ERISA Affiliate of such Company sponsors, maintains or contributes to, or has any obligation to contribute to, or has any Liability under or with respect to, any (i) Employee Pension Benefit Plan that is or was subject to Code §§ 412 or 4971, ERISA § 302 or Title IV of ERISA, or (ii) Multiemployer Plan, or multiple employer plan as defined in Code § 413(c), or otherwise has any Liability under Title IV of ERISA. There is no lien under ERISA or the Code in favor of, or enforceable by the PBGC or any other entity with respect to any Employee Benefit Plan that is an Employee Pension Benefit Plan or any of the assets of any Company. No Company has any Liability by reason of at any time being considered a single employer with any other Person under Code § 414.
(e) Section 4.22(e) of the Disclosure Schedule lists each agreement, contract, plan or other arrangement (whether or not written and whether or not an Employee Benefit Plan) to which any Company is a party that is a nonqualified deferred compensation plan within the meaning of Code § 409A and the Treasury Regulations promulgated hereunder. Except as set forth on Section 4.22(e) of the Disclosure Schedule, each such nonqualified deferred compensation plan (i) complies in all material respects, and is operated and administered in all material respects in accordance, with the requirements of Code § 409A, the Treasury Regulations promulgated hereunder and any other IRS guidance issued thereunder and (ii) has been operated and administered in good faith compliance with Code § 409A from the period beginning on January 1, 2005. This Section 4.22 contains all of the Companies representations and warranties with respect to the matters relating to Employee Benefit Plans and ERISA addressed herein.
4.23 Customers and Suppliers. With respect to each Disclosure Period, Section 4.23 of the Disclosure Schedule lists (a) the ten largest (by dollar volume) customers of the Companies, taken as a whole, during each such period (showing the dollar volume for each) and (b) the ten largest (by costs of goods sold) suppliers of the Companies, taken as a whole, during each such period (showing the dollar volume for each).
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4.24 Related Party Transactions. Except as set forth on Section 4.24 of the Disclosure Schedule, within the past three years, neither any equityholder, stockholder, officer or employee of any Company nor, to the Companies Knowledge, any Related Party of any of the foregoing has (a) owned any interest in any asset used in the Business, or (b) been involved in any business or transaction with any Company (except as an employee of, consultant to, or owner, director, or officer of any Companies or related to isolated immaterial purchases of tires and other Inventory from the Companies time to time). Except as set forth on Section 4.24 of the Disclosure Schedule, neither any shareholder, officer or employee of any Company nor, to the Companies Knowledge, any Related Party of any of the foregoing (i) is a party to any Contract with, or has any claim or right against, any Company (except as exist (but are not past due) under the terms of an employment agreement) or (ii) has any Indebtedness owing to any Company (excluding payables for employee-purchased tires on credit). To the Companies Knowledge, no Company (A) has any claim or right against any shareholder, officer or employee of any Company or any Related Party of any of the foregoing or (B) has any Indebtedness owing to any shareholder, officer or employee of any Company nor any Related Party of any of the foregoing.
4.25 Indebtedness and Guaranties. Complete and correct copies of all instruments (including all amendments, supplements, waivers and consents) relating to any Indebtedness of any Company have been furnished or made available to Buyer. No Company is a guarantor or otherwise liable for any Liability (including Indebtedness) of any other Person (excluding other active, wholly-owned Subsidiaries of the Target). Except as set forth on Section 4.25 of the Disclosure Schedule, no Company is party to any Contract which, by its terms, will require Buyer or any Company to support its obligations under such Contract with a letter of credit or any Encumbrances (other than Permitted Encumbrances) on the Companies assets.
4.26 No Retail Sales. Except as set forth on Section 4.26 of the Disclosure Schedule, within the past five years, no Company has engaged in or operated any retail sales business, including the sale of tires, tire parts, tire accessories and related equipment and the performance of related services for end consumers.
4.27 Insurance. Section 4.27 of the Disclosure Schedule sets forth the following information with respect to each insurance policy (collectively, the Insurance Policies) to which any Company is a party, a named insured, covered or otherwise the beneficiary of coverage: the name of the insurer, the policy number, the name of the policyholder, the period of coverage, and the amount of coverage. The Target has delivered or made available to Buyer true and complete copies of each Insurance Policy and each pending application of any Company for any insurance policy. All premiums relating to the Insurance Policies have been timely paid. Section 4.27 of the Disclosure Schedule describes any self-insurance arrangements affecting any Company. Each Company is in compliance in all material respects with all obligations relating to insurance created by Law or any Contract to which any Company is a party. The Target has delivered or made available to Buyer copies of loss runs and outstanding claims as of a recent date with respect to each Insurance Policy.
4.28 No Acceleration of Rights and Benefits. Except as set forth on Section 4.28 of the Disclosure Schedule, no rights or benefits of any Person have been (or will be) accelerated, increased or modified and no Person has the right to receive any payment or remedy (including rescission or liquidated damages), in each case as a result of a change of control of Target or the consummation of the Transactions.
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4.29 Capital Expenditures. Attached to Section 4.29 of the Disclosure Schedule is (a) a list of each Companys capital expenditures (or series of related capital expenditures) in excess of $250,000 for each Disclosure Period and (b) each Companys budget for capital expenditures for its current fiscal year. There are no capital expenditures that any Company currently plans to make or anticipates will need to be made during its current fiscal year or the following fiscal year in order to comply with existing Laws or to continue operating the business of such Company following the Closing in the manner currently conducted by such Company. No Company has foregone or otherwise materially altered any planned capital expenditure as a result of the Sellers or the Targets decisions to enter into the Transactions or otherwise sell or dispose of the business of any Company.
4.30 Ethical Practices. Each Company is, and for the last three years has been, in compliance in all material respects with the Foreign Corrupt Practices Act and all related or similar Laws. No Company nor its officers or, to the Companies Knowledge, employees, or any joint venture partner of any Company has, illegally offered money or illegally given anything of value to: (a) any official of a Governmental Body, any political party or official thereof, or any candidate for political office with the purpose of attempting to induce such Person to act improperly; (b) any customer or member of any Governmental Body; or (c) any other Person, with the intent that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to any customer, member of a Governmental Body or candidate for political office for the purpose of the following: (i) illegally influencing any action or decision of such Person, in his, her or its official capacity, including a decision to fail to perform his, her or its official function; (ii) illegally inducing such Person to use his, her or its influence with any Governmental Body to affect or influence any act or decision of such government or instrumentality to assist any Company in obtaining or retaining business for, or with, or directing business to, any Person; or (iii) where such payment or thing of value would constitute an illegal bribe, kickback or payment or gift to assist any Company in obtaining or retaining business for, or with, or directing business to, any Person.
4.31 No Brokers Fees. No Company has any Liability for any fee, commission or payment to any financial advisor, investment banker, broker or finder or similar agent with respect to the Transactions, other than fees and expenses payable to the Financial Advisor included within Transaction Costs.
4.32 No Other Representations. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IV, THE TARGET MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO CONDITION, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NOTWITHSTANDING ANYTHING TO THE CONTRARY, (A) THE TARGET SHALL NOT BE DEEMED TO MAKE TO BUYER ANY REPRESENTATION OR WARRANTY OTHER THAN AS EXPRESSLY MADE BY THE TARGET IN THIS AGREEMENT AND (B) EXCEPT AS EXPRESSLY COVERED BY A REPRESENTATION AND WARRANTY CONTAINED IN THIS ARTICLE IV, THE TARGET MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO (I) ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED TO OR MADE AVAILABLE TO BUYER OR ITS COUNSEL, ACCOUNTANTS OR ADVISORS OF FUTURE REVENUES, EXPENSES OR EXPENDITURES OR FUTURE RESULTS OF OPERATIONS OF THE COMPANIES, OR (II) ANY OTHER INFORMATION OR DOCUMENTS (FINANCIAL OR OTHERWISE) MADE AVAILABLE TO BUYER OR ITS COUNSEL, ACCOUNTANTS OR ADVISORS WITH RESPECT TO THE COMPANIES OR THE BUSINESS.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
Each of Buyer and Parent represents and warrants to the Sellers as of the date hereof and as of the Closing as follows:
5.1 Organization and Authority. Such Party is a limited liability company or corporation, as the case may be, duly organized, validly existing and in good standing under the laws of the state of Delaware. Such Party has full limited liability company or corporate, as the case may be, power and authority to execute and deliver each Transaction Document to which it is a party and to perform its obligations thereunder. The execution and delivery by such Party of each Transaction Document to which such Party is a party and the performance by such Party of the Transactions have been duly approved by all requisite limited liability company or corporate, as the case may be, action of such Party. This Agreement constitutes the valid and legally binding obligation of such Party, enforceable against such Party in accordance with the terms of this Agreement, subject to the Enforceability Exceptions. Upon the execution and delivery by such Party of each Transaction Document to which such Party is a party, such Transaction Document will constitute the valid and legally binding obligation of such Party, enforceable against such Party in accordance with the terms of such Transaction Document, subject to the Enforceability Exceptions.
5.2 No Conflicts. Neither the execution and delivery of this Agreement nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (a) violate any Law to which such Party is subject; (b) violate any Organizational Document of such Party; or (c) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any Contract to which such Party is a party or by which such Party is bound or the performance of which is guaranteed by such Party. Such Party is not required to notify, make any filing with, or obtain any Consent of, any Person in order to perform the Transactions.
5.3 Litigation. There is no Proceeding pending or threatened in writing against such Party relating to or that could impair such Partys ability to perform its obligations to consummate, the Transactions.
5.4 No Brokers Fees. Such Party has no Liability for any fee, commission or payment to any financial advisor, investment banker, broker or finder or similar agent with respect to the Transactions for which any Company or Seller could be liable.
5.5 Investment Intent. Buyer is acquiring the Units for its own account and not with a view to distribution of such Units in violation of the Securities Act.
5.6 Solvency. As of the Closing, and after giving effect to all of the transactions contemplated by this Agreement and assuming the accuracy of the representations and warranties regarding the Companies in Article IX, each of the Parent, the Buyer, and the Companies (other than the Companies that are inactive) will be Solvent. For purposes of this Section 5.6, Solvent means that, with respect to any Person and as of the Closing Date, (A) the amount of the present fair saleable value of the assets of such Person, will, as of such date, exceed the amount of all liabilities of such Person, contingent or otherwise, as of such date, as such quoted terms are generally determined in accordance with applicable federal laws governing determinations of the insolvency of debtors, (B) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its Indebtedness as its Indebtedness becomes absolute and matured, (C) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business and (D) such Person will be able to pay its Indebtedness as it matures.
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ARTICLE VI
CERTAIN COVENANTS
6.1 Efforts to Close. Each Party will use its reasonable best efforts to take all actions necessary, proper or advisable in order to perform the Transactions contemplated to occur on the Closing Date (including satisfaction, but not waiver, of the closing conditions set forth in Article VII).
6.2 Consents. As promptly as practicable after the date hereof and through the Closing Date, the Sellers and the Target will cause each Company to solicit the Consents set forth with respect to such Company on Schedule 6.2, but not prior to Buyers approval of the form and substance of each such Consent, which approval will not be unreasonably withheld or delayed. From the date hereof until the Closing, the Sellers and the Target will cause each Company to use commercially reasonable efforts, and Buyer will cooperate in all reasonable respects with the Sellers and the Companies, to obtain all such Consents; provided, however, that such cooperation will not include any requirement to pay any material consideration, to agree to any material undertaking or modification to a Contract or Permit or to offer or grant any material financial accommodation not required by the terms of such Contract or Permit.
6.3 Competition Act Approval.
(a) Notwithstanding anything contained herein to the contrary, Buyer shall be responsible for determining the strategy for the Competition Act Approval process. Each of Buyer and the Target shall use commercially reasonable efforts to obtain Competition Act Approval. Buyer and the Target shall cooperate with one another in connection with obtaining Competition Act Approval in respect of the Merger, including submitting on a timely basis all applications, notifications, filings, submissions, documentation and information that is required, or in the reasonable opinion of Buyer, advisable in connection with obtaining Competition Act Approval.
(b) Neither Buyer nor the Target shall submit any applications, notifications, filings, submissions, documentation, information or responses to any information requests or participate in any meetings or any material conversations with any Governmental Body in respect of obtaining Competition Act Approval unless it consults with the other Party in advance and gives the other Party a reasonable opportunity to review drafts of any such materials and considers the other Partys comments in good faith, or provides reasonable opportunity to attend and participate in any meetings or material communications. Despite the foregoing, applications, notifications, filings, submissions, documentation, information or responses to be submitted to any Governmental Body may be redacted as necessary before sharing with the other Party to address reasonable confidentiality concerns; provided that external legal counsel may review unredacted versions of such materials.
6.4 Operation of the Business. From the date hereof until the Closing, the Target will, and the Target and the Sellers will cause each Company to: (a) conduct the Business of each Company only in the Ordinary Course of Business (other than as contemplated by this Agreement); (b) use their best efforts to maintain, in a manner consistent with the Ordinary Course of Business, the properties, physical facilities and operations of each Company in the same condition as they were on the date of this Agreement (subject to reasonable wear and tear), preserve intact the current business organization of each Company, keep available the services of the current officers, employees and agents of each Company, and maintain the relations and goodwill with suppliers, customers, lenders, creditors, employees, agents and others having material business relationships with any Company; (c) continue in full force and effect without material modifications all Insurance Policies, except as required by applicable Law; (d) confer
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with Buyer with respect to, and provide Buyer with copies of, Tax Returns before filing; (e) not effect any recapitalization, reclassification, or like change in such Companys capitalization; (f) comply in all material respects with all applicable Laws; (g) maintain its books and records in accordance with past practice; (h) not institute, settle or agree to settle any Proceeding by or before any Governmental Body; and (i) not agree or commit to do any of the actions prohibited by this Section 6.4. The Sellers and the Target will not, and will cause each Company not to, engage in any practice, take any action, fail to take any action, or enter into any transaction as a result of which any change or event listed in Section 4.7 is reasonably likely to or does occur.
6.5 Full Access. From the date hereof until the Closing, the Sellers and the Target will, and will cause each Company and its Representatives to, (a) permit Buyer and its Representatives to have reasonably full access during normal business hours, upon reasonable prior notice, to all premises, properties, key personnel (including the opportunity to discuss the affairs of the Companies with such personnel), books, records, Contracts, documents and data of or pertaining to each Company, (b) furnish Buyer and its Representatives with copies of all such books, records, Tax Returns, Contracts, documents and data as Buyer may reasonably request and (c) furnish Buyer and its Representatives with such additional financial, operating, and other data and information (including compilations and analyses thereof) as Buyer may reasonably request.
6.6 Notice of Developments. From the date hereof until the Closing, the Sellers and the Target will immediately notify Buyer in writing of (a) any fact or condition existing prior to or on the date hereof that constitutes a breach of any representation or warranty of any Seller or the Target in this Agreement and (b) any fact or condition developing after the date hereof that would constitute a breach of any representation or warranty of any Seller or the Target in this Agreement if such representation or warranty were made on the date of the occurrence or discovery of such fact or condition.
6.7 401(k) Plan. If requested in writing by Buyer at least five (5) Business Days prior to the Closing Date, the Target shall take (or cause to be taken) all actions necessary or appropriate to terminate, effective no later than the day immediately preceding the Closing Date (the Plan Termination Date), any Employee Benefit Plan sponsored or maintained by any Company that contains a cash or deferred arrangement intended to qualify under Code § 401(k) (a Company 401(k) Plan); provided, that pursuant to any such termination of a Company 401(k) Plan, Buyer shall permit rollover contributions from Company 401(k) Plan participants into a similar plan of Buyer or its Affiliates. If the Target is required to terminate any Company 401(k) Plan, then the Target shall provide to Buyer prior to the Plan Termination Date written evidence of the adoption of resolutions by the applicable Companys Board of Directors or similar governing body authorizing the termination of such Company 401(k) Plan (the form and substance of which resolutions shall be subject to the prior review of Buyer). The Target and any applicable Company also shall take such other actions in furtherance of terminating such Company 401(k) Plan as Buyer may reasonably request. Any actions taken under this Section 6.7 shall be made contingent upon the consummation of the Merger.
6.8 Exclusivity. Each Seller and the Target agrees that it will not, and will cause its Representatives, each Company, and each Companys Representatives not to, directly or indirectly: (a) solicit, initiate or encourage any inquiry, proposal, offer or contact from any Person (other than Buyer and its Affiliates and Representatives) relating to any transaction involving the sale of any equity interest or assets (other than the sale of Inventory in the ordinary course of business) of any Company or any acquisition, divestiture, merger, share exchange, consolidation, business combination, recapitalization, redemption, financing or similar transaction involving any Company (in each case, an Acquisition Proposal); or (b) participate in any discussion or negotiation regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any Acquisition Proposal.
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6.9 Termination of Related Party Arrangements. Prior to or simultaneously with the Closing, the Target shall, and shall cause each of the respective Companies and the counterparties thereto to, terminate the related party agreements identified on Schedule 6.9 hereto.
6.10 Supplement to Disclosure Schedule. From time to time prior to the Closing, the Target shall promptly supplement or amend the Disclosure Schedule hereto with respect to any matter hereafter arising or of which it becomes aware after the date hereof, which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedule (each a Schedule Supplement). Any disclosure in any such Schedule Supplement shall not be deemed to have cured any inaccuracy in or breach of any representation or warranty contained in this Agreement, including for purposes of the indemnification or termination rights contained in this Agreement or of determining whether or not the conditions set forth in Section 7.1 have been satisfied.
6.11 Litigation Support. Following the Closing, if any Party is evaluating, pursuing, contesting or defending against any Proceeding in connection with (a) any Transaction or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any Company, then upon the request of such Party each other Party will cooperate with the requesting Party and its counsel in the evaluation, pursuit, contest or defense, make available its personnel, and provide such testimony and access to its books and records as may be necessary in connection therewith. The requesting Party will reimburse each other Party for its out-of-pocket expenses related to such cooperation, unless the requesting Party is entitled to indemnification therefor under Article VIII (without regard to whether or not Section 8.4 applies).
6.12 Name Change. Within 30 days after Closing, Holdings will change its name to a name that does not include the word Hercules.
6.13 Press Releases and Announcements. The timing and content of all announcements regarding any aspect of this Agreement to the financial community, any governmental entity or the general public shall be mutually agreed upon in advance by Buyer and the Sellers Representative; provided that each Party may make any such announcement that it in good faith believes, based on advice of counsel, is necessary or advisable in connection with any legal requirement, it being understood and agreed that, to the extent reasonably practical under the circumstances, each Party shall provide Buyer or Sellers Representative, as applicable, with copies of any such announcement in advance of such issuance and shall work in good faith with Buyer, on the one hand, or the Sellers Representative, on the other hand, to modify any language that such Party deems reasonably necessary to change; provided, that nothing herein shall prevent any Party from referencing the transactions contemplated hereby (including financial returns and other matters related thereto) in confidential materials provided to investors of such Party or referencing the consummation of the sale generally in tombstones or other announcements; provided, that no terms of such transaction are disclosed.
6.14 Confidentiality. For a period of five (5) years following the Closing, each Seller will, and will use commercially reasonable efforts to cause its Affiliates and Representatives to, maintain the confidentiality of the Confidential Information at all times, and will not, directly or indirectly, use any Confidential Information for its own benefit or for the benefit of any other Person or reveal or disclose any Confidential Information to any Person other than authorized Representatives of Buyer, except (i) in connection with this Agreement or the enforcement of any Sellers rights thereunder, (ii) with the prior written consent of Buyer, (iii) to prepare Tax Returns, or financial statements, (iv) to make distributions or reports to owners or current or prospective lenders or investors; provided that such Persons are subject to confidentiality obligations with respect to such Confidential Information, or (v) to the extent necessary to perform Sellers duties as an employee, director, or officer of any Company; provided, further, that
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nothing herein shall prohibit Holdings or any of its Affiliates or Representatives from being permitted to disclose Confidential Information to its equityholders, partners, investors, directors, managers, officers, employees, agents, lenders, advisors, or representatives so long as such parties are notified of such confidentiality obligations and informed to keep such information confidential. The covenants in this Section 6.14 will not apply to Confidential Information that (a) is or becomes available to the general public through no breach of this Agreement by such Seller or any of its Affiliates or Representatives or, to the Companies Knowledge, breach by any other Person of a duty of confidentiality to Buyer or (b) such Seller is required to disclose by applicable Law; provided, however, that such Seller will notify Buyer in writing of such required disclosure as much in advance as practicable in the circumstances and cooperate with Buyer to limit the scope of such disclosure.
6.15 WARN Act Notice. Following the Closing, Buyer shall, to the extent applicable, be solely responsible for providing any notice required under the WARN Act or any similar foreign, state or local law, regulation or ordinance in respect of the termination after the Closing of the employment of any employee of the Companies, and shall indemnify and hold the Sellers harmless from any Liability arising from any failure of Buyer to comply fully with the foregoing covenant.
6.16 Directors and Officers Indemnification.
(a) Following the Closing, Buyer agrees that all rights to indemnification or exculpation now existing in favor of the managers, directors, officers, employees and agents of any of the Companies, as provided in the charter, organizational or similar documents of such Company or otherwise in effect as of the date hereof with respect to any matters occurring prior to the Closing Date, shall survive the Closing and shall continue in full force and effect and that the Companies will perform and discharge their obligations to provide such indemnity and exculpation after the Closing. For a period of six (6) years following the Closing, the indemnification and liability limitation or exculpation provisions of the charter, organizational or similar documents of the Companies shall not be amended, repealed or otherwise modified after the Closing Date in any manner that would adversely affect the rights thereunder of individuals who, as of the Closing Date or at any time prior to the Closing Date, were managers, directors, officers, employees or agents of any of the Companies, unless such modification is required by applicable Law.
(b) The managers, directors, officers, employees and agents of each of the Companies who are both (i) Sellers and (ii) entitled to the indemnification, liability limitation and exculpation set forth in this Section 6.16(b) are intended to be third-party beneficiaries of this Section 6.16(b). This Section 6.16(b) shall survive the consummation of the transactions contemplated by the Closing.
6.17 Documents and Information. After the Closing Date, Buyer shall, and shall cause each of the Companies to, until the second anniversary of the Closing Date, retain all material books and records of the Companies relating to the periods prior the Closing Date (other than books and records related to Tax matters which shall be retained pursuant to the periods set forth in Section 9.4) in accordance with Buyers general document retention policies; provided, however, that if on the second anniversary of the Closing Date a claim for indemnification made by any Seller Indemnittee under this Agreement remains outstanding and unresolved, then all material books and records of the Companies relating to such claim shall be retained until such claim is resolved.
6.18 Additional Payment Covenants. For the Applicable Period, Buyer shall, and shall cause the Companies to, (i) use commercially reasonable efforts to cause the conditions for the Additional Payments to be satisfied, (ii) not take any action with the primary intent or purpose of frustrating the achievement of any conditions for the payment of any portion of any Additional Payments, and (iii) maintain the Companies business and relationships with the Key Suppliers in a manner consistent with the Companies past practices.
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6.19 Code § 280G Approval. Prior to the Closing, the Target shall take such actions, in a manner reasonably satisfactory to Buyer, as may be necessary to cause a stockholder vote, that if approved, would cause all payments which would otherwise constitute excess parachute payments under Code § 280G as a result of the Merger to satisfy the stockholder approval exemption under Code § 280G(b)(5)(A)(ii) (including without limitation, entering into a waiver of payments or benefits with each individual who is a disqualified individual of the Target and that may otherwise be entitled to receive excess parachute payments as a result of the Merger (as those terms are defined under Code § 280G) (a 280G Waiver), preparing a Code § 280G disclosure statement, and seeking the requisite stockholder approval).
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Buyers Obligations. Buyers obligation to perform the Transactions contemplated to be performed on or before the Closing Date is subject to satisfaction, or written waiver by Buyer, of each of the following conditions:
(a) (i) all of the representations and warranties regarding the Companies in Article IV shall be true and correct in all respects both as of the date hereof and as if made on the Closing Date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except where the failure of such representations and warranties to be so true and correct would not, in the aggregate, have a Material Adverse Effect, (ii) the Target shall have performed and complied in all material respects with all of its covenants and agreements in this Agreement to be performed prior to or at the Closing and (iii) the Target shall have delivered to Buyer at the Closing a certificate, in form and substance reasonably satisfactory to Buyer, confirming satisfaction of the conditions in clauses (i) and (ii) above;
(b) (i) all of the representations and warranties of the Sellers in Article III shall be true and correct in all respects both as of the date hereof and as if made on the Closing Date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except where the failure of such representations and warranties to be so true and correct would not, in the aggregate, have a material adverse effect, (ii) Holdings, both in its capacity as a Seller and as Sellers Representative, shall have performed and complied in all material respects with all of its covenants and agreements in this Agreement to be performed by it prior to or at the Closing and (iii) Holdings shall have delivered to Buyer at the Closing a certificate, in form and substance reasonably satisfactory to Buyer, confirming satisfaction of the conditions in clauses (i) (with respect to Holdings only and not all other Sellers) and (ii) above;
(c) no injunction or restraining order shall have been issued by any Governmental Body, and be in effect, which restrains or prohibits any of the Transactions;
(d) from the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect;
(e) Competition Act Approval shall have been received; and
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(f) each of the following documents must have been delivered to Buyer and dated as of the Closing Date (unless otherwise indicated):
(i) a certificate of the secretary or assistant secretary of the Target, in form and substance reasonably satisfactory to Buyer, certifying that (A) attached thereto are true, correct and complete copies of (1) the Targets Organizational Documents, (2) resolutions duly adopted by the board of managers of the Target authorizing the performance of the Transactions and the execution and delivery of the Transaction Documents to which it is a party and (3) a certificate of good standing for the Target as of a recent date from the Delaware Secretary of State and (B) the resolutions referenced in subsection (A)(2) above are in full force and effect.
(ii) certification from Target certifying as to its non-foreign status as set forth in Treasury Regulation § 1445-2(b), signed under penalties of perjury, in form and substance reasonably satisfactory to Buyer.
(iii) an opinion from Honigman Miller Schwartz and Cohn LLP in form and substance reasonably satisfactory to Buyer and subject to customary limitations and exceptions opining as to the Targets valid existence, authority, and the enforceability of this Agreement against the Target;
(iv) payoff letters with respect to the Repayment Indebtedness, dated as of the Closing Date or within a reasonable time prior to the Closing Date, and all documentation necessary or desirable to obtain releases of all Encumbrances related to the Repayment Indebtedness, including appropriate UCC termination statements and Personal Security Tax discharges, in each case in form and substance reasonably satisfactory to Buyer;
(v) written resignations of the officers and directors or managers of the Companies listed on Schedule 7.1(f)(v) hereto;
(vi) a payoff letter for the amounts under the BlackArch Engagement Letter in form and substance reasonably satisfactory to Buyer;
(vii) evidence of termination of each of the related party agreements identified on Schedule 6.9 hereto in form and substance reasonably satisfactory to Buyer;
(viii) the Indemnification Escrow Agreement, executed by the Sellers Representative and the Escrow Agent;
(ix) the Working Capital Escrow Agreement, executed by the Sellers Representative and the Escrow Agent;
(x) the Transition Services Agreement, executed by William P. Trimarco;
(xi) an itemized list of the Estimated Transaction Costs and Estimated Indebtedness;
(xii) evidence reasonably satisfactory to Buyer that (A) a stockholder vote was solicited in conformance with Code § 280G, and the requisite stockholder approval was obtained with respect to any payments and/or benefits that were subject to the stockholder vote (the 280G Approval) or (B) the 280G Approval was not obtained and as a consequence, pursuant to the 280G Waivers, the payments and/or benefits that were subject to the stockholder vote shall not be made or provided;
(xiii) Noncompete Agreements, executed by each of FdG Associates LLC, Robert Keller, Jeffrey R. Marshall and William P. Trimarco; and
(xiv) such other documents or instruments as Buyer may reasonably request and are reasonably necessary to consummate the Transactions.
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7.2 Conditions to Sellers and Targets Obligations. The Sellers and the Targets obligations to perform the Transactions contemplated to be performed on or before the Closing Date are subject to satisfaction, or written waiver by the Sellers Representative, of the following conditions:
(a) (i) all of the representations and warranties regarding Buyer in Article V shall be true and correct in all respects both as of the date hereof and as if made on the Closing Date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except where the failure of such representations and warranties to be so true and correct would not have a material and adverse effect on Buyers ability to consummate the Transactions, (ii) Buyer shall have performed and complied in all material respects with all of its covenants and agreements in this Agreement to be performed prior to or at the Closing and (iii) Buyer shall have delivered to Sellers Representative at the Closing a certificate, in form and substance reasonably satisfactory to Sellers Representative, confirming satisfaction of the conditions in clauses (i) and (ii) above;
(b) no injunction or restraining order shall have been issued by any Governmental Body, and be in effect, which restrains or prohibits any of the Transactions;
(c) Competition Act Approval shall have been received;
(d) each of the following documents must have been delivered to the Sellers Representative dated as of the Closing:
(i) a certificate of the secretary or assistant secretary of Buyer, in form and substance reasonably satisfactory to Sellers Representative certifying that (A) attached thereto are true, correct and complete copies of (1) Buyers Organizational Documents, (2) resolutions duly adopted by the board of managers of Buyer authorizing the performance of the Transactions and the execution and delivery of the Transaction Documents to which it is a party and (3) a certificate of good standing for Buyer as of a recent date from the Delaware Secretary of State and (B) the resolutions referenced in subsection (A)(2) above are in full force and effect;
(ii) the Indemnification Escrow Agreement, executed by Buyer and the Escrow Agent;
(iii) the Working Capital Escrow Agreement, executed by Buyer and the Escrow Agent;
(iv) the Transition Services Agreement, executed by Buyer; and
(v) such other documents or instruments as Sellers Representative may reasonably request and are reasonably necessary to consummate the Transactions.
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ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by the Sellers. Subject to the terms and conditions of this Article VIII:
(a) Each Seller, severally based on such Sellers individual breach and not jointly with any other Seller, will indemnify and hold harmless Buyer Indemnitees from, and pay and reimburse Buyer Indemnitees for, all Losses, directly or indirectly, relating to or arising from: (i) any breach or inaccuracy of any representation or warranty made by such Seller in Article III; or (ii) any breach of any covenant or agreement of such Seller in this Agreement.
(b) Each Seller, severally (in accordance with its Pro Rata Share) but not jointly, will indemnify and hold harmless Buyer Indemnitees from, and pay and reimburse Buyer Indemnitees for, all Losses, directly or indirectly, relating to or arising from: (i) any breach or inaccuracy of any representation or warranty made by the Target in Article IV; (ii) any breach of any covenant or agreement by the Sellers Representative or the Sellers collectively; (iii) any claim by any Seller or any Person claiming through or on behalf of any Seller related to Sellers Representatives conduct under Section 11.16 or otherwise; (iv) any Indebtedness or Transactions Costs to the extent not reflected in the Adjusted Closing Payment; or (v) any breach of any pre-Closing covenant or agreement of Target in this Agreement.
8.2 Indemnification by Buyer. Subject to the terms and conditions of this Article VIII, Buyer will indemnify and hold harmless the Seller Indemnitees from, and pay and reimburse the Seller Indemnitees for, all Losses, directly or indirectly, relating to or arising from: (a) any breach or inaccuracy of any representation or warranty made by Buyer in Article V; or (b) any breach of any covenant or agreement of Buyer in this Agreement.
8.3 Survival and Time Limitations. All representations, warranties, covenants and agreements in this Agreement will survive the Closing as set forth in this Agreement. The Sellers will have no Liability with respect to any claim for any breach or inaccuracy of any representation or warranty set forth in Article III or Article IV of this Agreement, unless Buyer notifies the Sellers Representative of such a claim on or before the Survival Date; provided, however, that (a) any claim for a Tax relating to a Pre-Closing Tax Period relating to a breach or inaccuracy in a representation in Section 4.16 (tax) may be made at any time until the date 90 days after the expiration of the statute or period of limitations (including any extension of such statute or period of limitations) applicable to Third-Party Claims with respect thereto; and (b) any claim relating to any Fundamental Representation or any Special Indemnity Matter may be made at any time without any time limitation. Buyer will have no Liability with respect to any claim for any breach or inaccuracy of any representation or warranty set forth in Article V of this Agreement, unless the Sellers Representative notifies Buyer of such a claim on or before the Survival Date; provided, however, that any claim relating to fraud, willful misconduct, or any covenant or agreement may be made at any time without any time limitation. If Buyer or the Sellers Representative, as applicable, provides proper notice of a claim within the applicable time period set forth above, liability for such claim will continue until such claim is resolved. If Buyer or the Sellers Representative, as applicable, however, does not provides proper notice of a claim within the applicable time period set forth above, then the Parties that would otherwise be responsible for such indemnification will not have any liability for such claims.
8.4 Limitations on Indemnification. The Sellers will have no Liability with respect to the matters described in Section 8.1(b)(i) until the total of all Losses with respect to such matters exceeds $1,550,000 (the Basket), in which event the Sellers will only be responsible for aggregate Losses exceeding the Basket; provided, however, that any claim relating to any Fundamental Representation will
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not be subject to or counted towards the Basket. The maximum aggregate Liability with respect to the matters described in Section 8.1(b)(i) will be limited to an amount equal to $9,300,000 (the Cap); provided, however, that any claim relating to any Fundamental Representation will not be subject to the Cap. This Section 8.4 will not apply to indemnification for any Special Indemnity Matters.
8.5 Claims Against the Companies. Except as set forth in the following sentence, a Seller may not assert, directly or indirectly, and hereby waives, any claims existing prior to or on the Closing Date against any Company (including under any employment, equity incentive or related agreements). Notwithstanding the foregoing, no Seller waives any rights such Seller has under this Agreement or any other Transaction Documents or any right that such Seller has accruing after the Closing or accrued but not due until after the Closing under any employment, equity incentive or related agreements specifically identified on the Disclosure Schedule. This Section 8.5 will also apply to the Sellers Representative in a similar manner as it applies to the Sellers.
8.6 Manner of Payment. Subject to the other conditions and limitations set forth in this Agreement (including Section 8.4), (A) Buyer may set off any amount to which Buyer or any other Buyer Indemnitee may be entitled under this Agreement against (i) any Additional Payments and (ii) any amount due to Sellers under Section 2.13(b) and (B) Buyer may set off any amount to which any Buyer Indemnitee may be entitled under Article IX against any Tax refunds that Sellers are entitled to under Article IX. Neither the exercise of nor the failure to exercise such right of setoff will constitute an election of remedies or limit the enforcement of any other remedies that may be available. Subject to the other provisions in this Section 8.6, claims for any amount due to Buyer under Section 2.13(b) (a Buyer True-Up Payment), or indemnification payments pursuant to Section 8.1 or Article IX will be paid as follows:
(a) any claim brought pursuant to Section 8.1(a) may be satisfied, at Buyers option, in any combination of (i) out of any available Escrow Funds, (ii) by using the set off rights pursuant to this Section 8.6 above, or (iii) directly from the breaching Seller giving rise to such claim;
(b) any claim brought for any Buyer True-Up Payment (i) will first be satisfied out of the Working Capital Escrow Amount, and (ii) to the extent, that any Buyer True-Up Payment exceeds the remaining balance of the Working Capital Escrow Amount such excess will be satisfied, at Buyers option, in any combination of (A) out of any available Escrow Funds, (B) by using the set off rights pursuant to this Section 8.6 above, or (C) directly from the Sellers (in accordance with their Pro Rata Share);
(c) any claim brought pursuant to Section 8.1(b)(i) (other than any claim for a breach or inaccuracy of any Fundamental Representation) (i) will first be satisfied out of any available Escrow Funds, (ii) if such claim exceeds the available Escrow Funds, the excess of such claim will be satisfied by using the set off rights pursuant to this Section 8.6 above to the extent there are payments due to the Sellers, and (iii) if such claim exceeds the aggregate amount available under clauses (i) and (ii) above, the excess of such claim will be satisfied directly from the Sellers (in accordance with their Pro Rata Share); and
(d) any claim brought pursuant to Section 8.1(b)(i) for a breach or inaccuracy of any Fundamental Representation or any claim for any Special Indemnity Matter (other than a claim brought pursuant to Section 8.1(a)) may be satisfied, at Buyers option, in any combination of (i) out of any available Escrow Funds, (ii) by using the set off rights pursuant to this Section 8.6 above; or (iii) directly from the Sellers (in accordance with their Pro Rata Share).
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Notwithstanding the foregoing or anything to the contrary, Buyer acknowledges and agrees that, with respect to breaches of the representations, warranties, and covenants contained in this Agreement, Buyer Indemnitees will only be permitted to seek recovery from the Escrow Funds, the Working Capital Escrow Amount, or under the set off rights pursuant to this Section 8.6 with respect to each Seller up to the lesser of (x) the Sellers Pro Rata Share of such Loss (provided that in the case of a claim under Section 8.1(a) with respect to such Seller, the Pro Rata Share will be 100%) and (y) the Sellers Pro Rata Share of the applicable escrow funds or payments being set off.
8.7 Third-Party Claims.
(a) If a third party commences a lawsuit or arbitration (a Third-Party Claim) against any Person (the Indemnified Party) with respect to any matter that the Indemnified Party might make a claim for indemnification against any Party (the Indemnifying Party) under this Article VIII, then the Indemnified Party must notify the Indemnifying Party (or the Sellers Representative, in the case of the Sellers) thereof in writing of the existence of such Third-Party Claim and must deliver copies of any documents served on the Indemnified Party with respect to the Third-Party Claim; provided, however, that any failure to notify the Indemnifying Party or deliver copies will not relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is materially prejudiced by such failure.
(b) Upon receipt of the notice described in Section 8.8(a), the Indemnifying Party will have the right to defend the Indemnified Party against the Third-Party Claim with counsel reasonably satisfactory to the Indemnified Party so long as (i) within twenty days after receipt of such notice, the Indemnifying Party notifies the Indemnified Party in writing that the Indemnifying Party will, subject to the limitations of Section 8.4, indemnify the Indemnified Party from and against any Losses the Indemnified Party may incur relating to or arising out of the Third-Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third-Party Claim and fulfill its indemnification obligations hereunder (which will be conclusively presumed in the case of the Sellers if the then-existing balance of the Escrow Funds is greater than the amount in controversy), plus anticipated legal fees and other defense costs, (iii) the Indemnifying Party is not a party to the Proceeding or the Indemnified Party has determined in good faith that there would be no conflict of interest associated with joint representation, (iv) the Third-Party Claim does not involve, and is not likely to involve, any claim by any Governmental Body other than a claim for Taxes (which is separately addressed in Article IX), (v) the Third-Party Claim involves only money damages and does not seek an injunction or other equitable relief, (vi) settlement of, or an adverse judgment with respect to, the Third Party Claim is not reasonably likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, (vii) the Indemnifying Party conducts the defense of the Third-Party Claim actively and diligently and (viii) the Indemnifying Party keeps the Indemnified Party reasonably apprised of all developments, including settlement offers, with respect to the Third-Party Claim and permits the Indemnified Party to participate in the defense of the Third-Party Claim.
(c) So long as the Indemnifying Party is conducting the defense of the Third-Party Claim in accordance with Section 8.8(b), (i) the Indemnifying Party will not be responsible for any attorneys fees incurred by the Indemnified Party regarding the Third-Party Claim (other than attorneys fees incurred prior to the Indemnifying Partys assumption of the defense pursuant to Section 8.8(b)) and (ii) neither the Indemnified Party nor the Indemnifying Party will consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the other party, which consent will not be withheld unreasonably. If the Indemnified Party desires to consent to the entry of judgment with respect to or to settle a Third-Party Claim but the Indemnifying Party refuses, then the Indemnifying Party will be responsible for all Losses with respect to such Third-Party Claim, without giving effect to the Cap.
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(d) If any condition in Section 8.8(b) is or becomes unsatisfied, (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third-Party Claim in any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), (ii) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically (but no less often than monthly) for the reasonable out-of-pocket costs of defending against the Third-Party Claim, including reasonable attorneys fees and expenses, and (iii) the Indemnifying Party will remain responsible for any Losses the Indemnified Party may incur relating to or arising out of the Third-Party Claim to the fullest extent provided in this Article VIII.
8.8 Other Indemnification Matters.
(a) Any claim for indemnification under this Article VIII must be asserted by providing written notice to the Sellers Representative or Buyer, as applicable, specifying the factual basis of the claim in reasonable detail to the extent then known by the Person asserting the claim.
(b) All indemnification payments under this Article VIII or Article IX will be deemed adjustments to the Purchase Price.
(c) For purposes of this Article VIII, the representations and warranties in Article III, Article IV and Article V shall not be deemed qualified by any references to materiality.
(d) The right to indemnification will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the Closing Date, with respect to any representation, warranty, covenant or agreement in this Agreement or by reason of the Indemnified Partys waiver of any condition set forth in Section 7.1or Section 7.2, as the case may be.
(e) Each Buyer Indemnitee shall take, and cause its Affiliates to take, reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto; provided, however that the Buyer Indemnitees shall not be required to pursue any claims against any third parties relating to such Loss or to otherwise seek recovery therefrom, but in such case, Sellers will be subrogated to any such claims of the Buyer Indemnitees.
(f) If any Seller liquidates or dissolves at any time when any Liability of such Seller with respect to this Article VIII may thereafter arise or be determined, then at the time of such liquidation or dissolution, such Seller will cause its shareholders, members, partners or other equityholders or distributees of such Sellers assets, as the case may be, to take such assets subject to such Liabilities ratably in proportion to the assets received; provided, however, that the failure on behalf of any Seller to comply with the covenant set forth in this sentence will in no way reduce such Sellers obligations in this Agreement.
(g) The calculation of any Losses will reflect the amount of any net proceeds actually received by Buyer Indemnitees from any third party (including any insurer) in respect of such Losses (giving effect to any insurance deductibles, self-insured or co-insurance payments made, retroactive or prospective premium adjustments, chargebacks related to insurance, any loss or reduction in insurance coverage as a result of a claim, and other related payments, costs or expenses), less all costs and expenses incurred by Buyer Indemnitees in pursuing or recovering such proceeds.
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(h) The calculation of any Losses will reflect the amount of any net Tax benefit received or to be received by any Buyer Indemnitee on account of such Losses in or prior to the Tax year of the indemnification payment or any the first Tax year immediately after the Tax year of the indemnification payment (and such net Tax benefit will be determined by first taking into account all other Taxable income and Taxable loss items of Buyer Indemnitees and then calculating the Tax benefit, if any, associated with such Losses).
(i) No Buyer Indemnitee will be entitled to indemnification for any Loss to the extent such Loss is included in the calculation of Indebtedness, Transaction Costs, or Working Capital (which includes the amount of the aggregate reserves included in Working Capital that relate to the matter or Liability at issue) or to the extent already recovered against any Seller.
8.9 Exclusive Remedy. Subject to Article IX and Section 11.13, the Parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud or will misconduct) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VIII.
ARTICLE IX
TAX MATTERS
The following provisions will govern the allocation of responsibility as between Buyer and the Sellers for certain tax matters following the Closing Date and set forth other covenants of the Parties hereunder:
9.1 Tax Indemnification.
(a) Each Seller, severally (in accordance with their Pro Rata Share) but not jointly, will indemnify and hold harmless Buyer Indemnitees from, and pay and reimburse Buyer Indemnitees for, all Losses, directly or indirectly, relating to or arising from: (i) all Taxes (or the non-payment thereof) of each Company for all Taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any Taxable period that includes (but does not end on) the Closing Date (Pre-Closing Tax Period), (ii) all Taxes of any member of an Affiliated Group of which any Company (or any predecessor of the foregoing) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation § 1.1502 6 (or any analogous or similar state, local, or foreign (including Canadian provincial or municipal) Law), and (iii) all Taxes of any Person imposed on any Company as a transferee or successor, under any Tax Sharing Agreement or pursuant to any Law, which Taxes relate to an event or transaction occurring before the Closing; provided, however, that in the case of each of clauses (i), (ii), or (iii) the Sellers shall be liable, severally (in accordance with their Pro Rata Share) but not jointly, only to the extent that such Taxes exceed the amount, if any, reserved for such Taxes in the calculation of Working Capital pursuant to Section 2.13; provided, further that in no event shall Sellers be liable for any Taxes resulting from any action taken by Buyer or any of the Companies after the Closing on the Closing Date outside of the Ordinary Course of Business (unless such action taken by Buyer is required by Law); and provided, further, that notwithstanding anything to the contrary, other than as included in the calculation of Working Capital, Buyer will have no right to bring any claims against Sellers pursuant to Section 8.1, this Article IX or otherwise in respect of the U.S. Customs and Border Protection audit described on Section 4.17(a) of the Disclosure Schedule and any amounts due thereunder. The indemnification under this Section 9.1 shall not be subject to the indemnification limits set forth in Section 8.4 or elsewhere in this Agreement. The Sellers, severally (in accordance with their Pro Rata Share) but not jointly, shall pay Buyer Indemnitees for any Taxes that are the responsibility of the Sellers pursuant to this Section 9.1 (i) in the case of any such Taxes that are reportable on a Tax Return due after
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the Closing Date, three (3) days prior to the due date of such Tax Return filed in accordance with Section 9.2 or 9.3 (as applicable) below (including applicable extensions) or upon written demand for payment, whichever is later, and (ii) in the case of any other of such Taxes, within three (3) days after reasonable evidence that, taking into account the resolution of any contest of such Taxes under Section 9.10, such Taxes are payable or upon written demand for payment, whichever is later.
(b) In the case of any Taxable period that includes (but does not end on) the Closing Date (a Straddle Period), the amount of any Taxes other than ad valorem property Taxes for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the Taxable period of any partnership or other passthrough entity shall be deemed to terminate at such time) and the amount of ad valorem property Taxes for a Straddle Period which relates to the PreClosing Tax Period shall be deemed to be the amount of such Tax for the entire Taxable period multiplied by a fraction, the numerator of which is the number of days in the Taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period.
9.2 Income Tax Returns for Periods Ending on or Before the Closing Date. Sellers Representative shall cause to be prepared income Tax Returns for any period ending on or before the Closing Date (regardless of when due), at the Targets expense and in accordance with past custom and practice (to the extent such custom and practice is in accordance with applicable Tax Law (provided for greater certainty that any Canadian Resident Company shall, at Sellers Representatives request, make an election under subsection 256(9) of the Income Tax Act (Canada) in respect of any Pre-Closing Tax Period that would otherwise have ended immediately prior to the Closing Date), and Buyer shall cause such returns to be timely filed. Sellers Representative will permit Buyer to review and comment on each such Tax Return at least fifteen (15) days prior to the due date of such Tax Return. The Sellers will pay and indemnify, severally (in accordance with their Pro Rata Share) but not jointly, Buyer Indemnitees for the Taxes on such Tax Returns in accordance with Section 9.1(a).
9.3 Other Pre-Closing Tax Returns. Buyer will cause the Companies to prepare and file all Tax Returns for each Company that relate to a Pre-Closing Period and are due after the Closing Date, other than income Tax Returns which Sellers Representative is responsible to prepare and the Buyer is responsible to file under Section 9.2. All Tax Returns which Buyer is responsible to prepare and file under this Section 9.3 shall be prepared on a basis consistent with past custom and practice (to the extent such custom and practice is consistent with applicable Tax Law). Buyer will permit the Sellers Representative to review and comment on each such Tax Return at least thirty (30) days prior to the due date of such Tax Return. The Sellers Representative shall deliver its comments on such Tax Return to Buyer within twenty (20) days of receiving such Tax Return from Buyer, and Buyer shall cause all reasonable comments to be incorporated into such Tax Return prior to timely filing of such Tax Return. The Sellers will indemnify, severally (in accordance with their Pro Rata Share) but not jointly, Buyer Indemnitees for the Taxes on such Tax Returns related to the Pre-Closing Tax Period (determined in accordance with Section 9.1(b)) in accordance with Section 9.1(a).
9.4 Cooperation on Tax Matters. The Parties will cooperate fully, as and to the extent reasonably requested by Buyer or the Sellers Representative, in connection with the filing and preparation of Tax Returns pursuant to this Article IX and any Proceeding related thereto. Such cooperation will include the retention and, upon the request of Buyer or the Sellers Representative, the provision of records and information that are reasonably relevant to any such Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Buyer will cause the Companies to retain all books and records with respect to Tax matters pertinent to the Companies relating to any Taxable period beginning before the Closing Date until the expiration of the statute or period of limitations of the respective Taxable periods.
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Upon the request of Buyer or the Sellers Representative, the Parties will (i) provide Buyer or the Sellers representative, as applicable, with all information that any Party may be required to report pursuant to Code § 6043(c) and (ii) use commercially reasonable efforts to obtain any certificate or other document from any Governmental Body or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the Transactions). Notwithstanding anything in Article IX to the contrary, Buyer shall not, and shall not allow any of the Companies to, amend, modify, or otherwise change any Tax Return that relates to any Pre-Closing Tax Period or take any action to extend the applicable statute of limitations with respect to any such Tax Return, in each case unless (i) otherwise required by Law or (ii) Buyer or the applicable Company has received prior written permission of Sellers Representative. Any other provision of this Agreement notwithstanding, no election under Section 338(g) of the Code shall be made with respect to any of the Companies or Buyers purchase of any of the Companies.
9.5 Certain Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement or the Transactions will be paid by the Sellers, severally (in accordance with their Pro Rata Share) but not jointly, when due, and the Sellers will, at their own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees. If required by applicable Law, Buyer will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.
9.6 Tax Sharing Agreements. All Tax sharing agreements or similar agreements with respect to or involving any Company shall be terminated as of the Closing Date and, after the Closing Date, Buyer and each Company shall not be bound thereby or have any Liability thereunder.
9.7 Refunds and Other Tax Benefits.
(a) All refunds of Taxes (whether in the form of a direct payment or as a credit actually utilized against Taxes otherwise payable) in respect of Pre-Closing Tax Periods not resulting from or attributable to the carryback of Tax losses or credits arising in a Post-Closing Tax Period (to the extent such refunds are not included in Working Capital as finally determined and subject to Section 9.7(b)) shall be property of the Sellers. To the extent that any of the Companies (or any Affiliate) receives such a refund (whether as a direct payment or as a credit), Buyer shall promptly pay, or cause such Company (or Affiliate) promptly to pay, to the Sellers Representative for disbursement to the Sellers: (i) the amount of such refund (plus related interest received from the applicable Governmental Body, if any), less (ii) all reasonable costs (including, Taxes due in respect of the receipt of such refund) incurred by Buyer, any Company (or Affiliate) to obtain such refund. For the avoidance of doubt, this Section 9.7(a) does not apply to goods and services Tax and harmonized sales Tax imposed under the Excise Tax Act (Canada) and to Quebec sales Tax imposed under the Quebec Sales Tax Act and to any Canadian input Tax credit received by any of the Companies.
(b) For purposes of determining refunds of Taxes in respect of a Pre-Closing Tax Period under this Section 9.7:
(i) subject to Section 9.7(b)(ii), any reduction in Liability for Taxes (including estimated Tax payments) of any of the Companies (i) for a Straddle Period resulting from Tax losses or credits for the portion of such period through the Closing Date (taking into account the provisions of Section 9.8) or (ii) in respect of any other Pre-Closing Tax Period, shall be treated as a refund of Taxes in respect of a Pre-Closing Tax Period;
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(ii) any income Tax losses for the Tax year that ends on or prior to the Closing Date shall be carried back (using any available short-form or accelerated procedures, including the filing of IRS Form 1139 and any corresponding form for applicable state, local and foreign purposes) to achieve the maximum possible savings in income Tax, that shall inure and be paid promptly to the Sellers Representative for disbursement to the Sellers; provided, however, that this Section 9.7(b)(ii) shall only be applicable to U.S. federal income Taxes, and the state income Taxes for the states listed on Schedule 9.7(b)(ii), Canadian federal income Taxes and Canadian provincial income Taxes (and any income Tax savings from any such income Tax losses in other jurisdictions shall not inure to the Sellers, unless Buyer chooses to cause such losses to be carried back for refund of Tax for any Pre-Closing Tax Period(s)); and
(iii) any reduction in Liability for Tax of any of the Companies, including for a Post-Closing Tax Period, resulting from or attributable to Tax deductions, losses or credits arising in a Pre-Closing Tax Period (to the extent not otherwise applied or carried back as contemplated by subparagraphs (i) and (ii) of this Section 9.7(b)) shall not be treated as a refund of Tax.
All costs incurred by Buyer or any Company (or any Affiliate) in connection with the filing of IRS Form 1139 and any amended Tax Returns in accordance with the foregoing, (as well as any Tax investigation, audit, dispute or claim with respect thereto) shall be economically borne by Sellers and reimbursed by Sellers out of such refunds obtained.
(c) Buyer shall, and shall cause each of the Companies to, cooperate with the Sellers Representative (including filing amended Tax Returns or claims for refund) to obtain any Tax refunds or credits that would reasonably be expected to give rise to payments to the Sellers Representative (for disbursement to the Sellers) under this Section 9.7; provided, that Sellers Representative will not request Buyer to seek to file for any Tax refund or credit (i) that Sellers Representative does not reasonably expect will exceed $15,000, or (ii) after the second anniversary of the Closing Date. Notwithstanding clause (ii), all Tax refunds or credits that were requested but not paid to the Sellers Representative prior to the second anniversary shall be paid over to the Sellers Representative for the benefit of the Sellers promptly following receipt thereof.
9.8 Transaction Tax Deductions.
(a) Buyer shall cause, (i) pursuant to Treasury Regulation §1.1502-76(b)(1)(ii)(A) or otherwise, the consolidated U.S. federal income Tax year of the Companies to end as of the end of the Closing Date and (ii) at Sellers Representatives request, the Tax year of the Canadian Resident Companies to end at the Effective Time (to the extent permitted by Law) pursuant to an election under subsection 256(9) of the Income Tax Act (Canada). No Party shall make (or purport to make) any election under Treasury Regulation § 1.1502-76(b)(2)(ii)(D) to ratably allocate items under Treasury Regulation § 1.1502-76(b)(2)(ii) or any election described in Treasury Regulation §1.1502-76(b)(2)(iii).
(b) For purposes of determining the income Tax of any of the Companies for a Tax year that ends on the Closing Date, any Transaction Tax Deductions shall be accrued and deducted for the year that ends on the Closing Date to the fullest extent permitted under applicable Tax Law. Transaction Tax Deductions means any items of loss or expense that are deductible for U.S. or Canadian federal or provincial income tax purposes resulting from or attributable to the transactions contemplated hereby, including (i) any loss or deduction resulting from or attributable to unamortized financing costs incurred with respect to Indebtedness, (ii) payments in respect of the Transaction Costs, (iii) payment in respect of any other item that has the effect of reducing the Purchase Price and (iv) any payments related to the Options and any payments made to the Optionholders hereunder.
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9.9 Optionholder Payments. Notwithstanding anything in the Agreement to the contrary, (but except to the extent included in the calculation of Transaction Costs or Working Capital and otherwise without duplicating any other provision of this Agreement) (i) the employer portion of any employment Taxes related to payments made on or before the Closing Date in respect of the Vested Options shall be borne by and be the sole responsibility of the Sellers (in accordance with their Pro Rata Shares) and in connection with any such payments to the Optionholders, may be subtracted by Buyer or any Company (or any Affiliate) from amounts otherwise to be paid to the Sellers, and (ii) the Buyer shall not make, and shall not allow any Company or Affiliate to make, an election under Section 110(1.1) of the Income Tax Act (Canada) in respect of any Option Payments or other payments to Canadian Optionholders or take any other action that would in any way compromise the deductibility of the Option Payments or any other payments to Canadian Optionholders (in whole or in part) under applicable Canadian federal or provincial Tax Law.
9.10 Tax Contests. Any other provision of this Agreement to the contrary notwithstanding:
(a) if any Governmental Body issues to any Company a written (a) notice of intent to audit, examine or conduct another proceeding with respect to Taxes or Tax Returns of such Company for any Pre-Closing Tax Period or (b) notice of actual or proposed deficiency, reassessment or adjustment, assertion of claim or demand concerning Taxes or Tax Returns for any Pre-Closing Tax Period, then Buyer shall notify Sellers Representative of the same promptly and, in any event, within ten (10) days;
(b) Sellers Representative shall have the right to control any such proceeding or the contest of any such deficiency, reassessment, adjustment or assertion of claim or demand (any such proceeding or contest, a Tax Contest), and Buyer shall cause such Company to execute any power of attorney or other document that Sellers Representative reasonably believes to be necessary to permit Sellers Representative to control such Tax Contest, except to the extent such Tax Contest relates to a Straddle Period, to which extent Buyer shall control (but shall allow Sellers Representative reasonably to participate in) such Tax Contest, and shall not, without the written consent of Sellers Representative (not to be unreasonably withheld, conditioned or delayed), settle such Tax Consent for such Straddle Period; and
(c) If the Sellers Representative obtains control of any Tax Contest pursuant to Section 9.10(b), (i) Seller shall conduct such Tax Contest in a commercially reasonable manner, (ii) Seller shall keep Buyer and the applicable Company informed of all material developments related to such Tax Contest and (iii) Sellers Representative shall not settle or otherwise resolve any deficiency, reassessment, adjustment or assertion of claim or demand related to such Tax Contest without the prior written approval of Buyer (not to be unreasonably withheld, conditioned or delayed).
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may, by written notice given to the non-terminating Parties prior to the Closing, be terminated:
(a) by (i) Buyer, upon prior written notice to Sellers Representative, if there has been a material violation or breach by the Target or the Sellers of any covenant, representation or warranty contained in this Agreement which has prevented the satisfaction of any condition to the obligations of Buyer at the Closing and such violation or breach has not been waived by Buyer or cured by the Target or the Sellers within ten days after written notice thereof from Buyer or (ii) the Sellers Representative, upon prior written notice to the Buyer, if there has been a material violation or breach by Buyer of any covenant, representation or warranty contained in this Agreement which would prevent the
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satisfaction of any condition to the obligations of the Target at the Closing and such violation or breach has not been waived by the Sellers Representative or cured by Buyer within ten days after written notice thereof by the Sellers Representative (provided that the failure of Buyer to deliver the consideration pursuant to Section 2.11 at the Closing as required hereunder shall not be subject to cure hereunder unless otherwise agreed to in writing by the Sellers Representative);
(b) by (i) Buyer, if any condition in Section 7.1 has not been satisfied or waived in writing by April 1, 2014 (the Outside Date) or if satisfaction of any such condition is or becomes impossible (in either case, for reasons other than the failure of Buyer to comply with its obligations under this Agreement) or (ii) the Sellers Representative, if any condition in Section 7.2 has not been satisfied or waived in writing by the Outside Date or if satisfaction of any such condition is or becomes impossible (other than through the failure of any Seller or the Target to comply with such Partys obligations under this Agreement); provided, however, that if on the Outside Date the conditions to Closing set forth in Section 7.1(e) and Section 7.2(c) shall not have been fulfilled, but all other conditions to Closing set forth in Article VII shall be or shall be capable of being fulfilled, then the Sellers Representative, by written notice delivered to Buyer, or Buyer, by written notice to the Sellers Representative, may extend the Outside Date to no later than the close of business on April 30, 2014; or
(c) by mutual consent of Buyer and Sellers Representative.
10.2 Effect of Termination. If this Agreement is validly terminated pursuant to Section 10.1, all further obligations of the Parties under this Agreement will terminate and there shall be no liability on the part of any of Parent, Buyer, the Target, or the Sellers to one another, except for fraud or willful breaches of this Agreement prior to the time of such termination; provided, however, that the Parties obligations under any confidentiality agreement and Article XI (Miscellaneous) will survive the termination.
ARTICLE XI
MISCELLANEOUS
11.1 Further Assurances. Each Party agrees to use commercially reasonable efforts to furnish upon request to any other Party such further information, to execute and deliver to any other Party such other documents, and to do such other acts and things, all as any other Party may reasonably request for the purpose of carrying out the intent of the Transaction Documents.
11.2 No Third-Party Beneficiaries. This Agreement does not confer any rights or remedies upon any Person (including any employee of any Company) other than the Parties, their respective successors and permitted assigns, any Indemnified Party, and as otherwise expressly set forth in this Agreement.
11.3 Entire Agreement. The Transaction Documents constitute the entire agreement among the Parties with respect to the subject matter of the Transaction Documents and supersede all prior agreements (whether written or oral and whether express or implied) among any Parties to the extent related to the subject matter of the Transaction Documents (including any letter of intent or confidentiality agreement).
11.4 Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Seller may assign, delegate or otherwise transfer (whether by operation of law or otherwise) any of such Sellers rights, interests or obligations in this Agreement without the prior written approval of Buyer. Buyer may assign any or all of its rights or interests in this Agreement to (a) any successor to Buyer, any successor to any Company, or
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any acquirer of a material portion of the businesses or assets of Buyer or any Company, (b) one or more of Buyers Affiliates, or (c) any lender to Buyer, any Company or any of their Affiliates as security for obligations to such lender; but such assignment will not relieve Buyer of any of its obligations under this Agreement. For the avoidance of doubt, the Parties acknowledge that following the Closing Target, as the Surviving Entity in the Merger, will be merged with and into Parent and upon the effectiveness of such merger Parent shall succeed to all of Buyers rights under this Agreement and shall be entitled to assert any of Buyers rights hereunder.
11.5 Counterparts. This Agreement may be executed by the Parties in multiple counterparts and shall be effective as of the date set forth above when each Party shall have executed and delivered a counterpart hereof, whether or not the same counterpart is executed and delivered by each Party. When so executed and delivered, each such counterpart shall be deemed an original and all such counterparts shall be deemed one and the same document. Transmission of images of signed signature pages by facsimile, e-mail or other electronic means shall have the same effect as the delivery of manually signed documents in person.
11.6 Notices. Any notice pursuant to this Agreement must be in writing and will be deemed effectively given to another Party on the earliest of the date (a) three Business Days after such notice is sent by registered U.S. mail, return receipt requested, (b) one Business Day after receipt of confirmation if such notice is sent by facsimile or electronic mail, (c) one Business Day after delivery of such notice into the custody and control of an overnight courier service for next day delivery, (d) one Business Day after delivery of such notice in person and (e) such notice is received by that Party; in each case to the appropriate address below (or to such other address as a Party may designate by notice to the other Parties):
If to the Sellers Representative or any Seller: |
with a copy to: | |
FdG Hercules Holdings LLC c/o FdG Associates LP 485 Lexington Avenue, 23rd New York, NY 10017 Attn: David S. Gellman Email: dsg@fdgassociates.com Fax: (212) 940-6803 Phone: (212) 940-6260 |
Honigman Miller Schwartz and Cohn LLP 2290 First National Building 660 Woodward Avenue Detroit, MI 48226 Attn: Joshua F. Opperer Email: jopperer@honigman.com Fax: (313) 465-7457 Phone: (313) 465-7456 | |
If to Buyer: | with a copy to: | |
ATD Merger Sub II LLC c/o American Tire Distributors, Inc. 12200 Herbert Wayne Court, Suite 150 P.O. Box 3145 Huntersville, NC 28078 Attn: J. Michael Gaither Email: mgaither@atd-us.com Fax: (704) 947-1919 Phone: (704) 632-7110 |
K&L Gates LLP Hearst Tower, 47th Floor 214 North Tryon Street Charlotte, NC 28202 Attn: Chad Warpula Email: chad.warpula@klgates.com Fax: (704) 353-3210 Phone: (704) 331-7510 |
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11.7 JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. EACH PARTY (A) CONSENTS TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN NEW YORK, NEW YORK (AND ANY CORRESPONDING APPELLATE COURT) IN ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT, (B) WAIVES ANY VENUE OR INCONVENIENT FORUM DEFENSE TO ANY PROCEEDING MAINTAINED IN SUCH COURTS, (C) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, AGREES NOT TO INITIATE ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT IN ANY OTHER COURT OR FORUM. PROCESS IN ANY SUCH PROCEEDING MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, AND (D) IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.
11.8 Governing Law. This Agreement and all other Transaction Documents (unless otherwise stated therein) will be governed by the laws of the State of New York without giving effect to any choice or conflict of law principles of any jurisdiction.
11.9 Amendments and Waivers. No amendment of any provision of this Agreement will be valid unless the amendment is in writing and signed by Buyer and the Sellers Representative. No waiver of any provision of this Agreement will be valid unless the waiver is in writing and signed by the waiving Party (or the Sellers Representative, in the case of a waiver by any or all Sellers). The failure of a Party at any time to require performance of any provision of this Agreement will not affect such Partys rights at a later time to enforce such provision. No waiver by any Party of any breach of this Agreement will be deemed to extend to any other breach hereunder or affect in any way any rights arising by virtue of any other breach.
11.10 Severability. Any provision of this Agreement that is determined by any court of competent jurisdiction to be invalid or unenforceable will not affect the validity or enforceability of any other provision hereof or the invalid or unenforceable provision in any other situation or in any other jurisdiction. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
11.11 Expenses. The Sellers (severally in accordance with their Pro Rata Share) will bear all expenses incurred by any Company or due from the Company to any Representative of any Company in connection with the Transactions contemplated to be performed before or on the Closing Date. Each Seller will bear all expenses incurred by such Seller or any of its Representatives in connection with the Transactions. Except as otherwise expressly provided in this Agreement, Buyer will bear all expenses incurred by Buyer or any of its Representatives in connection with the Transactions and by the Companies with respect to actions taken after the Closing Date.
11.12 Construction. The Article and Section headings in this Agreement are inserted for convenience only and are not intended to affect the interpretation of this Agreement. Any reference in this Agreement to any Article or Section refers to the corresponding Article or Section of this Agreement. Any reference in this Agreement to any Schedule or Exhibit refers to the corresponding Schedule or Exhibit attached to this Agreement and all such Schedules and Exhibits are incorporated herein by reference. The word including in this Agreement means including without limitation. This Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any provision in this Agreement. Unless the context requires otherwise, any reference to any Law will be deemed also to refer to all amendments and successor provisions thereto and all rules and regulations promulgated thereunder, in each case as in effect as of the Closing Date. The word or in this Agreement is disjunctive but not
45
necessarily exclusive. All words in this Agreement will be construed to be of such gender or number as the circumstances require. References in this Agreement to time periods in terms of a certain number of days mean calendar days unless expressly stated herein to be Business Days. In interpreting and enforcing this Agreement, each representation and warranty will be given independent significance of fact and will not be deemed superseded or modified by any other such representation or warranty. All references to currency in this Agreement are references to U.S. Dollars. If any amounts used to calculate the Purchase Price (or any adjustment thereto) are denominated in a currency other than U.S. dollars, then such amounts shall be expressed in U.S. dollars calculated based on the relevant currency exchange rate in effect on the Closing Date (as published in The Wall Street Journal, unless such currency exchange rate is not published in the Wall Street Journal on the Closing Date, in which case, as published on http://www.oanda.com or a similar website or publication as may be agreed upon by the Sellers Representative and Buyer). For the purposes of Article III, Article IV and Article V, references to written, in writing or similar phrases mean any form of written communication, whether via paper, email, text or otherwise. For the avoidance of doubt, as of the Effective Time of the Merger all responsibilities and obligations of Buyer under this Agreement will be the responsibilities and obligations of the Target.
11.13 Specific Performance. Each Party acknowledges that the other Parties could be damaged irreparably and might have no adequate remedy of law if any provision of this Agreement is not performed in accordance with its specific terms or otherwise is breached. Accordingly, each Party agrees that the other Parties will be entitled to seek an injunction to prevent any breach of any provision of this Agreement and to seek to enforce specifically any provision of this Agreement, in addition to any other remedy to which they may be entitled and without having to prove the inadequacy of any other remedy they may have at law or in equity and without being required to post bond or other security.
11.14 Time Is of the Essence. Time is of the essence with respect to all time periods and dates set forth herein.
11.15 Disclosure Schedule. The disclosure schedule (the Disclosure Schedule) is a series of schedules corresponding to the Sections contained in Article IV and containing the information required to be disclosed pursuant to, and certain exceptions to, the representations and warranties therein. Any disclosure set forth in any particular Section of the Disclosure Schedule will be deemed disclosed only for the purpose of the corresponding Section or subsection of the Agreement and not for the purpose of any other Section or subsection of the Agreement. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty pertains to the existence of the document or other item itself). The inclusion of information in the Disclosure Schedule shall not be construed as an admission of liability or that such information is material or required by this Agreement to be reflected in the Disclosure Schedule. Such additional matters are set forth for informational purposes only and do not necessarily include other matters of a similar nature. The Disclosure Schedule is incorporated herein by reference.
11.16 Sellers Representative.
(a) Each Seller, on behalf of such Seller and such Sellers successors, heirs and permitted assigns, hereby irrevocably appoints Holdings as the Sellers Representative as such Sellers agent and attorney-in-fact for all purposes set forth in this Agreement, including the full power and authority (i) to perform the Transactions to be performed by a Seller under this Agreement, (ii) to disburse any funds received hereunder to Sellers, (iii) to execute and deliver on behalf of each Seller any amendment or waiver under this Agreement and to agree to resolution of all claims hereunder, (iv) to retain legal counsel and other professional services, at the expense of Sellers, in connection with the
46
performance by the Sellers Representative of this Agreement, (v) to give and receive notices on behalf of the Sellers, (vi) to make, dispute, and settle all claims under this Agreement, including, without limitation, claims relating to the purchase price, adjustments, escrow releases, and indemnification claims, (vii) to withhold payments otherwise due to the Sellers in order to establish reserves for purchase price adjustments or other amounts that might be due by the Sellers and to pay (or seek reimbursement whether or not from the Sellers Representative Expense Fund) on behalf of the Sellers any amounts due by them to Buyer, any Indemnitee, or the Sellers Representative (other than indemnification claims under Section 8.1(a)), (viii) to interpret the terms of this Agreement and any other agreement entered into in connection therewith, and (ix) to do each and every act (including the execution and delivery of any certificates required) and exercise all rights which any such Seller is permitted or required to do or exercise under this Agreement.
(b) The Sellers Representative will have no liability to any Seller for any act done or omitted under this Agreement as the Sellers Representative while acting in good faith and not in a manner constituting wanton misconduct, and any act done or omitted pursuant to the advice of counsel will be conclusive evidence of such good faith. The Sellers will severally (in accordance with their Pro Rata Share) indemnify and hold harmless the Sellers Representative from and against any Losses the Sellers Representative may suffer as a result of any such action or omission.
(c) The Sellers Representative will receive no compensation for services as the Sellers Representative. The Sellers will reimburse the Sellers Representative in accordance with their Pro Rata Share for professional fees and expenses of any attorney, accountant or other advisors retained by the Sellers Representative and other reasonable out-of-pocket expenses incurred by the Sellers Representative in connection with the performance of the Sellers Representatives duties under this Agreement. An amount equal to the Sellers Representative Expense Fund will be delivered to the Sellers Representative at the Closing to be held in trust as a source of such reimbursement for costs and out-of-pocket expenses (including costs of professional advisers) incurred by the Sellers Representative for its obligations in connection with this Agreement, with any balance of the Sellers Representative Expense Fund not incurred for such purposes to be distributed to the Sellers in accordance with their Pro Rata Share at such times as determined by Sellers Representative.
(d) If the Sellers Representative resigns or is otherwise unable or unwilling to serve in such capacity, the Sellers who held the majority of the Units immediately prior to the Closing Date will appoint a new Person to serve as the Sellers Representative and will provide prompt written notice thereof to Buyer. Until such notice is received, Buyer will be entitled to rely on the actions and statements of the previous the Sellers Representative. The power and authority granted hereunder will be exclusive and no Seller shall be entitled to exercise any right under this Agreement except through the Sellers Representative.
(e) The appointment of the Sellers Representative as the attorney-in-fact for each Seller as set forth in this Section 11.16 and all authority hereby conferred are granted and conferred in consideration of the interest of the other Sellers, is therefore coupled with an interest and is and will be irrevocable and shall neither be terminated nor otherwise affected by any act of any Seller or by operation of law, whether by the death, dissolution, liquidation, incapacity or incompetence of such Seller or by the occurrence of any other event. If, after the execution of this Agreement, any Seller dies, dissolves or liquidates or becomes incapacitated or incompetent, the Sellers Representative is nevertheless authorized, empowered and directed to act in accordance with this Section 11.16 as if that death, dissolution, liquidation, incapacity or incompetency had not occurred and regardless of notice thereof. Each Seller agrees to execute such wills and documents as may be necessary and to give such instructions to his personal representatives as may be necessary so that its successors will remain subject to this Agreement and carry out the full intent and purposes hereof. Without limiting the generality of the foregoing, this Section 11.16 will not be affected by the subsequent incapacity or mental incompetency of any Seller.
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(f) Each Seller and the Sellers Representative acknowledge and agree that Buyer may rely on Sellers appointment of the Sellers Representative and deal exclusively with the Sellers Representative, consistent with such appointment as provided herein and the provisions of this Agreement dealing with actions to be taken by the Sellers Representative on behalf of Sellers, and Sellers and Sellers Representative agree to indemnify and save harmless Buyer (in accordance with their Pro Rata Shares) from and against any Loss or Liability that it may incur by reason of its relying upon the authority of the Sellers Representative as provided herein. All payments by Buyer to the Sellers Representative, or to an account designated by the Sellers Representative, for the benefit of Sellers as provided in this Agreement shall constitute a full acquittance of Buyer with respect thereto, and Buyer shall have no obligation to see to the application of such payments.
11.17 Attorney-Client Privilege and Conflict Waiver. Each of the Parties to this Agreement hereby agrees, on its own behalf and on behalf of its directors, members, partners, officers, employees and Affiliates, that Honigman Miller Schwartz and Cohn LLP may serve as counsel to each and any of the Sellers, the Sellers Representative and their respective Affiliates, on the one hand, and the Companies and their Subsidiaries, on the other hand, in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and that, following consummation of the transactions contemplated hereby, Honigman Miller Schwartz and Cohn LLP (or any successor) may serve as counsel to (i) the Sellers, the Sellers Representative and their respective Affiliates (other than the Companies) or any director, member, partner, officer or employee thereof, in connection with any litigation, claim or obligation arising out of or relating to this Agreement or the transactions contemplated by this Agreement notwithstanding such representation, or (ii) any of the Companies with respect to any matter other than any matter relating to this Agreement or the transactions contemplated by this Agreement, and each of the Parties hereto hereby consents thereto and waives any conflict of interest arising therefrom, and each of such Parties shall cause any Affiliate thereof to consent to waive any conflict of interest arising from such representation.
11.18 Parent Guaranty. To induce the Target and Sellers to enter into this Agreement, Parent hereby absolutely, unconditionally and irrevocably guarantees to the Sellers, on the terms and conditions set forth herein, the due and punctual payment, observance, performance and discharge of all of Buyers obligations under this Agreement until such time as the Closing has been fully consummated. To the fullest extent permitted by Law, Parent hereby expressly waives any and all rights or defenses arising by reason of any Law that would otherwise require any election of remedies by the Sellers. Parent waives promptness, diligence, notice of the acceptance, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of the incurrence of any of the foregoing guaranteed obligations and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar Law now or hereafter in effect, any right to require the marshaling of assets of Parent or Buyer or any other Person interested in the transactions contemplated by this Agreement and all suretyship defenses generally. Parent acknowledges that it will receive substantial direct and indirect benefits from the transactions contemplated by this Agreement and that the waivers set forth in this Agreement are knowingly made in contemplation of such benefits.
[Signature pages follow]
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The Parties have executed and delivered this Agreement and Plan of Merger as of the date first written above.
Buyer: | ||
ATD MERGER SUB II LLC | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Vice President & Secretary |
Parent: | ||
Solely for the purposes of Article V and Section 11.18: | ||
AMERICAN TIRE DISTRIBUTORS, INC. | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Executive Vice President and General Counsel |
Target: | ||
HERCULES TIRE HOLDINGS LLC | ||
By: | /s/ William P. Trimarco | |
Name: | William P. Trimarco | |
Title: | Chief Executive Officer and President |
Sellers Representative (in its capacity as a Seller and Sellers Representative): | ||
FdG HERCULES HOLDINGS LLC | ||
By: | /s/ David S. Gellman | |
Name: | David S. Gellman | |
Title: | Vice President |
[Signature Page to the Agreement and Plan of Merger]
EXHIBIT A
DEFINITIONS
280G Approval is defined in Section 7.1(f)(xii).
280G Waiver is defined in Section 6.19.
Accounts Receivable means all trade and other accounts receivable and other Indebtedness owing to any Company that would be booked by the Companies as accounts receivable in accordance with GAAP applied on a basis consistent with historical practices of the Companies.
Acquisition Proposal is defined in Section 6.8.
Active Employee means any employee employed by any Company, including any employee on leave of absence, such as family medical leave, military leave, disability leave (including long-term disability) or sick leave.
Additional Payments is defined in Section 2.14.
Adjusted Closing Payment is defined in Section 2.13(a).
Affiliate means, with respect to a specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, the specified Person. The term control means (a) the possession, directly or indirectly, of the power to vote 10% or more of the securities or other equity interests of a Person having ordinary voting power, (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, by contract or otherwise, including the voting power to elect a majority of the directors (or individuals having comparable functions) of such Person, or (c) being a director, officer, executor, or trustee of a Person or a Person that controls such Person.
Affiliated Group means an affiliated group as defined in Code § 1504(a) or any similar group defined under a similar provision of state, provincial, municipal, local or foreign Law.
Aggregate Units Deemed Outstanding means the sum of (a) the aggregate number of Existing Units, plus (b) the aggregate number of Vested Option Units, in each case, as of the Effective Time.
Aggregate Option Exercise Price means the aggregate amount that would be payable to Hercules by Optionholders in respect of all Vested Option Units if the underlying Vested Options associated with such Vested Option Units were exercised as of immediately prior to the Effective Time in accordance with the terms of the applicable option agreements with Hercules associated with such Vested Option Units.
Agreement is defined in the opening paragraph.
Applicable Period means (a) with respect to the portion of the Additional Payments associated with the Key Suppliers, the six-month period immediately following the Closing and (b) with respect to the portion of the Additional Payments associated with the Transition Services Agreement, the period immediately following the Closing through January 25, 2015.
Assets is defined in Section 4.9.
A-1
Audit Date means October 31, 2013.
Base Amount is defined in Section 2.11(a).
Basket is defined in Section 8.4.
BlackArch Engagement Letter means that certain Letter Agreement, dated as of October 18, 2013, between Hercules and BlackArch Partners LP.
Business is defined in the Statement of Purpose.
Business Day means any day that is not a Saturday, Sunday or a U.S. federal banking holiday.
Buyer is defined in the opening paragraph.
Buyer Indemnitees means Buyer, the Companies and their respective Affiliates and Representatives, in each case excluding the Sellers and the Sellers Representative.
Buyer True-Up Payment is defined in Section 8.6.
Canadian Optionholder means all Optionholders who are employees of a Canada Resident Company as of the Effective Time.
Canadian Pension Plan means any Employee Benefit Plan in which employees of a Canadian Company are eligible to participate and which provide pensions, superannuation benefits or retirement savings, including pension plans, top up pensions or supplemental pensions, registered pension plans (as defined in the Income Tax Act (Canada)), or retirement compensation arrangements (as defined in the Income Tax Act (Canada)), provided that a Canadian Pension Plan shall not include a registered retirement savings plan (as defined in the Income Tax Act (Canada)).
Canadian Resident Company means any Company that is a resident of Canada for purposes of the Income Tax Act (Canada).
Cap is defined in Section 8.4.
Cash means all cash, certificates of deposit, bank deposits (including cash collateral deposits securing letters of credit remaining in place at the Closing), negotiable instruments, marketable securities, undeposited checks and other cash equivalents of the Companies as of the Closing Time.
Certificate of Merger is defined in Section 2.10.
Closing is defined in Section 2.10.
Closing Date means the date on which the Closing occurs.
Closing Option Payment is defined in Section 2.11(d)(iv).
Closing Statement is defined in Section 2.12.
Closing Time is defined in Section 2.10.
A-2
COBRA means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code § 4980B.
Code means the Internal Revenue Code of 1986, as amended.
Commissioner means the Commissioner of Competition appointed under the Competition Act or any Person authorized to perform duties on behalf of the Commissioner.
Companies means the Target, each of the Targets direct or indirect Subsidiaries and 1077990 Ontario Inc. (Tireco).
Companies Knowledge (or similar terms) will consist only of the actual knowledge of Robert Keller, Jeffrey R. Marshall, or William P. Trimarco after reasonable inquiry; provided, that reasonable inquiry shall mean and require only the review of all knowledge qualified representations set forth in Article III and Article IV with the following persons: Vic Siewert, Joshua Simpson, Jedd Emans, Terry Kin, Terrence LeBlanc, Jonathan Morse, and Corri Miller.
Company 401(k) Plan is defined in Section 6.7.
Competition Act means the Competition Act (Canada), as amended, and the regulations promulgated thereunder.
Competition Act Approval means either: (a) the Commissioner shall have issued an advance ruling certificate under § 102 of the Competition Act; or (b) both of (i) the waiting period under § 123 of the Competition Act shall have expired or been terminated or the obligation to provide a pre-merger notification in accordance with Part IX of the Competition Act shall have been waived by the Commissioner in accordance with paragraph 113(c) of the Competition Act, and (ii) Buyer shall have been advised in writing by the Commissioner that the Commissioner does not, at that time, intend to make an application under § 92 of the Competition Act in respect of the Transactions, and any terms and conditions attached to such advice shall be acceptable to Buyer, acting reasonably.
Confidential Information means (i) in the case of any Seller that is an employee of any Company as of the date of this Agreement, any trade secrets and confidential information, including, but not limited to, processes, designs, rubber compounds, cost and pricing information, customer and supplier lists, and financial information which are the property of any Company and used in the course of its business and (ii) in the case of any Seller that is a non-employee of any Company as of the date of this Agreement, any non-public information concerning the business or affairs of any Company, including information relating to customers, clients, suppliers, distributors, investors, lenders, consultants, independent contractors or employees, customer and supplier lists, price lists and pricing policies, cost information, financial statements and information, budgets and projections, business plans, production costs, market research, marketing plans and proposals, sales and distribution strategies, manufacturing and production processes and techniques, processes and business methods, technical information, pending projects and proposals, new business plans and initiatives, research and development projects, inventions, discoveries, ideas, technologies, trade secrets, know-how, formulae, technical data, designs, patterns, improvements, industrial designs, mask works, compositions, works of authorship and other Intellectual Property, devices, samples, plans, drawings and specifications, photographs and digital images, computer software and programming, all other confidential information and materials relating to the business or affairs of any Company, and all notes, analyses, compilations, studies, summaries, reports, manuals, documents and other materials prepared by or for any Company containing or based in whole or in part on any of the foregoing, whether in verbal, written, graphic, electronic or any other form and whether or not conceived, developed or prepared in whole or in part by any Company.
A-3
Consent means any required consent, approval, authorization, permission or waiver.
Contract means any contract, lease, license, purchase order, work order, or other agreement, whether written or oral, together with all amendments and other modifications thereto.
Disclosure Period means each of (a) the two fiscal years ended as of the Audit Date and (b) the Interim Period.
Disclosure Schedule is defined in Section 11.15.
DLLCA is defined in Section 2.1.
Effective Time is defined in Section 2.10.
Employee Benefit Plan means any (a) qualified or nonqualified Employee Pension Benefit Plan (including any Multiemployer Plan) or deferred compensation or retirement plan or arrangement, (b) Employee Welfare Benefit Plan, (c) Canadian Pension Plan or (d) equity-based plan or arrangement (including any stock option, stock purchase, stock ownership, stock appreciation or restricted stock plan) or material fringe benefit or other retirement, severance, bonus, profit-sharing or incentive plan or arrangement.
Employee Pension Benefit Plan has the meaning set forth in ERISA § 3(2); provided that an Employee Pension Benefit Plan shall not include a Canadian Pension Plan but shall include a registered retirement savings plan (as defined in the Income Tax Act (Canada)).
Employee Welfare Benefit Plan has the meaning set forth in ERISA § 3(1), whether or not such plans are subject to ERISA.
Employment Law means any Law, collective bargaining agreement or arrangement, or binding custom relating to labor and employment, including any Law relating to employment practices, terms and conditions of employment, discrimination, disability, fair labor standards, workers compensation, wrongful discharge, immigration, occupational safety and health, family and medical leave, wages and hours (including overtime wages), worker classification, equal opportunity, employment equity, pay equity, meal and rest periods, or employee terminations.
Encumbrance means any lien, mortgage, pledge, encumbrance, security interest, hypothecation, community property interest, option, warrant, right of first refusal, or other restriction of title on any property.
Enforceability Exceptions means validity, binding effect or enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, fraudulent transfer, moratorium (whether general or specific) or other Law now or hereafter in effect affecting the enforceability of creditors rights generally.
Environmental Law means any Law relating to protection of the environment, or human health, including any Law relating to the presence, use, production, generation, handling, management, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any Hazardous Substance.
Equity means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents of such Persons capital stock, registered capital, partnership interests, membership
A-4
interests or other equivalent equity or ownership interests and any rights, warrants or options exchangeable or exercisable for or convertible into such capital stock or other equity or ownership interests.
Equityholders means holders of Units and holders of Vested Options.
ERISA means the Employee Retirement Income Security Act of 1974.
ERISA Affiliate is defined in Section 4.22(c).
Escrow Agent means Bank of New York.
Escrow Funds means the funds subject to the Indemnification Escrow Agreement as of any date of determination.
Estimated Cash is defined in Section 2.11(b).
Estimated Closing Payment is defined in Section 2.11(c).
Estimated Indebtedness is defined in Section 2.11(b).
Estimated Transaction Costs is defined in Section 2.11(b).
Estimated Working Capital is defined in Section 2.11(b).
Existing Units is defined in Section 2.5.
Financial Advisor means BlackArch Partners LP.
Financial Statements is defined in Section 4.5(a).
Fundamental Representations means the representations or warranties in Article III and Sections 4.1(a) (organization), 4.2 (capitalization), and 4.3 (authority).
GAAP means generally accepted accounting principles in the United States as set forth in pronouncements of the Financial Accounting Standards Board (and its predecessors) and the American Institute of Certified Public Accountants and, unless otherwise specified, as in effect on the Closing Date or, with respect to any financial statements, the date such financial statements were prepared.
Governmental Body means any federal, state, provincial, municipal, local, foreign or other government or quasi-governmental authority or any department, agency, subdivision, court or other tribunal of any of the foregoing.
Government Contract means any Contract to which any Company is a party or by which it is bound, the ultimate contracting party of which is a Governmental Body (including any subcontract with a prime contractor or other subcontractor who is a party to any such Contract).
Hazardous Substance means any material, substance or waste that is limited or regulated under any Environmental Law. The term includes asbestos, polychlorinated biphenyls, and petroleum products.
Hercules is defined in the Statement of Purpose.
A-5
Hercules Canada means Hercules Tire Company of Canada, Inc., a corporation existing under the laws of Ontario.
Holdings means FdG Hercules Holdings LLC, a Delaware limited liability company.
Indebtedness means as to any Person at any time: (a) obligations of such Person for borrowed money; (b) obligations of such Person evidenced by bonds, notes, debentures or other similar instruments; (c) obligations of such Person to pay the deferred purchase price of property or services (including earnouts or payments made in respect of noncompete or consulting arrangements), except trade accounts payable of such Person arising in the Ordinary Course of Business or amounts arising under consulting, employment or other service agreements that are to be performed after the closing date of such an acquisition transaction; (d) obligations arising under capitalized leases, conditional sales Contracts or other similar title retention instruments; (e) indebtedness or other obligations of others guaranteed by such Person (excluding guarantees in favor of other Companies); (f) obligations secured by an Encumbrance existing on any property or asset owned by such Person; (g) unpaid reimbursement obligations of such Person relating to drawn (and not standby) letters of credit, bankers acceptances, surety or other bonds or similar instruments that are due; (h) net payment obligations incurred by such Person pursuant to any hedging agreement; (i) Liabilities of such Person under any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement or other similar agreement designed to protect such Person against fluctuations in interest rates; and (j) all interest, fees, penalties, breakage costs and other expenses owed with respect to the items described in the foregoing clauses (a) through (j) or the repayment thereof; provided, that the Companies indebtedness to The Toledo-Lucas County Port Authority will only include the outstanding principal amount and accrued interest as of the Closing Time and will not include any prepayment penalties associated with repaying such debt early. Unless otherwise indicated, Indebtedness means Indebtedness of the Companies as of the Closing Time. Notwithstanding the foregoing, Indebtedness does not include any items included in Transaction Costs, Working Capital, payables for molds due over time, any indebtedness owed to any Companies, or any factored payables with Sailun, Crown, or DBS Bank.
Indemnification Escrow Agreement means the Indemnification Escrow Agreement, dated on or about the Closing Date, among the Sellers Representative, Buyer and the Escrow Agent in substantially the form attached hereto as Exhibit D.
Indemnification Escrow Amount is defined in Section 2.11(d)(i).
Indemnified Party is defined in Section 8.7(a).
Indemnifying Party is defined in Section 8.7(a).
Insurance Policies is defined in Section 4.27.
Intellectual Property means: (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), improvements thereto, and patents, patent applications, industrial designs, and patent disclosures, together with reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (b) trademarks, service marks, trade dress, logos, trade names, and corporate names, together with translations, adaptations, derivations and combinations thereof and including goodwill associated therewith, and applications, registrations, and renewals in connection therewith; (c) copyrightable works, copyrights, and applications, registrations and renewals in connection therewith; (d) mask works and applications, registrations and renewals in connection therewith; (e) trade secrets and Confidential Information; (f) computer software, in object and source code format (including data and related documentation); (g) plans, drawings, architectural plans and specifications; (h) websites; (i) other
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proprietary rights; and (j) copies and tangible embodiments and expressions thereof (in whatever form or medium) of any of the foregoing, including all improvements and modifications thereto and derivative works thereof.
Interim Balance Sheet is defined in Section 4.5(a).
Interim Date is defined in Section 4.5(a).
Interim Period is defined in Section 4.5(a).
Inventory means all inventories of the Companies wherever located, including tires, raw materials, goods consigned to vendors or subcontractors, works in process, finished goods, spare parts, goods in transit, products under research and development, demonstration equipment and inventory on consignment.
IRS means the U.S. Internal Revenue Service.
Interests means the limited liability company membership interests or other Equity of the Target or Hercules, as applicable.
Key Suppliers means Toyo Tires, Yokohama, and their Affiliates.
Law means any federal, state, provincial, municipal, local, foreign or other law, statute, ordinance, regulation, rule, regulatory or administrative guidance, Order, constitution, treaty, common law or other restriction of any Governmental Body.
Lease is defined in Section 4.13(b).
Leased Real Property is defined in Section 4.13(b).
Letter of Transmittal means a letter of transmittal substantially in the form of Exhibit C attached hereto.
Liability means any liability, obligation or commitment of any kind or nature, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due.
License is defined in Section 4.15(d).
Loss means any loss, claim, complaint, demand, Proceeding, Order, damage, penalty, fine, expense, cost, fee, settlement payment, adverse consequence, Liability, Tax, Encumbrance, expense, fee, court costs or reasonable attorneys fees and expenses; provided, however, that, a Loss will not include consequential, diminution in value, incidental, indirect, lost profits, punitive or exemplary damages and no multiple of profits, multiple of EBITDA, multiple of cash or similar valuation methodology may be used when calculating any Loss (in each case, other than to the extent payable to a third party).
Material Adverse Effect means a material adverse effect upon the financial condition, business, or results of operations of the Companies, taken as a whole, that substantially reduces the value of the Companies; provided, however, that any adverse change, event or effect arising from or related to the following shall not be taken into account in determining whether a Material Adverse Effect has occurred: (i) conditions affecting the United States or Canada economies generally, (ii) any national or
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international political or social conditions, including the engagement by the United States or Canada in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, Canada, or any of their respective territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States or Canada, (iii) financial, banking or securities markets (including any disruption thereof, any decline in the price of any security or any market index, or any adverse change therein), (iv) changes in GAAP, (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental Body, (vi) the public announcement of the transactions contemplated by this Agreement, (vii) the taking of any action contemplated by this Agreement, including the completion of the transactions contemplated hereby or (viii) any adverse change in or effect on the business of the Companies that is cured prior to the Closing; provided that, in the case of clauses (i) through (iv), only to the extent any such change, event or condition does not disproportionately affect the Companies compared to other participants in the industries in which the Companies conduct their business.
Material Contract is defined in Section 4.14(a).
Merger is defined in Section 2.1.
Multiemployer Plan has the meaning set forth in ERISA § 3(37) and, for greater certainty, shall include any multiemployer pension plan within the meaning of applicable Canadian Law.
NHTSA means the National Highway Traffic Safety Administration.
Noncompete Agreements means the Noncompetition, Nonsolicitation and Confidentiality Agreements, dated on or about the Closing Date, between Buyer and each of FdG Associates LLC, Robert Keller, Jeffrey R. Marshall and William P. Trimarco substantially in the form of Exhibit F attached hereto.
Notice of Disagreement is defined in Section 2.12(c).
Option means each outstanding, unexpired, unexercised option to purchase one or more shares of common stock of Hercules, whether or not then vested or exercisable, granted on or prior to the date hereof to any current or former employee or director of Hercules, any of its Subsidiaries, or any other Person, whether under the Option Plans, any other stock option plan or otherwise.
Option Plans means (i) The Hercules Tire & Rubber Company Management Stock Option Plan, adopted on June 24, 2005 and (ii) The Hercules Tire & Rubber Company Performance Stock Option Plan, adopted on June 24, 2005.
Optionholder means each holder of Options as of the date of this Agreement.
Option Payment means, with respect to each holder (or deemed holder) of Vested Option Units, an amount equal to (A) the product of (x) the Per Unit Payment, multiplied by (y) the aggregate number of Vested Option Units, minus (B) the aggregate exercise price that would be paid to Hercules in respect of such Vested Options had such Options been exercised immediately prior to the Effective Time and assuming concurrent payment in full of the exercise price thereof solely in cash, in each case, in accordance with the terms of the applicable option agreements with Hercules pursuant to which such Options were issued.
Order means any order, award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or verdict entered, issued, made or rendered by any Governmental Body or arbitrator.
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Ordinary Course of Business means the ordinary course of the conduct of the Business by the applicable Company, consistent with past operating practices.
Organizational Documents means (a) any certificate or articles of incorporation and bylaws, (b) any documents comparable to those described in clause (a) as may be applicable pursuant to any Law and (c) any amendment or modification to any of the foregoing.
Outside Date is defined in Section 10.1(b).
Owned Real Property is defined in Section 4.13(a).
Parent is defined in the opening paragraph.
Party means Buyer, Parent, the Target, or any Seller (including the Sellers Representative, acting on behalf of any or all Sellers).
PBGC means the Pension Benefit Guaranty Corporation.
Per Unit Payment means an amount equal to the quotient of (a) the sum of (i) the Estimated Closing Payment, minus (ii) the Indemnification Escrow Amount, minus (iii) the Working Capital Escrow Amount, minus, (iv) the Sellers Representative Expense Fund, plus (v) the Aggregate Option Exercise Price divided by (b) the Aggregate Units Deemed Outstanding.
Permit means any permit, authorization, license or Consent issued by any Governmental Body or pursuant to any Law.
Permitted Encumbrance means (a) any mechanics, materialmens or similar statutory lien incurred in the Ordinary Course of Business for monies not yet due or that are being contested in good faith, (b) any lien for Taxes not yet due or that are being contested in good faith, (c) any purchase money lien or lien securing rental payments under capital lease arrangements to the extent related to the assets purchased or leased, (d) any recorded easement, covenant, zoning or other restriction on the Real Property that, together with all other Permitted Encumbrances, does not prohibit or impair the current use, occupancy, value, or marketability of title of the property subject thereto, (e) any right, interest, lien or title of a licensor, sublicensor, licensee, sublicensee, lessor or sublessor under any license, lease or other similar agreement or in the property being leased or licensed, and (f) any liens set forth on Schedule P-1.
Person means any individual, corporation, limited liability company, partnership, company, sole proprietorship, joint venture, trust, estate, association, organization, labor union, Governmental Body or other entity.
Plan Termination Date is defined in Section 6.7.
PP Components is defined in Section 2.12(a).
Post-Exercise Unit is defined in Section 2.6(b).
Post-Closing Tax Period means any Tax Period which is not a Pre-Closing Tax Period.
Pre-Closing Tax Period is defined in Section 9.1(a).
Pro Rata Share means, without duplication, with respect to any Equityholder, the percentage determined by dividing (a) the sum of (i) the aggregate number, if any, of Existing Units held by such
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Equityholder as of immediately prior to the Effective Time, plus (ii) the aggregate number, if any, of all Vested Option Units that would be attributable to such Equityholder as of immediately prior to the time that is immediately prior to the Effective Time, by (b) the Aggregate Units Deemed Outstanding; provided, that in the event that any Optionholder fails to deliver an executed Letter of Transmittal to Sellers Representatives satisfaction prior to or at the Effective Time or such later time as determined in accordance with Section 2.8, then the Vested Options Units relating to the Vested Options held by such Optionholder shall be disregarded for purposes of determining the Pro Rata Share. Notwithstanding the foregoing, as determined by the Sellers Representative in good faith to be necessary or appropriate to allocate responsibility among the Sellers on an equitable basis taking into account claims by Buyer for breaches by individual Sellers of representations in Article III or breaches of individual Seller covenants, a Sellers Pro Rata Share of an indemnification obligation under Section 8.1 or otherwise may be adjusted to up to 100% of such Loss for purposes of determining such Sellers proportionate share of any disbursements to be made to Sellers under this Agreement or from the Escrow Funds.
Proceeding means any proceeding, charge, complaint, claim, demand, notice, action, suit, litigation, hearing, audit, investigation, arbitration or mediation (in each case, whether civil, criminal, administrative, investigative or informal) commenced, conducted, heard or pending by or before any Governmental Body, arbitrator or mediator.
Purchase Price is defined in Section 2.11(a).
Real Property is defined in Section 4.13(c).
Recall is defined in Section 4.17(e).
Related Party means (a) with respect to a specified individual, any member of such individuals Family and any Affiliate of any member of such individuals Family and (b) with respect to a specified Person other than an individual, any Affiliate of such Person and any member of the Family of any such Affiliates that are individuals. The Family of a specified individual means the individual, such individuals spouse and former spouses, any other individual who is related to the specified individual or such individuals spouse or former spouse within the third degree, and any other individual who resides with the specified individual. The Companies will not be deemed to be Related Parties of any Seller.
Repayment Indebtedness means any Indebtedness related to the Amended and Restated Credit Agreement, dated as of July 11, 2010, among Hercules, Hercules Tire Company of Canada Inc., the lenders party thereto, and JPMorgan Chase Bank, N.A.
Representative means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.
Resolution Accountants means the Chicago office of McGladrey LLP; provided, however, that if such firm is unwilling or unable to serve in such capacity, the Parties shall mutually agree upon a substitute accounting firm.
Schedule Supplement is defined in Section 6.10.
Securities Act means the Securities Act of 1933.
Seller and Sellers are defined in the opening paragraph.
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Seller Indemnitees means the Sellers and their Affiliates and Representatives (including the Sellers Representative).
Sellers Representative is defined in Section 11.16(a).
Sellers Representative Expense Fund is defined in Section 2.11(d)(iii).
Settlement Offer is defined in Section 2.12(d).
Solvent is defined in Section 5.6.
Special Indemnity Matters means any claims under Section 8.1(a), Sections 8.1(b)(ii)-(v), or claims based on any fraud or willful misconduct. For the sake of clarity, Special Indemnity Matters includes any breach by one or more Sellers or the Sellers Representative of any obligation to pay any amount due under Section 2.12, 2.13, 11.11 or 11.16 or Article IX.
Straddle Period is defined in Section 9.1(b).
Subsidiary means, with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (b) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entitys gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). The term Subsidiary shall include all direct or indirect Subsidiaries of the applicable Person.
Survival Date means January 25, 2015.
Surviving Entity is defined in the Statement of Purpose.
Tangible Personal Property is defined in Section 4.10.
Target is defined in the opening paragraph.
Tax means: any U.S. federal, state, local, foreign (including Canadian provincial and municipal) or other income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code § 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, general service, alternative or add-on minimum, estimated or other tax or surcharge of any kind whatsoever, however denominated, or computed, and any escheat amounts or other amounts due in respect of unclaimed property, and in respect of each and every of the foregoing, including any interest, penalty, or addition thereto, whether disputed or not, and all employment insurance, health insurance, and Canada, Quebec and other government pension plan premiums or contributions.
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Tax Contest is defined in Section 9.10(b).
Tax Return means any return, declaration, report, claim for refund, or information return or other document or statement relating to Taxes that is filed with any Governmental Body or required by Law to be filed with any Person, including any form, schedule or attachment thereto and any amendment or supplement thereof.
Tax Sharing Agreement is defined Section 4.16(f).
Third-Party Claim is defined in Section 8.7(a).
Transaction Costs means any fees, costs and expenses incurred or subject to reimbursement by any Company, in each case in connection with the Closing and any other Transactions contemplated to be performed before or on the Closing Date, but only to the extent incurred and not paid prior to the Closing, including (a) the fees, costs and expenses payable by any Company to the Financial Advisor and any investment bank, financial advisor, broker or finder relating to the Transactions, (b) any amounts related to any transaction bonuses, change in control payments, payments under the Targets long-term incentive plan, phantom equity payouts, stay-put, severance or other compensatory payments payable to any current or former employees, agents, directors, officers, independent contractors and consultants of and to any Company (including the employer and employee portion of any payroll, social security, unemployment or similar Taxes related thereto) as a result of the consummation of the Transactions, including any payments by any Company to any of its employees as a result of the consummation of the Transactions (provided, that the foregoing shall not include any payments made to the Sellers pursuant to this Agreement or any of the agreements contemplated hereunder, including the Transition Services Agreement or any employment arrangements or incentives proposed by Buyer), (c) the fees, costs and expenses payable by any Company to Honigman Miller Schwartz and Cohn LLP and any other attorneys engaged by any Company and (d) the fees, costs and expenses payable by any Company to outside accountants or other advisors.
Transaction Documents means this Agreement, the Indemnification Escrow Agreement, the Working Capital Escrow Agreement, the Transition Services Agreement, the Noncompete Agreements, the Letters of Transmittal, and all other written agreements, documents and certificates contemplated by any of the foregoing documents or in furtherance of the Transactions.
Transaction Tax Deductions is defined in Section 9.8.
Transactions means the transactions contemplated by the Transaction Documents.
Transition Services Agreement means the Transition Services Agreement, dated on or about the Closing Date, between Buyer and William P. Trimarco substantially in the form of Exhibit G attached hereto.
TREAD Act means the Transportation Recall Enhancement, Accountability and Documentation Act.
Units means Existing Units and Post-Exercise Units.
U.S. Optionholder means all Optionholders other than Canadian Optionholders.
U.S. Restricted Person List means: (i) the list of Specially Designated Nationals and Blocked Persons maintained by the U.S. Department of the Treasury, Office of Foreign Assets Control; (ii) the
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Denied Persons, Unverified, and Entity lists maintained by the Bureau of Industry and Security of the U.S. Department of Commerce under the Export Administration Regulations; (iii) the Debarred list maintained by the U.S. Department of State; and (iv) the lists maintained by the U.S. Department of State of Persons subject to sanctions by the U.S. Government for engaging in activities relating to proliferation or Iran.
U.S. Trade Laws means any U.S. Law, or other decision or requirement having the force or effect of law, imposing restrictions, requirements, conditions or sanctions in connection with international trade activities, including, but not limited to, as applicable, the Tariff Act of 1930, as amended, and other laws, regulations, and programs administered or enforced by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement, and their predecessor agencies, such as the U.S. Customs Regulations (19 C.F.R. Part 0 et seq.), the Export Administration Act of 1979, as amended, the Export Administration Regulations, 15 C.F.R. Part 730 et seq., the International Emergency Economic Powers Act, as amended, the Trading with the Enemy Act, as amended, the statutes, regulations, and Executive Orders administered by OFAC (including 31 C.F.R. Part 500 et seq.), the Arms Export Control Act, as amended, the International Traffic in Arms Regulations, administered by the U.S. Department of State, Directorate of Defense Trade Controls, 22 C.F.R. Part 120 et seq., statutes and Executive Orders authorizing sanctions for trade relating to specified activities, such as proliferation, or countries, such as Iran, including as administered by the U.S. Department of State, and the anti-boycott regulations administered by the U.S. Department of Commerce and the U.S. Department of the Treasury.
Vested Option means an Option outstanding as of immediately prior to the Effective Time that is vested and exercisable as of immediately prior to or at the Effective Time and is in-the-money.
Vested Option Unit means (i) in the case of all U.S. Optionholders, each Post-Exercise Unit that is issuable in respect of a Vested Option exercised (or deemed exercised) by any U.S. Optionholder and (ii) in the case of any Canadian Optionholder, each share of common stock of Hercules that would otherwise be issuable in respect of a Vested Option held by such Canadian Optionholder if such Options were being exercised and not cancelled at the Effective Time.
WARN Act means the Worker Adjustment Retraining and Notification Act of 1988, as amended.
Working Capital means (a) the amount of the consolidated current assets of the Companies that are included as current assets on Schedule 2.12(a), minus (b) the amount of the consolidated current liabilities of the Companies that are included as current liabilities on Schedule 2.12(a), in each case calculated as of the Closing Time but without giving effect to the Closing; provided, that only $394,000 will be accrued for the CBP Matter (as defined on Section 4.17(a) of the Disclosure Schedule), unless the CBP Matter is finally resolved prior to the final determination of the Adjusted Closing Payment in accordance with Section 2.12, in which case the amount of such accrual shall equal the amount finally determined for the CBP Matter subject to a cap of $594,000 (subject to reduction for any refunds or overpayments of custom duties or related Taxes paid by any Company in respect of a Pre-Closing Tax Period that are received, available, or applied by any Company prior to the final determination of the Adjusted Closing Payment). Notwithstanding the foregoing, Working Capital will exclude Cash, Indebtedness, Transaction Costs, inter-Company assets or liabilities, or income Taxes. All calculations of current assets, current liabilities, or Working Capital will be consistent with the calculation of Working Capital at December 31, 2013 as illustrated on Schedule 2.12(a).
Working Capital Escrow Amount is defined in Section 2.11(d)(ii).
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Working Capital Escrow Agreement means the Working Capital Escrow Agreement, dated on or about the Closing Date, among the Sellers Representative, Buyer and the Escrow Agent in substantially the form attached hereto as Exhibit E.
Working Capital Target means $116,359,000.
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Exhibit 2.2
STRICTLY CONFIDENTIAL | ||
EXECUTION VERSION |
STOCK PURCHASE AGREEMENT
BETWEEN
AMERICAN TIRE DISTRIBUTORS, INC.
AND
TTT HOLDINGS, INC.
February 17, 2014
TABLE OF CONTENTS
Page | ||||||
ARTICLE I DEFINITIONS |
1 | |||||
ARTICLE II SALE AND PURCHASE OF SHARES |
1 | |||||
2.1 |
Sale and Purchase of Shares; Closing |
1 | ||||
2.2 |
Closing Deliveries |
2 | ||||
2.3 |
Purchase Price |
3 | ||||
2.4 |
Closing Statement |
3 | ||||
2.5 |
Adjusted Closing Payment |
4 | ||||
2.6 |
Additional Payments |
5 | ||||
2.7 |
Withholding |
5 | ||||
2.8 |
Tax Matters |
5 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING SELLER |
6 | |||||
3.1 |
Organization and Authority |
6 | ||||
3.2 |
Share Ownership |
6 | ||||
3.3 |
No Conflicts |
6 | ||||
3.4 |
No Consents |
6 | ||||
3.5 |
Litigation |
6 | ||||
3.6 |
No Brokers Fees |
7 | ||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES |
7 | |||||
4.1 |
Organization, Qualification and Corporate Power |
7 | ||||
4.2 |
Capitalization; Subsidiaries |
7 | ||||
4.3 |
Authority |
7 | ||||
4.4 |
No Conflicts |
8 | ||||
4.5 |
No Consents |
8 | ||||
4.6 |
Financial Statements |
8 | ||||
4.7 |
Absence of Certain Changes |
9 | ||||
4.8 |
No Undisclosed Liabilities |
10 | ||||
4.9 |
Sufficiency of Assets |
10 | ||||
4.10 |
Accounts Receivable |
10 | ||||
4.11 |
Inventory |
11 | ||||
4.12 |
Real Property |
11 | ||||
4.13 |
Contracts |
11 | ||||
4.14 |
Intellectual Property |
12 | ||||
4.15 |
Tax |
13 | ||||
4.16 |
Legal Compliance |
15 | ||||
4.17 |
Litigation |
15 | ||||
4.18 |
Product and Service Warranties |
15 | ||||
4.19 |
Environmental |
16 | ||||
4.20 |
Employees |
16 | ||||
4.21 |
Employee Benefits |
17 | ||||
4.22 |
Customers and Suppliers |
19 | ||||
4.23 |
Related Party Transactions |
19 | ||||
4.24 |
Insurance |
19 | ||||
4.25 |
Ethical Practices |
19 | ||||
4.26 |
No Brokers Fees |
19 | ||||
4.27 |
Retail Sales |
20 | ||||
4.28 |
No Other Representations and Warranties |
20 |
i
ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BUYER |
20 | |||||
5.1 |
Organization and Authority |
20 | ||||
5.2 |
No Conflicts |
20 | ||||
5.3 |
No Consents |
20 | ||||
5.4 |
Litigation |
21 | ||||
5.5 |
Financing |
21 | ||||
5.6 |
Solvency |
21 | ||||
5.7 |
No Brokers Fees |
21 | ||||
5.8 |
Investment Intent |
21 | ||||
ARTICLE VI CERTAIN COVENANTS |
22 | |||||
6.1 |
Further Assurances |
22 | ||||
6.2 |
[Reserved] |
22 | ||||
6.3 |
Operation of the Business |
22 | ||||
6.4 |
Access |
22 | ||||
6.5 |
Notice of Developments |
23 | ||||
6.6 |
Employee Matters |
23 | ||||
6.7 |
Exclusivity |
24 | ||||
6.8 |
Hart-Scott-Rodino |
24 | ||||
6.9 |
Termination of Related Party Arrangements |
25 | ||||
6.10 |
Litigation Support |
25 | ||||
6.11 |
Financing Support |
25 | ||||
6.12 |
Transition |
26 | ||||
6.13 |
Press Releases and Announcements |
26 | ||||
6.14 |
Confidentiality |
27 | ||||
6.15 |
Financial Statements |
27 | ||||
6.16 |
Financial Obligations |
27 | ||||
ARTICLE VII CLOSING CONDITIONS |
28 | |||||
7.1 |
Mutual Conditions to the Obligations of the Parties |
28 | ||||
7.2 |
Conditions to Buyers Obligations |
28 | ||||
7.3 |
Conditions to Sellers Obligations |
29 | ||||
ARTICLE VIII INDEMNIFICATION |
29 | |||||
8.1 |
Indemnification by Seller |
29 | ||||
8.2 |
Indemnification by Buyer |
29 | ||||
8.3 |
Survival and Time Limitations |
29 | ||||
8.4 |
Limitations on Indemnification |
30 | ||||
8.5 |
Manner of Payment; Escrow Release |
30 | ||||
8.6 |
Third-Party Claims |
31 | ||||
8.7 |
Other Indemnification Matters |
31 | ||||
8.8 |
Exclusive Remedy |
32 | ||||
ARTICLE IX TAX MATTERS |
33 | |||||
9.1 |
Tax Indemnification |
33 | ||||
9.2 |
Tax Return Preparation |
33 | ||||
9.3 |
Tax Proceedings |
34 | ||||
9.4 |
Cooperation on Tax Matters |
34 | ||||
9.5 |
Transfer Taxes |
35 | ||||
9.6 |
Tax Sharing Agreements |
35 | ||||
9.7 |
Tax Refunds and Tax Benefits |
35 |
ii
9.8 |
Amended Tax Returns |
35 | ||||
9.9 |
Timing of Payments |
36 | ||||
9.10 |
Treatment of Certain Payments |
36 | ||||
9.11 |
Coordination; Survival |
36 | ||||
ARTICLE X TERMINATION |
36 | |||||
10.1 |
Termination Events |
36 | ||||
10.2 |
Effect of Termination |
37 | ||||
ARTICLE XI MISCELLANEOUS |
37 | |||||
11.1 |
No Third-Party Beneficiaries |
37 | ||||
11.2 |
Entire Agreement |
37 | ||||
11.3 |
Successors and Assigns |
37 | ||||
11.4 |
Counterparts |
37 | ||||
11.5 |
Notices |
38 | ||||
11.6 |
JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL |
38 | ||||
11.7 |
Governing Law |
39 | ||||
11.8 |
Amendments and Waivers |
39 | ||||
11.9 |
Severability |
39 | ||||
11.10 |
Expenses |
39 | ||||
11.11 |
Construction |
40 | ||||
11.12 |
Specific Performance |
40 | ||||
11.13 |
Disclosure Schedule |
40 |
EXHIBITS AND SCHEDULES
Exhibits
Exhibit A | Definitions | |
Exhibit B | Form of Escrow Agreement | |
Exhibit C | Form of Retention Agreement | |
Schedules | ||
Schedule 1 | Sample Working Capital Statement | |
Schedule 2.2(a)(vii) | Resignations | |
Schedule 2.3(b) | Transaction Accounting Principles | |
Schedule 2.3(d)(iii) | Repayment Indebtedness | |
Schedule 2.6 | Additional Payments Schedule | |
Schedule 2.8 | Purchase Price Allocation Schedule | |
Schedule 6.6(b) | Certain Employee Benefit Plans | |
Schedule 6.9 | Termination of Related Party Agreements | |
Schedule 8.4(a) | Basket Exception | |
Disclosure Schedule |
iii
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this Agreement) is entered into as of February 17, 2014 (the Effective Date) between American Tire Distributors, Inc., a Delaware corporation (Buyer) and TTT Holdings, Inc., a Delaware corporation (Seller).
STATEMENT OF PURPOSE
Seller owns all of the outstanding capital stock of Terrys Tire Town Holdings, Inc., an Ohio corporation (the Target). The Target and each of its direct and indirect Subsidiaries (the Companies) are engaged in the business of purchasing, marketing, distributing and selling tires, wheels and related tire and wheel accessories on a wholesale basis to tire dealers, wholesale distributors, retail chains, automotive dealers and others, retreading tires and selling retread and other commercial tires through commercial outlets to end users and selling tires directly to consumers via the internet (collectively, as conducted by the Companies, the Business). Pursuant to this Agreement, Seller is selling to Buyer, and Buyer is purchasing from Seller, all of the outstanding capital stock of the Target, without par value (the Shares), for the consideration and on the terms set forth in this Agreement.
ARTICLE I
DEFINITIONS
All capitalized terms used in this Agreement and not otherwise defined shall have the meanings given them in Exhibit A.
ARTICLE II
SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase of Shares; Closing.
(a) At the Closing Time, Seller agrees to sell and deliver to Buyer, and Buyer agrees to purchase from Seller, all of the Shares, free and clear of any Encumbrances, for the consideration specified below.
(b) Subject to the satisfaction of the conditions set forth in Article VII (or the waiver thereof by the Party entitled to waive any such condition), the Parties hereto will be required to complete the closing of the sale and purchase (the Closing) at the offices of Covington & Burling LLP, 620 Eighth Avenue, New York, New York 10018 as soon as practicable, and no later than the third Business Day after satisfaction or waiver of each condition to the Closing set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or at such other place and time as may be agreed by Buyer and Seller; provided, however, that Buyer shall not be required to close prior to March 31, 2014; provided that (i) if the 2013 Audited Financial Statements are not delivered to Buyer prior to February 28, 2014, such date shall be extended day for day until such statements are delivered to Buyer and (ii) if the 2013 Audited Financial Statements are withdrawn, restated in any material respect or reissued by Seller after being delivered to Buyer, such date shall be extended to the date that is 28 days after such restated or reissued 2013 Audited Financial Statements are delivered to Buyer; provided further that if the Closing has not occurred prior to May 15, 2014, then Buyer shall not be required to close prior to fifteen Business Days after the delivery to Buyer of the March Quarterly Financial Statements. The closing time will be deemed effective as of 12:01 a.m. Eastern Time (the Closing Time) on the Closing Date for all other purposes, including determining the Estimated Closing Payment and Adjusted Closing Payment.
2.2 Closing Deliveries.
(a) At the Closing, Seller shall deliver, or cause to be delivered, to Buyer, the following:
(i) certificates representing all of the outstanding Shares, accompanied by duly executed stock powers, in form and substance reasonably satisfactory to Buyer, for transfer to Buyer;
(ii) the minute books of each Company and the stock certificate books (including stock certificates for all outstanding shares of capital stock of each Subsidiary that is organized as a corporation) and the stock ledger of each Company that is organized as a corporation;
(iii) a certificate of the secretary or assistant secretary of each of Seller and the Target attaching copies of its Organizational Documents;
(iv) a certificate of good standing for the Target as of a recent date from the Ohio Secretary of State;
(v) a duly executed certificate of non-foreign status from Seller, substantially in the form of the sample certification set forth in Treasury Regulation § 1.1445-2(b)(2)(iv)(B), certifying as to Sellers non-foreign status;
(vi) payoff letters with respect to the Repayment Indebtedness (including the related lien releases and instruments of termination or discharge, or documents committing to release liens or terminate or discharge obligations contingent on the Closing having occurred, reasonably requested by Buyer in order to release all Encumbrances over the properties and assets of the Companies securing obligations under the Repayment Indebtedness), dated as of the Closing Date or within a reasonable time prior to the Closing Date, in form and substance reasonably satisfactory to Buyer;
(vii) written resignations of the officers and directors or managers of the Companies listed on Schedule 2.2(a)(vii);
(viii) evidence of termination of each of the Related Party Agreements identified on Schedule 6.9 hereto in form and substance reasonably satisfactory to Buyer;
(ix) the certificate to be delivered pursuant to Section 7.2(d); and
(x) the Retention Agreements or Commitment Letters, duly executed and delivered by the Key Employees, if any.
(b) At the Closing, Buyer shall deliver, or cause to be delivered, to Seller (or, as applicable, to third parties), the following:
(i) the payments set forth in Section 2.3(d); and
(ii) the certificate to be delivered pursuant to Section 7.3(c).
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2.3 Purchase Price.
(a) The purchase price for the Shares (the Purchase Price) is (i) $345,000,000 (the Base Amount), as may be adjusted pursuant to Sections 2.3(c) and 2.5, plus (ii) up to $20,000,000 in Additional Payments, pursuant to Section 2.6.
(b) Not later than two Business Days prior to the Closing Date, Seller shall deliver to Buyer good faith, written estimates of the Cash (the Estimated Cash), the Indebtedness of the Companies (the Estimated Indebtedness) and the Working Capital (the Estimated Working Capital), each as calculated in accordance with the accounting principles, methodologies and practices set forth on Schedule 2.3(b) (collectively, the Transaction Accounting Principles).
(c) The estimated closing payment (the Estimated Closing Payment) will be an amount equal to the Base Amount:
(i) plus, the amount of the Estimated Cash;
(ii) minus, the amount of the Estimated Indebtedness;
(iii) plus, if the Estimated Working Capital exceeds the Working Capital Target, the amount of such excess; and
(iv) minus, if the Estimated Working Capital is less than the Working Capital Target, the amount of such deficit.
(d) At Closing, Buyer will pay (or cause to be paid):
(i) an amount equal to $41,400,000 (the Escrow Amount), which represents payment of a portion of the Purchase Price, to the Escrow Agent by wire transfer of immediately available funds to a single bank account designated by the Escrow Agent to be held pursuant to the terms of the Escrow Agreement;
(ii) an amount equal to the Estimated Closing Payment, less the Escrow Amount, to Seller, by wire transfer of immediately available funds to a single bank account designated by Seller; and
(iii) on behalf of the Companies, an amount equal to the Repayment Indebtedness in accordance with the applicable pay-off letters, by wire transfer of immediately available funds to the bank accounts designated by the holders of the Repayment Indebtedness.
2.4 Closing Statement.
(a) After the Closing, Buyer will prepare a closing statement (the Closing Statement) showing its calculations of the Cash, Indebtedness and Working Capital (collectively, the PP Components), in each case as of the Closing Time, and the Adjusted Closing Payment. The PP Components will be calculated in accordance with the Transaction Accounting Principles. As promptly as practicable, and in any event, within 90 days after the Closing Date, Buyer will deliver to Seller the Closing Statement, together with reasonable supporting documentation.
(b) Seller and its accounting and legal representatives will be entitled to examine the work papers related to the preparation of the Closing Statement and the relevant books and records of the Companies and to discuss the preparation of the Closing Statement with Buyer, the Target and any employees or advisors of Buyer who are involved in preparing the PP Components or the Closing Statement.
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(c) If Seller disagrees with Buyers calculation of the Adjusted Closing Payment, Seller must deliver to Buyer, within 60 days after the date Buyer delivered the Closing Statement to Seller, a written description of such disagreement (a Notice of Disagreement). If Seller fails to provide a Notice of Disagreement within such 60-day period, the Closing Statement (including Buyers calculation of the Adjusted Closing Payment) shall be deemed final and binding upon the Parties. Buyer and Seller will negotiate in good faith to resolve any disagreement described in the Notice of Disagreement. If, after a period of 30 days following the date on which the Notice of Disagreement is delivered, Buyer and Seller have not resolved each such disagreement, then either Buyer or Seller will be entitled to submit such disagreements to the Resolution Accountants, with prior written notice regarding such submission to the nonsubmitting Party.
(d) Within five Business Days after receipt of such written notice, Buyer and Seller will each deliver to the Resolution Accountants a written settlement offer setting forth its calculations of the PP Components calculated in accordance with the Transaction Accounting Principles and the Adjusted Closing Payment (each, a Settlement Offer); provided, however, that neither Buyer nor Seller may submit a Settlement Offer that contains a proposal as to any PP Component that, in the case of a proposal by Buyer, is more adverse to Seller as compared to the Closing Statement, or, in the case of a proposal by Seller, is more adverse to Buyer as compared to the Notice of Disagreement. The scope of the disputes to be resolved by the Resolution Accountants shall be limited to whether any of the disputed determinations of the PP Components were properly calculated in accordance with the Transaction Accounting Principles. Buyer will cause the Companies to grant to the Resolution Accountants reasonable access to the Companies books and records relating to the calculation of the PP Components. The Resolution Accountants will resolve such remaining disagreements within 30 days after the date on which the Resolution Accountants are engaged or as soon thereafter as possible, and the calculation of the Adjusted Closing Payment by the Resolution Accountants will be binding upon the Parties. The cost of the services of the Resolution Accountants will be borne half by Buyer and half by Seller.
2.5 Adjusted Closing Payment.
(a) The adjusted closing payment (the Adjusted Closing Payment) will be an amount equal to the Base Amount:
(i) plus, the amount of the Cash;
(ii) minus, the amount of the Indebtedness of the Companies;
(iii) plus, if the Working Capital exceeds the Working Capital Target, the amount of such excess; and
(iv) minus, if the Working Capital is less than the Working Capital Target, the amount of such deficit.
(b) Within ten Business Days after the final determination of the Adjusted Closing Payment in accordance with Section 2.4:
(i) if the Adjusted Closing Payment exceeds the Estimated Closing Payment, Buyer will pay to Seller, by wire transfer of immediately available funds to the bank account designated by Seller pursuant to Section 2.3(d)(ii), the amount of such excess; or
(ii) if the Adjusted Closing Payment is less than the Estimated Closing Payment, Seller and Buyer will deliver joint written instructions to the Escrow Agent to deliver such deficit to Buyer from the available balance of the Escrow Amount and if the balance of the Escrow Amount is insufficient to cover such payment, then Seller will pay to Buyer, by wire transfer of immediately available funds to the bank account designated by Buyer, the amount of any such shortfall.
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2.6 Additional Payments. The Purchase Price will be subject to potential increase in accordance with Schedule 2.6 (the Additional Payments).
2.7 Withholding. Notwithstanding anything to the contrary in Article II, to the extent required by the Code or applicable Law, Buyer shall be permitted to deduct and withhold any amounts so required to be deducted and withheld from the Purchase Price. Any amounts that are so deducted or withheld and timely paid to the appropriate Governmental Body shall be treated for all purposes of this Agreement as having been paid to Seller.
2.8 Tax Matters.
(a) The Parties acknowledge and agree that the purchase and sale of the Shares pursuant to this Agreement shall be treated for U.S. federal income Tax purposes (and, in each state and local jurisdiction where such treatment is available for state and local income Tax purposes because (x) such jurisdiction follows the U.S. federal income Tax classification of Seller as an S corporation and the Companies as qualified subchapter S subsidiaries or disregarded entities, as applicable, or (y) a valid election has been made by Seller and/or the Companies in such jurisdictions to be classified in a manner consistent with their U.S. federal income Tax classification) as a purchase and sale of the assets of the Companies.
(b) The Purchase Price (together with any assumed liabilities and other items treated as consideration for U.S. federal income Tax purposes) shall be allocated among the Companies assets (the Allocation) as set forth in Section 2.8 of the Disclosure Schedule (the Purchase Price Allocation Schedule) for all U.S. federal (and, in each state and local jurisdiction described in Section 2.8(a), for such state and local) income Tax purposes, including the reporting of Sellers gain or loss and the determination of Buyers basis for income Tax purposes, and any amounts treated as an adjustment to the purchase price pursuant to Section 9.10 shall be allocated among the Companies assets in a manner consistent with the Purchase Price Allocation Schedule.
(c) Buyer, Seller, and the Companies each agree to file (and to cause their respective Affiliates to file) all Tax Returns in a manner consistent with Section 2.8(a) and Section 2.8(b). If any Taxing Authority challenges or disagrees with the Allocation, then the Party first receiving notice of such challenge or disagreement shall promptly provide written notice thereof to the other party or parties to this Agreement (together with a reasonably detailed description of the basis for such challenge or disagreement) and each Party shall promptly notify the other party or parties to this Agreement of the resolution (together with a reasonably detailed description of such resolution) of any Tax Proceeding with, against or with respect to such Party or any of its Affiliates to the extent relating to the Allocation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Except as set forth in the Disclosure Schedule (as provided in Section 11.13), Seller represents and warrants to Buyer as follows:
3.1 Organization and Authority. Seller has all necessary power, authority and legal capacity to execute and deliver each Transaction Document to which Seller is a party and the Seller Noncompete Agreement and to perform Sellers obligations thereunder. The execution and delivery by Seller of each Transaction Document and the Seller Noncompete Agreement and the consummation by Seller of the Transactions have been duly authorized by all necessary corporate action of Seller. Assuming due authorization, execution and delivery by Buyer, this Agreement will constitute the valid and legally binding obligation of Seller, enforceable against Seller in accordance with the terms of the Agreement. Upon the execution and delivery by Seller of each other Transaction Document to which Seller is a party, such Transaction Document will constitute the valid and legally binding obligation of Seller, enforceable against Seller in accordance with the terms of such Transaction Document. Upon the execution and delivery by Seller of the Seller Noncompete Agreement, the Seller Noncompete Agreement will constitute the valid and legally binding obligation of Seller, enforceable against Seller in accordance with the terms of the Seller Noncompete Agreement.
3.2 Share Ownership. Seller owns of record and beneficially all of the Shares, free and clear of any Encumbrance or restriction on transfer (other than any restriction under any securities or similar Law or as listed on Section 3.2 of the Disclosure Schedule that is being terminated on the Closing Date). The Target has no authorized and outstanding securities other than the Shares. Seller is not a party to (a) any option, warrant, purchase right, right of first refusal, call, put or other Contract (other than this Agreement) that could require Seller to sell, transfer or otherwise dispose of any Shares or (b) any voting trust, proxy or other Contract relating to the voting of any Shares. Other than its ownership of the Shares, Seller has no assets (other than immaterial assets) or operations that relate to the Business or the Companies.
3.3 No Conflicts. Neither the execution and delivery of the Transaction Documents to which Seller is a party or the Seller Noncompete Agreement nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (a) violate any Law to which Seller or any of the Shares is subject; (b) violate any Organizational Document of Seller; (c) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any Contract to which Seller is a party or by which Seller is bound or to which any of the Shares is subject or the performance of which is guaranteed by Seller; or (d) result in the imposition of any Encumbrance on any of the Shares, except in the case of clauses (a) and (c), for breaches, violations and defaults that would not reasonably be expected to affect the ability of Seller or the Companies to perform the obligations under this Agreement in any material respect or prevent or materially impede or delay the consummation of transactions contemplated by this Agreement.
3.4 No Consents. No consent, approval, Order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Body is required by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller or the consummation of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by Seller under the HSR Act, and the termination or expiration of the waiting period applicable under the HSR Act, and (ii) such other consents, approvals, Orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not been and would not reasonably be expected to be material to the Companies, taken as a whole, and would not reasonably be expected to affect the ability of Seller or the Companies to perform the obligations under this Agreement in any material respect or prevent or materially impede or delay the consummation of transactions contemplated by this Agreement.
3.5 Litigation. There is no Proceeding pending or, to the Companies Knowledge, threatened or anticipated against Seller or any Company relating to or affecting the Transactions.
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3.6 No Brokers Fees. Seller does not have any Liability for any fee, commission or payment to any financial advisor, investment banker, broker or finder or similar agent with respect to the Transactions for which Buyer or any Company could be liable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
Except as set forth in the Disclosure Schedule (as provided in Section 11.13), Seller represents and warrants to Buyer as follows:
4.1 Organization, Qualification and Corporate Power. Section 4.1 of the Disclosure Schedule sets forth each Companys jurisdiction of incorporation or formation, the other jurisdictions in which it is qualified to do business, and its officers. Each Company is a corporation or limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or formation. Each Company is duly qualified to do business and is in good standing under the Laws of each jurisdiction where such qualification is required except where the failure to be so qualified or in good standing would not reasonably be expected to be material to the Companies, taken as a whole. Each Company has full power and authority to conduct the business in which it is engaged, to own and use the properties and assets that it purports to own or use and to perform its obligations, except where the failure to have full power and authority would not reasonably be expected to be material to the Companies, taken as a whole. The Target has delivered to Buyer correct and complete copies of the Organizational Documents of each Company. No Company is in violation in any material respect of any of its Organizational Documents.
4.2 Capitalization; Subsidiaries. The entire authorized, issued and outstanding capital stock of the Target consists solely of the Shares set forth on Section 4.2 of the Disclosure Schedule. Such Shares are owned of record and beneficially by Seller. All of the outstanding capital stock or comparable equity interests of each Company have been duly authorized and are validly issued, fully paid and nonassessable. There are no outstanding securities convertible or exchangeable into capital stock or comparable equity interests of any Company or any options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other Contracts that could require any Company to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem capital stock or comparable equity interests of any Company. There are no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to any Company. There are no voting trusts, proxies or other Contracts relating to the voting of the capital stock or comparable equity interests of any Company. No Company directly or indirectly controls, or owns a controlling interest in, any Person that is not a Subsidiary. Section 4.2 of the Disclosure Schedule lists each Subsidiary, its authorized capital stock or comparable equity interests, the number of shares or comparable equity interests outstanding, and the record and beneficial owner of such shares or equity interests.
4.3 Authority. The Target has all necessary corporate power and authority to execute and deliver each Transaction Document to which it is a party and to perform its obligations thereunder. The execution and delivery by the Target of each Transaction Document to which it is a party and the performance by the Target of the Transactions have been duly authorized by all requisite corporate action of the Target. Each Transaction Document to which the Target is a party constitutes the valid and legally binding obligations of the Target, enforceable against the Target in accordance with the terms of such Transaction Document.
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4.4 No Conflicts. Neither the execution and delivery of this Agreement nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (a) assuming compliance with the matters set forth in Section 4.5, violate any Law to which any Company or any asset owned or used by any Company is subject; (b) violate any Permit held by any Company or give any Governmental Body the right to terminate, revoke, suspend or modify any Permit held by any Company; (c) violate any Organizational Document of any Company; (d) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of any obligations under, or to cancel, terminate, modify or exercise any remedy under, any Material Contract to which any Company is a party or by which any Company is bound or to which any asset of any Company is subject; or (e) result in the imposition of any Encumbrance upon any asset owned or used by any Company (other than Permitted Encumbrances on assets other than equity securities), except in each case of clauses (a), (b), (d) and (e), for violations, breaches, conflicts and Encumbrances that would not reasonably be expected to be material to the Companies, taken as a whole, and would not reasonably be expected to affect the ability of the Companies to perform the obligations under this Agreement in any material respect or prevent or materially impede or delay the consummation of transactions contemplated by this Agreement.
4.5 No Consents. No consent, approval, Order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Body is required by or with respect to any Company in connection with the execution and delivery of this Agreement by Seller or the consummation of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by Seller under the HSR Act, and the termination or expiration of the waiting period applicable under the HSR Act, and (ii) such other consents, approvals, Orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not been and would not reasonably be expected to be material to the Companies, taken as a whole, and would not reasonably be expected to affect the ability of the Companies to perform the obligations under this Agreement in any material respect or prevent or materially impede or delay the consummation of transactions contemplated by this Agreement.
4.6 Financial Statements.
(a) Attached to Section 4.6(a) of the Disclosure Schedule are the following financial statements: (i) the audited, consolidated balance sheets of Seller and the Companies as of December 31 of 2011 and 2012 and statements of income, changes in stockholders equity, and cash flow for each of the fiscal years then ended, together with the notes and the reports of PricewaterhouseCoopers, LLP, independent certified public accountants; and (ii) an unaudited, consolidated balance sheet of Seller and the Companies as of December 31, 2013 and statement of income, changes in stockholders equity and cash flow for the fiscal year then ended, together with the notes (the financial statements in clause (ii) shall be collectively referred to as the 2013 Unaudited Financial Statements and the financial statements in clauses (i) and (ii) shall be collectively referred to as the Financial Statements). The Financial Statements have been prepared in accordance with GAAP, applied on a consistent basis (except as may be noted therein) throughout the periods covered thereby, and present fairly in all material respects the financial condition of the Companies as of and for their respective dates; provided, however, that the unaudited financial statements described in clause (ii) above are subject to normal, recurring year-end adjustments permitted by GAAP and any other adjustment described therein, including in the notes.
(b) Each Companys books and records (i) are complete and correct in all material respects and all material transactions to which such Company is or has been a party are accurately reflected therein in all material respects on an accrual basis, (ii) have been maintained in accordance with customary and sound business practices in such Companys industry, (iii) form the basis for the Financial Statements and (iv) reflect in all material respects the assets, liabilities, financial position, results of operations and cash flows of such Company on an accrual basis.
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(c) Each Company maintains a system of internal accounting controls that has been designed to provide reasonable assurance regarding the reliability of such Companys financial reporting and preparation of the Financial Statements for external purposes. To the Companies Knowledge, there are no events of fraud related to the Business that involve management or other employees of any Company who have a role in any Companys financial reporting.
4.7 Absence of Certain Changes. Since December 31, 2013 through the date of this Agreement:
(a) no Company has sold, leased, transferred or assigned any of its assets, tangible or intangible, with a value of more than $150,000, other than the sale or transfer of Inventory or immaterial assets for fair consideration in the Ordinary Course of Business;
(b) no Company has entered into any Contract (or series of reasonably related Contracts, each of which materially relates to the underlying transaction as a whole) involving more than $250,000 annually;
(c) no Company has accelerated, terminated, modified or cancelled any Contract or Permit (or series of reasonably related Contracts and Permits) involving more than $300,000 in the aggregate annually to which any Company is a party or by which it is bound;
(d) no Company has imposed any Encumbrances (excluding Permitted Encumbrances) upon any of its assets, tangible or intangible;
(e) no Company has delayed or postponed the payment of accounts payable or other Liabilities or accelerated the collection of accounts receivable, in either case in any material respect outside the Ordinary Course of Business, or altered any material accounting method or practice (other than as required by Law);
(f) the Companies have not issued, created, incurred or assumed Indebtedness involving more than $250,000 in the aggregate (excluding any Indebtedness incurred under the existing credit facilities);
(g) no Company has canceled, compromised, waived or released any right or claim (or series of related rights or claims) or any Indebtedness (or series of related Indebtedness) owed to it, in any case involving more than $250,000 in the aggregate;
(h) no Company has issued, sold or otherwise disposed of any of its capital stock, or granted any options, warrants or other rights to acquire (including upon conversion, exchange or exercise) any of its capital stock or declared, set aside, made or paid any dividend or distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased or otherwise acquired any of its capital stock or amended any of its Organizational Documents;
(i) no Company has (i) made any loan to, or entered into any other transaction with, any of its officers or employees on terms that would not have resulted from an arms-length transaction, (ii) entered into any employment agreement or modified the terms of any existing employment agreement with any officer, (iii) granted any increase in the compensation of any of its officers or employees (including any increase in target bonus, or profit-sharing contributions), other than increases in the Ordinary Course of Business with respect to employees who are not officers, or (iv) adopted, amended, modified or terminated any material Employee Benefit Plan, except in the case of clauses (ii), (iii) or (iv), as required by applicable Law or the terms of any applicable Employee Benefit Plan;
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(j) no Company has made, rescinded or changed any material Tax election, changed any Tax accounting period, entered into any closing agreement within the meaning of Code § 7121 (or any analogous provision of state, local or foreign Law), settled any material Tax Proceeding or surrendered any right to claim a refund of material Taxes, in each case, which action could reasonably be expected to result in a material Tax Liability of such Company or Buyer for a Post-Closing Tax Period;
(k) no Company has not agreed or committed to any of the foregoing contained in clauses (a) through (j);
(l) there has not been any event, circumstance, condition, occurrence, effect or change that has had or could reasonably be expected to have, either individually or in the aggregate (taking into account all other events, circumstances, conditions, occurrences, effects or changes), a Material Adverse Effect;
(m) no Company has experienced any incident of material or unreimbursed damage, destruction or loss in an amount exceeding $300,000 other than ordinary wear and tear (whether or not covered by insurance) to its property;
(n) other than in the Ordinary Course of Business, no Company has made any material change in the manner in which products or services of the Business are marketed (including any material change in prices) or any material change in the manner in which the Business extends discounts or credits to customers;
(o) no Company has received any notice that any other party (excluding customers and suppliers of the Companies) to a Contract or Permit (or series of related Contracts or Permits) involving more than $300,000 in the aggregate annually to which any Company is a party or by which it is bound has accelerated, terminated, modified or cancelled such Contract or Permit; and
(p) there has not been any material loss of any distribution channel, sales location or source of supply of Inventory or contract services or the receipt of any notice that such a material loss may be pending.
4.8 No Undisclosed Liabilities. No Company has any material Liability (and no basis exists for any material Liability), except for (a) Liabilities under executory Contracts that are performed in accordance with their terms, excluding Liabilities for any breach of any executory Contract, (b) Liabilities to the extent reflected or reserved against in the 2013 Unaudited Financial Statements (or the notes thereto), (c) Liabilities incurred in the Ordinary Course of Business since December 31, 2013 (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement or violation of Law), and (d) Liabilities to the extent included in Indebtedness or Working Capital.
4.9 Sufficiency of Assets. At the Closing, the Companies will own all of the tangible and intangible properties, assets, Contracts, Permits and interests in properties required for the continued conduct in all material respects of the Business after the Closing in the same manner as conducted prior to Closing.
4.10 Accounts Receivable. All Accounts Receivable represent valid obligations arising from products or services actually sold by a Company in the Ordinary Course of Business, and the allowance for doubtful accounts reflected on the balance sheets included in the Financial Statements are as of the date thereof established in accordance with GAAP, consistently applied. To the Companies Knowledge, there is no contest, claim, or right to set-off, other than returns in the Ordinary Course of Business, under any Contract with any obligor of an Account Receivable relating to the amount or validity of such Account Receivable.
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4.11 Inventory. The Inventory is good and merchantable, of a quality and quantity useable and saleable for the needs of the Business in all material respects and in accordance with past practice, and fit for the purpose for which it was procured or manufactured. All Inventory not written off has been valued in the aggregate at the lower of cost or market value. Other than Inventory in transit in the Ordinary Course of Business, all of the Inventory is located on the Leased Real Property.
4.12 Real Property.
(a) Section 4.12(a) of the Disclosure Schedule lists all of the Contracts relating to real property and interests therein leased, subleased or otherwise occupied or used by any Company and all amendments thereto (each, a Lease) (such underlying property interests, with all easements and other rights appurtenant to such property, the Leased Real Property). With respect to each item of Leased Real Property, the leasehold interest of the applicable Company is free and clear of any Encumbrances, except Permitted Encumbrances. No Company is a sublessor of, or has assigned any lease covering, any item of Leased Real Property.
(b) The Leased Real Property constitutes all interests in real property currently used in connection with the Business. To the Companies Knowledge, the Leased Real Property is not subject to any rights of way, building use restrictions, title exceptions, variances, reservations or limitations of any kind or nature, except as set forth in the Lease relating to such item. The Leased Real Property complies in all material respects with all Laws, including zoning requirements, and the Companies have received and there remains in place a valid certificate of occupancy or the equivalent by the applicable Governmental Bodies having jurisdiction thereof authorizing the Companies use and occupancy, except where such failures to have a valid certificate are not, and would not reasonably be expected to be, material to the relevant Lease. No Company is a party to or bound by any Contract (including any option) for the purchase or sale of any real estate interest or any Contract for the lease to or from any Company of any real estate interest not currently in possession of any Company.
(c) No Company currently owns any real property.
4.13 Contracts.
(a) Section 4.13 of the Disclosure Schedule lists the following Contracts to which any Company is a party or by which any Company is bound or to which any asset of any Company is subject or under which any Company has any rights or the performance of which is guaranteed by any Company (excluding purchase orders and invoices entered into in the Ordinary Course of Business) (collectively, with the Insurance Policies, the Material Contracts):
(i) each Contract (or series of related Contracts) that involves delivery or receipt of products or services of an amount or value in excess of $400,000, on an annual basis, that was not entered into in the Ordinary Course of Business;
(ii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract (including any Lease or License) affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property having a value per item or aggregate payments in excess of $400,000 on an annual basis;
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(iii) each collective bargaining agreement and other Contract to or with any labor union or other employee representative of a group of employees;
(iv) each Contract containing any covenant that purports to restrict in any material respect the ability of any Company to engage in any line of business or to compete with any Person;
(v) each Contract (other than employment Contracts and Employee Benefit Plans) providing for commissions or similar payments to any Person based on levels of sales, purchases or profits, other than (a) payments of fixed amounts for goods, or (b) payments made pursuant to volume incentive programs negotiated with dealers or customers;
(vi) each Contract (or series of related Contracts) for capital expenditures in excess of $250,000;
(vii) each written material warranty, guaranty or other similar undertaking with respect to contractual performance other than in the Ordinary Course of Business;
(viii) each Contract for Indebtedness; and
(ix) each Contract by virtue of which any Company owns any interest, directly or indirectly, in any joint venture, partnership, limited liability company, association, or other entity.
(b) Seller or the Target has delivered to Buyer a correct and complete copy of each written Material Contract. Each Material Contract, with respect to any Company, is legal, valid, binding, enforceable against such Company, in full force and effect. Each Material Contract, with respect to the other parties to such Material Contract, to the Companies Knowledge, is legal, valid, binding, enforceable, in full force and effect. No Company is in breach or default, and, to the Companies Knowledge, no event has occurred that with notice or lapse of time would constitute a breach or default, or permit termination, modification or acceleration, under any Material Contract. To the Companies Knowledge, no other party is in breach or default, and no event has occurred that with notice or lapse of time would constitute a breach or default, or permit termination, modification or acceleration, under any Material Contract. As of the date of this Agreement, to the Companies Knowledge, no party to any Material Contract has repudiated any provision of any Material Contract.
(c) No Company is currently a party to, has been a party to within the last three years, or presently contemplates being a party to, any Government Contract.
4.14 Intellectual Property.
(a) Except where such failure to own, have the right to use, failure to take action or failure to be valid or enforceable is not, and would not reasonably be expected to be, material to the Companies, taken as a whole, (i) each Company owns or has the right to use all Intellectual Property necessary or prudent for the operation of the Business as presently conducted; (ii) each Company has taken all necessary and prudent action to maintain and protect each item of Intellectual Property that it owns, licenses or uses; and (iii) each item of Intellectual Property owned, licensed or used by any Company is valid and enforceable and otherwise fully complies with all Laws applicable to the enforceability thereof.
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(b) No Company has materially violated or materially infringed upon or otherwise come into material conflict with any Intellectual Property of third parties, and no Company has received any written notice alleging any such violation, infringement or other conflict. To the Companies Knowledge, no third party has materially infringed upon or otherwise come into conflict with any Intellectual Property of any Company.
(c) Section 4.14(c) of the Disclosure Schedule identifies each patent or registration (including copyright, trademark and service mark) that has been issued to any Company (whether active and in force or abandoned, lapsed, canceled or expired) with respect to any of its Intellectual Property, identifies each patent application or application for registration (whether pending, abandoned, lapsed, canceled or expired) that any Company has made with respect to any of its Intellectual Property, and identifies each license, agreement or other permission that any Company has granted to any third party that is active and in force with respect to any of its Intellectual Property. The Target has delivered to Buyer correct and complete copies of all such patents, registrations, applications, licenses, agreements and permissions (or, if oral, written summaries thereof) and have made available to Buyer correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each such item. Section 4.14(c) of the Disclosure Schedule also identifies each trade name or unregistered trademark or service mark owned by any Company. With respect to each item of Intellectual Property required to be identified in Section 4.14(c) of the Disclosure Schedule: (i) the applicable Company possess all right, title and interest in and to the item, free and clear of any Encumbrance (other than Permitted Encumbrances); (ii) the item is not subject to any Order; (iii) no Proceeding is pending or, to the Companies Knowledge, is threatened or anticipated that challenges the legality, validity, enforceability, use or ownership of the item; and (iv) such Company has not agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to the item, in each case of clauses (i) through (iv), except as is not, and would not reasonably be expected to be, material to the Companies, taken as a whole.
(d) Section 4.14(d) of the Disclosure Schedule identifies each item of Intellectual Property that any Person other than any Company owns and that any Company uses pursuant to license, agreement or permission that is material to any Company (a License). With respect to each item of Intellectual Property required to be identified in Section 4.14(d) of the Disclosure Schedule: (i) to the Companies Knowledge, such item is not subject to any Order; (ii) to the Companies Knowledge, no Proceeding is pending or is threatened or anticipated that challenges the legality, validity or enforceability of such item; and (iii) the applicable Company has not granted any material sublicense or similar right with respect to the License relating to such item.
4.15 Tax.
(a) Each Company has timely filed (taking into account extensions) with the appropriate Governmental Body all material Tax Returns that such Company was required to have filed. All such Tax Returns are true, correct and complete in all material respects. All material Taxes owed (or to be remitted) by each Company (whether or not shown on any Tax Return) have been paid to the appropriate Governmental Body. In the last three years, no claim has been made by any Governmental Body in a jurisdiction where any Company does not file income or franchise Tax Returns that such Company is or may be subject to income or franchise taxation by that jurisdiction. Except for Permitted Encumbrances, there are no Encumbrances on any of the assets of any Company that arose in connection with, or otherwise relate to, any failure (or alleged failure) to pay any Tax.
(b) Section 4.15(b) of the Disclosure Schedule (i) contains a list of all states, territories and other jurisdictions (whether domestic or foreign) in which each Company has filed an income or franchise Tax Return at any time during the last three calendar years, (ii) identifies those Tax
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Returns described in clause (i) above that currently are the subject of audit, and (iii) lists all rulings of a Taxing Authority with respect to Taxes that will be binding on a Company following the Closing. Seller has delivered or made available to Buyer true, correct and complete copies of all Tax Returns filed by, and all examination reports, and statements of deficiencies assessed against or agreed to by, each Company during the three-year period ending on the Closing Date.
(c) Each Company has withheld or collected, and paid to the proper Governmental Body, all material Taxes required to have been withheld or collected and remitted, and complied in all material respects with all information reporting and back-up withholding requirements, and has maintained all required records with respect thereto, in connection with amounts paid or owing to any employee, customer, creditor, equity holder, independent contractor, or other third party.
(d) The unpaid Taxes of the Companies (i) did not, as of December 31, 2013, exceed the accruals and reserves for Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth in the Financial Statements dated as of such date and (ii) will not exceed such accruals and reserves as adjusted for the passage of time and business operations of the Companies through the Closing Date.
(e) There is no audit, examination, investigation or other proceeding with respect to Taxes (a Tax Proceeding) pending or being threatened in writing. No Company has waived any statute or period of limitations with respect to any Tax or agreed to any extension of time with respect to the collection or assessment of any Tax, in each case, which waiver or extension is currently in effect.
(f) No Company is a party to any Tax allocation, sharing, reimbursement or similar agreement other than (x) any such agreement solely among the Companies and (y) any agreement entered into in the ordinary course of business and not primarily relating to Taxes. No Company has any Liability for Taxes of any Person (other than another Company) under Treasury Regulation § 1.1502-6 (or any similar provision of any other Law) or as a transferee or successor. No Company has participated in any listed transaction as defined in Treasury Regulation § 1.6011-4 or tax shelter as defined in Code § 6111 and the Treasury Regulations thereunder.
(g) Seller is, and since its date of formation has been, a validly electing S Corporation within the meaning of Code §§ 1361 and 1362 for U.S. federal income Tax purposes. Each Company is, and at all times during which it has been owned by Seller has been either (i) a qualified subchapter S subsidiary within the meaning of Code § 1361(b)(3)(B) or (ii) a disregarded entity within the meaning of Treasury Regulation § 301.7701-3 for U.S. federal income Tax purposes. The classification of Seller and each Company for applicable state income Tax purposes during the periods described in the first and second sentence of this Section 4.15(g), respectively, conformed to the U.S. federal income Tax classification in each jurisdiction (x) that follows the U.S. federal income tax classification of such entity or (y) in which a valid election has been made by Seller and/or the Companies to be classified in a manner consistent with their U.S. federal income Tax classification. Section 4.15(g) of the Disclosure Schedule identifies those states referred to in Section 4.15(b)(i) of the Disclosure Schedule that do not follow the U.S. federal income Tax classification of Seller and/or the Companies for state income Tax purposes, whether a classification election has been made in such state, and the classification elected.
(h) This Section 4.15 and Section 4.21 contain all of Sellers representations and warranties with respect to the matters relating to Taxes and Tax Returns.
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4.16 Legal Compliance.
(a) Each Company is, and for the last three years has been, in compliance in all material respects with all applicable Laws and Permits. No Proceeding is pending against any Company, alleging any failure to comply with any applicable Law or Permit. No event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a material violation by any Company of any Law or Permit. No Company has received any written notice or other written communication from any Person regarding any actual, alleged or potential material violation by any Company of any Law or Permit or any cancellation, termination or failure to renew any Permit held by any Company.
(b) None of the Companies, nor to the Companies Knowledge, any of their managers, stockholders, directors, officers, employees, or agents, are, or, at any time since January 1, 2009, were a Person that is or was: (i) identified on any U.S. Restricted Person List; (ii) identified on any other comparable list of Persons subject to trade restrictions and/or sanctions imposed or administered by any Governmental Body in any jurisdiction in which any Company operates; or (iii) organized, incorporated, established, located, resident of, or born in, or a citizen, national, or the government or a government instrumentality of, Cuba, Iran, Libya (during the period between February 25, 2011 and December 16, 2011), Myanmar (f/k/a Burma), North Korea, Sudan, Syria, or any other country embargoed or subject to substantial trade restrictions by the Governmental Body in any jurisdiction in which any Company operates. Each Company and, to the Companies Knowledge, its stockholders, managers, directors, officers, employees and agents (to the extent any such agents have acted and/or are acting for or on behalf of a Company), are, and for the last three years have been, in compliance in all material respects with all applicable U.S. and foreign export and import Laws, and there are no claims, complaints, charges, investigations or proceedings pending or, to the Companies Knowledge, expected or threatened between any Company and any Governmental Body under any such Laws. Each Company has at all times been in compliance in all material respects with all Laws relating to export control and trade embargoes.
(c) Section 4.16(c) of the Disclosure Schedule contains a complete and accurate list of each material Permit held by any Company or that otherwise relates to the Business or any asset owned or leased by any Company. Each Permit listed or required to be listed on Section 4.16(c) of the Disclosure Schedule is valid and in full force and effect.
(d) Each Company has prepared and timely applied for all export Permits required in accordance with U.S. and foreign export Laws for the conduct of the Business. Prior to the Closing, the Target will make available to Buyer true and complete copies of issued and pending export Permits, and all documentation required by, and necessary to evidence compliance with, all U.S. and foreign export and import Laws.
4.17 Litigation. As of the date of this Agreement, there is no Proceeding pending or, to the Companies Knowledge, threatened or anticipated relating to or affecting (a) any Company or the Business or any asset owned or used by it or (b) the Transactions. To the Companies Knowledge, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any such Proceeding, which Proceeding would reasonably be expected to be material to the Companies, taken as a whole. As of the date of this Agreement, there is no outstanding Order to which any Company or any asset owned or used by it is subject.
4.18 Product and Service Warranties. No product manufactured, sold, leased or delivered or any service provided by any Company is subject to any guaranty, warranty or indemnity beyond the applicable standard terms and conditions imposed by the manufacturer of the product. Attached to Section 4.18 of the Disclosure Schedule are copies of the standard terms and conditions of sale or lease for each Company that related to the Business (containing applicable guaranty, warranty and indemnity provisions).
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4.19 Environmental.
(a) Each Company has complied in the last five years and is in compliance in all material respects with all Environmental Laws. Each Company has obtained and complied with, and is in material compliance with, all Permits that are required pursuant to any Environmental Law for the occupation of its facilities and the operation of the Business. In the last five years, no Company has received any written or, to the Companies Knowledge, oral notice or report regarding any actual or alleged violation of any Environmental Law, or any Liabilities or potential Liabilities, including any investigatory, remedial or corrective obligations, relating to it or its facilities arising under any Environmental Law. None of the following exists at any property or facility currently owned or operated by any Company: (a) underground storage tanks, (b) asbestos-containing material in any form or condition, (c) materials or equipment containing polychlorinated biphenyls, or (d) landfills, surface impoundments or disposal areas. None of the Companies have treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, including any Hazardous Substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to any material Liability, including any material Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any Environmental Law. No Company has stored any oil, petroleum or other Hazardous Substance on any Leased Real Property. No Company has engaged in fueling, refueling or vehicle maintenance operations involving the use of Hazardous Substances on any Leased Real Property or at any other property or facility previously owned or operated by any Company. No Company has, either expressly or by operation of Law, assumed or undertaken any Liability, including any obligation for corrective or remedial action, of any other Person relating to any Environmental Law. No facts, events or conditions relating to the past or present facilities, properties or operations of any Company are expected to prevent, hinder or limit continued compliance in any material respect with any Environmental Law, give rise to any material investigatory, remedial or corrective obligations pursuant to any Environmental Law, or give rise to any other material Liabilities pursuant to any Environmental Law, including any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage.
(b) This Section 4.19 contains all of the Companies representations and warranties with respect to the matters relating to Environmental Laws.
4.20 Employees.
(a) Section 4.20 of the Disclosure Schedule sets forth, as of December 31, 2013, the name, job title, current rate of base salary, any change in base compensation since December 31, 2013 with respect to each Active Employee whose annual compensation for calendar year 2013 (including wages, salaries and actual or anticipated bonuses), exceeded $200,000 (determined, for such purposes, without regard to the Transactions). No Company is, or during the last six years has been, a party to or bound by any collective bargaining agreement. During the last three years, no Company has experienced any material strike, slowdown, picketing, work stoppage, employee grievance process, claim of unfair labor practice or other material collective bargaining dispute. There is no lockout of any employees by any Company as of the date of this Agreement, and no such action is contemplated by any Company. No Company has committed any material unfair labor practice under the National Labor Relations Act. To the Companies Knowledge, (i) no event has occurred or circumstance exists that would reasonably be expected to provide the basis for any material work stoppage or other material labor dispute and (ii) there is no material organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of any Company.
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(b) Each Company is, and during the last three years, has been in compliance in all material respects with all applicable Employment Laws. There are no material Proceedings pending, or to the Companies Knowledge, threatened against any Company relating to the employment of any employee of any Company, other than routine claims for benefits. No Company has any material Liability with respect to any misclassification of (i) any Person or employee as an independent contractor rather than as an employee, (ii) any employee leased from another employer or (iii) any employee currently or formerly classified as exempt from overtime wages. Within the past year, no Company has incurred any Liability under the WARN Act or any similar state or local Law that remains unsatisfied, and no employment terminations prior to the Closing Date shall result in unsatisfied Liability under the WARN Act or any similar state or local Law, other than any such employment terminations at the direction of Buyer. No Company employee has experienced an employment loss, as defined by the WARN Act or any similar applicable state or local Law, requiring notice to employees in the event of a closing or layoff, within ninety days prior to the date of this Agreement.
4.21 Employee Benefits.
(a) Section 4.21(a) of the Disclosure Schedule lists each material Employee Benefit Plan:
(i) Each Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in all material respects with the applicable requirements of ERISA, the terms of such Employee Benefit Plan, the Code and other applicable Laws.
(ii) All contributions (including all employer contributions and employee salary reduction contributions) that are due have been paid to each Employee Benefit Plan that is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date that are not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Companies. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each Employee Benefit Plan that is an Employee Welfare Benefit Plan or if not yet due have been accrued in accordance with the past custom and practice of the Companies.
(iii) The Employee Benefit Plan that is a qualified plan under Code § 401(a) (the Company 401(k) Plan) has received a favorable determination letter from the IRS, or may rely upon an opinion or advisory letter issued by the IRS, that it is such a qualified plan, and, to the Companies Knowledge, there are no facts or circumstances that would reasonably be expected to result in the revocation of such determination letter, or the inability to rely upon such opinion or advisory letter.
(iv) No Company has any binding commitment or understanding to materially modify or terminate any Employee Benefit Plan, except as required by Buyer in connection with the Closing or as may be mandated by operation of Law.
(v) Except as provided in this Agreement, the execution of the Transaction Documents and the performance of the Transactions will not constitute a triggering event under any Employee Benefit Plan that (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment, parachute payment (as defined in Code § 280G), acceleration, vesting or increase in benefits to any employee or former employee of any Company.
(vi) The Target has delivered or made available to Buyer correct and complete copies of (A) the plan documents and summary plan descriptions, or employee booklets prepared for employees and former employees and their beneficiaries concerning each material Employee Benefit Plan, (B) the most recent determination letter received from the IRS with respect to the Company 401(k) Plan, (C) the Form 5500 Annual Reports and non-discrimination testing results for the most recent plan year, and (D) all related trust agreements, insurance contracts and other funding agreements that implement each such material Employee Benefit Plan.
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(b) With respect to each Employee Benefit Plan that any Company (or any entity treated as a single employer with Seller for purposes of Code § 414) maintains or has maintained or to which it contributes, has contributed, or has been required to contribute or had any Liability, there has been no prohibited transaction (as defined in ERISA § 406 or Code § 4975) with respect to any such Employee Benefit Plan. No fiduciary (as defined in ERISA § 3(21)) has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No material Proceeding with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or, to the Companies Knowledge, threatened. There are no pending, or to the Companies Knowledge, threatened material claims with respect to any such Employee Benefit Plan, other than routine claims for benefits.
(c) No Company nor any other entity, trade or business that, along with such Company, is a member of a group described in Code § 414(b), (c), (m) or (o) or ERISA § 4001(a)(14) (ERISA Affiliate) contributes, has during the last six years contributed to, has during the last six years been required to contribute, or as a result of the Transactions will be required to contribute to any Multiemployer Plan or has any Liability (including withdrawal liability as defined in ERISA § 4201) under any Multiemployer Plan. No Company maintains or has during the last six years maintained or contributes, has during the last six years contributed, has during the last six years been required to contribute, or as a result of the Transactions will be required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses or their dependents (other than in accordance with COBRA or other applicable Law).
(d) No Company nor any ERISA Affiliate of such Company sponsors, maintains or contributes to, or has any obligation to contribute to, or has any Liability under or with respect to, any (i) Employee Pension Benefit Plan that is or was, during the last six years, subject to Code §§ 412 or 4971, ERISA § 302 or Title IV of ERISA, or (ii) multiple employer plan as defined in Code § 413(c), or otherwise has any Liability under Title IV of ERISA.
(e) Each Employee Benefit Plan that is a nonqualified deferred compensation plan within the meaning of Code § 409A and the Treasury Regulations promulgated thereunder (i) complies in all material respects, and is operated and administered in all material respects in accordance, with the requirements of Code § 409A, the Treasury Regulations promulgated thereunder and (ii) has been operated and administered in good faith compliance with Code § 409A from the period beginning on January 1, 2005.
(f) This Section 4.21 contains all of the Companies representations and warranties with respect to the matters relating to Employee Benefit Plans and ERISA.
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4.22 Customers and Suppliers. With respect to the twelve months ended December 31, 2013, Section 4.22 of the Disclosure Schedule lists (a) the ten largest (by dollar volume) customers of the Companies (taken as a whole, and showing the dollar volume for each) and (b) the ten largest (by dollar volume) suppliers of the Companies (taken as a whole, and showing the dollar volume for each). As of the date of this Agreement, no customer or supplier listed on Section 4.22 of the Disclosure Schedule has notified any Company in writing of a likely decrease in the volume of purchases from or sales to any Company, or a decrease in the price that any such customer is willing to pay for products or services of any Company, or an increase in the price that any such supplier will charge for products or services sold to any Company.
4.23 Related Party Transactions. Section 4.23 of the Disclosure Schedule lists all Contracts and arrangements between or among any Company, on the one hand, and any stockholder, officer or employee of any Company, or any Related Party of the foregoing, on the other hand (the Related Party Agreements). Other than as set forth in the Related Party Agreements, within the past three years, neither any stockholder, officer or employee of any Company nor any Related Party of any of the foregoing has (a) owned any interest in any asset used in the Business, (b) been involved in any business or transaction with any Company or (c) engaged in competition with any Company. Other than is set forth in any Related Party Agreement, neither any shareholder, officer or employee of any Company nor any Related Party of any of the foregoing has any Indebtedness owing to any Company. Other than is set forth in any Related Party Agreement, no Company (A) has any claim or right against any shareholder, officer or employee of any Company or any Related Party of any of the foregoing or (B) has any Indebtedness owing to any shareholder, officer or employee of any Company nor any Related Party of any of the foregoing.
4.24 Insurance. Section 4.24 of the Disclosure Schedule sets forth each insurance policy (collectively, the Insurance Policies) to which any Company is a party, a named insured, covered or otherwise the beneficiary of coverage. The Target has delivered to Buyer true and complete copies of each Insurance Policy and each pending application of any Company for any insurance policy. Each Company maintains insurance coverage in scope and amount customary and reasonable for the businesses in which it is engaged.
4.25 Ethical Practices. Each Company is, and for the last three years has been, in compliance in all material respects with the Foreign Corrupt Practices Act and all related or similar Laws. No Company nor its officers or employees has offered money or given anything of value to: (a) any official of a Governmental Body, any political party or official thereof, or any candidate for political office; (b) any customer or member of any Governmental Body; or (c) any other Person, while knowing or having reason to know that all or a portion of such money or thing of value may be offered, given or promised, directly or indirectly, to any customer, member of a Governmental Body or candidate for political office for the purpose of the following: (i) illegally influencing any action or decision of such Person, in his, her or its official capacity, including a decision to fail to perform his, her or its official function; (ii) inducing such Person to use his, her or its influence with any Governmental Body to affect or influence any act or decision of such government or instrumentality to assist any Company in obtaining or retaining business for, or with, or directing business to, any Person; or (iii) where such payment or thing of value would constitute a bribe, kickback or illegal or improper payment or gift to assist any Company in obtaining or retaining business for, or with, or directing business to, any Person.
4.26 No Brokers Fees. No Company has any Liability for any fee, commission or payment to any financial advisor, investment banker, broker or finder or similar agent with respect to the Transactions.
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4.27 Retail Sales. Section 4.27 of the Disclosure Schedule sets forth the retail sales businesses (including the sale of tires, tire parts, tire accessories and related equipment and the performance of related services for end consumers) that any Company has engaged in or operated within the last three years.
4.28 No Other Representations and Warranties. Except for the representations and warranties set forth in Article III and Article IV or in any other Transaction Document or the Seller Noncompete Agreement, Buyer acknowledges than neither Seller nor any Company nor any other Person or entity on behalf of Seller or any Company has made any representation or warranty, whether express or implied, with respect to Seller and the Companies or their respective businesses, affairs, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any other information provided or made available to Buyer on behalf of Seller or the Companies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
Buyer represents and warrants to Seller:
5.1 Organization and Authority. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware. Buyer has all necessary corporate power and authority to execute and deliver each Transaction Document to which it is a party and to perform its obligations thereunder. The execution and delivery by Buyer of each Transaction Document to which Buyer is a party and the performance by Buyer of the Transactions have been duly approved by all requisite corporate action of Buyer. Each Transaction Document to which Buyer constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with the terms of such Transaction Document.
5.2 No Conflicts. Neither the execution and delivery of this Agreement nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (a) violate any Law to which Buyer is subject; (b) violate any Organizational Document of Buyer; or (c) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any Contract to which Buyer is a party or by which Buyer is bound or the performance of which is guaranteed by Buyer, except in the case of clauses (a) and (c), for breaches, violations and defaults that would not reasonably be expected to affect the ability of Buyer to perform its obligations under this Agreement in any material respect or prevent or materially impede or delay the consummation of transactions contemplated by this Agreement.
5.3 No Consents. No consent, approval, Order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Body is required by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by Buyer under the HSR Act, and the termination or expiration of the waiting period applicable under the HSR Act, and (ii) such other consents, approvals, Orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate would not reasonably be expected to affect the ability of Buyer to perform the obligations under this Agreement in any material respect or prevent or materially impede or delay the consummation of transactions contemplated by this Agreement.
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5.4 Litigation. There is no Proceeding pending or, to Buyers Knowledge, threatened or anticipated against Buyer relating to or affecting the Transactions.
5.5 Financing. Prior to the execution of this Agreement, Buyer has delivered to Seller true and complete copies of (a) the executed debt commitment letter, dated as of February 17, 2014, by and among Buyer, Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, the Lenders; provided that in the event that additional lenders, arrangers, bookrunners, agents, managers or similar entities that have not executed such debt commitment letter as of the date of this Agreement are added as parties to such debt commitment letter after the date hereof, the term Lenders shall include each such institution), and all exhibits, annexes and schedules thereto (the Financing Commitment), pursuant to which the Lenders have agreed to lend, subject to the terms and conditions set forth therein, debt financing in the amounts set forth therein (the Financing). Assuming the conditions set forth in Sections 7.1 and 7.3 are satisfied at the Closing, the net proceeds contemplated by the Financing Commitment, together with other Buyer resources, will in the aggregate be sufficient for Buyer to pay the Purchase Price, the Repayment Indebtedness, all other amounts required to be paid to Seller or on Sellers behalf in connection with the consummation of the transactions contemplated by this Agreement. There are no conditions or other contingencies related to funding of the full amount of the Financing other than those expressly set forth in the Financing Commitment delivered to the Company prior to the execution and delivery of this Agreement. In no event shall the receipt or availability of any funds or financing (including the Financing) by or to Buyer or any of its Affiliates or any other financing transaction be a condition to any of the obligations of Buyer under this Agreement.
5.6 Solvency. Immediately after giving effect to the Transactions, including (a) the Financing, (b) the payment of the Purchase Price, as may be adjusted pursuant to Sections 2.3(c) and 2.5, (c) payment of any other amounts required to be paid in connection with the consummation of the transactions contemplated by the Transaction Documents (including payment of the Repayment Indebtedness) or the Financing Commitment and (d) payment of all related fees and expenses of Buyer, and assuming the satisfaction in full of each of the conditions set forth in Section 7.1 and Section 7.3 and the accuracy of the representations and warranties regarding the Companies in Article IV, each of Buyer and the Target will be Solvent as of immediately following the Closing Date.
5.7 No Brokers Fees. Buyer has no Liability for any fee, commission or payment to any financial advisor, investment banker, broker or finder or similar agent with respect to the Transactions for which Seller could be liable.
5.8 Investment Intent. Buyer has knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of its purchase of the Shares. Buyer is purchasing the Shares for its own account and not with a view to distribution of such Shares in violation of the Securities Act. Buyer acknowledges that the Shares have not been registered under the Securities Act or any state securities Laws and agrees that the Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposes of without registration under the Securities Act, except pursuant to an exemption from such registration available under the Securities Act, and without compliance with foreign securities Laws, in each case, to the extent applicable.
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ARTICLE VI
CERTAIN COVENANTS
The Parties agree as follows with respect to the period following the Closing:
6.1 Further Assurances.
(a) Each Party will use its reasonable best efforts to take all actions necessary, proper or advisable in order to perform the Transactions (including satisfaction, but not waiver, of the closing conditions set forth in Article VII). Before and after the Closing Date, each Party agrees to furnish upon request to any other Party such further information, to execute and deliver to any other Party such other documents, and to do such other acts and things, all as any other Party may reasonably request for the purpose of carrying out the intent of the Transaction Documents and the Seller Noncompete Agreement.
(b) No Party will take, or knowingly omit to take, any action (including any acquisition or entering into any business combination) which is intended to or which could reasonably be expected to adversely affect the ability of such Party to perform its covenants and agreements under this Agreement in any material respect or otherwise prevent or materially delay satisfaction of the conditions to this Agreement or consummation of the Transactions.
6.2 [Reserved].
6.3 Operation of the Business. From the Effective Date until the earlier of the Closing or the termination of this Agreement, except as otherwise contemplated by this Agreement, required by Law, as set forth in Section 6.3 of the Disclosure Schedule or as consented to by Buyer in writing (which consent shall not be unreasonably withheld, conditioned or delayed), Seller will cause each Company to: (a) conduct the Business of each Company in the Ordinary Course of Business; (b) use their reasonable best efforts to maintain the properties, physical facilities and operations of each Company in the same condition as they were on the date of this Agreement (subject to reasonable wear and tear), preserve intact the current business organization of each Company, keep available the services of the current officers and key employees of each Company, and maintain the relations and goodwill with suppliers, customers, lenders and others having material business relationships with any Company; (c) continue in full force and effect without modification all Insurance Policies, except as required by applicable Law; (d) not effect any recapitalization, reclassification, or like change in such Companys capitalization; (e) comply in all material respects with all applicable Laws; (f) maintain its books and records in accordance with past practice; (g) not settle or agree to settle any Proceeding (other than a Tax Proceeding) by or before any Governmental Body; (h) not settle any material Tax Proceeding if such settlement could reasonably be expected to result in a material Tax Liability of such Company or Buyer for a Post-Closing Tax Period; and (i) not agree or commit to do any of the actions prohibited by this Section 6.3. Seller will not, and will cause each Company not to, take any action or fail to take any action which, if taken or failed to be taken at the Effective Date, would constitute or result in a breach of Sections 4.7(a) through (k).
6.4 Access.
(a) From the Effective Date until the earlier of the Closing or the termination of this Agreement, Seller will, and will cause each Company and its Representatives to, (i) permit Buyer and its Representatives to have access during normal business hours, upon reasonable prior notice, subject to applicable Law and in accordance with reasonable procedures and limitations established by Seller, at Buyers expense, to premises, properties, senior management personnel (including the opportunity to discuss the affairs of the Companies with such senior management personnel), books, records, Contracts, documents and data of or pertaining to each Company, (ii) furnish Buyer and its Representatives with copies of all such books, records, Contracts, documents and data as Buyer may reasonably request and (iii) permit Buyer to take such actions as may be reasonably necessary to comply with Buyers obligations under Schedule 2.6; provided, however, that notwithstanding anything herein to the contrary, none of Seller nor any Company shall be required to provide access to or to disclose information where such access or disclosure would reasonably be expected to (A) contravene any Law, (B) jeopardize any attorney-client or other privilege or other immunity or protection from disclosure of Seller or any
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Company, (C) contravene any Contract; provided, however, that at Buyers request, Seller or the applicable Company shall use its reasonable best efforts to seek a waiver of such contravention or confidentiality obligation to allow access to such information to be provided to Buyer, or (D) jeopardize trade secret protection.
(b) Notwithstanding anything to the contrary contained herein, prior to the Closing, without the prior written consent of Seller (which consent shall not be unreasonably withheld, conditioned or delayed), Buyer shall not, and shall cause its Affiliates and its Representatives not to, contact any distributor, supplier, vendor, customer or partner of any of the Companies regarding the business, operations, assets, financial condition or prospects of the Companies or the Transactions (which, for the avoidance of doubt, shall not prevent Buyer or its Affiliates or Representatives from contacting any such Persons in the ordinary course of the conduct of the business of Buyer and its Subsidiaries consistent with past practice; provided that Buyer shall not discuss this Agreement or the Transactions). Seller shall have the right to have one or more of its representatives present at all times during any visits, examinations, discussions or contacts contemplated by this Section 6.4.
(c) After the Closing Date, until the second anniversary of the Closing Date (or later to the extent required by Law), Buyer shall, and shall cause each of the Companies to, retain all material books and records of the Companies relating to the periods prior the Closing Date (other than books and records related to Tax matters which shall be retained pursuant to the periods set forth in Article IX) in accordance with Buyers general document retention policies.
6.5 Notice of Developments. From the Effective Date until the Closing, Seller will notify Buyer as promptly as practicable in writing of any fact or condition developing after the Effective Date, which, if existing, occurring or known at the date of this Agreement, would have been required to be disclosed to Buyer and would constitute a breach of any representation or warranty of Seller in this Agreement. No such notification shall be deemed to have cured any inaccuracy in or breach of any representation or warranty contained in this Agreement, including for purposes of the indemnification or termination rights contained in this Agreement or of determining whether or not the conditions set forth in Section 7.2 have been satisfied.
6.6 Employee Matters.
(a) If requested in writing by Buyer at least five Business Days prior to the Closing Date, subject to applicable Law and the terms of the Company 401(k) Plan, Seller shall cause the Target to take (or cause to be taken) all actions necessary or appropriate to terminate, effective no later than the day immediately preceding the Closing Date (the Plan Termination Date), the Company 401(k) Plan; provided, however, that pursuant to any such termination, Buyer shall permit participants in the Company 401(k) Plan to roll over contributions and, if administratively feasible, loans from the Company 401(k) Plan into a similar plan of Buyer or its Affiliates (Parent 401(k) Plan) and participants in the Company 401(k) Plan shall be eligible to participate in the Parent 401(k)) Plan as soon as administratively feasible after the Closing Date. If the Target is required to terminate the Company 401(k) Plan, then Seller shall provide to Buyer prior to the Plan Termination Date written evidence of the adoption of resolutions by the applicable Companys Board of Directors or similar governing body authorizing the termination of the Company 401(k) Plan (the form and substance of which resolutions shall be subject to the prior review of Buyer). Seller shall cause the Target and any applicable Company to take such other actions in furtherance of terminating the Company 401(k) Plan as Buyer may reasonably request. Any actions taken under this Section 6.6(a) shall be made contingent upon the Closing.
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(b) Buyer hereby acknowledges that a change of control (or similar phrase) within the meaning of the Employee Benefit Plans set forth on Schedule 6.6(b) will occur at or prior to the Closing Time.
(c) For the avoidance of doubt, Buyer and Seller agree that Seller shall be responsible for all payments in respect of options to purchase shares of common stock of Seller, including the employer portion of all employment Taxes and all Tax withholdings and remittances (Option Cash Out).
6.7 Exclusivity. Seller agrees that it will not, and will cause its Representatives, each Company, and each Companys Representatives not to, directly or indirectly: (a) solicit, initiate or encourage any inquiry, proposal, offer or contact from any Person (other than Buyer and its Affiliates and Representatives) relating to any transaction involving the sale of any equity interest or assets (other than the sale of Inventory in the Ordinary Course of Business) of any Company or any acquisition, divestiture, merger, share exchange, consolidation, business combination, recapitalization, redemption, financing or similar transaction involving any Company (in each case, an Acquisition Proposal); or (b) participate in any discussion or negotiation regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any Acquisition Proposal. If any Person makes an Acquisition Proposal, Seller will notify Buyer as promptly as practicable of such Acquisition Proposal in reasonable detail.
6.8 Hart-Scott-Rodino.
(a) Each of Buyer and Seller shall (i) promptly (and in any event no later than two Business Days following the date of this Agreement) make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby (if not previously made), (ii) use its reasonable best efforts to supply as promptly as practicable any additional information or documentary material requested by any Antitrust Authority and (iii) use its reasonable best efforts to take all other actions necessary to cause the expiration or termination of the applicable waiting period under the HSR Act as promptly as practicable.
(b) Each of Buyer and Seller shall cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry. In that regard, prior to the Closing, each Party shall promptly consult with the other Parties with respect to and provide any necessary information with respect to (and, in the case of correspondence, provide the other parties (or their counsel) copies of) all filings made by such party with any Antitrust Authority or any other information supplied by such Party to, or correspondence with, an Antitrust Authority in connection with this Agreement or the Transactions. Each Party shall promptly inform the other Parties and, if in writing, furnish the other Party with copies of (or, in the case of oral communications, advise the other Party orally of) any communication from any Antitrust Authority regarding this Agreement or the Transactions, and permit the other Party to review and discuss in advance, and consider in good faith the views of the other Party in connection with, any proposed communication with any such Antitrust Authority. Neither Party hereto shall participate in any meeting or teleconference with any Antitrust Authority in connection with this Agreement or the Transactions unless it consults with the other Party in advance and, to the extent permitted by such Antitrust Authority, gives the other Party the opportunity to attend and participate. Each Party shall furnish the other Party with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between it and any such Antitrust Authority with respect to this Agreement or the Transactions, and furnish the other Party with such necessary information and reasonable assistance as the other Party may reasonably request in connection with its preparation of necessary filings or submissions of information to any such Antitrust Authority; provided, however, that materials provided pursuant to this Section 6.8(b) may be redacted (i) to remove references concerning the valuation of the Companies and the Transactions or other
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confidential information, (ii) as necessary to comply with contractual arrangements or applicable Law, and (iii) as necessary to address reasonable privilege concerns. Buyer and Seller may each designate certain materials provided pursuant to this Section 6.8(b) as outside legal counsel only as reasonably necessary and appropriate.
(c) Buyer shall be responsible for all filing or similar fees payable in connection with any filings or submissions under the HSR Act.
6.9 Termination of Related Party Arrangements. At or prior to the Closing, Seller shall, and shall cause each of the respective Companies and the counterparties thereto to, terminate the Related Party Agreements identified on Schedule 6.9 hereto.
6.10 Litigation Support. Following the Closing, if any Party is evaluating, pursuing, contesting or defending against any Proceeding in connection with (a) any Transaction or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any Company, then upon the request of such Party each other Party will reasonably cooperate with the requesting Party and its counsel in the evaluation, pursuit, contest or defense, make reasonably available its personnel, and provide such testimony and access to its books and records as may be reasonably necessary in connection therewith. The requesting Party will reimburse each other Party for its out-of-pocket expenses related to such cooperation, unless the requesting Party is entitled to indemnification therefor under Article VIII (without regard to whether or not Section 8.4 applies).
6.11 Financing Support.
(a) Seller shall cause the Companies, and shall use reasonable best efforts to cause their respective Representatives, including auditors, to provide all cooperation reasonably requested by Buyer for Buyer to secure financing for the Purchase Price and all other amounts payable by Buyer in connection with the acquisition of the Shares and consummation of the Transaction Documents, including (i) providing three years of audited financial information of the Companies and, if the Closing has not occurred by May 15, 2014, the unaudited consolidated balance sheet of Seller and the Companies as of March 31, 2014 and statement of income, changes in stockholders equity, and cash flow for the fiscal quarter then ended (the March Quarterly Financial Statements), and other business and financial information customarily included in confidential information memorandums or offering statements in financings similar to the Financing, (ii) permitting site visits upon reasonable request and reasonable notice, (iii) making officers of the Companies available by telephone or video conference to the potential financing sources to discuss the business and financial information, (iv) assisting in the preparation of pro forma financial statements by Buyer, (v) assisting in providing the collateral to be pledged by Buyer substantially concurrently with the Closing or as soon as practicable thereafter (including delivery of stock certificates, and (vi) at least five (5) Business Days prior to the Closing Date, providing all documentation and other information about the Business as is requested in writing by Buyer at least ten (10) Business Days prior to the Closing Date which the Lenders reasonably determine is required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act. In no event shall Seller or any of the Companies be required to (A) bear any cost or expense, pay any fee, or incur any other actual or potential liability or obligation in connection with the Financing prior to the Closing, (B) take any actions to the extent such actions would unreasonably interfere with the ongoing business or operations of the Companies, (C) take any action that would reasonably be expected to conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under any applicable Laws or Contract to which any Company is a party or (D) take any corporate or other action to adopt or approve, any document or agreement with respect to the Financing, including any pledge or security documents which shall be
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effective prior to the Closing. Buyer shall promptly, upon request by Seller, reimburse Seller or the Companies, as applicable, for all expenses incurred, at Buyers request, by Seller or the Companies with respect to the Financing, and shall indemnify and hold harmless Seller and each Company and their respective Representatives from and against any and all Losses, claims, costs and expenses suffered or incurred by any of them in connection with the Financing or any information used in connection therewith, except with respect to any material misstatement or omission in any information provided in writing by Seller or any of the Companies for use in connection therewith.
(b) Buyer shall use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the Financing as promptly as practicable (taking into account the timing of the Closing described in the provisos to Section 2.1(b)) on the terms described in the Financing Commitment (including the flex provisions applicable thereto). If all or any portion of the Financing becomes unavailable, Buyer shall obtain alternative financing, which financing shall be in an amount sufficient to consummate the Transactions. Buyer shall keep Seller informed on a reasonably current basis and in reasonable detail of the status of its efforts to arrange the Financing. Buyer shall give Seller prompt notice of the occurrence of any breach or threatened breach by any party to the Financing Commitment of which Buyer becomes aware and that would reasonably be expected to adversely impact the ability of Buyer to obtain all or any portion of the Financing contemplated by the Financing Commitment.
6.12 Transition. Seller will refer all inquiries relating to the Business to the Companies from and after the Closing. Seller shall, and shall cause the Companies to, reasonably cooperate with Buyer to encourage the Key Employees to enter into the Retention Agreements. Notwithstanding anything contained in this Agreement to the contrary, Seller shall have the right to cause the Companies to provide additional compensation (any such amount, a Retention Payment) to the Key Employees in connection with its efforts to encourage the Key Employees to enter into the Retention Agreements (and the Companies will be responsible for making such Retention Payments, together with the employer portion of all employment Taxes and Tax withholdings and remittances with respect to the Retention Payment); provided, that any Retention Payment proposed to be paid to a Key Employee (together with the employer portion of all employment Taxes and Tax withholdings and remittances with respect to the Retention Payment) shall be credited against any Additional Payment owed to Seller by Buyer pursuant to this Agreement and such Retention Payment shall be made concurrently with payment of such Additional Payment; provided, further, that within two Business Days following payment of any Retention Payment, Buyer will provide Seller with documentation setting forth the Retention Payments paid and the calculation of the employer portion of all employment Taxes and Tax withholdings and remittances with respect to the Retention Payment.
6.13 Press Releases and Announcements. The timing and content of all announcements regarding any aspect of this Agreement to the financial community, any governmental entity or the general public shall be mutually agreed upon in advance by Buyer and Seller; provided, however, that each Party may make any such announcement that it in good faith believes, based on advice of counsel, is necessary or advisable in connection with any legal requirement, it being understood and agreed that, to the extent reasonably practical under the circumstances, each Party shall provide Buyer or Seller, as applicable, with copies of any such announcement in advance of such issuance and shall work in good faith with Buyer, on the one hand, or Seller, on the other hand, to modify any language that such Party deems reasonably necessary to change; provided, that nothing herein shall prevent any Party from referencing the Transactions (including financial returns and other matters related thereto) in confidential materials provided to investors of such Party or referencing the consummation of the sale after the Closing generally in tombstones or other announcements; provided, however, that no terms of such transaction are disclosed.
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6.14 Confidentiality.
(a) The terms of the Confidentiality Agreement are incorporated into this Agreement by reference and shall continue in full force and effect until the Closing, at which time the Confidentiality Agreement shall terminate. If, for any reason, the Closing is not consummated, the Confidentiality Agreement shall remain in full force and effect in accordance with its terms.
(b) From and after the Closing, Seller will, and will cause its Representatives and the Companies and their Representatives to, maintain the confidentiality of the Confidential Information at all times after the Closing, and will not, directly or indirectly, use any Confidential Information for its own benefit or for the benefit of any other Person or reveal or disclose any Confidential Information to any Person other than authorized Representatives of Buyer, except in connection with this Agreement or with the prior written consent of Buyer. The covenants in this Section 6.14 will not apply to Confidential Information that (a) is or becomes available to the general public through no breach of this Agreement by Seller or any of its Affiliates or Representatives or, to the Companies Knowledge, breach by any other Person of a duty of confidentiality to Buyer or (b) Seller is required to disclose by applicable Law; provided, however, that Seller will notify Buyer in writing of such required disclosure as much in advance as practicable in the circumstances and cooperate with Buyer to limit the scope of such disclosure. At any time after the Closing that Buyer may reasonably request, Seller will, and will cause its Affiliates and Representatives to, turn over or return to Buyer all Confidential Information in any form (including all copies and reproductions thereof) in their possession or control; provided, however, that notwithstanding the foregoing, the obligation to return Confidential Information shall not cover information that is (a) maintained on routine computer system backup tapes, disks or other backup storage devices of Seller or its Affiliates or (b) required to be retained by Law or regulation, as long as such backed-up or otherwise retained information is not used, disclosed, or otherwise recovered from such backup devices; provided that such materials referenced in this sentence shall indefinitely remain subject to the terms of this Section 6.14(b).
6.15 Financial Statements. As promptly as practicable after the date of this Agreement, Seller shall deliver the audited, consolidated balance sheet of Seller and the Companies as of December 31, 2013 and statement of income, changes in stockholders equity, and cash flow for the fiscal year then ended, together with the notes and the reports of PricewaterhouseCoopers, LLP, independent certified public accountants (the 2013 Audited Financial Statements). The 2013 Audited Financial Statements will have been prepared in accordance with GAAP, applied on a consistent basis (except as may be noted therein) throughout the period covered thereby, and will present fairly in all material respects the financial condition of the Companies as of its date.
6.16 Financial Obligations. At the Closing, or as soon as practicable thereafter, Buyer shall at its sole expense arrange for substitute letters of credit, surety bonds, Buyer guarantees and other obligations to replace the outstanding letters of credit, surety bonds, guarantees and other contractual obligations entered into by or on behalf of Seller or any of its Affiliates (other than the Companies) in connection with or relating to the Business, in each case that are listed on Section 6.16 of the Disclosure Schedule, which Section 6.16 of the Disclosure Schedule may be updated (but only with respect to guarantees in favor of tire manufacturers or of landlords pursuant to Leases in existence as of the date of this Agreement in the Ordinary Course of Business) by Seller until the date that is five Business Days prior to the estimated Closing Date (the Seller Guarantees). Buyer further agrees that to the extent Seller or any of its Affiliates (other than the Companies) incurs any cost or expenses, or is required to make any payment, in connection with such Seller Guarantees on or after the Closing, Buyer shall indemnify and hold harmless Seller and its Affiliates against, and reimburse Seller and its Affiliates for, any and all amounts paid, including costs or expenses in connection with such Seller Guarantees, including Sellers and any of its Affiliates reasonable and documented, out-of-pocket expenses in
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maintaining such Seller Guarantees, whether or not any such Seller Guarantee is drawn upon or required to be performed, and shall in any event promptly and in no event later than three Business Days after written demand therefor from Seller, reimburse Seller and any of its Affiliates to the extent that any Seller Guarantee is called upon and Seller or any of its Affiliates makes any payment or incurs any Liability in respect of any such Seller Guarantee.
ARTICLE VII
CLOSING CONDITIONS
7.1 Mutual Conditions to the Obligations of the Parties. The respective obligations of each Party to consummate the Transactions contemplated to be performed on or before the Closing Date are subject to the satisfaction, or written waiver by both of the Parties, of each of the following conditions:
(a) the waiting period applicable to the Transactions under the HSR Act shall have expired or been terminated;
(b) no injunction or Order shall have been issued by any Governmental Body of competent authority, and be in effect, which restrains or prohibits any of the Transactions; and
(c) each Party shall have duly executed and delivered to the other Party the Transaction Documents.
7.2 Conditions to Buyers Obligations. Buyers obligation to perform the Transactions contemplated to be performed on or before the Closing Date is subject to satisfaction, or written waiver by Buyer, of each of the following conditions:
(a) all of the representations and warranties of Seller in Article III shall be true and correct in all but de minimis respects both as of the Effective Date and as if made on the Closing Date;
(b) (A) all of the Fundamental Representations regarding the Companies shall be true and correct in all but de minimis respects both as of the Effective Date and as if made on the Closing Date and (B) all of the other representations and warranties regarding the Companies shall be true and correct in all respects (without giving effect to any materiality or Material Adverse Effect qualification) both as of the Effective Date and as if made on the Closing Date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date), except, in the case of this clause (B), where any failure of any such representations and warranties to be true and correct would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
(c) Seller shall have performed and complied in all material respects with all of its covenants and agreements in this Agreement to be performed prior to or at the Closing;
(d) Seller shall have delivered to Buyer at the Closing a certificate, in form and substance reasonably satisfactory to Buyer, confirming satisfaction of the conditions in Sections 7.2(a), (b) and (c) above;
(e) from the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect; and
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(f) the 2013 Audited Financial Statements shall not differ (excluding any change in the LIFO (i.e., last in, first out) reserve) in any material adverse respect from the 2013 Unaudited Financial Statements.
7.3 Conditions to Sellers Obligations. Sellers obligations to perform the Transactions contemplated to be performed on or before the Closing Date are subject to satisfaction, or written waiver by Seller, of the following conditions:
(a) (i) all of the Fundamental Representations regarding Buyer shall be true and correct in all but de minimis respects both as of the Effective Date and as if made on the Closing Date and (ii) all of the other representations and warranties of Buyer shall be true and correct in all respects (without giving effect to any materiality qualification) both as of the Effective Date and as if made on the Closing Date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date), except, in the case of this clause (ii), where any failures of any such representations and warranties to be true and correct would not reasonably be expected, individually or in the aggregate, to prevent, materially impede or materially delay the consummation of the Transactions;
(b) Buyer shall have performed and complied in all material respects with all of its covenants and agreements in this Agreement to be performed prior to or at the Closing; and
(c) Buyer shall have delivered to Seller at the Closing a certificate, in form and substance reasonably satisfactory to Seller, confirming satisfaction of the conditions in Sections 7.3(a) and (b) above.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller. Subject to the terms and conditions of this Article VIII, except with respect to Taxes (indemnification for which shall be governed exclusively by Article IX), Seller will indemnify and hold harmless the Buyer Indemnitees from, and pay and reimburse the Buyer Indemnitees for, all Losses, directly or indirectly, relating to or arising from: (a) any breach or inaccuracy of any representation or warranty made by Seller in Article III or IV (other than any representation or warranty in Section 4.15 (Tax)); (b) any breach of any covenant or agreement of Seller in this Agreement; or (c) any Indebtedness to the extent not reflected in the Adjusted Closing Payment.
8.2 Indemnification by Buyer. Subject to the terms and conditions of this Article VIII, except with respect to Taxes (the indemnification for which shall be governed exclusively by Article IX) Buyer will indemnify and hold harmless Seller Indemnitees from, and pay and reimburse Seller Indemnitees for, all Losses, directly or indirectly, relating to or arising from: (a) any breach or inaccuracy of any representation or warranty made by Buyer in Article V; or (b) any breach of any covenant or agreement of Buyer in this Agreement.
8.3 Survival and Time Limitations. The representations and warranties of the Parties contained in this Agreement shall survive the Closing until the first anniversary of the Closing Date; provided, however, that (i) the Fundamental Representations (other than Sections 3.2 and 4.2) shall survive the Closing until 30 days following the expiration of the applicable statutory period of limitations, (ii) the representations and warranties set forth in Sections 3.2, 4.2 and 4.15(g) shall survive without any time limitation and (iii) the representations and warranties set forth in Section 4.15 (other than Section 4.15(g)) shall not survive the Closing. Any covenant or agreement contained in this Agreement (other than those contained in Sections 6.3, 6.9, 6.11, 6.15 or Article II or XI), in each case to the extent
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requiring performance before the Closing, shall terminate effective as of the Closing and shall not survive the Closing for any purposes, and thereafter there shall be no Liability on the part of, nor shall any claim be made by, any Person in respect thereof. Any covenant or agreement contained in Sections 6.3, 6.9, 6.11, 6.15 or Article II or XI, in each case to the extent requiring performance before the Closing, shall survive the Closing until the first anniversary of the Closing Date. The covenants or agreements in this Agreement that contemplate performance after the Closing, or expressly by their terms survive the Closing, shall, in each case, survive the Closing until, and will expires on the date that is 30 days following the expiration of the applicable statutory period of limitations. Buyer or Seller, as applicable, must give written notice of a claim to the other Party in accordance with the provisions hereof prior to the expiration of the applicable survival period for such representations, warranties, covenants or agreements. If Buyer or Seller, as applicable, provides proper notice of a claim within the applicable time period set forth above, or, in the case of Seller, with respect to claims relating to fraud or misconduct by Buyer, at any time, or in the case of Buyer, with respect to claims relating to fraud of willful misconduct by Seller or claims that are the subject of Section 8.1(c), at any time, liability for such claim will continue until such claim is resolved.
8.4 Limitations on Indemnification.
(a) Seller will have no Liability with respect to the matters described in Section 8.1(a) until the total of all Losses with respect to such matters exceeds $2,112,500 (the Basket), in which event Seller will only be required to pay or be liable for Losses in excess of the Basket. The maximum aggregate Liability with respect to the matters described in Section 8.1 will be limited to an amount equal to $41,400,000 (the Cap). Notwithstanding the foregoing, the Basket shall not apply to the matter on Schedule 8.4(a) and this Section 8.4(a) shall not apply to any Seller Special Indemnity Matter.
(b) Buyer will have no liability with respect to the matters described in Section 8.2(a) until the total of all Losses exceeds the Basket, in which event Buyer will only be required to pay or be liable for Losses in excess of the Basket. The maximum aggregate Liability with respect to the matters described in Section 8.2 will be limited to the Cap. Notwithstanding the foregoing, this Section 8.4(b) shall not apply to any Buyer Special Indemnity Matter.
8.5 Manner of Payment; Escrow Release. Any claims by Buyer for indemnification pursuant to this Article VIII or under Section 9.1(a) shall be satisfied first out of any available Escrow Funds. If the available Escrow Funds are insufficient to cover such claims, then Seller will pay to Buyer the amount of any such shortfall. On the Escrow Release Date, Seller and Buyer shall deliver to the Escrow Agent joint instructions instructing the Escrow Agent to distribute the Escrow Funds remaining on the Escrow Release Date to Seller, by wire transfer of immediately available funds to a bank account designated by Seller; provided, that the joint instruction shall not require the Escrow Agent to distribute any amounts subject to claims for which Buyer delivered a written notice to an Indemnifying Party in accordance with Section 8.6(a) and that remain pending and unresolved on the Escrow Release Date, until such claims are finally resolved or judicially determined (at which time any remaining Escrow Funds in respect of such claims, to the extent not payable to Buyer, shall be released to Seller per joint instructions to the Escrow Agent).
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8.6 Third-Party Claims.
(a) If a third party commences a Proceeding (a Third-Party Claim) against any Person (the Indemnified Party) with respect to any matter that the Indemnified Party might make a claim for indemnification against any Party (the Indemnifying Party) under this Article VIII, then the Indemnified Party must notify the Indemnifying Party thereof in writing of the existence of such Third-Party Claim and must deliver copies of any documents served on the Indemnified Party with respect to the Third-Party Claim; provided, however, that any failure to notify the Indemnifying Party or deliver copies will not relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is materially prejudiced by such failure.
(b) Upon receipt of a notice of a Third-Party Claim for indemnity from an Indemnified Party pursuant to Section 8.6(a), the Indemnifying Parties will be entitled, by providing notice to the Indemnified Party within twenty Business Days after receiving the notice pursuant to Section 8.6(a), to assume the defense and control of such Third-Party Claim (at the expense of such Indemnifying Parties), so long as (i) the Third-Party Claim does not involve any claim by any Governmental Body and (ii) settlement of, or an adverse judgment with respect to, the Third-Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party. If the Indemnifying Parties assume the defense and control of such Third-Party Claim, the Indemnified Party may retain a single separate counsel (and one counsel in each relevant local jurisdiction) at its own expense and participate in the defense of such Third-Party Claim, but the Indemnifying Parties shall control the defense of such Third-Party Claim. If the Indemnifying Parties do not assume the defense and control of the Third-Party Claim pursuant to this Section 8.6(b), the Indemnified Party shall be entitled to assume and control such defense (at the expense of the Indemnifying Parties), but the Indemnifying Parties may nonetheless retain a single separate counsel (and one counsel in each relevant local jurisdiction) at their own expense and participate in the defense of such Third-Party Claim (including with respect to Third-Party Claims for which the Indemnifying Parties are not entitled to assume the control and defense). Each Indemnified Party shall, and shall cause each of its Affiliates and representatives to, cooperate fully with the Indemnifying Parties in the defense of any Third-Party Claim, including by furnishing books and records, personnel and witnesses, as appropriate for any defense of such Third-Party Claim. The party assuming the defense and control of a Third-Party Claim shall select counsel, contractors and consultants of recognized standing and competence and shall use its reasonable best efforts in the defense or settlement of such Third-Party Claim. In no event shall any Indemnified Party or any of its Affiliates admit any liability to any third party in connection with any matter which is the subject of a Third-Party Claim. If the Indemnifying Parties have assumed the defense and control of a Third-Party Claim, the Indemnifying Parties shall not consent to the entry of any judgment or enter into any settlement with respect to such Third-Party Claim without the consent of the Indemnified Party unless (i) such judgment or settlement does not involve any equitable relief, encumber any assets of any Indemnified Party or result in a finding or admission of any violation of Law or admission of wrongdoing by the Indemnified Party, (ii) the Indemnifying Parties pay or cause to be paid all amounts in such settlement or judgment, and (iii) the Indemnifying Parties obtain, in customary form, a complete and unconditional release of the Indemnified Party affected by such Third-Party Claim with respect to the matters which are the subject of such Third-Party Claim.
8.7 Other Indemnification Matters.
(a) Any claim for indemnification under this Article VIII must be asserted by providing written notice to Seller or Buyer, as applicable, specifying the factual basis of the claim in reasonable detail to the extent then known by the Person asserting the claim.
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(b) For purposes of this Article VIII, the representations and warranties in Article III, Article IV and Article V shall not be deemed qualified by any references to material, materiality or Material Adverse Effect except with respect to (i) the representations and warranties set forth in Sections 4.7(l) (Absence of Material Adverse Effect), the first sentence of 4.14(d) (Intellectual Property), 4.16(c) (Permits) and 4.21(a) (Employee Benefits), and (ii) reference to the defined term Material Contract.
(c) The right to indemnification will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the Closing Date, with respect to any representation, warranty, covenant or agreement in this Agreement or by reason of the Indemnified Partys waiver of any condition set forth in Article VII, as the case may be.
(d) Each Buyer Indemnitee shall take, and cause its Affiliates to take, reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto; provided, however that the Buyer Indemnitees shall not be required to pursue any claims against any third parties relating to such Loss or to otherwise seek recovery therefrom, but in such case, Seller will be subrogated to any such claims of the Buyer Indemnitees.
(e) The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, will not affect the right to indemnification, payment of damages, or other remedy based on any such representation, warranty, covenant or agreement.
(f) The calculation of any Losses will reflect the amount of any net proceeds actually received by the Buyer Indemnitees from any third party (including any insurer) in respect of such Losses (giving effect to any insurance deductibles or self-insured or co-insurance payments made, retroactive or prospective premium adjustments, chargebacks related to insurance, any loss or reduction in insurance coverage as a result of a claim, and other related payments, costs or expenses), less all out-of-pocket costs and expenses incurred by the Buyer Indemnitees in pursuing or recovering such proceeds (it being agreed that if third-party insurance or indemnification proceeds in respect of such facts are recovered by any Buyer Indemnitee subsequent to the Indemnifying Partys making of an indemnification payment in satisfaction of it applicable indemnification obligation, such proceeds, less the amount of out-of-pocket costs incurred to obtain such proceeds, shall be promptly remitted to the Indemnifying Party to the extent of the indemnification payment made). The Buyer Indemnitees shall use, and cause their respective Affiliates to use, commercially reasonable efforts to seek full recovery under all insurance and indemnity provisions covering such Loss to the same extent as it would if such Loss were not subject to indemnification under this Agreement.
8.8 Exclusive Remedy. From and after the Closing, this Article VIII and Article IX in addition to other written agreements relating to the Transactions dated as of the Effective Date will provide the sole and exclusive legal remedy with respect to any and all matters arising out of, resulting from or relating to the Transaction Documents and the Transactions, except for claims based upon fraud or willful misconduct and for breaches of post-Closing covenants.
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ARTICLE IX
TAX MATTERS
The following provisions will govern the allocation of responsibility between the Parties for certain tax matters following the Closing Date and set forth other covenants of the Parties:
9.1 Tax Indemnification.
(a) Subject to Section 8.7(d), Seller will indemnify and hold harmless the Buyer Indemnitees from, and pay and reimburse the Buyer Indemnitees for: (i) any Taxes of any Company for any taxable period ending on or before the Closing Date or the portion of any Straddle Period ending on the Closing Date (any such taxable period or portion thereof, a Pre-Closing Tax Period), (ii) any Taxes of any Person (other than a Company) (A) imposed on any Company as a transferee or successor (but only if such Company is a transferee or successor of such Person as a result of an event or transaction occurring before the Closing) and (B) for which any Company is liable pursuant to Contract entered into prior to the Closing (other than any Contract entered into in the ordinary course of business and not primarily relating to Taxes) and which Taxes are for a Pre-Closing Tax Period, (iii) any Transfer Taxes for which Seller is responsible pursuant to Section 9.5, (iv) any Losses and any Taxes, directly or indirectly, resulting from, arising out of or attributable to (A) any inaccuracy as of immediately prior to the Closing of any representation or warranty made by Seller in Section 4.15(g) or (B) any breach of any covenant or agreement of Seller in this Agreement and (v) any reasonable out-of-pocket costs and expenses (including reasonable legal fees and expenses) relating to any item described in clause (i) through (iv); provided, however, that (I) Seller shall be liable for Taxes under this Section 9.1(a) only to the extent that such Taxes exceed the amount, if any, reflected as a liability or reserved for such Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) in the Closing Statement and taking into account any adjustments of the Purchase Price relating to Working Capital pursuant to Section 2.5 and (II) Seller shall not be liable for any Taxes under this Section 9.1(a) resulting from, arising out of or attributable to any action taken or transaction entered into outside of the ordinary course of business by or at the direction of Buyer on the Closing Date after the Closing.
(b) Buyer will indemnify and hold harmless the Seller Indemnitees from, and pay and reimburse the Seller Indemnitees for: (i) any Taxes of any Company for any taxable period beginning after the Closing Date or the portion of any Straddle Period that begins on or after the Closing Date (any such taxable period or portion thereof, a Post-Closing Tax Period), (ii) any Taxes resulting from, arising out of or attributable to any action taken or transaction entered into outside of the ordinary course of business by or at the direction of Buyer on the Closing Date after the Closing, (iii) any Transfer Taxes for which Buyer is responsible pursuant to Section 9.5, (iv) any Taxes resulting from, arising out of or attributable to any breach of any covenant or agreement of Buyer in this Agreement and (v) any reasonable out-of-pocket costs and expenses (including reasonable legal fees and expenses) relating to any item described in clause (i) through (iv); provided, however, that Buyer shall not be liable for Taxes or other amounts under this Section 9.1(b) to the extent that such Taxes or other amounts result from, arise out of or are attributable to any inaccuracy as of immediately prior to the Closing of any representation or warranty made by Seller in Section 4.15(g).
(c) In the case of any taxable period that includes (but does not end on) the Closing Date (a Straddle Period), (i) the amount of any Taxes based on or measured by income or receipts for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity shall be deemed to terminate at such time) and (ii) the amount of any other Taxes for the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period.
9.2 Tax Return Preparation. Buyer will cause the Companies to prepare and timely file (taking into account extensions) all Tax Returns required to be filed by any of the Companies (x) for any taxable period ending on or prior to the Closing Date that are due (taking into account extensions) after the Closing Date and (y) for any Straddle Period. Buyer shall deliver any such Tax Return to Seller no later than twenty (20) days prior to the due date (taking into account extensions) for such Tax
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Return for Sellers review, comment and approval (such approval not to be unreasonably withheld, conditioned or delayed). Buyer shall revise any Tax Return described in the preceding sentence to reflect any comments received from Seller at least five days prior to the due date (taking into account extensions) for such Tax Return and shall cause such revised Tax Return to be timely filed.
9.3 Tax Proceedings.
(a) If any Taxing Authority asserts a Tax Claim, then the party to this Agreement first receiving notice of such Tax Claim promptly shall provide written notice thereof to the other party or parties to this Agreement; provided, however, that the failure of such party to give such prompt notice shall not relieve the other party of any of its obligations under this Article IX, except to the extent that the other party is actually prejudiced by such failure. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of the relevant portion of any correspondence received from the Taxing Authority.
(b) In the case of any Tax Proceeding of, against or with respect to any of the Companies for any taxable period ending on or before the Closing Date, Seller shall have the exclusive right to control such Tax Proceeding; provided, that, if such Tax Proceeding could reasonably be expected to result in a material Tax Liability of such Company or Buyer for a Post-Closing Tax Period, (i) Seller shall keep Buyer reasonably informed of all material developments related to such Tax Proceeding and (ii) Seller shall not (and shall not permit any of its Affiliates to) settle, abandon or compromise any such Tax Proceeding without the written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed).
(c) In the case of any Tax Proceeding of, against or with respect to any of the Companies for a Straddle Period, Seller and Buyer shall jointly control such Tax Proceeding and neither Party shall (or permit any of its Affiliates to) settle, abandon or compromise any such Tax Proceeding without the written consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(d) Notwithstanding anything herein to the contrary (including, for the absence of doubt, Section 9.3(b)(ii)), Seller shall have the exclusive right to control, settle, abandon or compromise any Tax Proceeding of or against Seller or with respect to any Tax Return of Seller.
9.4 Cooperation on Tax Matters. The Parties will cooperate fully, as and to the extent reasonably requested by Buyer or Seller, in connection with (i) the filing and preparation of any Tax Return, amended Tax Return or claim for refund, (ii) determining a Liability for Taxes or an indemnity obligation hereunder or a right to a Tax refund, or (iii) the conduct of any Tax Proceeding. Such cooperation will include the retention and, upon the request of Buyer or Seller, the provision of records and information that are reasonably relevant to any such matters and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Buyer will cause the Companies to retain all books and records with respect to Tax matters pertinent to the Companies relating to any taxable period beginning before the Closing Date until 30 days following the expiration of the statute or period of limitations of the respective taxable periods. Upon the reasonable request of Buyer or Seller, the Parties will (i) provide Buyer or Seller, as applicable, with all information that any Party may be required to report pursuant to Code § 6043(c) and (ii) use commercially reasonable efforts to obtain any certificate or other document from any Governmental Body or any other Person as may be reasonably necessary to mitigate, reduce or eliminate any Tax that otherwise could be imposed with respect to the Transactions.
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9.5 Transfer Taxes. Buyer and Seller shall each be responsible for and shall pay fifty percent (50%) of any transfer, documentary, sales, use, stamp, registration, real estate transfer (including any indirect real estate transfer) and other such Taxes and fees imposed on the purchase and sale of Shares pursuant to this Agreement (Transfer Taxes). The parties shall reasonably cooperate (including by executing and delivering (or causing to be executed and delivered) such certificates or forms as may be necessary or appropriate) to establish any available exemption from (or otherwise reduce) such Transfer Taxes. The party primarily responsible for the filing of any Tax Return or other documentation in respect of any Transfer Taxes under applicable Law shall be responsible for the timely filing of such Tax Return or other documentation; provided, that, if required by applicable Law, the other Party will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation. The Parties shall cooperate as is reasonably necessary to enable the timely filing of all such Tax Returns
9.6 Tax Sharing Agreements. All Tax sharing agreements or similar agreements (other than this Agreement), if any, to which Seller or any of its Affiliates (other than the Companies), on the one hand, and any of the Companies, on the other hand, are parties, shall be terminated as of the Closing Date and, after the Closing Date, none of Seller, Buyer any of the Companies or any of their respective Affiliates shall be bound thereby or have any Liability or rights thereunder.
9.7 Tax Refunds and Tax Benefits.
(a) Seller shall be entitled to claim any deduction in respect of any Option Cash Out payments or any Retention Payments and Buyer shall not (and shall cause the Companies not to) claim any such deduction on its Tax Return (or a Tax Return of a Company); provided, that if under applicable Law such deduction is not permitted to be claimed on a Tax Return of Seller and is permitted to be claimed on a Tax Return of Buyer or any of the Companies, then Buyer shall (or shall cause its applicable Affiliate to) claim such deduction on such Tax Return.
(b) Seller shall be entitled to the amount of any Tax benefit actually realized by Buyer or the Companies in cash or cash equivalents (e.g., as a refund) or as a reduction of Taxes otherwise due and payable at that time as a result of or in connection with (x) any deduction described in the proviso contained in Section 9.7(a), (y) any deduction claimed by a Company that, as of immediately prior to the Closing, was treated as a taxable entity for applicable income Tax purposes in respect of any Loss for which Seller has (directly or indirectly, including through a reduction of amounts otherwise payable by Buyer to Seller hereunder) indemnified a Buyer Indemnitee or which is otherwise economically borne by Seller hereunder or (z) any Tax for which Seller is responsible pursuant to Section 9.1(a). Any refunds or credits of or against Taxes that are received by Buyer or the Companies in cash or cash equivalents or realized as a reduction in Taxes otherwise due and payable at that time that relate to either (i) taxable periods of any Company ending on or before the Closing Date or (ii) Straddle Periods of any Company to the extent such refunds relate to the portion of such Straddle Period that ends on the Closing Date, will be for the account of Seller. Buyer will pay, or cause to be paid, over to Seller the amount of any refunds, credits or other Tax benefits to which Seller is entitled pursuant to this Section 9.7, net of reasonable fees or expenses incurred by Buyer or any Company in obtaining such refund, credit or other Tax benefit, within five Business Days after receipt thereof. The reasonable out-of-pocket costs incurred by Buyer or any Company, to the extent attributable to obtaining any such refund, credit or other Tax benefit shall be borne by Seller (including the costs of filing any amended Tax Returns and any Tax Proceeding attributable thereto).
9.8 Amended Tax Returns. Except as either (i) required by applicable Law or (ii) with the prior written consent of Seller, none of the Companies nor Buyer (or any Affiliate of any of the foregoing) shall amend, or cause to be amended, any Tax Returns of any of the Companies that relate to any taxable period ending on or before the Closing Date or any Straddle Period.
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9.9 Timing of Payments. Any indemnity payment required to be made pursuant to this Article IX shall be made within ten days after the indemnified party makes written demand therefor upon the indemnifying party, but in no case earlier than five days prior to the date on which the relevant Taxes or other amounts are required to be paid to the applicable Governmental Body or third party.
9.10 Treatment of Certain Payments. Except to the extent otherwise required by applicable Law, any payment made pursuant to Section 2.3(c), Section 2.5 or Section 2.6 and any indemnification payment made pursuant to Article VIII or this Article IX shall be treated as an adjustment to the purchase price for Tax purposes.
9.11 Coordination; Survival. Notwithstanding anything to the contrary in this Agreement, indemnification with respect to Taxes and the procedures relating thereto shall be governed exclusively by this Article IX, Section 8.5 and Section 8.7(d) and the provisions of Article VIII (other than Section 8.5 and Section 8.7(d)) shall not apply. The indemnification obligations contained in this Article IX shall survive the Closing Date until 30 days following the expiration of the applicable statutory periods of limitations. The representations and warranties made pursuant to Section 4.15 (other than Section 4.15(g)) shall not survive the Closing. The representations and warranties made pursuant to Section 4.15(g) shall survive without any time limitation.
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may, by written notice given to the non-terminating Party prior to the Closing, be terminated:
(a) by (i) Buyer, upon prior written notice to Seller, if there has been a material breach or failure to perform by Seller of any covenant, representation or warranty contained in this Agreement which has prevented the satisfaction of any condition to the obligations of Buyer at the Closing and such breach or failure to perform has not been waived by Buyer or cured by Seller within thirty days after written notice thereof from Buyer or (ii) Seller, upon prior written notice to Buyer, if there has been a material breach or failure to perform by Buyer of any covenant, representation or warranty contained in this Agreement which would prevent the satisfaction of any condition to the obligations of Seller at the Closing and such breach or failure to perform has not been waived by Seller or cured by Buyer within thirty days after written notice thereof from Seller; provided, however, that the right to terminate this Agreement under this Section 10.1(a) shall not be available to any Party if such Party shall have breached or failed to perform in any material respect any of its respective representations, warranties, covenants or other agreements contained in this Agreement, and such breach or failure to perform would give rise to a failure of a condition in Article VII to the obligations of the other Party at the Closing.
(b) by either Buyer or Seller if the Closing shall not have occurred on or before May 15, 2014 (the Outside Date); provided, however, that if on the Outside Date the conditions to Closing set forth in Section 7.1(a) or Section 7.1(b) (to the extent any such injunction or Order is in respect of an antitrust Law) shall not have been fulfilled, but all other conditions to Closing set forth in Article VII shall be or shall be capable of being fulfilled, then Seller, by written notice delivered to Buyer, or Buyer, by written notice to Seller, may extend the Outside Date to no later than the close of business on August 13, 2014; provided, further, that the right to terminate this Agreement under this Section 10.1(b) shall not be available to any Party whose failure to perform any material covenant or obligation under this Agreement has been the cause of, or has resulted in, the failure of the Transactions to occur on or before such date;
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(c) by either Buyer or Seller if an injunction or Order issued by any Governmental Body of competent authority permanently restrains or prohibits any of the Transactions and such injunction or Order becomes final and nonappealable); or
(d) by mutual written consent of Buyer and Seller.
The Party desiring to terminate this Agreement pursuant to any of clause (a), (b) or (c) of this Section 10.1 shall give written notice of such termination to the other Party in accordance with Section 11.5 specifying the provision or provisions hereof pursuant to which such termination is effected.
10.2 Effect of Termination. If this Agreement is validly terminated pursuant to Section 10.1, all further obligations of the Parties under this Agreement will terminate and there shall be no liability on the part of any of Party to one another, except for fraud or willful breaches of this Agreement prior to the time of such termination; provided, however, that the Parties obligations under the Confidentiality Agreement, Section 6.13, this Section 10.2 and Article XI (Miscellaneous) will survive the termination.
ARTICLE XI
MISCELLANEOUS
11.1 No Third-Party Beneficiaries. This Agreement does not confer any rights or remedies upon any Person (including any employee of any Company) other than (i) the Parties and their respective successors and permitted assigns, (ii) as expressly set forth in this Agreement, any Indemnified Party, and (iii) the Lenders and their respective Affiliates and Representatives with respect to Sections 11.6(a)(iv), 11.6(b) and this Section 11.1.
11.2 Entire Agreement. The Transaction Documents, together with the Confidentiality Agreement, the Noncompete Agreements and other written agreements relating to the Transactions dated as of the Effective Date, constitute the entire agreement among the Parties with respect to the subject matter of the Transaction Documents, the Confidentiality Agreement and the Noncompete Agreements and supersede all prior agreements (whether written or oral and whether express or implied) among any Parties to the extent related to the subject matter of the Transaction Documents, the Confidentiality Agreement and the Noncompete Agreements (including any letter of intent).
11.3 Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Seller nor Buyer may assign, delegate or otherwise transfer (whether by operation of Law or otherwise) any of its rights, interests or obligations in this Agreement without the prior written approval of the other Party; provided, however, Buyer may assign any or all of its rights or interests, or delegate any or all of its obligations, in this Agreement to (a) any successor to Buyer, any successor to any Company, or any acquirer of a material portion of the businesses or assets of Buyer or any Company, in each case after the Closing; (b) one or more of Buyers Affiliates, or (c) any bona fide lender to Buyer, any Company or any of their Affiliates as security for obligations to such lender; provided, however, that no such assignment or grant of security interest will relieve or release Buyer from any of its Liabilities or obligations under this Agreement.
11.4 Counterparts. This Agreement may be executed by the Parties in multiple counterparts and shall be effective as of the date set forth above when each Party shall have executed and delivered a counterpart hereof, whether or not the same counterpart is executed and
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delivered by each Party. When so executed and delivered, each such counterpart shall be deemed an original and all such counterparts shall be deemed one and the same document. Transmission of images of signed signature pages by facsimile, e-mail or other electronic means shall have the same effect as the delivery of manually signed documents in person.
11.5 Notices. Any notice pursuant to this Agreement must be in writing and will be deemed effectively given to another Party on the earliest of the date (a) three Business Days after such notice is sent by registered U.S. mail, return receipt requested, (b) one Business Day after receipt of confirmation if such notice is sent by facsimile or electronic mail, (c) one Business Day after delivery of such notice into the custody and control of an overnight courier service for next day delivery, (d) one Business Day after delivery of such notice in person and (e) such notice is received by that Party; in each case to the appropriate address below (or to such other address as a Party may designate by notice to the other Parties):
If to Seller:
TTT Holdings, Inc. 330 West Spring Street, Suite 400 Columbus, OH 43215 Attn: Robert D. Walter, Chairman Email: RWalter@talismancp.com Fax: 614.857.5046 Phone: 614.857.5005 |
with a copy to:
Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attn: David A. Katz Email: DAKatz@wlrk.com Fax: 212.403.2309 Phone: 212.403.1309 | |
If to Buyer:
American Tire Distributors, Inc. 12200 Herbert Wayne Court, Suite 150 P.O. Box 3145 Huntersville, NC 28078 Attn: J. Michael Gaither Email: mgaither@atd-us.com Fax: (704) 947-1919 Phone: (704) 632-7110 |
with copies to:
K&L Gates LLP Hearst Tower, 47th Floor 214 North Tryon Street Charlotte, NC 28202 Attn: Christian Chad Warpula Email: chad.warpula@klgates.com Fax: (704) 353-3210 Phone: (704) 331-7510
Covington & Burling LLP 620 Eighth Avenue, 42nd Floor New York, NY 10018 Attn: Scott F. Smith Email: ssmith@cov.com Fax: (212) 841-1010 Phone: (212) 841-1056 |
11.6 JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
(a) EACH PARTY (I) CONSENTS TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN NEW YORK, NEW YORK (AND ANY CORRESPONDING APPELLATE COURT) IN ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE SELLER NONCOMPETE AGREEMENT, (II) WAIVES ANY VENUE OR INCONVENIENT FORUM DEFENSE TO ANY
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PROCEEDING MAINTAINED IN SUCH COURTS, (III) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, AGREES NOT TO INITIATE ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE SELLER NONCOMPETE AGREEMENT IN ANY OTHER COURT OR FORUM. PROCESS IN ANY SUCH PROCEEDING MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, AND (IV) IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE SELLER NONCOMPETE AGREEMENT.
(b) EACH PARTY AGREES THAT IT WILL NOT BRING OR SUPPORT ANY ACTION, CAUSE OF ACTION, CLAIM, CROSS-CLAIM OR THIRD-PARTY CLAIM OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR IN EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST ANY LENDER AND ITS AFFILIATES AND REPRESENTATIVES IN ANY WAY RELATING TO THIS AGREEMENT OR THE TRANSACTIONS, INCLUDING BUT NOT LIMITED TO ANY DISPUTE ARISING OUT OF OR RELATING IN ANY WAY TO THE FINANCING COMMITMENT OR THE PERFORMANCE THEREOF, IN ANY FORUM OTHER THAN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, OR, IF UNDER APPLICABLE LAW EXCLUSIVE JURISDICTION IS VESTED IN THE FEDERAL COURTS, THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (AND APPELLATE COURTS THEREOF), AND MAKES THE AGREEMENTS, WAIVERS AND CONSENTS SET FORTH IN SECTION 11.6(A) MUTATIS MUTANDIS BUT WITH RESPECT TO THE COURTS SPECIFIED IN THIS SECTION 11.6(B).
11.7 Governing Law. This Agreement and all other Transaction Documents (unless otherwise stated therein) will be governed by and construed in accordance with the Laws of the State of New York applicable to contracts executed and to be performed wholly within such State and without giving effect to any choice or conflict of law principles of any jurisdiction.
11.8 Amendments and Waivers. No amendment of any provision of this Agreement will be valid unless the amendment is in writing and signed by Buyer and Seller. No waiver of any provision of this Agreement will be valid unless the waiver is in writing and signed by the waiving Party. The failure of a Party at any time to require performance of any provision of this Agreement will not affect such Partys rights at a later time to enforce such provision. No waiver by any Party of any breach of this Agreement will be deemed to extend to any other breach hereunder or affect in any way any rights arising by virtue of any other breach.
11.9 Severability. Any provision of this Agreement that is determined by any court of competent jurisdiction to be invalid or unenforceable will not affect the validity or enforceability of any other provision hereof or the invalid or unenforceable provision in any other situation or in any other jurisdiction. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that that the Transactions be consummated as originally contemplated to the fullest extent possible. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
11.10 Expenses. Except as otherwise expressly set forth in this Agreement, regardless of whether the Transactions are consummated, Seller will bear all expenses (including the Transaction Costs) incurred by Seller or any Company (or any Representative of Seller or any Company) in connection with the Transactions contemplated to be performed before or on the Closing Date, and Buyer will bear all expenses incurred by Buyer or any of its Representatives in connection with the Transactions. Buyer and Seller shall each bear one-half of the costs and fees of the Escrow Agent related to the Transactions.
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11.11 Construction. The Article and Section headings in this Agreement are inserted for convenience only and are not intended to affect the interpretation of this Agreement. Any reference in this Agreement to any Article or Section refers to the corresponding Article or Section of this Agreement. Any reference in this Agreement to any Schedule or Exhibit refers to the corresponding Schedule or Exhibit attached to this Agreement and all such Schedules and Exhibits are incorporated herein by reference. The word including in this Agreement means including without limitation. This Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any provision in this Agreement. Unless the context requires otherwise, any reference to any Law will be deemed also to refer to all amendments and successor provisions thereto and all rules and regulations promulgated thereunder, in each case as in effect as of the Closing Date. All accounting terms not specifically defined in this Agreement will be construed in accordance with GAAP as in effect on the Effective Date (unless another effective date is specified herein). All references to currency in this Agreement are references to U.S. Dollars. The word or in this Agreement is disjunctive but not necessarily exclusive. All words in this Agreement will be construed to be of such gender or number as the circumstances require. References in this Agreement to time periods in terms of a certain number of days mean calendar days unless expressly stated herein to be Business Days. In interpreting and enforcing this Agreement, each representation and warranty will be given independent significance of fact and will not be deemed superseded or modified by any other such representation or warranty. For the purposes of Articles III, IV and V, references to written, in writing or similar phrases mean any form of written communication, whether via paper or email.
11.12 Specific Performance. Each Party acknowledges that the other Parties may be damaged irreparably and would have no adequate remedy of law if any provision of this Agreement is not performed in accordance with its specific terms or otherwise is breached. Accordingly, each Party agrees that the other Parties will be entitled to an injunction to prevent any breach of any provision of this Agreement and to enforce specifically any provision of this Agreement, in addition to any other remedy to which they may be entitled and without having to prove the inadequacy of any other remedy they may have at law or in equity and without being required to post bond or other security.
11.13 Disclosure Schedule. The disclosure schedule (the Disclosure Schedule) is a series of schedules corresponding to the Sections contained in this Agreement and containing the information required to be disclosed pursuant to, and certain exceptions to, the representations and warranties therein. Any disclosure set forth in any particular Section of the Disclosure Schedule will be deemed disclosed for the purpose of the corresponding Section or subsection of the Agreement and for the purpose of any other Section or subsection of the Agreement, where the application or relevance of such disclose as an exception to (or a disclosure for purposes of) such other Section is reasonably apparent on the face of such disclosure. The inclusion of any information in any Section of the Disclosure Schedule (i) shall not be deemed (x) to be an admission or evidence of the materiality of such information or that such information, alone or together with any other matter or item, could result in a Material Adverse Effect, (y) to establish a standard of materiality for any purpose whatsoever or (z) to be an admission that such item is required to be disclosed in order for the representations and warranties of Seller or of any Company to be true and correct or for Seller or any Company to be in compliance with its covenants and agreements, (ii) does not represent an admission or determination by Seller or any Company that such item did not arise in the Ordinary Course of Business and (iii) shall not constitute, or be deemed to be, an admission by any Person to any other Person of any manner whatsoever (including any breach or violation of any Contract, Law or Order). The specification of any dollar amount in the representations, warranties or covenants contained in this Agreement is not intended to imply that such amount, or any higher or lower amount, is or is not material or in the Ordinary Course of Business for purposes of this Agreement. The Disclosure Schedule is incorporated herein by reference.
[Signature pages follow]
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The Parties have executed and delivered this Stock Purchase Agreement as of the date first written above.
AMERICAN TIRE DISTRIBUTORS, INC. | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Executive Vice President and General Counsel | |
TTT HOLDINGS, INC. | ||
By: | /s/ Brendan A. Ford | |
Name: | Brendan A. Ford | |
Title: | Vice President |
EXHIBIT A
DEFINITIONS
2013 Audited Financial Statements is defined in Section 6.15.
2013 Unaudited Financial Statements is defined in Section 4.6(a).
Accounts Receivable means all trade and other accounts receivable owing to any Company. Unless otherwise indicated, Accounts Receivable are as of the Closing Time.
Acquisition Proposal is defined in Section 6.7.
Active Employee means any employee employed by any Company, including any employee on temporary leave of absence, such as family medical leave, military leave, disability leave (including long-term disability) or sick leave.
Additional Payments is defined in Section 2.6.
Adjusted Closing Payment is defined in Section 2.5(a).
Affiliate means, with respect to a specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, the specified Person. The term control means, as to any Person, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise (and the terms controlled by and under common control with shall have correlative meanings.
Agreement is defined in the opening paragraph.
Allocation is defined in Section 2.8(b).
Antitrust Authority means the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice.
Base Amount is defined in Section 2.3(a).
Basket is defined in Section 8.4(a).
Business is defined in the Statement of Purpose.
Business Day means any day that is not a Saturday, Sunday or a U.S. federal banking holiday.
Buyer is defined in the opening paragraph.
Buyer Indemnitees means Buyer, the Companies and their respective Affiliates and Representatives, in each case excluding Seller.
Buyers Knowledge means (a) the actual knowledge and (b) the knowledge after reasonable inquiry in his or her professional duties, of J. Michael Gaither.
Buyer Special Indemnity Matters means any claims under Section 8.2(a) for a breach or inaccuracy of any Fundamental Representation, and any claims based on fraud or willful misconduct. For the sake of clarity, Buyer Special Indemnity Matters includes any breach by Buyer of any obligation of it to pay any amount due under Section 2.3, 2.4, or 11.10.
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Cap is defined in Section 8.4(a).
Cash means all cash, certificates of deposit, bank deposits, negotiable instruments, marketable securities and other cash equivalents of the Companies as of the Closing Time, net of all cut but uncashed checks issued by the Companies that are outstanding as of the Closing Time.
Closing is defined in Section 2.1(b).
Closing Date means the date on which the Closing occurs.
Closing Statement is defined in Section 2.4(a).
Closing Time is defined in Section 2.1(b).
COBRA means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code § 4980B.
Code means the Internal Revenue Code of 1986, as amended.
Commitment Letter is defined on Schedule 2.6.
Companies is defined in the Statement of Purpose.
Companies Knowledge means (a) the actual knowledge and (b) the knowledge after reasonable inquiry in his or her professional duties, of Robert E. Walter, John Boyle, William Tolerton, Tom Pitera and Mike Beaulieu.
Company 401(k) Plan is defined in Section 4.21(a)(iii).
Confidential Information means information concerning the business or affairs of any Company, including information relating to customers, clients, suppliers, distributors, investors, lenders, consultants, independent contractors or employees, customer and supplier lists, price lists and pricing policies, cost information, financial statements and information, budgets and projections, business plans, production costs, market research, marketing plans and proposals, sales and distribution strategies, manufacturing and production processes and techniques, processes and business methods, technical information, pending projects and proposals, new business plans and initiatives, research and development projects, inventions, discoveries, ideas, technologies, trade secrets, know-how, formulae, technical data, designs, patterns, marks, names, improvements, industrial designs, mask works, compositions, works of authorship and other Intellectual Property, devices, samples, plans, drawings and specifications, photographs and digital images, computer software and programming, all other confidential information and materials relating to the business or affairs of any Company, and all notes, analyses, compilations, studies, summaries, reports, manuals, documents and other materials prepared by or for any Company containing or based in whole or in part on any of the foregoing, whether in verbal, written, graphic, electronic or any other form and whether or not conceived, developed or prepared in whole or in part by any Company.
Confidentiality Agreement means the Confidentiality Agreement, dated January 22, 2014, between American Tire Distributors, Inc. and TTT Holdings, Inc.
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Consent means any consent, approval, authorization, permission or waiver.
Contract means any contract, obligation, understanding, commitment, lease, license, purchase order, work order, bid or other agreement, whether written or oral and whether express or implied, together with all amendments and other modifications thereto, excluding any Employee Benefit Plan.
Disclosure Schedule is defined in Section 11.13.
Effective Date is defined in the opening paragraph.
Employee Benefit Plan means any (a) qualified or nonqualified Employee Pension Benefit Plan (excluding any Multiemployer Plan) or deferred compensation or retirement plan or arrangement, (b) Employee Welfare Benefit Plan or (c) equity-based plan or arrangement (including any stock option, stock purchase, stock ownership, stock appreciation or restricted stock plan) or material fringe benefit or other retirement, severance, bonus, profit-sharing or incentive plan or arrangement, in the case of each of clauses (a), (b) and (c) that any Company maintains or to which any Company contributes, has any obligation to contribute or has any other Liability.
Employee Pension Benefit Plan has the meaning set forth in ERISA § 3(2).
Employee Welfare Benefit Plan has the meaning set forth in ERISA § 3(1), whether or not such plans are subject to ERISA.
Employment Law means any Law governing employment discrimination, disability of employees, fair labor standards, workers compensation, wrongful discharge, occupational safety and health, family and medical leave, wages and hours (including overtime wages), worker classification, or equal opportunity.
Encumbrance means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse or other claim, community property interest, condition, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant, zoning or other restriction of any kind or nature.
Environmental Law means any Law relating to the environment, health or safety, including any Law relating to the presence, use, production, generation, handling, management, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any material, substance or waste limited or regulated by any Governmental Body.
ERISA means the Employee Retirement Income Security Act of 1974.
ERISA Affiliate is defined Section 4.21(c).
Escrow Agent means The Bank of New York Mellon Trust Company, N.A. a national banking association.
Escrow Agreement means the Escrow Agreement, dated on or about the Closing Date, among Seller, Buyer and the Escrow Agent, substantially in the form of Exhibit B attached hereto.
Escrow Amount is defined in Section 2.3(d)(i).
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Escrow Funds means the remaining portion of funds that were part of the Escrow Amount as of any date of determination.
Escrow Release Date means the date that is the one year anniversary of the Closing Date.
Estimated Cash is defined in Section 2.3(b).
Estimated Closing Payment is defined in Section 2.3(c).
Estimated Indebtedness is defined in Section 2.3(b).
Estimated Working Capital is defined in Section 2.3(b).
Financial Statements is defined in Section 4.6(a).
Financing is defined in Section 5.5.
Financing Commitment is defined in Section 5.5.
Fundamental Representations means (i) with respect to Seller, the representations or warranties in Article III (Seller) and the second, third and fourth sentences of Section 4.1 (organization), Section 4.2 (capitalization), Section 4.3 (authority) and Section 4.26 (no brokers fees), and (ii) with respect to Buyer, Section 5.1 (organization and authority), Section 5.6 (solvency) and Section 5.7 (no brokers fees).
GAAP means generally accepted accounting principles in the United States as set forth in pronouncements of the Financial Accounting Standards Board (and its predecessors) and the American Institute of Certified Public Accountants and, unless otherwise specified, as in effect on the Closing Date or, with respect to any financial statements, the date such financial statements were prepared.
Governmental Body means any federal, state, local, foreign or other government or quasi-governmental authority or any department, agency, subdivision, court or other tribunal of any of the foregoing.
Government Contract means any Contract to which any Company is a party or by which it is bound, the ultimate contracting party of which is a Governmental Body (including any subcontract with a prime contractor or other subcontractor who is a party to any such Contract).
Hazardous Substance means any material, substance or waste that is limited or regulated by any Governmental Body or, even if not so limited or regulated, could pose a hazard to the health or safety of the occupants of the Leased Real Property or adjacent properties or any property or facility formerly owned, leased or used by any Company. The term includes asbestos, polychlorinated biphenyls, petroleum products and all materials, substances and wastes regulated under any Environmental Law.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
Indebtedness means as to any Person at any time: (a) obligations of such Person for borrowed money; (b) obligations of such Person evidenced by bonds, notes, debentures or other similar instruments; (c) obligations of such Person to pay the deferred purchase price of property or services (including earnouts and similar arrangements), except trade accounts payable of such Person arising in the Ordinary
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Course of Business that are not past due by more than 120 days and for which adequate reserves have been established on the financial statements of such Person; (d) obligations arising under capitalized leases, conditional sales Contracts or other similar title retention instruments; (e) reimbursement obligations of such Person relating to amounts drawn and outstanding under letters of credit, bankers acceptances, surety or other bonds or similar instruments; (f) Liabilities of such Person relating to unfunded, vested benefits under any Employee Benefit Plan (excluding (i) vacation pay and sick pay that is accrued on the Companies books in the Ordinary Course of Business, in each case to the extent accrued in Working Capital and (ii) obligations of Seller to deliver stock of Seller pursuant to stock options or stock ownership plans); (g) net payment obligations incurred by such Person pursuant to any hedging agreement; (h) Liabilities of such Person under any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement or other similar agreement designed to protect such Person against fluctuations in interest rates; (i) any guarantees of the foregoing items in clauses (a) through (i) for the benefit of another Person; and (j) all interest, fees, penalties, breakage costs and other expenses owed with respect to the items described in the foregoing clauses (a) through (i) or the repayment thereof. Unless otherwise indicated, Indebtedness means Indebtedness of the Companies as of the Closing Time. Notwithstanding the foregoing, Indebtedness does not include any items included as a Liability in Working Capital.
Indemnified Party is defined in Section 8.6(a).
Indemnifying Party is defined in Section 8.6(a).
Insurance Policies is defined in Section 4.24.
Intellectual Property means: (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), improvements thereto, and patents, patent applications, industrial designs, and patent disclosures, together with reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (b) trademarks, service marks, trade dress, logos, trade names, and corporate names, together with translations, adaptations, derivations and combinations thereof and including goodwill associated therewith, and applications, registrations, and renewals in connection therewith; (c) copyrightable works, copyrights, and applications, registrations and renewals in connection therewith; (d)mask works and applications, registrations and renewals in connection therewith; (e) trade secrets; (f) computer software, in object and source code format (including data and related documentation); (g) plans, drawings, architectural plans and specifications; (h) websites; (i) other proprietary rights; and (j) copies and tangible embodiments and expressions thereof (in whatever form or medium) of any of the foregoing, including all improvements and modifications thereto and derivative works thereof.
Inventory means all inventories of the Companies wherever located, including tires, raw materials, goods consigned to vendors or subcontractors, works in process, finished goods, goods in transit, demonstration equipment and inventory on consignment.
IRS means the U.S. Internal Revenue Service.
Key Employee is defined on Schedule 2.6.
Law means any federal, state, local, foreign or other law, statute, ordinance, regulation, rule, regulatory or administrative guidance, Order, constitution, treaty, principle of common law or other restriction of any Governmental Body.
Lease is defined in Section 4.12(a).
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Leased Real Property is defined in Section 4.12(a).
Lenders is defined in Section 5.5.
Liability means any liability, obligation or commitment of any kind or nature, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due.
License is defined in Section 4.14(d).
Loss means any loss, claim, complaint, demand, Order, damage, penalty, fine, expense, cost, fee, settlement payment, adverse consequence, Liability expense, fee, court costs or reasonable attorneys fees and expenses; provided, however, that (a) a Loss shall include consequential, special or indirect damages only to the extent that any such damages are reasonably foreseeable (but shall always include any consequential, special or indirect damages payable to a third party) and (b) a Loss shall not include any punitive or exemplary damages (other than punitive or exemplary damages payable to a third party).
March Quarterly Financial Statements is defined in Section 6.11.
Material Adverse Effect means any change, event or effect, individually or in the aggregate, that results in a material adverse effect upon the financial condition, business, liabilities or results of operations of the Companies, taken as a whole; provided, however, that any change, event or effect arising from or related to the following shall not be taken into account in determining whether a Material Adverse Effect has occurred: (i) conditions affecting the United States or foreign economies generally, (ii) any national or international political or social conditions, including the engagement by the United States hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States or any of their respective territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (iii) changes in financial, banking or securities markets (including any disruption thereof, any decline in the price of any security or any market index, or any adverse change therein), (iv) changes in GAAP, (v) changes in any Laws, rules, regulations, Orders, or other binding directives issued by any Governmental Body, (vi) changes that are generally applicable to the industry in which any Company operates; (vii) the execution or performance of or the public announcement of this Agreement and the Transactions, the identity of Buyer and its Affiliates or the compliance by any Person with any term of any Transaction Documents (including, in each case, the impact thereof on relationships, contractual or otherwise, with customers, suppliers, vendors, distributed, partners, employees or Governmental Bodies); (viii) Buyers announcement or other disclosure of its plans or intentions with respect to the conduct of the Business (or any portion thereof) after the Closing; (ix) any matter disclosed on the Disclosure Schedule; or (x) the taking of any action approved by Buyer under this Agreement; provided, however, that, in the case of clauses (i) through (vi), only to the extent any such change, event or condition does not substantially disproportionately affect the Companies compared to other participants in the industries in which the Companies conduct their business.
Material Contract is defined in Section 4.13(a).
Multiemployer Plan has the meaning set forth in ERISA § 3(37).
multiple employer plan is defined in Section 4.21(d).
Noncompete Agreements means the Seller Noncompete Agreement and the Stockholder Noncompete Agreements.
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Notice of Disagreement is defined in Section 2.4(c).
Option Cash Out is defined in Section 6.6(c).
Order means any order, award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or verdict entered, issued, made or rendered by any Governmental Body or arbitrator.
Ordinary Course of Business means the ordinary course of the conduct of the Business by the applicable Company, consistent with past operating practices.
Organizational Documents means (a) any certificate or articles of incorporation and bylaws, (b) any documents comparable to those described in clause (a) as may be applicable pursuant to any Law and (c) any amendment or modification to any of the foregoing.
Outside Date is defined in Section 10.1(b).
Parent 401(k) Plan is defined in Section 6.6(a).
Party means Buyer or Seller, as applicable.
Permit means any permit, authorization, license or Consent issued by any Governmental Body or pursuant to any Law.
Permitted Encumbrance means (a) any mechanics, materialmens or similar statutory lien incurred in the Ordinary Course of Business for monies not yet due or that are being contested in good faith, (b) any lien for Taxes not yet due, that are being contested in good faith or which may thereafter be paid without penalty, (c) any right, interest, Encumbrance or title of a licensor, sublicensor, licensee, sublicensee, landlord, lessor, sublessor or other Person in title under any License, Lease or other Contract (for which a correct and complete copy has been provided by Seller to Buyer prior to the date hereof) or in the property being licensed, leased or occupied as set forth in such License, Lease or Contract, (d) Encumbrances securing the obligations under any Indebtedness of any Company, (e) any purchase money lien or lien securing rental payments under capital lease arrangements to the extent related to the assets purchased or leased or vendor financing arrangements (to the extent of public record or correct and complete copies of which have been provided by Seller to Buyer prior to the date hereof), (f) Encumbrances arising in the Ordinary Course of Business under workmens compensation, unemployment insurance, social security, retirement or similar Laws (excluding violations of any such Laws), (g) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, in each case in the Ordinary Course of Business, consistent with past practice and (h) with respect to Leased Real Property, (i) charges, easements, rights of way, restrictions, declarations, covenants, conditions, defects, exceptions, encumbrances and other similar matters of record that affect title to the property of any Company but do not materially detract from the value or marketability of the property to which it relates or materially impair the ability of any Company to use or operate the property to which it relates, (ii) zoning, entitlement, building codes and other land use Laws regulating the use or occupancy of real property or the activities conducted thereon, or (iii) matters that would be disclosed by an accurate survey of the Leased Real Property; provided, that with respect to this clause (h) only, any such item does not, individually or in the aggregate with other such items, materially interfere with the Ordinary Course of Business or materially impair the continued use and operation of such Leased Real Property.
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Person means any individual, corporation, limited liability company, partnership, company, sole proprietorship, joint venture, trust, estate, association, organization, labor union, Governmental Body or other entity.
Plan Termination Date is defined in Section 6.6.
Post-Closing Tax Period is defined in Section 9.1(b).
PP Components is defined in Section 2.4(a).
Pre-Closing Tax Period is defined in Section 9.1(a).
Proceeding means any proceeding, charge, complaint, claim, demand, notice, action, suit, litigation, hearing, audit, investigation, arbitration or mediation (in each case, whether civil, criminal, administrative, investigative or informal) commenced, conducted, heard or pending by or before any Governmental Body, arbitrator or mediator.
Purchase Price is defined in Section 2.3(a).
Purchase Price Allocation Schedule is defined in Section 2.8(b).
Related Party means (a) with respect to a specified individual, any member of such individuals Family and any Affiliate of any member of such individuals Family and (b) with respect to a specified Person other than an individual, any Affiliate of such Person and any member of the Family of any such Affiliates that are individuals. The Family of a specified individual means, as it relates to the individual, any child, stepchild, parent, stepparent, spouse, sibling, mother-in law, father-in-law, sons-in-law, daughters-in-law, brother-in-law and sister-in-law and any other person sharing the household of such person (other than a tenant or employee). The Companies will not be deemed to be Related Parties of Seller.
Related Party Agreements is defined in Section 4.23.
Repayment Indebtedness means the Indebtedness set forth on Schedule 2.3(d)(iii).
Representative means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.
Resolution Accountants means the New York City office of Deloitte LLP subject to it certifying to the Parties that it is an independent firm without any material relationship (current or prior) with any Party; provided, however, that if such firm is unwilling or unable to serve in such capacity, the Parties shall mutually agree upon a substitute accounting firm and such substitute accounting firm shall likewise certify its independence to the Parties.
Retention Agreements means the Retention Agreements, dated on or about the Closing Date, between Buyer and each Key Employee, substantially in the form of Exhibit C attached hereto.
Retention Payment is defined in Section 6.12.
Securities Act means the Securities Act of 1933, as amended.
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Seller is defined in the opening paragraph.
Seller Guarantees is defined in Section 6.16.
Seller Indemnitees means Seller and its Affiliates and Representatives.
Seller Noncompete Agreement means the Noncompetition, Nonsolicitation and Confidentiality Agreement, dated and executed as of the date of this Agreement, to be effective as of the Closing Date, between Buyer and Seller.
Seller Special Indemnity Matters means any claims under Section 8.1(a) for a breach or inaccuracy of any Fundamental Representation, any claims under Section 8.1(b) or (c), and any claims based on any fraud or willful misconduct. For the sake of clarity, Seller Special Indemnity Matters includes any breach by Seller of any obligation of it to pay any amount due under Section 2.3, 2.4 or 11.10.
Settlement Offer is defined in Section 2.4(d).
Shares is defined in the Statement of Purpose.
Solvent means, with respect to any Person, as of a specified time, (a) the amount of the fair value of the property of such Person will, as of such time, exceed the sum of all debts as of such time (including contingent liabilities), (b) such Person will not have, as of such time, an unreasonably small amount of capital for the operation of the businesses in which it is engaged or about to be engaged following such time and (c) such Person will be able to pay its liabilities as they mature or (in the case of contingent liabilities) otherwise become payable. For purposes of this definition, the terms fair value and property of a Person will be determined in accordance with applicable federal bankruptcy Laws governing determinations of the insolvency of debtors and the phrases not have an unreasonably small amount of capital for the operation of the businesses in which it is engaged or about to be engaged and able to pay its liabilities as they mature or (in the case of contingent liabilities) otherwise become payable shall have the meaning given to such or similar terms under applicable federal bankruptcy Laws governing fraudulent transfers.
Straddle Period is defined in Section 9.1(c).
Stockholder Noncompete Agreements means the Noncompetition, Nonsolicitation and Confidentiality Agreements, dated and executed as of the date of this Agreement, to be effective as of the Closing Date, between Buyer and each of John Boyle, William Tolerton, Robert Walter and Matthew Walter.
Subsidiary means, with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (b) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entitys gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). The term Subsidiary shall include all direct or indirect Subsidiaries of the applicable Person.
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Target is defined in the Statement of Purpose.
Tax means any federal, state, local, foreign or other income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code § 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, general service, alternative or add-on minimum, estimated or other tax of any kind whatsoever, however denominated, or computed, and any escheat amounts or other amounts due in respect of unclaimed property, and in respect of each and every of the foregoing, including any interest, penalty, or addition thereto, whether disputed or not.
Tax Claim means any claim with respect to Taxes made by any Taxing Authority that, if pursued successfully, would reasonably be expected to serve as the basis for a claim for indemnification under Article IX.
Tax Proceeding is defined in Section 4.15(e).
Tax Return means any return, declaration, report, claim for refund, or information return or other document or statement relating to Taxes that is filed or required to be filed with any Governmental Body, including any schedule or attachment thereto and any amendment or supplement thereof.
Taxing Authority means any Governmental Body responsible for the administration, collection or imposition of any Tax.
Third-Party Claim is defined in Section 8.6(a).
Transaction Accounting Principles is defined in Section 2.3(b).
Transaction Costs means any fees, costs and expenses incurred or subject to reimbursement by any Company, in each case in connection with the Closing and any other Transactions contemplated to be performed before or on the Closing Date, including (a) the fees, costs and expenses payable by any Company to any investment bank, financial advisor, broker or finder, (b) the fees, costs and expenses payable by any Company to Wachtell, Lipton, Rosen & Katz, Benesch, Friedlander, Coplan & Arnoff LLP and any other attorneys engaged by any Company and (c) the fees, costs and expenses payable by any Company to outside accountants or other advisors.
Transaction Documents means this Agreement and the Escrow Agreement and all exhibits, schedules and amendments to this Agreement or the Escrow Agreement.
Transactions means the transactions contemplated by the Transaction Documents.
Transfer Taxes is defined in Section 9.5.
U.S. Restricted Person List means: (i) the list of Specially Designated Nationals and Blocked Persons maintained by the U.S. Department of the Treasury, Office of Foreign Assets Control; (ii) the Denied Persons, Unverified, and Entity lists maintained by the Bureau of Industry and Security of the U.S. Department of Commerce under the Export Administration Regulations; (iii) the Debarred list maintained by the U.S. Department of State; and (iv) the lists maintained by the U.S. Department of State of Persons subject to sanctions by the U.S. Government for engaging in activities relating to proliferation or Iran.
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U.S. Trade Laws means any U.S. Law, or other decision or requirement having the force or effect of Law, imposing restrictions, requirements, conditions or sanctions in connection with international trade activities, including, but not limited to, as applicable, the Tariff Act of 1930, as amended, and other Laws, regulations, and programs administered or enforced by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement, and their predecessor agencies, such as the U.S. Customs Regulations (19 C.F.R. Part 0 et seq.), the Export Administration Act of 1979, as amended, the Export Administration Regulations, 15 C.F.R. Part 730 et seq., the International Emergency Economic Powers Act, as amended, the Trading with the Enemy Act, as amended, the statutes, regulations, and Executive Orders administered by OFAC (including 31 C.F.R. Part 500 et seq.), the Arms Export Control Act, as amended, the International Traffic in Arms Regulations, administered by the U.S. Department of State, Directorate of Defense Trade Controls, 22 C.F.R. Part 120 et seq., statutes and Executive Orders authorizing sanctions for trade relating to specified activities, such as proliferation, or countries, such as Iran, including as administered by the U.S. Department of State, and the anti-boycott regulations administered by the U.S. Department of Commerce and the U.S. Department of the Treasury.
WARN Act means the Worker Adjustment Retraining and Notification Act of 1988, as amended.
Working Capital means (a) the sum of the amounts for the consolidated trial balance account numbers and names included as current asset line items of the Companies shown on Schedule 1, minus (b) the sum of the amounts of for the consolidated trial balance account numbers and names included as current Liability line items of the Companies shown on Schedule 1, in each case of (a) and (b), (i) calculated as of the Closing Time (but without giving effect to the Closing), (ii) calculated in a manner consistent with the Transaction Accounting Principles and (iii) excluding Cash and Indebtedness.
Working Capital Target means $51,153,483.
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Exhibit 4.1
SIXTH SUPPLEMENTAL INDENTURE
Sixth Supplemental Indenture (this Sixth Supplemental Indenture), dated as of January 31, 2014 among American Tire Distributors, Inc., a Delaware corporation (the Issuer), American Tire Distributors Holdings, Inc., a Delaware corporation, as a Guarantor, Am-Pac Tire Dist. Inc., a California corporation, as a Subsidiary Guarantor, Tire Wholesalers, Inc., a Washington corporation, as a Subsidiary Guarantor, and The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).
W I T N E S S E T H
WHEREAS, each of American Tire Distributors, Inc., American Tire Distributors Holdings, Inc., as a Guarantor, and Am-Pac Tire Dist. Inc., as a Subsidiary Guarantor (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee a Senior Subordinated Notes Indenture (the Initial Indenture), dated as of May 28, 2010, providing for the issuance of an unlimited aggregate principal amount of 11.50% Senior Subordinated Notes due 2018, as supplemented by the First Supplemental Indenture thereto, dated as of January 7, 2011, the Second Supplemental Indenture thereto, dated as of January 7, 2011, the Third Supplemental Indenture thereto, dated as of May 27, 2011, the Fourth Supplemental Indenture thereto, dated as of June 22, 2012, and the Fifth Supplemental Indenture thereto, dated as of June 22, 2012;
WHEREAS, pursuant to Section 9.02 of the Initial Indenture, the Issuer, the Guarantors and the Trustee may amend or supplement certain terms of the Indenture with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding;
WHEREAS, the Company has solicited consents of the Holders (the Consent Solicitation) to certain amendments to the Indenture (the Proposed Amendments);
WHEREAS, the Issuer has obtained written consent to the Proposed Amendments to the Indenture from the Holders of at least a majority in aggregate principal amount of the of the Notes outstanding as of the date hereof (the Requisite Consent);
WHEREAS, pursuant to Section 9.02 of the Initial Indenture, the Trustee is authorized to execute and deliver this Sixth Supplemental Indenture;
WHEREAS, all things necessary have been done to make this Sixth Supplemental Indenture a valid and binding agreement of the Issuer, the Guarantors listed on the signature pages hereto and the Trustee, in accordance with its terms;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:
(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Initial Indenture.
(2) Amendments to the Indenture.
a. | Modification of Section 1.01. The text of the definition of TCW shall be deleted in its entirety and replaced with the following: |
TCW means TCW/Crescent Mezzanine Partners V, L.P., TCW/Crescent Mezzanine Partners VB, L.P., TCW/Crescent Mezzanine Partners VC, L.P., TCW Capital Trust, Crescent Mezzanine Partners VI, L.P., Crescent Mezzanine Partners VIB, L.P., Crescent Mezzanine Partners VIC, L.P. and their Affiliates.
b. | Modification of Section 4.09(a). The text of the last proviso to Section 4.09(a) of the Initial Indenture is deleted in its entirety and replaced with the following: |
provided, further that the Issuer and its Restricted Subsidiaries may only incur Senior Indebtedness if the Senior Debt Ratio at the time of incurrence and after giving pro forma effect thereto would be no greater than 4.00 to 1.00.
c. | Modification of Section 4.09(b)(xiv)(1). The text of Section 4.09(b)(xiv)(1) of the Initial Indenture is deleted in its entirety and replaced with the following: |
(1) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) and, if such Indebtedness is Senior Indebtedness, the Senior Debt Ratio would be no greater than 4.00:1.00, or
(3) Governing Law. THIS SIXTH SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(4) Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Sixth Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Sixth Supplemental Indenture or as to the accuracy of the recitals to this Sixth Supplemental Indenture.
(5) Counterparts. The parties may sign any number of copies of this Sixth Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
(6) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed, all as of the date first above written.
AMERICAN TIRE DISTRIBUTORS, INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: | Jason T. Yaudes | |
Title: | Executive Vice President and Chief Financial Officer | |
AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: | Jason T. Yaudes | |
Title: | Executive Vice President and Chief Financial Officer | |
AM-PAC TIRE DIST. INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: | Jason T. Yaudes | |
Title: | Vice President and Treasurer | |
TIRE WHOLESALERS, INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: | Jason T. Yaudes | |
Title: | Vice President and Treasurer | |
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee | ||
By: | /s/ Melonee Young | |
Name: | Melonee Young | |
Title: | Vice President |
[Signature page to Sixth Supplemental Indenture]
Exhibit 4.2
SEVENTH SUPPLEMENTAL INDENTURE
Seventh Supplemental Indenture (this Seventh Supplemental Indenture), dated as of January 31, 2014 among American Tire Distributors, Inc., a Delaware corporation (the Issuer), American Tire Distributors Holdings, Inc., a Delaware corporation, as a Guarantor, Am-Pac Tire Dist. Inc., a California corporation, as a Subsidiary Guarantor, Tire Wholesalers, Inc., a Washington corporation, as a Subsidiary Guarantor, and The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the Trustee).
W I T N E S S E T H
WHEREAS, each of American Tire Distributors, Inc., American Tire Distributors Holdings, Inc., as a Guarantor, and Am-Pac Tire Dist. Inc., as a Subsidiary Guarantor (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee a Senior Subordinated Notes Indenture (the Initial Indenture), dated as of May 28, 2010, providing for the issuance of an unlimited aggregate principal amount of 11.50% Senior Subordinated Notes due 2018, as supplemented by the First Supplemental Indenture thereto, dated as of January 7, 2011, the Second Supplemental Indenture thereto, dated as of January 7, 2011, the Third Supplemental Indenture thereto, dated as of May 27, 2011, the Fourth Supplemental Indenture thereto, dated as of June 22, 2012, the Fifth Supplemental Indenture thereto, dated as of June 22, 2012, and the Sixth Supplemental Indenture thereto, dated as of January 31, 2014;
WHEREAS, the Issuer wishes to issue $225,000,000 aggregate principal amount of Additional Notes;
WHEREAS, in accordance with Section 2.01 of the Initial Indenture, the Issuer may issue Additional Notes in compliance with Section 4.09 thereof and may enter into a supplemental indenture to the Initial Indenture to provide for the issuance of such Additional Notes;
WHEREAS, the Issuer and the Guarantors wish to execute and deliver this Seventh Supplemental Indenture to provide for the issuance of $225,000,000 aggregate principal amount of its 11.50% Senior Subordinated Notes due 2018 (the New Notes) as Additional Notes under the Initial Indenture;
WHEREAS, in connection with the issuance of the New Notes and pursuant to Section 2.01 of the Initial Indenture, the Trustee is authorized to execute and deliver this Seventh Supplemental Indenture;
WHEREAS, all things necessary have been done to make this Seventh Supplemental Indenture a valid and binding agreement of the Issuer, the Guarantors listed on the signature pages hereto and the Trustee, in accordance with its terms;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:
(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Initial Indenture.
(2) Additional Notes. As of the date hereof, the Issuer shall issue the New Notes pursuant to this Seventh Supplemental Indenture. The New Notes issued pursuant to this Seventh Supplemental
Indenture constitute Additional Notes issued pursuant to Section 2.01 of the Initial Indenture and shall be consolidated with and form a single class with the Initial Notes previously established pursuant to the Initial Indenture. The New Notes shall have the same terms and conditions in all respects as the Initial Notes, except that the issue date of the New Notes shall be January 31, 2014, the issue price shall be 98.25%, interest on the New Notes shall accrue from January 31, 2014, and the New Notes shall be issued with separate CUSIP numbers from the Initial Notes. The New Notes will not be fungible for U.S. federal income tax purposes with the Initial Notes. The form of the global notes representing the New Notes is attached hereto as Exhibit A.
(3) Aggregate Principal Amount. The aggregate principal amount of the New Notes that may be authenticated and delivered pursuant to this Seventh Supplemental Indenture shall be $225,000,000.
(4) Governing Law. THIS SEVENTH SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(5) Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Seventh Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Seventh Supplemental Indenture or as to the accuracy of the recitals to this Seventh Supplemental Indenture.
(6) Counterparts. The parties may sign any number of copies of this Seventh Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
(7) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to be duly executed, all as of the date first above written.
AMERICAN TIRE DISTRIBUTORS, INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: | Jason T. Yaudes | |
Title: | Executive Vice President and Chief Financial Officer | |
AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: |
Jason T. Yaudes | |
Title: | Executive Vice President and Chief Financial Officer | |
AM-PAC TIRE DIST. INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: | Jason T. Yaudes | |
Title: |
Vice President and Treasurer | |
TIRE WHOLESALERS, INC. | ||
By: | /s/ Jason T. Yaudes | |
Name: |
Jason T. Yaudes | |
Title: |
Vice President and Treasurer | |
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee | ||
By: | /s/ Melonee Young | |
Name: |
Melonee Young | |
Title: | Vice President |
[Signature page to Seventh Supplemental Indenture]
EXHIBIT A
[face of Senior Subordinated Note]
[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Regulation S Temporary Global Note Legend, if applicable pursuant to the provisions of the Indenture]
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND THE YIELD TO MATURITY OF THE NOTE WILL BE MADE AVAILABLE TO THE HOLDER UPON REQUEST TO THE CHIEF FINANCIAL OFFICER OF THE ISSUER AT 12200 HERBERT WAYNE COURT, SUITE 150, HUNTERSVILLE, NC 28078, TELEPHONE NUMBER: (704) 632-7127.
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CUSIP
ISIN
[RULE 144A][REGULATION S] [GLOBAL] NOTE
representing
11.50% Senior Subordinated Note due 2018
No. | [$ ] |
American Tire Distributors, Inc., a Delaware corporation, promises to pay to or registered assigns, the principal sum [set forth on the Schedule of Exchanges of Interests in the Global Senior Note attached hereto] [of United States Dollars] on June 1, 2018. Interest Payment Dates: June 1 and December 1, commencing on June 1, 2014
Record Dates: May 15 and November 15
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IN WITNESS HEREOF, the Issuer has caused this instrument to be duly executed.
Dated:
AMERICAN TIRE DISTRIBUTORS INC. | ||
By: |
| |
Name: | ||
Title: |
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This is one of the Notes referred to in the within-mentioned Indenture:
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee | ||
By: |
| |
Name: | ||
Title: |
Date:
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[Back of Senior Subordinated Note]
11.50% Senior Subordinated Note due 2018
Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
(1) Interest. American Tire Distributors, Inc., a Delaware corporation, promises to pay interest on the principal amount of this Note at a rate per annum of 11.50% until maturity. The Issuer shall pay interest on this Note semi-annually in arrears on June 1 and December 1 of each year, or, if any such day is not a Business Day, on the next succeeding Business Day (each, an Interest Payment Date). The Issuer shall make each interest payment to the Holder of record of this Note on the immediately preceding May 15 and November 15 (each, a Record Date). Interest on this Note shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including January 31, 2014. The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate borne by this Note; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate borne by this Note; provided that the interest shall be increased automatically by 2.00% per annum upon the occurrence and during the continuance of an Event of Default; provided, further, that such default interest shall be ineffective if TCW does not own at least a majority of the aggregate principal amount of the Notes then outstanding. Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months. TCW shall provide notice to the Trustee if it ceases to own at least a majority of the aggregate principal amount of the Notes then outstanding within two Business Days of such a decrease in ownership.
(2) Method of Payment. The Issuer shall pay interest on this Note to the Person who is the registered Holder of this Note at the close of business on the Record Date (whether or not a Business Day) next preceding the Interest Payment Date, even if this Note is cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Payment of interest may be made by check mailed to the Holders at their addresses set forth in the Note Register of Holders, provided that (a) all cash payments of principal, premium, if any, and interest on, Notes represented by Global Notes registered in the name of or held by DTC or its nominee shall be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof and (b) all payments of principal, premium, if any, and interest with respect to certificated Notes shall be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
(3) Paying Agent and Registrar. Initially, The Bank of New York Mellon Trust Company, N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to the Holders. The Issuer or any of its Subsidiaries may act in any such capacity.
(4) Indenture. The Issuer issued the Notes under an Indenture, dated as of May 28, 2010 (the Indenture), among American Tire Distributors, Inc., American Tire Distributors Holdings, Inc., as a Guarantor, Am-Pac Tire Dist. Inc., as a Subsidiary Guarantor, and the Trustee. This Note is one of a duly authorized issue of notes of the Issuer designated as its 11.50% Senior Subordinated Notes due 2018. The Issuer shall be entitled to issue Additional Notes in accordance with Sections 2.01, 4.09 and 4.12 of the
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Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the Trust Indenture Act). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.
(5) Optional Redemption.
(a) Except as described below under clauses 5(b), 5(c) and 5(d) hereof, the Notes shall not be redeemable at the Issuers option.
(b) At any time prior to June 1, 2013, the Issuer may redeem all or a part of the Notes at a redemption price equal to 100.0% of the principal amount of such Notes redeemed plus the Applicable Premium as of, plus accrued and unpaid interest, if any, to, but excluding the date of redemption (the Redemption Date), subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date.
(c) On or after June 1, 2013, the Issuer may redeem the Notes, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to but excluding the Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on June 1 of each of the years indicated below:
Year |
Percentage | |||
2013 |
104.000 | % | ||
2014 |
102.000 | % | ||
2015 |
100.000 | % |
(d) Until June 1, 2013, the Issuer may, at its option, on one or more occasions, redeem up to 35.0% of the aggregate principal amount of Notes issued under this Indenture at a redemption price equal to 111.50% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to, but excluding the Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds from one or more Equity Offerings to the extent that such net cash proceeds are received by or contributed to the Issuer; provided that (i) at least 50.0% of the sum of the aggregate principal amount of the Notes originally issued under this Indenture on the Issue Date and any Additional Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; and (ii) each such redemption occurs within 120 days of the date of closing of each such Equity Offering. Any redemption or notice of redemption may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of an Equity Offering, other offering or other corporate transaction event. Notice of any redemption in respect of an Equity Offering may be given prior to the completion thereof. If any Notes are listed on an exchange, and the rules of such exchange so require, the Issuer shall notify the exchange of any such notice of redemption. In addition, the Issuer shall notify the exchange of the principal amount of any Notes outstanding following any partial redemption of Notes.
(e) Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.
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(6) Mandatory Redemption. The Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.
(7) Notice of Redemption. Subject to Section 3.03 of the Indenture, notice of redemption shall be delivered electronically or mailed by first-class mail at least 30 days but not more than 60 days before the redemption date (except that redemption notices may be delivered electronically or mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 13 of the Indenture) to each Holder whose Notes are to be redeemed at its registered address. No Notes of less than $2,000 can be redeemed in part, except that if all the Notes of a Holder are to be redeemed, the entire amount of Notes held by such Holder shall be redeemed. On and after the Redemption Date, interest ceases to accrue on this Note or portions thereof called for redemption.
(8) Offers to Repurchase. Upon the occurrence of a Change of Control, the Issuer shall make a Change of Control Offer in accordance with Section 4.14 of the Indenture. In connection with certain Asset Sales, the Issuer shall make an Asset Sale Offer as and when provided in accordance with Sections 3.09 and 4.10 of the Indenture.
(9) Subordination. The Notes and the Guarantees are subordinated to Senior Indebtedness of the Issuer and the Guarantors on the terms and subject to the conditions set forth in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Notes and Guarantees may be paid. The Issuer agrees, and each Holder by accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.
(10) Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $2,000 and any integral multiple of $1,000 in excess of $2,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.
(11) Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes.
(12) Amendment, Supplement and Waiver. The Indenture, the Guarantees or the Notes may be amended or supplemented as provided in the Indenture.
(13) Defaults and Remedies. The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Requisite Holders may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable immediately without further action or notice. Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture. Subject to certain limitations, the Requisite Holders may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default relating to the payment of principal, premium, if any, or interest) if it determines that withholding notice is in their interest. The Requisite Holders by notice to the Trustee may on behalf of all the Holders waive any existing Default or
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and its consequences under the Indenture except a continuing Default in payment of the principal of, premium, if any, or interest on, any of the Notes held by a non-consenting Holder. The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required within five Business Days after becoming aware of any Default, to deliver to the Trustee a statement specifying such Default and what action the Issuer proposes to take with respect thereto.
(14) Authentication. This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.
(15) Governing Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES.
(16) CUSIP and ISIN Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP and ISIN numbers to be printed on the Notes and the Trustee may use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
The Issuer shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Issuer at the following address:
American Tire Distributors, Inc.
12200 Herbert Wayne Court, Suite 150
Huntersville, North Carolina 28078
Facsimile: 704-992-1451
Attention: General Counsel
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: |
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(Insert assignees legal name) |
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(Insert assignees soc. sec. or tax I.D. no.)
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(Print or type assignees name, address and zip code)
and irrevocably appoint |
| |
to transfer this Note on the books of the Issuer. The agent may substitute another to act for him. |
Date: |
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Your Signature: |
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(Sign exactly as your name appears on the face of this Note) | ||||
Signature Guarantee*: |
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* | Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). |
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:
¨ Section 4.10 ¨ Section 4.14
If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:
$
Date: |
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Your Signature: |
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(Sign exactly as your name appears on the face of this Note) | ||||
Tax Identification No.: |
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Signature Guarantee*: |
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* | Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). |
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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The initial outstanding principal amount of this Global Note is $ . The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note for an interest in this Global Note, have been made:
Date of Exchange |
Amount of decrease in Principal Amount of this Global Note |
Amount of increase in Principal Amount of this Global Note |
Principal Amount of this Global Note following such decrease or increase |
Signature of authorized officer of Trustee or Custodian | ||||
* | This schedule should be included only if the Note is issued in global form. |
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Exhibit 10.1
SECOND AMENDMENT TO
SIXTH AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO SIXTH AMENDED AND RESTATED CREDIT AGREEMENT (this Amendment) is made and entered into as of January 31, 2014, by and among AMERICAN TIRE DISTRIBUTORS, INC., a Delaware corporation (American Tire); AM-PAC TIRE DIST. INC., a California corporation (Am-Pac; together with American Tire, collectively, U.S. Borrowers and each individually, a U.S. Borrower); TRICAN TIRE DISTRIBUTORS INC. / DISTRIBUTEURS DE PNEUS TRICAN INC., a corporation organized under the laws of Canada (and the entity resulting from the amalgamations of ATD Acquisition Co. V Inc., Triwest Trading (Canada) Ltd. and Trican Tire Distributors Inc., and of Trican Tire Distributors Inc. and Wholesale Tire Distributors Inc.), in its capacity as a Canadian Borrower (Trican; together with U.S. Borrowers, collectively, Borrowers and each individually, a Borrower); AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC., a Delaware corporation (Holdings); TIRE WHOLESALERS, INC., a Washington corporation (Wholesalers; together with Holdings, collectively, Guarantors and each individually, a Guarantor; Borrowers and Guarantors, collectively, Loan Parties and each individually, a Loan Party); BANK OF AMERICA, N.A., as administrative and collateral agent (in such capacities, together with its successors in such capacities, Agent) for certain financial institutions (collectively, Lenders), and the Lenders signatory hereto.
Recitals:
Loan Parties, Agent, Lenders and the other parties named therein are parties to a certain Sixth Amended and Restated Credit Agreement dated as of November 30, 2012 (as amended by the First Amendment to Sixth Amended and Restated Credit Agreement dated as of March 22, 2013, the Credit Agreement), pursuant to which Lenders have agreed to make certain loans and other extensions of credit to Borrowers.
Borrowers have advised Agent and Lenders of the formation of a new, wholly-owned subsidiary of American Tire, ATD Merger Sub II, LLC, a Delaware limited liability company (ATD Merger Sub), and the proposed merger of ATD Merger Sub with and into Hercules Tire Holdings LLC, a Delaware limited liability company (Hercules Holdings), with Hercules Holdings as the surviving legal entity of such merger, pursuant to an Agreement and Plan of Merger dated on or about the date hereof among ATD Merger Sub, Hercules Holdings, and the equityholders of Hercules Holdings that are party thereto (the Hercules Merger Agreement), and after giving effect to such merger (the Proposed Hercules Merger), Hercules Holdings shall be immediately merged into American Tire, with The Hercules Tire & Rubber Company, a Connecticut corporation (Hercules Tire), as a wholly-owned subsidiary of American Tire.
In connection with the Proposed Hercules Merger, Borrowers desire for Hercules Tire and certain of its subsidiaries to be joined as Loan Parties to the Credit Agreement and the other Loan Documents, with Hercules Tire to be joined as a U.S. Borrower, Hercules Asia Pacific, LLC, a Connecticut limited liability company (Hercules Pacific), to be joined as a U.S. Guarantor, and Hercules Tire Company of Canada Inc., a corporation organized under the laws of Canada (Hercules Canada) to be joined as a Canadian Borrower, and Borrowers have requested that Agent and the requisite Lenders consent to such Proposed Hercules Merger and acknowledge that such Proposed Hercules Merger will constitute a Permitted Acquisition under the Credit Agreement.
Further, in connection with the Proposed Hercules Merger, Borrowers have requested that the Credit Agreement be amended to provide for, among other things, (i) the increase by certain Revolving Lenders of their respective Revolving Commitments resulting in the maximum aggregate amount of all Canadian Revolving Commitments increasing to an aggregate principal amount of $125,000,000 (such
Revolving Lenders whose Revolving Commitments are increasing are collectively referred to here as Increasing Revolving Lenders and individually as an Increasing Revolving Lender), (ii) (A) the increase by certain U.S. Lenders of their existing Tranche B Commitments (or the provision by certain U.S. Lenders of new Tranche B Commitments) resulting in the maximum aggregate amount of all Tranche B Commitments increasing to an aggregate principal amount of up to $80,000,0000 (such Tranche B Lenders whose Tranche B Commitments are newly provided or increasing are collectively referred to here as Increasing Tranche B Lenders and individually as an Increasing Tranche B Lender), (B) the extension of the Tranche B Maturity Date to the date that is 36 months after the effective date hereof, and (C) the increase of the inventory advance rate under the Tranche B Borrowing Base from 7.5% to 10% of Net Orderly Liquidation Value (clauses (ii)(A) (C) are collectively referred to herein as the Tranche B Amendments); and (iii) the addition of a new credit facility under the Credit Agreement pursuant to which certain Canadian Lenders agree to make available to Canadian Borrowers a first-in last-out Tranche C facility in an aggregate principal amount of up to $15,000,0000 (such Canadian Lenders are collectively referred to here as Tranche C Lenders and individually as a Tranche C Lender); and to make certain other changes to the Credit Agreement, in each case as set forth in the modified version of the Credit Agreement attached as Annex 1 hereto and incorporated herein by reference (the Modified Credit Agreement).
At the request of Borrowers, the Increasing Revolving Lenders, the Increasing Tranche B Lenders, and the Tranche C Lenders have agreed to confirm to Borrowers their Commitments to provide the loans described above (collectively, the Modified Commitments) in the amounts set forth in Annex 2 hereto (the Revised Commitment Schedule), subject to the conditions set forth herein, and with the consent of requisite Lenders, to amend the Credit Agreement as set forth in the Modified Credit Agreement attached hereto as Annex 1, subject to the terms and conditions set forth herein.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions. All capitalized terms used in this Amendment (including the preamble and recitals hereto), unless otherwise defined herein, shall have the meaning ascribed to such terms in the Credit Agreement subject to the rules of construction described in Section 1.03 thereof.
2. Consent to Proposed Hercules Merger. Subject to satisfaction of the conditions precedent set forth in Section 10 hereof, Agent and the requisite Lenders hereby consent to the Proposed Hercules Merger, and acknowledge and agree that the Proposed Hercules Merger will constitute a Permitted Acquisition under the Credit Agreement, notwithstanding any failure by Borrowers to comply with any requirements set forth in the definition thereof.
3. Confirmation of Lenders Modified Commitments. Capitalized terms used in this Section, unless otherwise defined in this Amendment, shall have the meaning ascribed to such terms in the Modified Credit Agreement.
(a) Each Increasing Revolving Lender hereby confirms its Commitment to make Revolving Loans and to acquire participations in Protective Advances, Letters of Credit and Swingline Loans in the amount of each such Revolving Lenders increased Revolving Commitments as reflected on the Revised Commitment Schedule, in each case upon satisfaction of the conditions precedent set forth in Section 10 hereof. The aggregate amount of the Canadian Revolving Lenders Canadian Revolving Commitments as of the Second Amendment Effective Date (as defined in Section 10 hereof) is $125,000,000.
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(b) Each Tranche B Lender hereby confirms its Commitment to make Tranche B Loans to U.S. Borrowers in the amount of each such Tranche B Lenders increased Tranche B Commitment set forth on the Revised Commitment Schedule, pursuant to the amended terms for the Tranche B Loans and Tranche B Commitments set forth in the Modified Credit Agreement, in each case upon satisfaction of the conditions precedent set forth in Section 10 hereof. The aggregate amount of all Tranche B Lenders Tranche B Commitments as of the Second Amendment Effective Date is $80,000,000.
(c) Each Tranche C Lender hereby confirms its Commitment to make Tranche C Loans to Canadian Borrowers in the amount of each such Tranche C Lenders Tranche C Commitment set forth on the Revised Commitment Schedule, in each case upon satisfaction of the conditions precedent set forth in Section 10 hereof. The aggregate amount of all Tranche C Lenders Tranche C Commitments as of the Second Amendment Effective Date is $15,000,000.
(d) (i) No Increasing Revolving Lender shall be required to make Canadian Revolving Loans or acquire participations in Canadian Protective Advances, Canadian Letters of Credit and Canadian Swingline Loans in excess of its Canadian Revolving Commitment under the Credit Agreement as in effect prior to the Second Amendment Effective Date, (ii) no Increasing Tranche B Lender shall be required to make any Tranche B Loans in excess of its Tranche B Commitment under the Credit Agreement as in effect prior to the Second Amendment Effective Date or enter into any of the other Tranche B Amendments, and (iii) no Tranche C Lender shall be required to fund any Tranche C Loans, in each case, unless and until the conditions precedent set forth in Section 10 hereof have been satisfied and the Second Amendment Effective Date has occurred.
(e) Until the Second Amendment Effective Date, none of the Increasing Revolving Lenders increased Canadian Revolving Commitments, the Increasing Tranche B Lenders increased Tranche B Commitments, nor the Tranche C Lenders Tranche C Commitments shall be included in the determination of the calculation of Average Revolving Loan Utilization and Canadian Excess Availability under the Modified Credit Agreement.
4. Amendments to Credit Agreement.
(a) The Credit Agreement is, effective as of the Second Amendment Effective Date, hereby amended to delete the stricken text (indicated
textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example:
double-underlined text) as set forth in the pages of the Credit Agreement attached as Annex 1 hereto, except that any Schedule or Exhibit to the Credit Agreement not amended pursuant
to the terms of this Amendment or otherwise included as part of said Annex 1 shall remain in effect without any amendment or other modification thereto.
(b) The Credit Agreement is, effective as of the Second Amendment Effective Date, hereby further amended by (i) replacing the Commitment Schedule attached thereto with the Revised Commitment Schedule, (ii) supplementing each of the other Schedules to the Credit Agreement with the disclosure set forth on the supplements to Schedules attached to this Amendment, (iii) replacing Exhibit A and Exhibit F-1 attached thereto with the attached Exhibit A and Exhibit F-1 and (iv) adding as Exhibit G-4 thereto the attached Exhibit G-4.
(c) Upon or prior to the occurrence of the Second Amendment Effective Date, Borrowers and Agent will update the form of Borrowing Base Certificate attached to the Credit Agreement as Exhibit B thereto to reflect the Tranche C Loans.
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5. Ratification and Reaffirmation. Each Loan Party agrees that (i) all of its obligations, liabilities and indebtedness under each Loan Document, including guarantee obligations, shall remain in full force and effect on a continuous basis after giving effect to this Amendment and the Modified Credit Agreement; (ii) all of the Liens and security interests created and arising under such Loan Documents remain in full force and effect on a continuous basis, and the perfected status and priority of each such Lien and security interest (subject to the Intercreditor Agreement) continues in full force and effect on a continuous basis, unimpaired, uninterrupted and undischarged, after giving effect to this Amendment as collateral security for its obligations, liabilities and indebtedness under the Modified Credit Agreement and under its guarantees in the Loan Documents; and (iii) all Obligations under the Loan Documents are payable or guaranteed, as applicable, by each of the Loan Parties in accordance with the Modified Credit Agreement and the other Loan Documents.
6. Acknowledgments and Stipulations. Each Loan Party acknowledges and stipulates that the Credit Agreement and the other Loan Documents executed by such Loan Party are legal, valid and binding obligations of such Loan Party that are enforceable against such Loan Party in accordance with the terms thereof, subject to applicable bankruptcy, insolvency or similar laws affecting creditors rights generally and to general principles of equity.
7. Representations and Warranties. Each Loan Party represents and warrants to Agent and each Lender, to induce Agent and such Lenders to enter into this Amendment, that no Default or Event of Default exists on the date hereof and after giving effect hereto; the execution, delivery and performance of this Amendment are within each Loan Partys organizational powers and have been duly authorized by all necessary organizational and, if required, equityholder action of such Loan Party and this Amendment has been duly executed and delivered by such Loan Party. As of the Second Amendment Effective Date, all of the representations and warranties made by Loan Parties in the Credit Agreement and any other Loan Document are true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects), except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of such earlier date).
8. Reference to Credit Agreement. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to this Agreement, hereunder, or words of like import shall mean and be a reference to the Credit Agreement, as amended by this Amendment.
9. Loan Document. This Amendment shall be deemed to be a Loan Document.
10. Conditions Precedent to Second Amendment Effective Date. The effectiveness of (a) the consent to the Proposed Hercules Merger described in Section 2 hereof, (b) the modified Commitments of the Increasing Revolving Lenders, the Increasing Tranche B Lenders, and the Tranche C Lenders described in Section 3 hereof, (c) the Tranche B Amendments and the other amendments to the Credit Agreement contained in Section 4 hereof, and (d) the ability of (1) the Canadian Borrowers to borrow under the Canadian Revolving Commitments in excess of the Canadian Revolving Commitments available to the Canadian Borrowers immediately prior to the Second Amendment Effective Date (2) the U.S. Borrowers to borrow under the Tranche B Commitments in excess of the Tranche B Commitments available to the U.S. Borrowers immediately prior to the Second Amendment Effective Date and (3) the ability of the Canadian Borrowers to borrow Tranche C Loans (and, for the avoidance of doubt, the inclusion of such amounts in the calculation of Average Revolving Loan Utilization or Canadian Excess Availability as described in Section 3(e) above) are each subject to the satisfaction of each of the following conditions precedent on or before February 28, 2014 or such later date as may be reasonably acceptable to
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Agent, the Increasing Revolving Lenders, the Increasing Tranche B Lenders, and the Tranche C Lenders, in form and substance reasonably satisfactory to Agent, unless satisfaction thereof is specifically waived in writing by Agent (the date on which Agent has confirmed that all such conditions precedent are satisfied is hereinafter referred to as the Second Amendment Effective Date):
(a) Agent shall have received duly executed counterparts of this Amendment by all Loan Parties and the Super Majority Lenders, each Increasing Revolving Lender, each Increasing Tranche B Lender, the Tranche B Period Super Majority Lenders, and each Tranche C Lender.
(b) There shall exist no Default or Event of Default on the Second Amendment Effective Date both before and after giving effect to this Amendment under the Modified Credit Agreement.
(c) Agent shall have received duly executed promissory notes or amended and restated promissory notes as requested by any Increasing Revolving Lender, Increasing Tranche B Lender and Tranche C Lender, which shall be in substantially the form of Exhibits G-1, G-3 or G-4, as applicable, to the Modified Credit Agreement.
(d) Agent shall have received duly executed counterparts of each of the fee letters entered into by Borrowers, Agent and the other applicable parties thereto.
(e) Agent shall have received a complete and correct copy of the Hercules Merger Agreement (as defined in the Modified Credit Agreement) and all schedules and exhibits thereto.
(f) On or prior to the consummation of the Proposed Hercules Merger, American Tire shall have received the proceeds of equity contributions to Accelerate Parent Corp. from affiliates of TPG Accelerate V, L.P. and TPG Accelerate VI Capital, L.P. and certain co-investors, in a minimum amount of $35,000,000 and maximum amount of $50,000,000 (the Equity Contribution) and shall have provided Agent satisfactory evidence thereof.
(g) On or prior to the consummation of the Proposed Hercules Merger, American Tire and its U.S. Subsidiaries shall have received the gross proceeds in a minimum principal amount of $225,000,000 from the issuance of additional unsecured subordinated indebtedness in the form of senior subordinated notes due 2019 (the Supplemental Senior Subordinated Notes).
(h) Agent shall have received duly executed counterparts of the following documents:
(i) Joinder Agreements in the form of Exhibit D to the Credit Agreement and Exhibit J to the U.S. Security Agreement (or, in the case of Hercules Canada, Exhibit H to the Canadian Security Agreement) by each of Hercules Tire, Hercules Pacific, and Hercules Canada (collectively, the Hercules Loan Parties), together with any applicable schedules thereto and other deliverables required pursuant to Section 5.11 of the Credit Agreement and 7.11 of the applicable Security Agreement with respect to such Hercules Loan Parties;
(ii) (A) a closing certificate of each of the Hercules Loan Parties certifying to, among other things, the certified articles of incorporation or organization of such Hercules Loan Party and the bylaws or operating agreement of such Hercules Loan Party and the consent of the board of directors of each Hercules Loan Party to the respective Joinder Agreements described in clause (i) above and (B) evidence of consent of the board of directors of each applicable Loan Party to the increase in the Canadian Revolving Commitments and the Tranche B Commitments, and the provision of the Tranche C Commitments; and
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(iii) a favorable written opinion of Loan Parties counsel in the jurisdictions required by Agent addressed to Agent and Lenders, which shall be substantially similar to the opinion delivered on the Effective Date, opining that, among other things, this Amendment and the Modified Credit Agreement are permitted under and do not violate the Senior Secured Note Documents, the Senior Subordinated Note Documents, the Intercreditor Agreement, the definitive documentation with respect to the Supplemental Senior Subordinated Notes or any other material agreement of a Loan Party.
(i) The Agent (or its bailee), or such other Person as may be required under the Intercreditor Agreement shall have received (i) the certificates representing the shares of Equity Interests of the Hercules Loan Parties required to be pledged pursuant to the applicable Security Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) required to be pledged to the Agent (or its bailee) pursuant to the applicable Security Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.
(j) The Agent shall have received with respect to each of the Hercules Loan Parties substantially simultaneously with the Second Amendment Effective Date evidence of Agents perfected Lien on such Persons assets, prior in right to any other Person (other than with respect to Liens expressly permitted pursuant to the Modified Credit Agreement).
(k) Agent shall have received an updated Borrowing Base Certificate giving pro forma effect to the modified Canadian Commitments and Tranche B Loans and the Tranche C Loans, and, after giving effect to the increase in the Canadian Revolving Commitments hereunder (and assuming the Proposed Hercules Merger has occurred, and after giving effect to the Hercules Initial Borrowing Base (as defined in the Modified Credit Agreement), Excess Availability is not less than $250,000,000. For the avoidance of doubt, Excess Availability shall not include any availability under the Tranche B Borrowing Base or Tranche C Borrowing Base.
(l) Each Lender shall have received in immediately available funds the fees payable to such Lender on the Second Amendment Effective Date (including the fees described in the fee letters and in Section 12 below), and Borrowers shall have paid to Agent the fees and expenses of Agent and its legal counsel in connection with this Amendment to the extent invoices for such fees and expenses have been presented to the Company at least two (2) Business Days prior to the Second Amendment Effective Date (including the reasonable and documented expenses of legal counsel).
(m) Agent shall have received (i) the unqualified, audited consolidated balance sheets of Hercules Holdings and its consolidated subsidiaries for each of the fiscal years ending 2011, 2012, and 2013, and the related consolidated statements of income, changes in stockholders equity, and of cash flows of Hercules Holdings and its consolidated subsidiaries for each such fiscal year, together with the notes thereto, and (ii) the unaudited consolidated balance sheets and related consolidated statements of income, changes in stockholders equity, and cash flow statement of Hercules Holdings and its consolidated subsidiaries for the most recently ended fiscal month, and, in each case, Agent shall have determined that such audited financial statements are consistent with the Financial Statements delivered pursuant to (and as defined in) the Hercules Merger Agreement, and are otherwise in form and substance satisfactory to Agent.
(n) The Proposed Hercules Merger shall have been consummated substantially simultaneously with the Second Amendment Effective Date in accordance with the terms of the Hercules Merger Agreement in all material respects and without giving effect to any modifications, amendments, consents or waivers that are material and adverse to the Lenders or the Agent as reasonably determined by
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the Agent, without the prior consent of the Agent (such consent not to be unreasonably withheld, delayed or conditioned). The merger of Hercules Holdings with and into American Tire, with American Tire as the surviving legal entity of such merger shall occur immediately following consummation of the Hercules Merger.
11. Additional Covenant Regarding Equity Contribution. To the extent that the aggregate amount of the Equity Contribution made to American Tire on the Second Amendment Effective Date is less than $50,000,000, the Borrowers shall cause affiliates of TPG Accelerate V, L.P. and TPG Accelerate VI Capital, L.P. or certain co-investors to make an additional equity contributions to American Tire in an aggregate amount equal to the difference between the actual amount of the Equity Contribution made on the Second Amendment Effective Date and $50,000,000, and shall provide Agent satisfactory evidence thereof on or before February 21, 2014.
12. Commitment Increase Closing Fee; Expenses of Agent. The Borrowers agree to pay a commitment increase closing fee to the Agent, in an amount equal to 0.30% of the aggregate increase in the total Commitments pursuant to this Amendment and the Modified Credit Agreement, to be allocated among the Increasing Revolving Lenders, the Increasing Tranche B Lenders and the Tranche C Lenders based on the aggregate increase in each such Lenders total Commitments. Such commitment increase closing fee shall be earned, due and payable in full on the Second Amendment Effective Date. In addition, subject to the limitations set forth in Section 10 of the Credit Agreement, the Borrowers agree to pay, on demand, all reasonable out-of-pocket costs and expenses incurred by Agent in connection with the preparation, negotiation and execution of this Amendment, the Modified Credit Agreement and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of Agents outside legal counsel to the extent of its obligations under Section 9.03 of the Credit Agreement.
13. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York.
14. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
15. No Novation, etc. Except as otherwise expressly provided in this Amendment, nothing herein shall be deemed to amend or modify any provision of the Credit Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Credit Agreement as herein modified shall continue in full force and effect.
16. Counterparts; Telecopied Signatures. This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any manually executed signature page to this Amendment delivered by a party by facsimile or other electronic transmission shall be deemed to be an original signature hereto.
17. Further Assurances. The parties hereto agree to take such further actions as Agent or Borrowers shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein.
18. Section Titles. Section titles and references used in this Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto.
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19. Waiver of Jury Trial. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this Amendment.
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signatures begin on following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal in and delivered by their respective duly authorized officers as of the date first written above.
BORROWERS: | ||
AMERICAN TIRE DISTRIBUTORS, INC., as a U.S. Borrower | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Executive Vice President and General Counsel | |
AM-PAC TIRE DIST. INC., as a U.S. Borrower | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Vice President and Secretary | |
TRICAN TIRE DISTRIBUTORS INC. / DISTRIBUTEURS DE PNEUS TRICAN INC., as a Canadian Borrower | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Vice President and Secretary |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
GUARANTORS: | ||
AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC. | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Executive Vice President and General Counsel | |
TIRE WHOLESALERS, INC. | ||
By: | /s/ J. Michael Gaither | |
Name: | J. Michael Gaither | |
Title: | Vice President and Secretary |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
AGENT AND LENDERS: | ||
BANK OF AMERICA, N.A., as Agent, a U.S. Revolving Lender and a Tranche B Lender | ||
By: | /s/ Seth Benefield | |
Name: | Seth Benefield | |
Title: | Senior Vice President | |
BANK OF AMERICA, N.A., (acting through its Canada branch), as a Canadian Revolving Lender and a Tranche C Lender | ||
By: | /s/ Medina Sales De Andrade | |
Name: | Medina Sales De Andrade | |
Title: | Vice President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
WELLS FARGO CAPITAL FINANCE, LLC, as a U.S. Revolving Lender and a Tranche B Lender | ||
By: | /s/ Michael P. Henry | |
Name: | Michael P. Henry | |
Title: | Duly Authorized Signatory |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
WELLS FARGO CAPITAL FINANCE CORPORATION CANADA, as a Canadian Revolving Lender and a Tranche C Lender | ||
By: | /s/ Domenic Cosentino | |
Name: | Domenic Cosentino | |
Title: | Vice President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
BARCLAYS BANK PLC, as a U.S. Revolving Lender and a Canadian Revolving Lender | ||
By: | /s/ Noam Azachi | |
Name: | Noam Azachi | |
Title: | Vice President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
ROYAL BANK OF CANADA, as a U.S. Revolving Lender | ||
By: | /s/ Ben Thomas | |
Name: | Ben Thomas | |
Title: | Authorized Signatory |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
ROYAL BANK OF CANADA, as a Canadian Revolving Lender | ||
By: | /s/ Ben Thomas | |
Name: | Ben Thomas | |
Title: | Authorized Signatory |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
UBS AG, STAMFORD BRANCH, as a U.S. Revolving Lender and a Canadian Revolving Lender | ||
By: | /s/ Lana Gifas | |
Name: | Lana Gifas | |
Title: | Director Banking Products Services, US | |
By: | /s/ Jennifer Anderson | |
Name: | Jennifer Anderson | |
Title: | Associate Director Banking Product Services, US |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
RBS BUSINESS CAPITAL, a division of RBS Asset Finance, Inc., as a U.S. Revolving Lender, a Canadian Revolving Lender, a Tranche B Lender, and a Tranche C Lender | ||
By: | /s/ Don Cmar | |
Name: | Don Cmar | |
Title: | Vice President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
SUNTRUST BANK, as a U.S. Revolving Lender, a Canadian Revolving Lender, a Tranche B Lender, and a Tranche C Lender | ||
By: | /s/ Stephen D. Motts | |
Name: | Stephen D Motts | |
Title: | Director |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
TD BANK, N.A., as a U.S. Revolving Lender and a Tranche B Lender | ||
By: | /s/ Stephen A. Caffrey | |
Name: | Stephen A. Caffrey | |
Title: | Vice President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
THE TORONTO-DOMINION BANK, as a Canadian Revolving Lender and a Tranche C Lender | ||||
By: | /s/ Michael Ho |
/s/ Darcy Mack | ||
Name: | Michael Ho |
Darcy Mack | ||
Title: | Analyst |
Vice-President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
U.S. BANK NATIONAL ASSOCIATION, as a U.S. Revolving Lender and a Tranche B Lender | ||
By: | /s/ Scot Turner | |
Name: | Scot Turner | |
Title: | Senior Vice President |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
U.S. BANK NATIONAL ASSOCIATION, Canada branch, as a Canadian Revolving Lender and a Tranche C Lender | ||
By: | /s/ Joseph Rauhala | |
Name: | Joseph Rauhala | |
Title: | Principal Officer |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
REGIONS BANK, as a U.S. Revolving Lender and a Tranche B Lender | ||
By: | /s/ Tom Buda | |
Name: | Tom Buda | |
Title: | VP |
Second Amendment to Sixth Amended and
Restated Credit Agreement (American Tire)
Annex 1
Modified Credit Agreement
(See attached.)
Annex 2
REVISED COMMITMENT SCHEDULE
LENDER |
TOTAL U.S. REVOLVING COMMITMENTS |
TOTAL CANADIAN REVOLVING COMMITMENTS |
TOTAL TRANCHE B COMMITMENTS |
TOTAL TRANCHE C COMMITMENTS |
||||||||||||
Bank of America, N.A. |
$ | 278,000,000.00 | $ | 0 | $ | 45,000,000.00 | $ | 0 | ||||||||
Bank of America, N.A. (acting through its Canada branch) |
$ | 0 | $ | 42,000,000.00 | $ | 0 | $ | 7,000,000.00 | ||||||||
Wells Fargo Capital Finance, LLC |
$ | 190,000,000.00 | $ | 0 | $ | 13,000,000.00 | $ | 0 | ||||||||
Wells Fargo Capital Finance Corporation Canada |
$ | 0 | $ | 30,000,000.00 | $ | 0 | $ | 3,500,000.00 | ||||||||
SunTrust Bank |
$ | 120,000,000.00 | $ | 19,000,000.00 | $ | 7,000,000.00 | $ | 2,000,000.00 | ||||||||
UBS AG, Stamford Branch |
$ | 60,000,000.00 | $ | 10,000,000.00 | $ | 0 | $ | 0 | ||||||||
Regions Bank |
$ | 50,000,000.00 | $ | 0 | $ | 6,000,000.00 | $ | 0 | ||||||||
U.S. Bank National Association |
$ | 37,000,000.00 | $ | 0 | $ | 3,000,000.00 | $ | 0 | ||||||||
U.S. Bank National Association, Canada branch |
$ | 0 | $ | 6,000,000.00 | $ | 0 | $ | 1,000,000.00 | ||||||||
RBS Business Capital |
$ | 35,000,000.00 | $ | 3,000,000.00 | $ | 3,000,000.00 | $ | 1,000,000.00 | ||||||||
TD Bank, N.A. |
$ | 33,000,000.00 | $ | 0 | $ | 3,000,000.00 | $ | 0 | ||||||||
The Toronto-Dominion Bank |
$ | 0 | $ | 5,000,000.00 | $ | 0 | $ | 500,000.00 | ||||||||
Barclays Bank PLC |
$ | 28,000,000.00 | $ | 5,000,000.00 | $ | 0 | $ | 0 | ||||||||
Royal Bank of Canada |
$ | 19,000,000.00 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Royal Bank of Canada |
$ | 0 | $ | 5,000,000.00 | $ | 0 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
TOTAL: |
$ | 850,000,000.00 | $ | 125,000,000.00 | $ | 80,000,000.00 | $ | 15,000,000.00 |
SUPPLEMENTS TO EXISTING SCHEDULES TO CREDIT AGREEMENT
See attached
2
EXHIBIT A TO SECOND AMENDMENT
[FORM OF]
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the Assignment and Assumption) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the Assignor) and [Insert name of Assignee] (the Assignee). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as further amended, supplemented or otherwise modified from time to time, the Credit Agreement), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Agent as contemplated below (i) all of the Assignors rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the Assigned Interest). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
Assignor: |
|
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Assignee: |
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[and is an Affiliate/Approved Fund of [identify Lender]1] | ||||
Borrower(s) |
|
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Agent: | Bank of America, N.A., as the administrative agent and the collateral agent under the Credit Agreement. | |||
Credit Agreement: | The Sixth Amended and Restated Credit Agreement dated as of November 30, 2012, among American Tire Distributors, Inc., a Delaware corporation (the Company), American Tire Distributors Holdings, Inc., a Delaware corporation (Holdings), Trican Tire Distributors Inc. / |
1 | Select as applicable. |
3
Distributeurs de Pneus Trican Inc., a corporation incorporated under the laws of Canada, each subsidiary of the Company from time to time party thereto, the Lenders parties thereto, and Bank of America, N.A., as administrative agent and collateral agent for the Lenders thereunder (the Agent). |
Assigned Interest2:
Aggregate Amount of [Canadian][U.S.] |
Amount of [Canadian][U.S.] Commitment/Loans Assigned |
CUSIP | ||||
$ | $ | |||||
$ | $ | |||||
$ | $ |
Each notice or other communication hereunder shall be in writing, shall be sent by messenger, by telecopy or facsimile transmission, or by first-class mail, shall be deemed given when sent and shall be sent as follows:
(a) | If to Assignee, to the following address (or to such other address as Assignee may designate from time to time): | |||||
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(b) | If to Assignor, to the following address (or to such other address as Assignor may designate from time to time): | |||||
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Payments hereunder shall be made by wire transfer of immediately available [Canadian][United States] Dollars as follows:
If to Assignee, to the following account (or to such other account as Assignee may designate from time to time):
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ABA No. |
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Account No. |
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Reference: |
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2 | Incorporate and specify any Tranche B Commitments or Tranche C Commitments and Loans Assigned, to the extent applicable. |
4
If to Assignor, to the following account (or to such other account as Assignor may designate from time to time):
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ABA No. |
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Account No. |
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Reference: |
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|||||
Effective Date: , 20 [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR | ||||
[NAME OF ASSIGNOR] | ||||
By: |
| |||
Name: |
| |||
Title: |
| |||
ASSIGNEE | ||||
[NAME OF ASSIGNEE] | ||||
By: |
| |||
Name: |
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Title: |
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5
Consented to and Accepted: | ||
BANK OF AMERICA, N.A. as Agent | ||
By: |
| |
Name: |
| |
Title: |
| |
[APPLICABLE ISSUING BANK],3 as Issuing Bank | ||
By: |
| |
Name: |
| |
Title: |
| |
[APPLICABLE ISSUING BANK] as Issuing Bank | ||
By: |
| |
Name: |
| |
Title: |
| |
[Consented to:]4 | ||
[AMERICAN TIRE DISTRIBUTORS, INC.] | ||
By: |
| |
Name: |
| |
Title: |
|
3 | Pursuant to Section 9.04, each Applicable Issuing Bank is required to consent to an assignment under the Credit Agreement. |
4 | To be added only if the consent of the Borrower is required by the terms of the Credit Agreement. |
6
Annex 1 to Assignment and Assumption
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
Representations and Warranties.
Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) its [Canadian][U.S.] Commitment, and the outstanding balances of its [Canadian][U.S.] Revolving Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth herein, and (iv) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Company, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Company, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
Assignee. The Assignee (a) represents and warrants that (i) it is an Eligible Assignee and has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Sections 3.04(a) and 3.04(b) or delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (ii) it appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent, by the terms thereof, together with such powers as are reasonably incidental thereto, and (iii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and
Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be construed in accordance with and governed by the laws of the State of New York.
2
EXHIBIT F-1 TO SECOND AMENDMENT
[FORM OF]
BORROWING REQUEST
Bank of America, N.A.,
as Agent for the Lenders referred to below,
[ ]
Attention: []
[Date]5
Ladies and Gentlemen:
Reference is made to the Sixth Amended and Restated Credit Agreement dated as of November 30, 2012, among American Tire Distributors, Inc., a Delaware corporation (the Company), American Tire Distributors Holdings, Inc., a Delaware corporation (Holdings), Am-Pac Tire Dist. Inc., a California corporation, Trican Tire Distributors Inc. / Distributeurs de Pneus Trican Inc., a corporation incorporated under the laws of Canada, each subsidiary of the Company from time to time party thereto, the Lenders parties thereto, and Bank of America, N.A., as administrative agent and collateral agent for the Lenders thereunder (the Agent) (as amended, supplemented or otherwise modified from time to time, the Credit Agreement). Terms defined in the Credit Agreement are used herein with the same meanings.
The undersigned Borrower Agent hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:
(A) | Date of Borrowing | |||
(which shall be a Business Day) |
| |||
(B) | Principal Amount of Borrowing6 |
| ||
(C) | Type of Borrowing7 |
|
5 | Must be notified in writing (a) in the case of an Interest Period Loan other than a Canadian BA Rate Loan, not later than 12:00 noon, New York City time, two (2) Business Days before the date of the proposed Borrowing, (b) in the case of a Canadian BA Rate Loan, not later than 12:00 noon, Toronto, Ontario time, three (3) Business Days before the date of the proposed Borrowing, or (c) in the case of a Floating Rate Loan (including any such notice of a Floating Rate Loan to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) of the Credit Agreement), not later than 12:00 noon, New York City time, or with respect to Canadian Prime Rate Loans or Canadian Base Rate Loans, 12:00 noon, Toronto, Ontario time, on the date of the proposed Borrowing. |
6 | Not less than an aggregate principal amount as indicated in Section 2.02(c) and in an integral multiple as indicated therein. |
7 | Specify a Floating Rate Loan or an Interest Period Loan (and if not specified, such Borrowing shall be deemed a request for (A) ABR Loans if requested for or on behalf of a U.S. Borrower, and (B) Canadian Prime Rate Loans if requested for and on behalf of a Canadian Borrower, unless the request specifies such Loans are to be denominated in Dollars in which case it shall be deemed a request for Canadian Base Rate Loans). To the extent applicable, specify if Borrowing requested is for a Tranche B Loan or a Tranche C Loan. |
(D) | Currency of Borrowing8 |
| ||
(E) | Interest Period9 |
| ||
(F) | Account Number and Location |
| ||
(G) | Identity of Borrower for Borrowing |
|
The undersigned hereby certifies that s/he is a Responsible Officer of the Borrower Agent and hereby confirms that, after giving effect to the Borrowing(s) requested herein, Borrowers are in compliance with the permitted indebtedness provisions of Section 4.09(b)(i) of each of the Senior Secured Notes Indenture, the Senior Subordinated Notes Indenture and any other indenture governing the Supplemental Senior Subordinated Notes, in each case as of the date hereof.
[AMERICAN TIRE DISTRIBUTORS, INC.] | ||
By: |
| |
Name: |
| |
Title: |
|
8 | If not specified, such Borrowing shall be deemed a request for (A) ABR Loans in Dollars if on behalf of a U.S. Borrower, and (B) Canadian Prime Rate Loans in Canadian Dollars if on behalf of a Canadian Borrower. |
9 | The initial Interest Period applicable to an Interest Period Loan shall be subject to the definition of Interest Period, and, if not specified, the Interest Period requested shall be deemed a request for an Interest Period Loan with an Interest Period of one months duration. |
EXHIBIT G-4
[FORM OF]
TRANCHE C NOTE
$[ ] | New York, New York | |
[], 20[] |
FOR VALUE RECEIVED, the undersigned, TRICAN TIRE DISTRIBUTORS INC. / DISTRIBUTEURS DE PNEUS TRICAN INC., a corporation organized under the laws of Canada, and and certain Canadian Subsidiaries that are borrowers pursuant to Section 5.11(a) of the Credit Agreement (collectively, the Canadian Borrowers), hereby unconditionally and jointly and severally promise to pay to [ ] (the Tranche C Lender) or its registered assigns, at the office of Bank of America, N.A. (the Agent) at 300 Galleria Parkway, Suite 800, Atlanta, Georgia 30339, on the dates and in the amounts set forth in the Sixth Amended and Restated Credit Agreement dated as of November 30, 2012 (as the same may be amended, supplemented or otherwise modified from time to time, the Credit Agreement), among American Tire Distributors, Inc., a Delaware corporation (the Company), American Tire Distributors Holdings, Inc., a Delaware corporation (Holdings), Trican Tire Distributors Inc. / Distributeurs de Pneus Trican Inc., a corporation incorporated under the laws of Canada, each subsidiary of the Company from time to time party thereto, the Lenders parties thereto, and Bank of America, N.A., as administrative agent and collateral agent for the Lenders thereunder (the Agent), in lawful money of the United States of America in immediately available funds, the aggregate unpaid principal amount of all Tranche C Loans made by the Tranche C Lender to the Canadian Borrowers pursuant to the Credit Agreement and unconditionally and jointly and severally promise to pay interest from the date of such Tranche C Loans on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on the dates provided in the Credit Agreement. Terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement.
Principal of and interest on this promissory note from time to time outstanding shall be due and payable as provided in the Credit Agreement. This promissory note is issued pursuant to and evidences Tranche C Loans under the Credit Agreement, to which reference is made for a statement of the rights and obligations of the Tranche C Lender and the duties and obligations of the Canadian Borrowers. The Credit Agreement contains provisions for acceleration of the maturity of this promissory note upon the happening of certain stated events, and for the borrowing, prepayment and reborrowing of amounts upon specified terms and conditions.
The holder of this promissory note is hereby authorized by the Canadian Borrowers to record on a schedule annexed to this promissory note (or on a supplemental schedule) the amounts owing with respect to Tranche C Loans, and the payment thereof. Failure to make any notation, however, shall not affect the rights of the holder of this promissory note or any obligations of the Canadian Borrowers hereunder or under any other Loan Documents.
Time is of the essence of this promissory note. Each Canadian Borrower and all endorsers, sureties and guarantors of this promissory note hereby severally waive demand, presentment for payment, protest, notice of protest, notice of intention to accelerate the maturity of this promissory note, diligence in collecting, the bringing of any suit against any party, and any notice of or defense on account of any extensions, renewals, partial payments, or changes in any manner of or in this promissory note or in any of its terms, provisions and covenants, or any releases or substitutions of any security, or any delay, indulgence or other act of any trustee or any holder hereof, whether before or after maturity. The Canadian Borrowers jointly and severally agree to pay, and to save the holder of this promissory note harmless against, any liability for the payment of all costs and expenses (including without limitation reasonable attorneys fees) if this promissory note is collected by or through an attorney-at-law.
In no contingency or event whatsoever shall the amount paid or agreed to be paid to the holder of this promissory note for the use, forbearance or detention of money advanced hereunder exceed the highest lawful rate permitted under applicable law. If any such excess amount is inadvertently paid by the Canadian Borrowers or inadvertently received by the holder of this promissory note, such excess shall be returned to the Canadian Borrowers or credited as a payment of principal, in accordance with the Credit Agreement. It is the intent hereof that the Canadian Borrowers not pay or contract to pay, and that holder of this promissory note not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Canadian Borrowers under applicable law.
THIS PROMISSORY NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
TRICAN TIRE DISTRIBUTORS INC. / DISTRIBUTEURS DE PNEUS TRICAN INC., as a Canadian Borrower | ||
By: |
| |
Name: |
| |
Title: |
| |
[ ], as a Canadian Borrower | ||
By: |
| |
Name: |
| |
Title: |
|
Exhibit 10.2
EXECUTION VERSION
Published Deal CUSIP Number: 03021BAA2
$300,000,000
CREDIT AGREEMENT
Dated as of March 28, 2014
among
AMERICAN TIRE DISTRIBUTORS, INC.,
as Borrower,
AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC.,
as Holdings,
each GUARANTOR from time to time party hereto,
BANK OF AMERICA, N.A.,
as Administrative Agent,
and
THE OTHER LENDERS PARTY HERETO
BANK OF AMERICA, N.A.,
as Sole Lead Arranger and Sole Bookrunner
Table of Contents
Page | ||||||
ARTICLE I | ||||||
Definitions and Accounting Terms | ||||||
SECTION 1.01 |
Defined Terms | 1 | ||||
SECTION 1.02 |
Other Interpretive Provisions | 62 | ||||
SECTION 1.03 |
Accounting Terms | 63 | ||||
SECTION 1.04 |
Rounding | 63 | ||||
SECTION 1.05 |
References to Agreements, Laws, Etc. | 63 | ||||
SECTION 1.06 |
Times of Day and Timing of Payment and Performance | 63 | ||||
SECTION 1.07 |
Pro Forma and Other Calculations | 63 | ||||
SECTION 1.08 |
Available Amount Transaction | 65 | ||||
SECTION 1.09 |
Currency Generally | 65 | ||||
SECTION 1.10 |
Limited Condition Acquisitions | 65 | ||||
ARTICLE II | ||||||
The Commitments and Borrowings | ||||||
SECTION 2.01 |
Term Borrowings | 66 | ||||
SECTION 2.02 |
Borrowings, Conversions and Continuations of Loans | 66 | ||||
SECTION 2.03 |
Prepayments | 68 | ||||
SECTION 2.04 |
Termination of Commitments | 77 | ||||
SECTION 2.05 |
Repayment of Loans | 77 | ||||
SECTION 2.06 |
Interest | 77 | ||||
SECTION 2.07 |
Fees | 78 | ||||
SECTION 2.08 |
Computation of Interest and Fees | 78 | ||||
SECTION 2.09 |
Evidence of Indebtedness | 78 | ||||
SECTION 2.10 |
Payments Generally | 79 | ||||
SECTION 2.11 |
Sharing of Payments | 80 | ||||
SECTION 2.12 |
Incremental Facilities | 81 | ||||
SECTION 2.13 |
Refinancing Amendments | 83 | ||||
SECTION 2.14 |
Extensions of Loans | 84 | ||||
SECTION 2.15 |
Prepayment Premium | 86 | ||||
ARTICLE III | ||||||
Taxes, Increased Costs Protection and Illegality | ||||||
SECTION 3.01 |
Taxes | 86 | ||||
SECTION 3.02 |
Illegality | 89 | ||||
SECTION 3.03 |
Inability to Determine Rates | 89 | ||||
SECTION 3.04 |
Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans | 89 | ||||
SECTION 3.05 |
Funding Losses | 91 | ||||
SECTION 3.06 |
Matters Applicable to All Requests for Compensation | 91 | ||||
SECTION 3.07 |
Replacement of Lenders under Certain Circumstances | 92 | ||||
SECTION 3.08 |
Survival | 93 |
-i-
ARTICLE IV | ||||||
Conditions Precedent to Credit Extension | ||||||
SECTION 4.01 |
Conditions to Borrowing | 93 | ||||
ARTICLE V | ||||||
Representations and Warranties | ||||||
SECTION 5.01 |
Existence, Qualification and Power; Compliance with Laws | 95 | ||||
SECTION 5.02 |
Authorization; Enforceability | 95 | ||||
SECTION 5.03 |
Governmental Authorization; No Conflict | 96 | ||||
SECTION 5.04 |
Insurance | 96 | ||||
SECTION 5.05 |
Financial Statements; No Material Adverse Effect | 96 | ||||
SECTION 5.06 |
Litigation | 96 | ||||
SECTION 5.07 |
Labor Matters | 97 | ||||
SECTION 5.08 |
Ownership of Property; Liens | 97 | ||||
SECTION 5.09 |
Environmental Matters | 97 | ||||
SECTION 5.10 |
Taxes | 97 | ||||
SECTION 5.11 |
ERISA Compliance | 97 | ||||
SECTION 5.12 |
Subsidiaries | 97 | ||||
SECTION 5.13 |
Federal Reserve Regulations; Investment Company Act | 98 | ||||
SECTION 5.14 |
Disclosure | 98 | ||||
SECTION 5.15 |
Intellectual Property; Licenses, Etc. | 98 | ||||
SECTION 5.16 |
Solvency | 98 | ||||
SECTION 5.17 |
Subordination of Junior Financing | 99 | ||||
SECTION 5.18 |
USA Patriot Act and OFAC | 99 | ||||
SECTION 5.19 |
Collateral Documents | 99 | ||||
ARTICLE VI | ||||||
Affirmative Covenants | ||||||
SECTION 6.01 |
Financial Statements | 99 | ||||
SECTION 6.02 |
Certificates; Other Information | 100 | ||||
SECTION 6.03 |
Notices | 102 | ||||
SECTION 6.04 |
Payment of Obligations | 102 | ||||
SECTION 6.05 |
Preservation of Existence, Etc. | 102 | ||||
SECTION 6.06 |
Maintenance of Properties | 102 | ||||
SECTION 6.07 |
Maintenance of Insurance | 102 | ||||
SECTION 6.08 |
Compliance with Laws | 103 | ||||
SECTION 6.09 |
Books and Records | 103 | ||||
SECTION 6.10 |
Inspection Rights | 103 | ||||
SECTION 6.11 |
Covenant to Give Security | 103 | ||||
SECTION 6.12 |
Compliance with Environmental Laws | 104 | ||||
SECTION 6.13 |
Further Assurances and Post-Closing Covenant | 104 | ||||
SECTION 6.14 |
Use of Proceeds | 104 | ||||
SECTION 6.15 |
Maintenance of Ratings | 104 | ||||
ARTICLE VII | ||||||
Negative Covenants | ||||||
SECTION 7.01 |
Liens | 104 | ||||
SECTION 7.02 |
[Reserved] | 104 |
-ii-
SECTION 7.03 |
Indebtedness | 104 | ||||
SECTION 7.04 |
Fundamental Changes | 105 | ||||
SECTION 7.05 |
Dispositions | 107 | ||||
SECTION 7.06 |
Restricted Payments | 108 | ||||
SECTION 7.07 |
Change in Nature of Business | 113 | ||||
SECTION 7.08 |
Transactions with Affiliates | 113 | ||||
SECTION 7.09 |
Burdensome Agreements | 115 | ||||
SECTION 7.10 |
Accounting Changes | 117 | ||||
SECTION 7.11 |
Modification of Terms of Junior Financing | 117 | ||||
SECTION 7.12 |
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries | 117 | ||||
SECTION 7.13 |
Impairment of Security Interests | 118 | ||||
ARTICLE VIII | ||||||
Events of Default and Remedies | ||||||
SECTION 8.01 |
Events of Default | 118 | ||||
SECTION 8.02 |
Remedies upon Event of Default | 120 | ||||
SECTION 8.03 |
Application of Funds | 120 | ||||
ARTICLE IX | ||||||
Administrative Agent and Other Agents | ||||||
SECTION 9.01 |
Appointment and Authorization of the Administrative Agent | 121 | ||||
SECTION 9.02 |
Rights as a Lender | 121 | ||||
SECTION 9.03 |
Exculpatory Provisions | 121 | ||||
SECTION 9.04 |
Lack of Reliance on the Administrative Agent | 122 | ||||
SECTION 9.05 |
Certain Rights of the Administrative Agent | 123 | ||||
SECTION 9.06 |
Reliance by the Administrative Agent | 123 | ||||
SECTION 9.07 |
Delegation of Duties | 123 | ||||
SECTION 9.08 |
Indemnification | 123 | ||||
SECTION 9.09 |
The Administrative Agent in Its Individual Capacity | 124 | ||||
SECTION 9.10 |
Holders | 124 | ||||
SECTION 9.11 |
Resignation by the Administrative Agent | 124 | ||||
SECTION 9.12 |
Collateral Matters | 125 | ||||
SECTION 9.13 |
Delegation of Duties | 125 | ||||
SECTION 9.14 |
Administrative Agent May File Proofs of Claim | 126 | ||||
SECTION 9.15 |
Appointment of Supplemental Administrative Agents | 127 | ||||
SECTION 9.16 |
Intercreditor Agreements | 127 | ||||
SECTION 9.17 |
Withholding Tax | 128 | ||||
ARTICLE X | ||||||
Miscellaneous | ||||||
SECTION 10.01 |
Amendments, Etc. | 128 | ||||
SECTION 10.02 |
Notices and Other Communications; Facsimile Copies | 131 | ||||
SECTION 10.03 |
No Waiver; Cumulative Remedies | 132 | ||||
SECTION 10.04 |
Costs and Expenses | 133 | ||||
SECTION 10.05 |
Indemnification by the Borrower | 133 | ||||
SECTION 10.06 |
Marshaling; Payments Set Aside | 134 | ||||
SECTION 10.07 |
Successors and Assigns | 134 | ||||
SECTION 10.08 |
Confidentiality | 141 | ||||
SECTION 10.09 |
Setoff | 142 | ||||
SECTION 10.10 |
Interest Rate Limitation | 142 |
-iii-
SECTION 10.11 |
Counterparts; Integration; Effectiveness | 142 | ||||
SECTION 10.12 |
Electronic Execution of Assignments and Certain Other Documents | 142 | ||||
SECTION 10.13 |
Survival of Representations and Warranties | 142 | ||||
SECTION 10.14 |
Severability | 143 | ||||
SECTION 10.15 |
GOVERNING LAW | 143 | ||||
SECTION 10.16 |
WAIVER OF RIGHT TO TRIAL BY JURY | 143 | ||||
SECTION 10.17 |
Binding Effect | 144 | ||||
SECTION 10.18 |
Lender Action | 144 | ||||
SECTION 10.19 |
Use of Name, Logo, Etc. | 144 | ||||
SECTION 10.20 |
USA PATRIOT Act | 144 | ||||
SECTION 10.21 |
Service of Process | 144 | ||||
SECTION 10.22 |
No Advisory or Fiduciary Responsibility | 144 | ||||
ARTICLE XI | ||||||
Guaranty | ||||||
SECTION 11.01 |
Guaranty | 145 | ||||
SECTION 11.02 |
Limitation on Guarantor Liability | 146 | ||||
SECTION 11.03 |
Execution and Delivery | 146 | ||||
SECTION 11.04 |
Subrogation | 146 | ||||
SECTION 11.05 |
Benefits Acknowledged | 146 | ||||
SECTION 11.06 |
Release of Guaranty by Guarantors | 146 | ||||
ARTICLE XII | ||||||
Collateral Documents | ||||||
SECTION 12.01 |
Collateral and Collateral Documents | 147 | ||||
SECTION 12.02 |
[Reserved] | 148 | ||||
SECTION 12.03 |
Release of Collateral | 148 | ||||
SECTION 12.04 |
Permitted Releases Not To Impair Lien | 149 | ||||
SECTION 12.05 |
[Reserved] | 149 | ||||
SECTION 12.06 |
Suits To Protect the Collateral | 149 | ||||
SECTION 12.07 |
Authorization of Receipt of Funds by the Administrative Agent Under the Collateral Documents | 150 | ||||
SECTION 12.08 |
Purchaser Protected | 150 | ||||
SECTION 12.09 |
Powers Exercisable by Receiver or Administrative Agent | 150 | ||||
SECTION 12.10 |
Release Upon Termination of the Borrowers Obligations | 150 | ||||
SECTION 12.11 |
Collateral Agent | 151 | ||||
SECTION 12.12 |
Designations | 153 | ||||
SECTION 12.13 |
Additional Collateral | 153 |
SCHEDULES
1.01 |
Closing Date Guarantors | |
1.01A |
Closing Date Security Documents | |
2.01 |
Commitments | |
4.01(a)(vi) |
Local Counsel | |
5.12 |
Subsidiaries and Other Equity Investments | |
7.01 |
Existing Liens | |
7.03 |
Existing Indebtedness | |
7.06 |
Existing Investments | |
7.08 |
Transactions with Affiliates | |
7.09 |
Existing Restrictions | |
10.02 |
Administrative Agents Office, Certain Addresses for Notices |
-iv-
EXHIBITS
Form of
A |
Committed Loan Notice | |
B |
Term Loan Note | |
C |
Compliance Certificate | |
D-1 |
Assignment and Assumption | |
D-2 |
Affiliated Lender Assignment and Assumption | |
E |
Guarantor Joinder Agreement | |
F |
United States Tax Compliance Certificates | |
G |
Solvency Certificate | |
H |
Discount Range Prepayment Notice | |
I |
Discount Range Prepayment Offer | |
J |
Solicited Discounted Prepayment Notice | |
K |
Acceptance and Prepayment Notice | |
L |
Specified Discount Prepayment Notice | |
M |
Solicited Discounted Prepayment Offer | |
N |
Specified Discount Prepayment Response | |
O |
Mortgage |
-v-
CREDIT AGREEMENT
This CREDIT AGREEMENT (this Agreement) is entered into as of March 28, 2014 among AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC., a Delaware corporation (Holdings; as hereinafter further defined), AMERICAN TIRE DISTRIBUTORS, INC., a Delaware corporation (the Borrower), the GUARANTORS from time to time party hereto, BANK OF AMERICA, N.A, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent) under the Loan Documents, and each lender from time to time party hereto (collectively, the Lenders and individually, a Lender).
PRELIMINARY STATEMENTS
Pursuant to the Acquisition Agreement, the Borrower will acquire (the Acquisition), directly or indirectly, the Equity Interests of Terrys Tire Town Holdings, Inc. (the Acquired Company) on the Closing Date.
In connection therewith, it is intended that (a) the Borrower will obtain an initial aggregate principal amount of $300,000,000 of Initial Term Loans pursuant to this Agreement, (b) the Borrower will borrow revolving loans under the ABL Credit Agreement in an aggregate principal amount of approximately $60,000,000 and (c) the proceeds of the Initial Term Loans and ABL Revolving Loans will be used to pay the consideration and other amounts owing in connection with the Acquisition under the Acquisition Agreement, to repay certain existing indebtedness and hedging obligations of the Acquired Company and its Subsidiaries and to pay all fees, costs and expenses incurred in connection with the Transactions and related transactions (including to fund any original issue discount and upfront fees).
In consideration of the mutual covenants and agreements herein contained, 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:
ABL Agent means Bank of America, N.A., in its capacity as Agent under the ABL Facility, and any successor thereto in such capacity.
ABL Collateral has the meaning ascribed to ABL Facility Collateral in the Crossing Lien Intercreditor Agreement.
ABL Credit Agreement means that certain Sixth Amended and Restated Credit Agreement, dated as of November 30, 2012, as amended by the First Amendment thereto dated as of March 21, 2013 and as further amended by the Second Amendment thereto dated as of January 31, 2014, among the financial institutions party thereto as lenders, Bank of America, N.A., as administrative agent and collateral agent, Holdings, the Borrower and each other Subsidiary of the Borrower party thereto.
ABL Credit Documents means the ABL Credit Agreement and all other instruments, agreements and other documents evidencing the ABL Credit Agreement or providing for any Guarantee, Lien or other right in respect thereof.
ABL Revolving Loans means revolving credit loans made to the Borrower or its Affiliates pursuant to the ABL Credit Agreement.
Acceptable Discount has the meaning specified in Section 2.03(a)(iv)(D)(2).
[Credit Agreement]
Acceptable Prepayment Amount has the meaning specified in Section 2.03(a)(iv)(D)(3).
Acceptance and Prepayment Notice means a notice of the Borrowers acceptance of the Acceptable Discount in substantially the form of Exhibit K.
Acceptance Date has the meaning specified in Section 2.03(a)(iv)(D)(2).
Acquired Company has the meaning specified in the introductory paragraph to this Agreement.
Acquisition has the meaning specified in the preliminary statements to this Agreement.
Acquisition Agreement means that certain Stock Purchase Agreement dated as of February 17, 2014 between the Borrower and TTT Holdings, Inc.
Acquisition Consideration means an amount equal to the total funds required to consummate the Acquisition as set forth in the Acquisition Agreement.
Additional Lender means, at any time, any bank, other financial institution or institutional lender or investor that, in any case, is not an existing Lender and that agrees to provide any portion of any (a) Incremental Term Loan in accordance with Section 2.12, (b) Other Term Loans pursuant to a Refinancing Amendment in accordance with Section 2.13 or (c) Replacement Loans pursuant to Section 10.01; provided that each Additional Lender shall be subject to the approval of the Administrative Agent, such approval not to be unreasonably withheld or delayed, to the extent that any such consent would be required from the Administrative Agent under Section 10.07(b)(iii)(B) for an assignment of Loans to such Additional Lender.
Administrative Agent has the meaning specified in the introductory paragraph to this Agreement.
Administrative Agents Office means the Administrative Agents address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.
Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Administrative Agent.
Affiliate of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
Affiliate Transaction has the meaning specified in Section 7.08.
Affiliated Lender means the Sponsor or any Affiliate of the Sponsor other than (a) Holdings, the Borrower or any Subsidiary of Holdings, (b) any Debt Fund Affiliate and (c) any natural person.
Affiliated Lender Assignment and Assumption has the meaning specified in Section 10.07(h)(vi).
Affiliated Lender Cap has the meaning specified in Section 10.07(h)(iv).
After-Acquired Property means any and all assets or property (other than Excluded Assets) acquired after the Closing Date, including any property or assets acquired by the Borrower or a Subsidiary Guarantor from another Subsidiary Guarantor, which in each case constitutes Collateral or would have constituted Collateral had such assets and property been owned by the Borrower or a Subsidiary Guarantor on the Closing Date.
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Agent Parties has the meaning specified in Section 10.02(d).
Agent-Related Persons means the Agents, together with their respective Affiliates and controlling Persons, and their respective officers, directors, employees, partners, agents and other representatives of such Persons and of such Persons Affiliates and their respective successors and assigns.
Agents means, collectively, the Administrative Agent and the Supplemental Administrative Agents (if any).
Aggregate Commitments means the Commitments of all the Lenders.
Agreement means this Credit Agreement.
All-In Yield means, as to any Indebtedness, the yield thereof, whether in the form of interest rate, margin, OID, upfront fees, a Eurodollar Rate floor (with such increased amount being determined in the manner described in the final proviso of this definition), or otherwise, in each case, incurred or payable by the Borrower generally to all lenders of such Indebtedness; provided that OID and upfront fees shall be equated to interest rate assuming a 4-year life to maturity (or, if less, the stated life to maturity at the time of incurrence of the applicable Indebtedness); provided, further, that All-In Yield shall not include arrangement fees, structuring fees, commitment fees, underwriting fees and similar fees (regardless of whether paid in whole or in part to any or all lenders) or other fees not generally paid to all lenders of such Indebtedness or, if applicable, ticking fees accruing prior to the funding of such Indebtedness or consent fees for an amendment paid generally to consenting lenders; provided further that, with respect to any Loans of an applicable Class that includes a Eurodollar Rate floor, (1) to the extent that the Reference Rate on the date that the All-In Yield is being calculated is less than such floor, the amount of such difference shall be deemed added to the Applicable Rate for such Loans of such Class for the purpose of calculating the All-In Yield and (2) to the extent that the Reference Rate on the date that the All-In Yield is being calculated is greater than such floor, then the floor shall be disregarded in calculating the All-In Yield.
Annual Financial Statements means the audited consolidated balance sheets of Acquired Company and its Subsidiaries as of the fiscal years ended December 31, 2013 and December 31, 2012, and the related statements of operations, shareholders equity, and cash flows for the fiscal years then ended.
Applicable Discount has the meaning specified in Section 2.03(a)(iv)(C)(2).
Applicable Rate means a percentage per annum equal to: (i) until delivery of financial statements for the first full fiscal quarter ending after the Closing Date pursuant to Section 6.01, (a) 4.75% for Eurodollar Rate Loans and (b) 3.75% for Base Rate Loans, and (ii) thereafter, the following percentages per annum, based upon the Consolidated Net Leverage Ratio as specified in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a):
Pricing Level | Consolidated Net Leverage Ratio |
Eurodollar Rate | Base Rate | |||
1 | ³ 4.50 to 1.00 | 4.75% | 3.75% | |||
2 | < 4.50 to 1.00 | 4.50% | 3.50% |
Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Net Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a); provided that Pricing Level 1 (as set forth above) shall apply as of (x) the first Business Day after the date on which a Compliance Certificate was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such Compliance Certificate is so delivered (and thereafter the pricing level otherwise determined in accordance with this definition shall apply)
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and (y) at the option of the Administrative Agent or the Required Facility Lenders under the Term Facility in respect of the Initial Term Loans, the first Business Day after an Event of Default under Section 8.01(a) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply).
Appropriate Lender means, at any time, with respect to Loans of any Class, the Lenders of such Class.
Approved Fund means, with respect to any Lender, any Person (other than a natural person) that is primarily engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities and is administered, advised or managed by (a) such Lender, (b) an Affiliate of such Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages such Lender.
Arranger means Bank of America, N.A. in its capacity as sole lead arranger under this Agreement.
Assignee Group means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
Assignment and Assumption means an Assignment and Assumption substantially in the form of Exhibit D-1 or any other form approved by the Administrative Agent.
Attorney Costs means all reasonable fees, expenses and disbursements of any law firm or other external legal counsel, to the extent documented and invoiced.
Auction Agent means (a) the Administrative Agent or (b) any other financial institution or advisor engaged by the Borrower (whether or not an Affiliate of the Administrative Agent) to act as an arranger in connection with any Discounted Term Loan Prepayment pursuant to Section 2.03(a)(iv); provided that the Borrower shall not designate the Administrative Agent as the Auction Agent without the written consent of the Administrative Agent (it being understood that the Administrative Agent shall be under no obligation to agree to act as the Auction Agent); provided, further, that neither the Borrower nor any of its Affiliates may act as the Auction Agent.
Available Amount means, at any time, the sum of (without duplication) of:
(a) $50,000,000; plus
(b) 50.0% of the Consolidated Net Income of the Borrower for the period (taken as one accounting period) beginning on the first day of the fiscal quarter in which the Closing Date occurs to the end of the Borrowers most recently ended fiscal quarter for which internal financial statements are available at such time, or, in the case such Consolidated Net Income for such period is a deficit, minus 100.0% of such deficit; plus
(c) 100.0% of the aggregate net cash proceeds and the fair market value of marketable securities or other property received by the Borrower since immediately after the Closing Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness pursuant to clause (m)(i) of the definition of Permitted Indebtedness) from the issue or sale of:
(i) (A) Equity Interests of the Borrower, including Treasury Capital Stock, but excluding cash proceeds and the fair market value of marketable securities or other property received from the sale of:
(x) Equity Interests to any future, present or former employees, directors, officers, managers, distributors or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any Parent Entity of the
4
Borrower or the Borrowers Subsidiaries after the Closing Date to the extent such amounts have been applied to Restricted Payments made in accordance with Section 7.06(b)(iv);
(y) Designated Preferred Stock;
and (B) to the extent such net cash proceeds are actually contributed to the Borrower, Equity Interests of any Parent Entity of the Borrower (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such Person or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with Section 7.06(b)(iv)); or
(ii) debt securities of the Borrower that have been converted into or exchanged for such Equity Interests of the Borrower;
provided that this clause (c) shall not include the proceeds from (W) Refunding Capital Stock, (X) Equity Interests or convertible debt securities of the Borrower sold to a Restricted Subsidiary, (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (Z) Excluded Contributions; plus
(d) 100.0% of the aggregate amount of cash and the fair market value of marketable securities or other property contributed to the capital of the Borrower following the Closing Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness pursuant to clause (m)(i) of the definition of Permitted Indebtedness) (other than by a Restricted Subsidiary and other than any Excluded Contributions); plus
(e) 100.0% of the aggregate amount received in cash and the fair market value of marketable securities or other property received by means of:
(i) the sale or other disposition (other than to the Borrower or a Restricted Subsidiary) of Restricted Investments made by the Borrower or a Restricted Subsidiary and repurchases and redemptions of such Restricted Investments from the Borrower or a Restricted Subsidiary (other than by the Borrower or a Restricted Subsidiary) and repayments of loans or advances, which constitute Restricted Investments made by the Borrower or a Restricted Subsidiary, in each case after the Closing Date; or
(ii) the sale (other than to the Borrower or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (only to the extent the Investment in such Unrestricted Subsidiary was a Restricted Investment) or a dividend from an Unrestricted Subsidiary after the Closing Date; plus
(f) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after the Closing Date, the fair market value of the Investment in such Unrestricted Subsidiary at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary to the extent the Investment in such Unrestricted Subsidiary was a Restricted Investment; plus
(g) the aggregate amount of Declined Proceeds accumulated since the Closing Date.
Available Incremental Amount has the meaning specified in Section 2.12(d)(iii).
Bankruptcy Code has the meaning specified in Section 8.02.
Base Rate means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its prime rate and (c) the Eurodollar Rate on such day for an Interest Period of one (1)
5
month plus 1.00% (or, if such day is not a Business Day, the immediately preceding Business Day). The prime rate is a rate set by the Administrative Agent based upon various factors including the Administrative Agents costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.
Base Rate Loan means a Loan that bears interest based on the Base Rate.
Big Boy Letter means a letter from a Lender acknowledging that (1) an Affiliated Lender may have information regarding the Borrower and its Subsidiaries, their ability to perform the Obligations or any other material information that has not previously been disclosed to the Administrative Agent and the Lenders (Excluded Information), (2) the Excluded Information may not be available to such Lender, (3) such Lender has independently and without reliance on any other party made its own analysis and determined to assign Term Loans to an Affiliated Lender pursuant to Section 10.07(h) notwithstanding its lack of knowledge of the Excluded Information and (4) such Lender waives and releases any claims it may have against the Administrative Agent, such Affiliated Lender, Holdings, the Borrower and the Subsidiaries of the Borrower with respect to the nondisclosure of the Excluded Information; or otherwise in form and substance reasonably satisfactory to such Affiliated Lender and assigning Lender.
Borrower has the meaning specified in the introductory paragraph to this Agreement.
Borrower Materials has the meaning specified in Section 6.02.
Borrower Offer of Specified Discount Prepayment means the offer by a Borrower Party to make a voluntary prepayment of Loans at a specified discount to par pursuant to Section 2.03(a)(iv)(B).
Borrower Parties means the collective reference to Holdings, the Borrower and each Subsidiary of the Borrower and Borrower Party means any one of them.
Borrower Solicitation of Discount Range Prepayment Offers means the solicitation by a Borrower Party of offers for, and the corresponding acceptance by a Lender of, a voluntary prepayment of Loans at a specified range of discounts to par pursuant to Section 2.03(a)(iv)(C).
Borrower Solicitation of Discounted Prepayment Offers means the solicitation by a Borrower Party of offers for, and the subsequent acceptance, if any, by a Lender of, a voluntary prepayment of Loans at a discount to par pursuant to Section 2.03(a)(iv)(D).
Borrowing means a borrowing consisting of Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Rate Loans, having the same Interest Period.
Borrowing Base means, as of any date, an amount equal to the sum of:
(i) 85% of the aggregate book value of all accounts receivable of the Borrower and the Restricted Subsidiaries; and
(ii) 70% of the aggregate book value of all inventory owned by the Borrower and the Restricted Subsidiaries,
all calculated on a consolidated basis in accordance with GAAP.
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the jurisdiction where the Administrative Agents Office is located and if such day relates to any interest rate settings as to a Eurodollar Rate Loan, any fundings, disbursements, settlements and payments in respect of any such Eurodollar Rate Loan, or any other
6
dealings to be carried out pursuant to this Agreement in respect of any such Eurodollar Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank eurodollar market.
Canadian Dollars means the lawful currency of Canada.
Capital Expenditures means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including in all events all amounts expended or capitalized under Capitalized Lease Obligations) by the Borrower and the Restricted Subsidiaries during such period that, in conformity with GAAP, are or are required to be included as capital expenditures on the consolidated statement of cash flows of the Borrower and the Restricted Subsidiaries.
Capital Stock means:
(a) in the case of a corporation, corporate stock;
(b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(d) 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 but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP; provided that all obligations of any Person that are or would be characterized as operating lease obligations in accordance with GAAP on the Closing Date (whether or not such operating lease obligations were in effect on such date) shall continue to be accounted for as operating lease obligations (and not as Capitalized Lease Obligations) for purposes of this Agreement regardless of any change in GAAP following the Closing Date that would otherwise require such obligations to be recharacterized (on a prospective or retroactive basis or otherwise) as Capitalized Lease Obligations.
Capitalized Software Expenditures means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by the Borrower and the Restricted Subsidiaries during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of the Borrower and the Restricted Subsidiaries.
Cash Collateral Account means an account held at, and subject to the sole dominion and control of, the Collateral Agent.
Cash Equivalents means:
(a) Dollars;
(b) (i) Canadian Dollars, Pounds, euros or any national currency of any participating member state of the EMU; or
(ii) in the case of any Foreign Subsidiary that is a Restricted Subsidiary or any jurisdiction in which the Borrower and the Restricted Subsidiaries conduct business, such local currencies held by it from time to time in the ordinary course of business;
7
(c) securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 12 months or less from the date of acquisition;
(d) certificates of deposit, time deposits and eurodollar time deposits with maturities of 12 months or less from the date of acquisition, demand deposits, bankers acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic or foreign commercial bank having capital and surplus of not less than $500,000,000 in the case of U.S. banks and $100,000,000 (or the U.S. dollar equivalent as of the date of determination) in the case of non-U.S. banks;
(e) repurchase obligations for underlying securities of the types described in clauses (c), (d) and (h) entered into with any financial institution or recognized securities dealer meeting the qualifications specified in clause (d) above;
(f) commercial paper rated at least P-2 by Moodys or at least A-2 by S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) and in each case maturing within 24 months after the date of creation or acquisition thereof and Indebtedness or Preferred Stock issued by Persons with a rating of A or higher from S&P or A-2 or higher from Moodys with maturities of 24 months or less from the date of acquisition;
(g) marketable short-term money market and similar funds having a rating of at least P-2 or A-2 from either Moodys or S&P, respectively (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency);
(h) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade Rating from either Moodys or S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) with maturities of 24 months or less from the date of acquisition;
(i) readily marketable direct obligations issued by any foreign government or any political subdivision or public instrumentality thereof, in each case having an Investment Grade Rating from either Moodys or S&P (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) with maturities of 24 months or less from the date of acquisition;
(j) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moodys (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency); and
(k) investment funds investing at least 90.0% of their assets in securities of the types described in clauses (a) through (j) above.
In the case of Investments by any Foreign Subsidiary that is a Restricted Subsidiary or Investments made in a country outside the United States of America, Cash Equivalents shall also include (a) investments of the type and maturity described in clauses (a) through (h) and clauses (j) and (k) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies and (b) other short-term investments utilized by Foreign Subsidiaries that are Restricted Subsidiaries in accordance with normal investment practices for cash management in investments analogous to the foregoing investments in clauses (a) through (k) and in this paragraph.
8
Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (a) and (b) above, provided that such amounts are converted into any currency listed in clauses (a) and (b) as promptly as practicable and in any event within ten (10) Business Days following the receipt of such amounts.
Cash Management Agreement means any agreement entered into from time to time by Holdings, the Borrower or any Restricted Subsidiary in connection with cash management services for collections, other Cash Management Services and for operating, payroll and trust accounts of such Person, including automatic clearing house services, controlled disbursement services, electronic funds transfer services, information reporting services, lockbox services, stop payment services and wire transfer services.
Cash Management Bank means any Person that was an Agent, a Lender or an Affiliate of an Agent or Lender at the time it entered into a Cash Management Agreement, whether or not such Person subsequently ceases to be an Agent, a Lender or an Affiliate of an Agent or Lender.
Cash Management Obligations means obligations owed by Holdings, the Borrower or any Restricted Subsidiary to any Cash Management Bank in connection with, or in respect of, any Cash Management Services.
Cash Management Services means (a) commercial credit cards, merchant card services, purchase or debit cards, including non-card e-payables services, (b) treasury management services (including controlled disbursement, overdraft, automatic clearing house fund transfer services, return items and interstate depository network services) and (c) any other demand deposit or operating account relationships or other cash management services, including under any Cash Management Agreements.
Casualty Event means any event that gives rise to the receipt by the Borrower or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.
CFC means a controlled foreign corporation within the meaning of Section 957(a) of the Code.
Change in Law means the occurrence, after the Closing Date, of any of the following: (a) the adoption of any law, rule, regulation or treaty (excluding the taking effect after the Closing Date of a law, rule, regulation or treaty adopted prior to the Closing Date), (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. It is understood and agreed that (i) the DoddFrank Wall Street Reform and Consumer Protection Act (Public Law 111-203, H.R. 4173), all Laws relating thereto and all interpretations and applications thereof and (ii) 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 regulatory authorities, in each case pursuant to Basel III, shall, for the purpose of this Agreement, be deemed to be adopted subsequent to the Closing Date.
Change of Control means the earliest to occur (after the Closing Date) of (and excluding, for the avoidance of doubt, the Transactions):
(a) except as permitted by Section 7.04, the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Borrower and its Subsidiaries, taken as a whole, to any Person other than a Permitted Holder; or
(b) the Borrower becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, in a single transaction or in a related series of transactions, by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50.0% or more of the total voting power of the Voting Stock of the Borrower or any of its direct or indirect parent companies.
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Class (a) when used with respect to Lenders, refers to whether such Lenders have Loans or Commitments with respect to a particular Class of Loans or Commitments, (b) when used with respect to Commitments, refers to whether such Commitments are Term B Commitments, Incremental Term Commitments, or Commitments in respect of any Class of Replacement Loans or a Class of Loans to be made pursuant to a given Term Loan Extension Series or Other Term Loan Commitments of a given Class of Other Term Loans, in each case not designated part of another existing Class and (c) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such Borrowing, are Initial Term Loans, Incremental Term Loans, Replacement Loans, Extended Term Loans or Other Term Loans, in each case not designated part of another existing Class. Commitments (and, in each case, the Loans made pursuant to such Commitments) that have different terms and conditions shall be construed to be in different Classes. Commitments (and, in each case, the Loans made pursuant to such Commitments) that have identical terms and conditions shall be construed to be in the same Class.
Closing Date means the first date on which all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01, which date was March 28, 2014.
Closing Date Material Adverse Effect means a Material Adverse Effect as defined in the Acquisition Agreement.
Closing Date Release means the termination and release of all obligations of the Acquired Company and its Subsidiaries in respect of all Indebtedness for borrowed money set forth in Section 2.3(d)(iii) of the Disclosure Schedule (as defined in the Acquisition Agreement) of the Acquisition Agreement (including any amendments or modifications to or refinancing of such Indebtedness), including the termination and release of all security interests and guaranties in connection therewith, or provision therefor reasonably acceptable to the Arranger.
Code means the U.S. Internal Revenue Code of 1986, as amended.
Collateral means the Collateral as defined in the Security Agreement.
Collateral Agent means Bank of America, N.A.
Collateral Documents means, collectively, the Security Agreement, security agreements, pledge agreements, mortgages, collateral assignments, deeds of trust and all other pledges, agreements, financing statements, patent, trademark or copyright filings, mortgages or other filings or documents that create or purport to create a Lien in the Collateral in favor of the Collateral Agent and/or the Administrative Agent (for the benefit of the Collateral Agent, the Administrative Agent and the Secured Parties) and the Intercreditor Agreements, in each case as they may be amended from time to time, and any instruments of assignment, control agreements, lockbox letters or other instruments or agreements executed pursuant to the foregoing.
Commercial and Retread Business means the collective reference to the commercial and retread businesses of (a) Premier Bandag #8, Inc., an Ohio corporation, located at 2300 West Main Street, Alliance, OH 44601 and (b) Terrys Tire Town, Inc., an Ohio corporation located at (i) 1615 Perry Drive SW, Canton, OH, (ii) 1658 Highland Road, units 8-10, Twinsburg, OH 44087 and (iii) 39 Ohio Machinery, Girard, OH 44601.
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Commitment means a Term B Commitment, Incremental Term Commitment, Other Term Loan Commitment, Extended Term Loan Commitment of a given Term Loan Extension Series, or any commitment in respect of Replacement Loans, as the context may require.
Committed Loan Notice means a notice of (a) a Borrowing with respect to a given Class of Loans, (b) a conversion of Loans of a given Class from one Type to the other, or (c) a continuation of Eurodollar Rate Loans of a given Class, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.
Compensation Period has the meaning specified in Section 2.10(c)(ii).
Compliance Certificate means a certificate substantially in the form of Exhibit C and which certificate shall in any event be a certificate of a Financial Officer of the Borrower (a) certifying as to whether a Default has occurred and is continuing and, if applicable, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (b) setting forth reasonably detailed calculations, in the case of financial statements delivered under Section 6.01(a), beginning with the financial statements for the fiscal year of the Borrower ending December 31, 2014, of Excess Cash Flow for such fiscal year (or the relevant portion thereof in the case of the 2014 fiscal year), (c) in the case of financial statements delivered under Section 6.01(a), beginning with the financial statements for the fiscal year of the Borrower ending December 31, 2014, setting forth a reasonably detailed calculation of the Net Cash Proceeds received during the applicable period by, or on behalf of, the Borrower or any Restricted Subsidiary in respect of any Disposition subject to prepayment pursuant to Section 2.03(b)(ii)(A) and the portion of such Net Cash Proceeds that has been invested or are intended to be reinvested in accordance with Section 2.03(b)(ii)(B) and (d) commencing with the certificate delivered pursuant to Section 6.02(a) for the first full fiscal quarter ending after the Closing Date, if the Secured Net Leverage Ratio as of the last day of the most recent Test Period would result in a change in the applicable Pricing Level as set forth in the definition of Applicable Rate, setting forth a calculation of such Secured Net Leverage Ratio.
Consolidated Current Assets means, as at any date of determination, the total assets of the Borrower and the Restricted Subsidiaries on a consolidated basis that may properly be classified as current assets in conformity with GAAP, excluding cash and Cash Equivalents, amounts related to current or deferred taxes based on income or profits, assets held for sale, loans (permitted) to third parties, pension assets, deferred bank fees, derivative financial instruments and any assets in respect of Hedging Obligations, and excluding the effects of adjustments pursuant to GAAP resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to the Transactions, the Hercules Transactions or any consummated acquisition.
Consolidated Current Liabilities means, as at any date of determination, the total liabilities of the Borrower and the Restricted Subsidiaries on a consolidated basis that may properly be classified as current liabilities in conformity with GAAP, excluding (A) the current portion of any Funded Debt, (B) the current portion of interest, (C) accruals for current or deferred taxes based on income or profits, (D) accruals of any costs or expenses related to restructuring reserves or severance, (E) revolving credit loans, swingline loans and letter of credit obligations under the ABL Credit Agreement or any other revolving loans, swingline loans and letter of credit obligations under any other revolving credit facility, (F) the current portion of any Capitalized Lease Obligation, (G) deferred revenue arising from cash receipts that are earmarked for specific projects, (H) liabilities in respect of unpaid earn-outs, (I) the current portion of any other long-term liabilities, (J) accrued litigation settlement costs and (K) any liabilities in respect of Hedging Obligations, and, furthermore, excluding the effects of adjustments pursuant to GAAP resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to the Transactions, the Hercules Transactions or any consummated acquisition.
Consolidated Depreciation and Amortization Expense means with respect to any Person for any period, the total amount of depreciation and amortization expense of such Person and its Restricted Subsidiaries, including the amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses and Capitalized Software Expenditures of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
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Consolidated Interest Expense means, with respect to any Person for any period, without duplication, the sum of:
(a) consolidated interest expense in respect of Indebtedness of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (i) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (ii) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (iii) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (iv) the interest component of Capitalized Lease Obligations, and (v) net payments, if any, made (less net payments, if any, received), pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (t) any expense resulting from the discounting of any Indebtedness in connection with the application of recapitalization accounting or, if applicable, purchase accounting in connection with the Transactions, the Hercules Transactions or any acquisition, (u) penalties and interest relating to taxes and any other financing fees related to the Transactions, the Hercules Transactions or any acquisition (or purchase of assets) after the Closing Date, (v) any additional interest or liquidated damages with respect to other securities for failure to timely comply with registration rights obligations, (w) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses and discounted liabilities, (x) any expensing of bridge, commitment and other financing fees, (y) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Qualified Securitization Facility and (z) any accretion of accrued interest on discounted liabilities); plus
(b) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less
(c) interest income of such Person and its Restricted Subsidiaries for such period.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Consolidated Net Income means, with respect to any Person for any period, the aggregate of the Net Income attributable to such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided that, without duplication:
(a) the cumulative effect of a change in accounting principles (effected either through cumulative effect adjustment, restructuring or a retroactive application, in each case, in accordance with GAAP) and changes as a result of the adoption or modification of accounting policies during such period shall be excluded;
(b) any net after-tax effect of gains or losses attributable to asset dispositions or abandonments (including any disposal of abandoned or discontinued operations) or the sale or other disposition of any Capital Stock of any Person other than in the ordinary course of business as determined in good faith by the Borrower shall be excluded;
(c) the Net Income for such period of any Person that is an Unrestricted Subsidiary or, any Person that is not the Borrower or a Restricted Subsidiary or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash or Cash Equivalents (or to the extent converted into cash or Cash Equivalents) to the Borrower or a Restricted Subsidiary thereof in respect of such period and the net losses of any such Person shall only be included to the extent funded with cash from the Borrower or any Restricted Subsidiary;
(d) solely for the purpose of determining clause (b) of the Available Amount, the Net Income for such period of any Restricted Subsidiary (other than any Subsidiary Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any
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agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived, provided that Consolidated Net Income of the Borrower will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash or Cash Equivalents) to the Borrower or any Restricted Subsidiary thereof in respect of such period, to the extent not already included therein;
(e) effects of adjustments (including the effects of such adjustments pushed down to the Borrower and the Restricted Subsidiaries) in the inventory, property and equipment, software, goodwill, other intangible assets, in-process research and development, deferred revenue, debt line items and other noncash charges in such Persons consolidated financial statements pursuant to GAAP resulting from the application of recapitalization accounting or, if applicable, purchase accounting in relation to the Transactions, the Hercules Transactions or any consummated acquisition or the amortization or write-off or write-down of any amounts thereof, net of taxes, shall be excluded;
(f) any net after-tax effect of income (loss) from the early extinguishment or conversion of (a) Indebtedness, (b) Hedging Obligations or (c) other derivative instruments shall be excluded;
(g) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded;
(h) any non-cash compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs, shall be excluded, and any cash charges associated with the rollover, acceleration, or payout of Equity Interests by management of the Borrower or its Restricted Subsidiaries or any Parent Entity of the Borrower in connection with the Transactions, shall be excluded;
(i) any fees, expenses or charges incurred during such period, or any amortization thereof for such period, in connection with any acquisition, Investment, Disposition, incurrence or repayment of Indebtedness (including such fees, expenses or charges related to any Loan Document, Senior Notes Document, Senior Subordinated Notes Document or ABL Credit Document), issuance of Equity Interests, Refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of any Loan Document, Senior Notes Document, Senior Subordinated Notes Document or ABL Credit Document) and including, in each case, any such transaction whether consummated on, after or prior to the Closing Date and any such transaction undertaken but not completed, and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful or consummated (including, for the avoidance of doubt, the effects of expensing all transaction related expenses in accordance with Accounting Standards Codification Topic No. 805, Business Combinations) shall be excluded;
(j) accruals and reserves that are established within twelve months after the Closing Date that are so required to be established as a result of the Transactions (or within twelve months after the closing of any acquisition (including the Hercules Acquisition) that are so required to be established as a result of such acquisition) in accordance with GAAP shall be excluded;
(k) any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any investment, acquisition or any sale, conveyance, transfer or other disposition of assets permitted hereunder, to the extent actually indemnified or reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is (i) not denied by the applicable carrier (without any right of appeal thereof) within 180 days and (ii) in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded;
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(l) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount shall in fact be reimbursed by the insurer and only to the extent that such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 day period), expenses, charges or losses with respect to liability or casualty events or business interruption shall be excluded;
(m) any net unrealized gain or loss (after any offset) resulting in such period from Hedging Obligations and the application of Accounting Standards Codification 815 shall be excluded;
(n) any net unrealized gain or loss (after any offset) resulting in such period from currency translation and transaction gains or losses including those related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk) and any other monetary assets and liabilities shall be excluded; and
(o) effects of adjustments to accruals and reserves during a prior period relating to any change in the methodology of calculating reserves for returns, rebates and other chargebacks (including government program rebates) shall be excluded.
In addition, to the extent not already included in the Consolidated Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Investment permitted hereunder or any sale, conveyance, transfer or other disposition of assets permitted hereunder.
Notwithstanding the foregoing, for the purpose of determining the Available Amount (other than clause (e) of such definition), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Borrower and the Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Borrower and the Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Borrower or any Restricted Subsidiary, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the Available Amount pursuant to clause (e) thereof.
Consolidated Net Leverage Ratio means, as of any date of determination, the ratio of (a) the Consolidated Total Indebtedness of the Borrower and the Restricted Subsidiaries as of the last day of the Test Period most recently ended on or prior to such date of determination to (b) EBITDA of the Borrower and the Restricted Subsidiaries for such Test Period.
Consolidated Total Indebtedness means, as at any date of determination, an amount equal to (a) the sum of (1) the aggregate principal amount of all outstanding Indebtedness of the Borrower and the Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, purchase money Indebtedness and obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments as determined in accordance with GAAP (excluding for the avoidance of doubt all undrawn amounts under revolving credit facilities, all letters of credit, bank guarantees and performance or similar bonds and all obligations under Qualified Securitization Facilities and all Hedging Obligations) and (2) the aggregate amount of all outstanding Disqualified Stock of the Borrower and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP minus (b) the aggregate amount of cash and Cash Equivalents of the Borrower and the Restricted Subsidiaries on such date that would not appear as restricted on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries. The U.S. dollar-equivalent principal amount of any Indebtedness denominated in a foreign currency will reflect the currency translation effects, determined in accordance with GAAP, of Hedging Obligations for currency exchange risks with respect to the applicable currency in effect on the date of determination of the U.S. dollar-equivalent principal amount of such Indebtedness. For purposes hereof, the maximum fixed repurchase price of any Disqualified Stock or Preferred
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Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Borrower.
Consolidated Working Capital means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities.
Contingent Obligations means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other monetary obligations that do not constitute Indebtedness (primary obligations) of any other Person (the primary obligor) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent:
(a) to purchase any such primary obligation or any property constituting direct or indirect security therefor;
(b) to advance or supply funds;
(i) for the purchase or payment of any such primary obligation; or
(ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or
(c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.
Contract Consideration has the meaning specified in clause (b)(xi) of the definition of Excess Cash Flow.
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.
Controlled Investment Affiliate means, as to any Person, any other Person, other than the Sponsor, which directly or indirectly is in control of, is controlled by, or is under common control with such Person and is organized by such Person (or any Person controlling such Person) primarily for making direct or indirect equity or debt investments in the Borrower and/or other companies.
Corrective Extension Amendment has the meaning specified in Section 2.14(e).
Credit Agreement Refinanced Debt has the meaning assigned to such term in the definition of Credit Agreement Refinancing Indebtedness.
Credit Agreement Refinancing Indebtedness means (a) Permitted Equal Priority Refinancing Debt, (b) Permitted Junior Priority Refinancing Debt or (c) Permitted Unsecured Refinancing Debt; provided that, in each case, such Indebtedness is issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) to Refinance, in whole or in part, existing Loans (or, if applicable, unused Commitments under any Incremental Facility) or any then-existing Credit Agreement Refinancing Indebtedness (Credit Agreement Refinanced Debt); provided, further, that (i) the covenants, events of default and guarantees of any such Indebtedness in the form of bonds, notes or debentures or which Refinances, in whole or in part, existing Loans (excluding, for the avoidance of doubt, interest rates (including through fixed interest rates), interest margins, rate floors, fees, funding discounts, original issue discounts and prepayment or redemption premiums and terms) (when taken as a whole) are no more restrictive on the Borrower than those applicable to the Credit Agreement
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Refinanced Debt (when taken as a whole) (other than covenants or other provisions applicable only to periods after the Latest Maturity Date at the time of incurrence, issuance or obtainment of such Indebtedness) (provided that such terms shall not be deemed to be more restrictive solely as a result of the inclusion in the documentation governing such Credit Agreement Refinancing Indebtedness of a Previously Absent Financial Maintenance Covenant so long as the Administrative Agent shall be given prompt written notice thereof and this Agreement is amended to include such Previously Absent Financial Maintenance Covenant for the benefit of each Facility (provided however, that if (x) the Credit Agreement Refinancing Indebtedness that includes a Previously Absent Financial Maintenance Covenant consists of a revolving credit facility (whether or not the documentation therefor includes any other facilities) and (y) the applicable Previously Absent Financial Maintenance Covenant is a springing financial maintenance covenant, the Previously Absent Financial Maintenance Covenant shall not be required to be included in this Agreement for the benefit of any Term Facility hereunder and such Credit Agreement Refinancing Indebtedness shall not be deemed to be more restrictive solely as a result of such Previously Absent Financial Maintenance Covenant benefiting only such revolving credit facilities), (ii) any such Indebtedness in the form of bonds, notes or debentures or which Refinances, in whole or in part, existing Loans shall have a maturity date that is no earlier than the Credit Agreement Refinanced Debt and a Weighted Average Life to Maturity equal to or greater than the Credit Agreement Refinanced Debt (without giving effect to any amortization or prepayments thereof prior to the time of such Refinancing) as of the date of determination, (iii) except to the extent otherwise permitted under this Agreement (subject to a dollar for dollar usage of any other basket set forth in the definition of Permitted Indebtedness, if applicable), such Indebtedness shall not have a greater principal amount (or shall not have a greater accreted value, if applicable) than the principal amount (or accreted value, if applicable) of the Credit Agreement Refinanced Debt plus accrued interest, fees and premiums (including tender premium) and penalties (if any) thereon and fees, expenses, original issue discount and upfront fees incurred in connection with such Refinancing, (iv) such Credit Agreement Refinanced Debt shall be repaid, defeased or satisfied and discharged, and all accrued interest, fees and premiums (if any) in connection therewith shall be paid, substantially concurrently with the date such Credit Agreement Refinancing Indebtedness is issued, incurred or obtained with the Net Cash Proceeds received from the incurrence or issuance of such Indebtedness and (v) in the case of any such Indebtedness in the form of bonds, notes or debentures or which Refinances, in whole or in part, existing Loans, shall not require any mandatory repayment, redemption, repurchase or defeasance (other than (x) in the case of bonds, notes or debentures, customary change of control, asset sale event or casualty or condemnation event offers and customary acceleration any time after an event of default and (y) in the case of any term loans, mandatory prepayments (including redemptions or repurchases or offers to prepay, redeem or repurchase based on excess cash flow) that are on terms no more restrictive on the Borrower than those applicable to the Credit Agreement Refinanced Debt) prior to the 91st day after the maturity date of the Credit Agreement Refinanced Debt; and, provided, further, that Credit Agreement Refinancing Indebtedness may be incurred in the form of a bridge or other interim credit facility intended to be Refinanced with long-term indebtedness (and such bridge or other interim credit facility shall be deemed to satisfy clause (ii) of the second proviso in this definition so long as (x) such credit facility includes customary rollover provisions and (y) assuming such credit facility were to be extended pursuant to such rollover provisions, such extended credit facility would comply with clause (ii) above), provided that, on or prior to the first anniversary of the incurrence of such bridge or other credit facility, clause (v) of the second proviso in this definition shall not prohibit the inclusion of customary terms for bridge facilities, including customary mandatory prepayment, repurchase or redemption provisions.
Credit Facilities means, with respect to the Borrower or any of its Restricted Subsidiaries, one or more debt facilities, including the ABL Credit Agreement, or other financing arrangements (including, without limitation, commercial paper facilities or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term indebtedness, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount permitted to be borrowed thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 7.03 hereof) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.
Crossing Lien Intercreditor Agreement means that certain Lien Subordination and Intercreditor Agreement dated as of May 28, 2010 among Bank of America, N.A., as ABL Agent, The Bank of New York
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Mellon Trust Company, N.A., as Noteholder Collateral Agent, Holdings, the Borrower, Am-Pac Tire Dist. Inc., each Subsidiary of the Borrower party thereto and each additional representative party thereto from time to time (as amended, amended and restated or otherwise supplemented).
Customary Intercreditor Agreement means (a) to the extent executed in connection with the incurrence of secured Indebtedness the Liens on the Collateral securing which are intended to rank equal in priority to the Liens on the Collateral securing the Obligations (but without regard to the control of remedies), at the option of the Borrower and the Administrative Agent acting together in good faith, either (i) the Equal Priority Intercreditor Agreement or (ii) a customary intercreditor agreement in form and substance reasonably acceptable to the Administrative Agent and the Borrower, which agreement shall provide that the Liens on the Collateral securing such Indebtedness shall rank equal in priority to the Liens on the Collateral securing the Obligations (but without regard to the control of remedies), (b) to the extent executed in connection with the incurrence of secured Indebtedness the Liens on the Collateral securing which are intended to rank equal in priority to the Liens on the Collateral securing the Obligations and junior in priority to the Liens on the ABL Collateral, at the option of the Borrower and the Administrative Agent acting together in good faith, either (i) the Crossing Lien Intercreditor Agreement or (ii) a customary intercreditor agreement in form and substance reasonably acceptable to the Administrative Agent and the Borrower, which agreement shall provide that the Liens on the Collateral securing such Indebtedness shall rank equal in priority to the Liens on the Collateral securing the Obligations and junior in priority to the Liens on the ABL Collateral and (c) to the extent executed in connection with the incurrence of secured Indebtedness the Liens on the Collateral securing which are intended to rank junior in priority to the Liens on the Collateral securing the Obligations and junior in priority to the Liens on the ABL Collateral, at the option of the Borrower and the Administrative Agent acting together in good faith, enter into a customary intercreditor agreement in form and substance reasonably acceptable to the Administrative Agent and the Borrower, which agreement shall provide that the Liens on the Collateral securing such Indebtedness shall rank junior in priority to the Liens on the Collateral securing the Obligations and junior in priority to the Liens on the ABL Collateral.
Debt Fund Affiliate means any Affiliate of the Sponsor that is a bona fide debt fund that is not (a) a natural person or (b) Holdings, the Borrower or any Subsidiary of the Borrower.
Debtor Relief Laws means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Declined Proceeds has the meaning specified in Section 2.03(b)(v).
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 an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate applicable to Base Rate Loans plus (c) 2.00% per annum; provided that with respect to the outstanding principal amount of any Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan (giving effect to Section 2.02(c)) plus 2.00% per annum, in each case, to the fullest extent permitted by applicable Laws.
Designated Non-Cash Consideration means the fair market value of non-cash consideration received by the Borrower or a Restricted Subsidiary in connection with a Disposition pursuant to Section 7.05(j) that is so designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale, redemption or repurchase of or collection or payment on such Designated Non-Cash Consideration.
Designated Preferred Stock means Preferred Stock of the Borrower or any Parent Entity thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Borrower or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to a certificate of a Responsible Officer, on or promptly after the issuance date thereof, the cash proceeds of which are excluded from the calculation of the Available Amount.
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Discount Prepayment Accepting Lender has the meaning assigned to such term in Section 2.03(a)(iv)(B)(2).
Discount Range has the meaning assigned to such term in Section 2.03(a)(iv)(C)(1).
Discount Range Prepayment Amount has the meaning assigned to such term in Section 2.03(a)(iv)(C)(1).
Discount Range Prepayment Notice means a written notice of a Borrower Solicitation of Discount Range Prepayment Offers made pursuant to Section 2.03(a)(iv)(C) substantially in the form of Exhibit H.
Discount Range Prepayment Offer means the written offer by a Lender, substantially in the form of Exhibit I, submitted in response to an invitation to submit offers following the Auction Agents receipt of a Discount Range Prepayment Notice.
Discount Range Prepayment Response Date has the meaning assigned to such term in Section 2.03(a)(iv)(C)(1).
Discount Range Proration has the meaning assigned to such term in Section 2.03(a)(iv)(C)(3).
Discounted Prepayment Determination Date has the meaning assigned to such term in Section 2.03(a)(iv)(D)(3).
Discounted Prepayment Effective Date means in the case of a Borrower Offer of Specified Discount Prepayment, Borrower Solicitation of Discount Range Prepayment Offer or Borrower Solicitation of Discounted Prepayment Offer, five (5) Business Days following the Specified Discount Prepayment Response Date, the Discount Range Prepayment Response Date or the Solicited Discounted Prepayment Response Date, as applicable, in accordance with Section 2.03(a)(iv)(B), Section 2.03(a)(iv)(C) or Section 2.03(a)(iv)(D), respectively, unless a shorter period is agreed to between the Borrower and the Auction Agent.
Discounted Term Loan Prepayment has the meaning assigned to such term in Section 2.03(a)(iv)(A).
Disposition or Dispose means the sale, transfer, license, lease or other disposition (including any Sale and Lease-Back Transaction and any sale of Equity Interests in a Restricted Subsidiary) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
Disqualified Institution means any competitor of the Borrower or its Subsidiaries that is an operating company and any Affiliate thereof (other than any financial investor that is not an operating company or an Affiliate of an operating company and other than any Affiliate that is a bona fide diversified debt fund) identified in writing by (x) Holdings or the Sponsor to the Arranger prior to the launch of general syndication, or (y) following the Closing Date, the Borrower to the Administrative Agent.
Disqualified Stock means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than for any Equity Interests that are not Disqualified Stock and other than solely as a result of a change of control, asset sale or casualty or condemnation event) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control, asset sale or casualty or condemnation event), in whole or in part, in each case prior to the date 91 days after the earlier of the then Latest Maturity Date or the date the Loans are no longer outstanding; provided that any Capital Stock issued to any plan for the benefit of, or held by, any future, current or former employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates (excluding TPG Capital, L.P. (but not excluding any future, current or former employee, director, officer, manager or consultant)) or Immediate Family Members), of the Borrower, any Subsidiaries of the Borrower, any
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Parent Entity of the Borrower or any other entity in which the Borrower or a Restricted Subsidiary has an Investment and is designated in good faith as an affiliate by the board of directors of the Borrower (or the compensation committee thereof), in each case pursuant to any stock subscription or shareholders agreement, management equity plan or stock option plan or any other management or employee benefit plan or agreement shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Borrower or any of its Subsidiaries or in order to satisfy applicable statutory or regulatory obligations or as a result of such employees, directors, officers, managers or consultants termination, death or disability. For the purposes hereof, the aggregate principal amount of Disqualified Stock shall be deemed to be equal to the greater of its voluntary or involuntary liquidation preference and maximum fixed repurchase price, determined on a consolidated basis in accordance with GAAP, and the maximum fixed repurchase price of any Disqualified Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which the Consolidated Total Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined reasonably and in good faith by the Borrower.
Dollar and $ mean lawful money of the United States.
Domestic Subsidiary means any direct or indirect Subsidiary of the Borrower that is organized under the Laws of the United States, any state thereof or the District of Columbia (other than any such Subsidiary that is treated as a disregarded entity for United States Federal income tax purposes and substantially all of whose assets consist (directly or indirectly through disregarded entities) of the Equity Interests and/or Indebtedness of one or more CFCs).
EBITDA means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period:
(a) increased (without duplication) by the following, in each case (other than clauses (ix) and (xii)) to the extent deducted (and not added back) in determining Consolidated Net Income for such period:
(i) provision for taxes based on income or profits or capital, including, without limitation, federal, state, provincial, franchise, excise and similar taxes and foreign withholding taxes (including any future taxes or other levies which replace or are intended to be in lieu of such taxes and any penalties and interest related to such taxes or arising from tax examinations) and the net tax expense associated with any adjustments made pursuant to clauses (a) through (o) of the definition of Consolidated Net Income; plus
(ii) Fixed Charges of such Person for such period (including (x) net losses on Hedging Obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, net of interest income and gains with respect to such obligations, (y) costs of surety bonds in connection with financing activities and (z) amounts excluded from Consolidated Interest Expense as set forth in clauses (a)(t) through (z) in the definition thereof); plus
(iii) Consolidated Depreciation and Amortization Expense of such Person for such period; plus
(iv) the amount of any restructuring charges, accruals or reserves; plus
(v) any other non-cash charges, including (A) any write offs or write downs reducing Consolidated Net Income for such period, (B) equity-based awards compensation expense, (C) losses on sales, disposals or abandonment of, or any impairment charges or asset write-down or write-off related to, intangible assets, long-lived assets and investments in debt and equity securities and (D) all losses from investments recorded using the equity method (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof, in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period) (collectively, Non-Cash Charges); plus
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(vi) the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-Wholly Owned Subsidiary; plus
(vii) the amount of management, monitoring, consulting and advisory fees (including termination and transaction fees) and related indemnities and expenses paid or accrued in such period under the Management Fee Agreement or otherwise to investors to the extent otherwise permitted under Section 7.08; plus
(viii) the amount of extraordinary, nonrecurring or unusual losses (including all fees and expenses relating thereto) or expenses, Transaction Expenses, integration costs, transition costs, pre-opening, opening, consolidation and closing costs for facilities, costs incurred in connection with any strategic initiatives, costs or accruals or reserves incurred in connection with acquisitions after the Closing Date, other business optimization expenses (including costs and expenses relating to business optimization programs and new systems design and implementation costs), restructuring costs (including those incurred in connection with cost-savings pursuant to clause (ix) below and under Section 1.07) and curtailments or modifications to pension and postretirement employee benefit plans; plus
(ix) the amount of run-rate cost savings and synergies projected by the Borrower in good faith to result from actions either taken or expected to be within 12 months after the end of such period (which cost savings and synergies shall be subject only to certification by management of the Borrower and calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of such period), net of the amount of actual benefits realized from such actions (it is understood and agreed that run-rate means the full recurring benefit that is associated with any action taken or expected to be taken; provided that some portion of such benefit is expected to be realized within 12 months of taking such action) (which adjustments may be incremental to pro forma cost savings adjustments made pursuant to Section 1.07); plus
(x) the amount of loss on sale of receivables, Securitization Assets and related assets to any Securitization Subsidiary in connection with a Qualified Securitization Facility; plus
(xi) any costs or expense incurred by the Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan, agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Equity Interest of the Borrower (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation of the Available Amount; plus
(xii) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of EBITDA pursuant to clause (b) below for any previous period and not added back; plus
(xiii) any net loss from disposed or discontinued operations;
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(b) decreased (without duplication) by the following, in each case to the extent included in determining Consolidated Net Income for such period:
(i) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period; plus
(ii) any non-cash gains with respect to cash actually received in a prior period unless such cash did not increase EBITDA in such prior period; plus
(iii) any net income from disposed or discontinued operations; plus
(iv) extraordinary gains and unusual or non-recurring gains (less all fees and expenses relating thereto); and
(c) increased or decreased (without duplication) by, as applicable, any adjustments resulting from the application of FASB Accounting Standards Codification 460, Guarantees.
Notwithstanding anything to the contrary contained herein, for purposes of determining EBITDA under this Agreement for any period that includes any of the fiscal quarters ended March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013, consolidated EBITDA for such fiscal quarters shall be $54,771,000, $75,111,000, $85,215,000 and $103,861,000, respectively, in each case, as may be subject to add-backs and adjustments (without duplication) with respect to acquisitions and Dispositions occurring prior to, on and following the Closing Date as contemplated pursuant to clauses (a)(viii) and (a)(ix) of this definition for the applicable Test Period. For the avoidance of doubt, EBITDA shall be calculated, including pro forma adjustments, in accordance with Section 1.07.
ECF Percentage has the meaning specified in Section 2.03(b)(i).
Eligible Assignee has the meaning specified in Section 10.07(a).
EMU means the economic and monetary union as contemplated in the Treaty on European Union.
Environment means ambient air, indoor air, surface water, groundwater, drinking water, soil, surface and sub-surface strata, and natural resources such as wetlands, flora and fauna.
Environmental Laws means all applicable laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating to the protection of the environment, the preservation or reclamation of natural resources, the management, transportation, disposal, Release or threatened Release of any Hazardous Material or to health and safety matters (to the extent related to the exposure to any Hazardous Material).
Environmental Liability means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary 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 in writing pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Environmental Permit means any permit, approval, identification number, license or other authorization required under any Environmental Law.
Equal Priority Intercreditor Agreement means that certain Intercreditor and Collateral Agency Agreement dated as of May 28, 2010 among Holdings, the Borrower and The Bank of New York Mellon, as collateral agent and trustee with respect to the Senior Notes.
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Equity Interests means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.
ERISA Affiliate means any trade or business (whether or not incorporated) that together with any Loan Party is treated as a single employer within the meaning of Section 414 of the Code or Section 4001 of ERISA.
ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any of their respective ERISA Affiliates 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 a termination under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any of their respective ERISA Affiliates from a Multiemployer Plan, written notification of any Loan Party or any of their respective ERISA Affiliates concerning the imposition of withdrawal liability or written notification that a Multiemployer Plan is insolvent or is in reorganization within the meaning of Title IV of ERISA; (d) the filing under Section 4041(c) of ERISA of a notice of intent to terminate a Pension Plan, the treatment of a Pension Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement in writing of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) the imposition of any liability under Title IV of ERISA with respect to the termination of any Pension Plan or Multiemployer Plan, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any of their respective ERISA Affiliates; (f) 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; (g) a failure to satisfy the minimum funding standard (within the meaning of Section 302 of ERISA or Section 412 of the Code) with respect to a Pension Plan, whether or not waived; (h) the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Pension Plan, (i) the imposition of a lien under Section 303(k) of ERISA or Section 412(c) of the Code with respect to any Pension Plan; (j) a determination that any Pension Plan is in at risk status (within the meaning of Section 303 of ERISA or Section 430 of the Code); or (k) the occurrence of a nonexempt prohibited transaction with respect to any Pension Plan maintained or contributed to by any Loan Party or any of their respective ERISA Affiliates (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could result in liability to any Loan Party.
euro means the single currency of participating member states of the EMU.
Eurodollar Rate means:
(a) for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to (i) the Ice Benchmark Administration Limited LIBOR Rate (LIBOR) or a comparable or successor rate, which rate is approved by the Administrative Agent, as published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, or (ii) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by the Administrative Agents London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period; and
(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) LIBOR, at approximately 11:00 a.m., London time, determined two (2) Business Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the
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rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in Same Day Funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by the Administrative Agents London Branch to major banks in the London interbank eurodollar market at their request at the date and time of determination;
provided that in no event shall the Eurodollar Rate for the Initial Term Loans that bear interest at a rate based on clauses (a) and (b) of this definition be less than 1.00%.
Eurodollar Rate Loan means a Loan that bears interest at a rate based on clause (a) of the definition of Eurodollar Rate.
Event of Default has the meaning specified in Section 8.01.
Excess Cash Flow means, for any period, an amount equal to the excess of:
(a) the sum, without duplication, of:
(i) Consolidated Net Income of the Borrower for such period,
(ii) an amount equal to the amount of all Non-Cash Charges (including depreciation and amortization) to the extent deducted in arriving at such Consolidated Net Income, but excluding any such Non-Cash Charges representing an accrual or reserve for potential cash items in any future period and excluding amortization of a prepaid cash item that was paid in a prior period,
(iii) decreases in Consolidated Working Capital (except as a result of the reclassification of items from short-term to long-term or vice versa) for such period (other than any such decreases arising from acquisitions or Dispositions outside the ordinary course of assets, business units or property by the Borrower or any Restricted Subsidiary completed during such period or the application of recapitalization or purchase accounting),
(iv) an amount equal to the aggregate net non-cash loss on Dispositions by the Borrower and the Restricted Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income,
(v) the amount deducted as tax expense in determining Consolidated Net Income to the extent in excess of cash taxes paid in such period, and
(vi) cash receipts in respect of Hedging Obligations during such fiscal year to the extent not otherwise included in such Consolidated Net Income; over
(b) the sum, without duplication, of:
(i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income (but excluding any non-cash credit to the extent representing the reversal of an accrual or reserve described in clause (a)(ii) above) and cash losses, charges, expenses, costs and fees excluded by virtue of clauses (a) through (o) of the definition of Consolidated Net Income,
(ii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Capital Expenditures, Capitalized Software Expenditures or acquisitions of intellectual property accrued or made in cash during such period, in each case except to the extent financed with the proceeds of Funded Debt (other than any Indebtedness under any revolving credit facilities) of the Borrower or any Restricted Subsidiary,
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(iii) the aggregate amount of all principal payments of Indebtedness of the Borrower and the Restricted Subsidiaries (including (A) the principal component of payments in respect of Capitalized Lease Obligations, (B) all scheduled principal repayments of Loans, Senior Notes, Senior Subordinated Notes (or any Indebtedness representing Refinancing Indebtedness in respect thereof in accordance with the corresponding provisions of the governing documentation thereof), Permitted Incremental Equivalent Debt and Credit Agreement Refinancing Indebtedness, in each case to the extent such payments are permitted hereunder and actually made and (C) the amount of any scheduled repayment of Term Loans pursuant to Section 2.05 and mandatory prepayment of Term Loans pursuant to Section 2.03(b)(ii), Senior Notes, Senior Subordinated Notes (or any Indebtedness representing Refinancing Indebtedness in respect thereof in accordance with the corresponding provisions of the governing documentation thereof), and any mandatory redemption, repurchase, prepayment or defeasance of Permitted Incremental Equivalent Debt or Credit Agreement Refinancing Indebtedness pursuant to the corresponding provisions of the governing documentation thereof, in each case, to the extent required due to a Disposition or Casualty Event that resulted in an increase to Consolidated Net Income for such period and not in excess of the amount of such increase, but excluding (X) all other prepayments of Term Loans, (Y) all prepayments in respect of the ABL Credit Agreement or any other revolving credit facility, except to the extent there is an equivalent permanent reduction in commitments thereunder and (Z) payments on any Junior Financing, except in each case to the extent permitted to be paid pursuant to Section 7.06) made during such period, in each case, except to the extent financed with the proceeds of Funded Debt (other than any Indebtedness under any revolving credit facilities) of the Borrower or the Restricted Subsidiaries,
(iv) an amount equal to the aggregate net non-cash gain on Dispositions by the Borrower and the Restricted Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income and the net cash loss on Dispositions to the extent otherwise added to arrive at Consolidated Net Income,
(v) increases in Consolidated Working Capital (except as a result of the reclassification of items from short term to long-term or vice versa) for such period (other than any such increases arising from acquisitions or Dispositions outside the ordinary course by the Borrower and the Restricted Subsidiaries during such period or the application of recapitalization or purchase accounting),
(vi) cash payments by the Borrower and the Restricted Subsidiaries during such period in respect of long-term liabilities of the Borrower and the Restricted Subsidiaries (other than Indebtedness) to the extent such payments are not expensed during such period or are not deducted in calculating Consolidated Net Income,
(vii) without duplication of amounts deducted pursuant to clauses (viii) and (xi) below in prior fiscal years, the amount of Investments made in cash pursuant to clauses (c), (e), (k), (l), (m), (n), (o), (x), (y) and (aa) of the definition of Permitted Investments and pursuant to Section 7.06(a), (b)(x) and (b)(xv) during such period, except to the extent such Investments were financed with the proceeds of Funded Debt (other than any Indebtedness under any revolving credit facilities) of the Borrower or any Restricted Subsidiary,
(viii) the amount of Restricted Payments paid in cash during such period pursuant to Section 7.06(a) and clauses (i), (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii) and (xiv) of Section 7.06(b), except to the extent such Restricted Payments were financed with the proceeds of Funded Debt (other than any Indebtedness under any revolving credit facilities) of the Borrower or any Restricted Subsidiary,
(ix) the aggregate amount of expenditures actually made by the Borrower and the Restricted Subsidiaries from internally generated cash flow of the Borrower and the Restricted Subsidiaries during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period or are not deducted in calculating Consolidated Net Income,
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(x) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and the Restricted Subsidiaries during such period that are made in connection with any prepayment or redemption of Indebtedness to the extent such payments are not expensed during such period or are not deducted in calculating Consolidated Net Income and such payments reduced Excess Cash Flow pursuant to clause (b)(iii) above or reduced the mandatory prepayment required by Section 2.03(b)(i),
(xi) without duplication of amounts deducted from Excess Cash Flow in prior periods, and at the option of the Borrower, the aggregate consideration required to be paid in cash by the Borrower or any of the Restricted Subsidiaries pursuant to binding contracts (the Contract Consideration) entered into prior to or during such period relating to Permitted Investments or other Investments permitted by Section 7.06, capital expenditures or acquisitions of intellectual property to be consummated or made during the period of four consecutive fiscal quarters of the Borrower following the end of such period; provided that, to the extent the aggregate amount of internally generated cash flow actually utilized to finance such Permitted Investments or other Investments permitted by Section 7.06, capital expenditures or acquisitions of intellectual property during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters,
(xii) the amount of cash taxes paid or tax reserves set aside or payable (without duplication) in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period,
(xiii) cash expenditures in respect of Hedging Obligations during such fiscal year to the extent not deducted in arriving at such Consolidated Net Income, and
(xiv) any fees, expenses or charges incurred during such period (including, for purposes of the Excess Cash Flow payment to be calculated in respect of each full fiscal quarter in the fiscal year ending December 31, 2014 occurring after the Closing Date, any Transaction Expenses and expenses related to the Hercules Transactions incurred on and after the Closing Date), or any amortization thereof for such period, in connection with any acquisition, Investment, Disposition, incurrence or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of this Agreement, the other Loan Documents, the ABL Credit Documents, the Senior Notes Documents and the Senior Subordinated Notes Documents) and including, in each case, any such transaction consummated prior to the Closing Date and any such transaction undertaken but not completed, and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Excluded Assets has the meaning given to such term in the Security Agreement.
Excluded Capital Stock means (a) any Capital Stock with respect to which the Borrower and the Administrative Agent have reasonably determined that the costs (including any costs resulting from material adverse tax consequences) of pledging such Equity Interests shall be excessive in view of the benefits to be obtained by the Secured Parties therefrom, (b) solely in the case of any pledge of Capital Stock of any Foreign Subsidiary to secure the Obligations, any Capital Stock that is voting Capital Stock of such Foreign Subsidiary in excess of 65% of the outstanding voting Capital Stock of such class, (c) any Capital Stock to the extent the pledge thereof would be prohibited by any applicable law, rule or regulation or contractual obligation, (d) the Capital Stock of any Subsidiary that is not wholly owned by the Borrower and its Subsidiaries at the time such Subsidiary becomes a Subsidiary (for
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so long as such Subsidiary remains a non-wholly owned Subsidiary), (e) the Capital Stock of any Subsidiary whose assets, as reflected on their most recent balance sheet prepared in accordance with GAAP, and revenues for the twelve-month period ending on the last day of the most recent fiscal quarter for which financial statements are available, do not exceed $1,000,000, (f) the Capital Stock of any Subsidiary of a Foreign Subsidiary and (g) the Capital Stock of any Unrestricted Subsidiary. Notwithstanding anything in this definition to the contrary, the Capital Stock of the Borrower, Am-Pac and Tire Pros Francorp. shall not be deemed Excluded Capital Stock under this Agreement or the Collateral Documents.
Excluded Contract means at any date any rights or interest of the Borrower or any Guarantor in any property or assets or under any agreement, contract, license, lease, instrument, document or other general intangible or, in the case of any investment property, under any applicable equity holder or similar agreement (referred to solely for purposes of this definition as a Contract) to the extent that such Contract by the terms of a restriction in favor of a Person who is not the Borrower or any Guarantor, or any requirement of law, prohibits, or requires any consent or establishes any other condition for or could our would be terminated, abandoned, invalidated, rendered unenforceable, or would be breached or defaulted under because of an assignment thereof or a grant of a security interest therein by the Borrower or a Guarantor; provided that: (i) rights to payment under any such Contract otherwise constituting an Excluded Contract by virtue of this definition shall be included in the Collateral to the extent permitted thereby or by Section 9-406 or Section 9-408 of the Uniform Commercial Code and (ii) all proceeds paid or payable to any of the Borrower or any Guarantor from any sale, transfer or assignment of such contract and all rights to receive such proceeds shall be included in the Collateral.
Excluded Contribution means net cash proceeds, marketable securities or Qualified Proceeds received by the Borrower after the Closing Date from:
(a) contributions to its common equity capital; and
(b) the sale (other than to a Subsidiary of the Borrower or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Borrower) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Borrower;
in each case designated as Excluded Contributions pursuant to a certificate executed by a Financial Officer of the Borrower on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation of the Available Amount.
Excluded Equipment means at any date any equipment or other assets or property of the Borrower or any Guarantor which is subject to, or secured by, a Capitalized Lease Obligation or a purchase money obligation if and to the extent that (i) a restriction in favor of a Person who is not the Borrower or a Restricted Subsidiary or has been incurred pursuant to clause (e) of the definition of Permitted Indebtedness contained in the agreements or documents granting or governing such Capitalized Lease Obligation or purchase money obligation or other obligation under clause (e) of the definition of Permitted Indebtedness prohibits, or requires any consent or establishes any other conditions for or would or could be terminated, abandoned, invalidated, rendered unenforceable, or would be breached or defaulted under such agreement or document because of an assignment thereof, or a grant of a security interest therein, by the Borrower or any Guarantor and (ii) such restriction relates only to the asset or assets acquired by the Borrower or any Guarantor with the proceeds of such Capitalized Lease Obligation or purchase money obligation or other obligation under clause (e) of the definition of Permitted Indebtedness and attachments and accessions thereto, improvements thereof or substitutions therefor; provided that all proceeds paid or payable to any of the Borrower or any Guarantor from any sale, transfer or assignment or other voluntary or involuntary disposition of such assets and all rights to receive such proceeds shall be included in the Collateral to the extent not otherwise required to be paid to the holder of any Capitalized Lease Obligations or purchase money obligations or other obligations under clause (e) of the definition of Permitted Indebtedness secured by such assets.
Excluded Information has the meaning specified in the definition of Big Boy Letter.
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Excluded Proceeds means the proceeds of long-term Indebtedness (other than revolving credit facilities) or the Net Cash Proceeds of the issuance of Equity Interests or other amounts not included in the calculation of Excess Cash Flow.
Excluded Taxes means, with respect to each Agent and each Lender, (i) any tax on such Agent or Lenders net income or profits (or franchise tax in lieu of such tax on net income or profits) imposed by a jurisdiction as a result of such Agent or Lender being organized or having its principal office or applicable Lending Office located in such jurisdiction or as a result of any other present or former connection between such Agent or Lender and the jurisdiction (including as a result of such Agent or Lender carrying on a trade or business, having a permanent establishment or being a resident for tax purposes in such jurisdiction, other than a connection arising solely from such Agent or Lender having executed, delivered, enforced, 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 sold or assigned an interest in any Loan or Loan Document, any Loan Documents), (ii) any branch profits tax under Section 884(a) of the Code, or any similar tax, imposed by any other jurisdiction described in clause (i), (iii) other than any Foreign Lender becoming a party hereto pursuant to the Borrowers request under Section 3.07, any U.S. federal withholding tax that is imposed on amounts payable to a Foreign Lender pursuant to a Law in effect at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) (or where the Foreign Lender is a partnership for U.S. federal income tax purposes, pursuant to a law in effect on the later of the date on which such Foreign Lender becomes a party hereto or the date on which the affected partner becomes a partner of such Foreign Lender), except, in the case of a Foreign Lender that designates a new Lending Office or is an assignee, to the extent that such Foreign Lender (or its assignor, if any) was entitled, immediately prior to the time of designation of a new Lending Office (or assignment), to receive additional amounts from a Loan Party with respect to such U.S. federal withholding tax pursuant to Section 3.01, (iv) any withholding tax attributable to a Lenders failure to comply with Section 3.01(c), or (v) any U.S. federal withholding tax imposed under FATCA and (vi) any interest, additions to taxes and penalties with respect to any taxes described in clauses (i) through (v) of this definition.
Existing Term Loan Class has the meaning specified in Section 2.14(a).
Extended Term Loan Commitment means a Commitment to provide an Extended Term Loan.
Extended Term Loans has the meaning specified in Section 2.14(a).
Extending Term Lender has the meaning specified in Section 2.14(b).
Extension means the establishment of an Term Loan Extension Series by amending a Loan pursuant to Section 2.14 and the applicable Extension Amendment.
Extension Amendment has the meaning specified in Section 2.14(c).
Extension Election has the meaning specified in Section 2.14(b).
Facility means the Initial Term Loans, a given Class of Other Term Loans, a given Term Loan Extension Series of Extended Term Loans, a given Class of Incremental Term Loans or a given Class of Replacement Loans, as the context may require.
fair market value means, with respect to any asset or liability, the fair market value of such asset or liability as determined by the Borrower in good faith.
FATCA means Sections 1471 through 1474 of the Code as in effect on the date hereof or any amended or successor version thereof that is substantively comparable and not materially more onerous to comply with (and, in each case, any regulations promulgated thereunder or official interpretations thereof), and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
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Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent.
Financial Officer means, with respect to a Person, the chief financial officer, accounting officer, treasurer, controller or other senior financial or accounting officer of such Person.
First Lien Obligations means the Obligations, the obligations under the Senior Notes Documents, any Permitted Incremental Equivalent Debt (other than any Permitted Incremental Equivalent Debt that is unsecured or is secured by a Lien on the Collateral ranking junior to the Lien on the Collateral securing the Obligations (but without regard to control of remedies)) and any Permitted Equal Priority Refinancing Debt, collectively.
Fixed Charge Coverage Ratio means, with respect to the Borrower and the Restricted Subsidiaries for any period, the ratio of EBITDA of the Borrower and the Restricted Subsidiaries for such period to the Fixed Charges of the Borrower and the Restricted Subsidiaries for such period.
Fixed Charges means, with respect to any Person for any period, the sum of, without duplication:
(a) Consolidated Interest Expense of such Person for such period;
(b) all cash dividends or other cash distributions paid (excluding items eliminated in consolidation) on any series of Preferred Stock during such period; and
(c) all dividends or other distributions paid or accrued (excluding items eliminated in consolidation) on any series of Disqualified Stock during such period.
Flood Insurance Laws means, collectively, (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statute thereto, (iii) the National Flood Insurance Reform Act of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto.
Foreign Casualty Event has the meaning specified in Section 2.03(b)(vi).
Foreign Disposition has the meaning specified in Section 2.03(b)(vi).
Foreign Lender means a Lender that is not a United States person within the meaning of Section 7701(a)(30) of the Code.
Foreign Plan means any employee benefit plan, program or agreement maintained or contributed to by, or entered into with, the Borrower or any Subsidiary of the Borrower with respect to employees employed outside the United States (other than benefit plans, programs or agreements that are mandated by applicable Laws).
Foreign Subsidiary means any direct or indirect Restricted Subsidiary of the Borrower that is not a Domestic Subsidiary.
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Fund means any Person (other than a natural person) that is primarily engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.
Funded Debt means all Indebtedness of the Borrower and the Restricted Subsidiaries for borrowed money that matures more than one year from the date of its creation or matures within one year from such date that is renewable or extendable, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including Indebtedness in respect of the Loans.
GAAP means generally accepted accounting principles in the United States, as in effect on May 28, 2010; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower request an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof (including through the adoption of IFRS) on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof (including through the adoption of IFRS), then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.
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).
Granting Lender has the meaning specified in Section 10.07(g).
guarantee means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.
Guarantee means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
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Guarantor means Holdings and each Subsidiary Guarantor (which, on the Closing Date, shall include each Subsidiary of the Borrower listed on Schedule 1.01).
Guarantor Joinder Agreement means a Guarantor Joinder Agreement substantially in the form of Exhibit E or any other form approved by the Administrative Agent.
Guaranty means the guaranty made by Holdings and the Subsidiary Guarantors in favor of the Administrative Agent on behalf of the Secured Parties pursuant to Article XI.
Hazardous Materials means all explosive or radioactive substances or wastes, and all other substances, wastes, pollutants and contaminants and chemicals in any form including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas and infectious or medical wastes, to the extent any of the foregoing are regulated pursuant to any Environmental Law.
Hedging Obligations means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement or other derivative (including equity derivative agreements) for the purpose of transferring or mitigating interest rate, currency, commodity risks or equity risks either generally or under specific contingencies.
Hercules Acquisition means, the merger of ATD Merger Sub II LLC, a Delaware limited liability company and wholly-owned Subsidiary of the Borrower, with and into Hercules Holdings and the subsequent merger of Hercules Holdings with and into the Borrower, with the Borrower as the surviving legal entity of such merger.
Hercules Holdings means Hercules Tire Holdings LLC, a Delaware limited liability company.
Hercules Transactions means, collectively, (a) the Hercules Acquisition, (b) the effectiveness and/or funding of additional revolving commitments under the ABL Credit Agreement on the date of the consummation of the Hercules Acquisition and the related amendments to the ABL Credit Agreement, (c) the issuance of Senior Subordinated Notes in an aggregate principal amount of $225,000,000 and the related amendments to the Senior Subordinated Notes Documents, (d) consummation of any other transactions in connection with the foregoing, and (e) the payment of the fees and expenses incurred in connection with any of the foregoing.
Holdings means (a) Holdings (as defined in the introductory paragraph to this Agreement or (b) any of the following Persons: (i) Holdings and its direct Subsidiaries, if any, on the Closing Date that are not the Borrower, (ii) any Successor Holdings or (iii) any other Person or Persons (the New Holdings), other than the Borrower, that is a Subsidiary of (or are Subsidiaries of) an the Borrower (or the previous New Holdings, as the case may be) and a direct parent of the Borrower (the Previous Holdings); provided that (A) such New Holdings directly or indirectly owns 100% of the Equity Interests of the Borrower, (B) the New Holdings shall expressly assume all the obligations of the Previous Holdings under this Agreement and the other Loan Documents pursuant to a supplement hereto or thereto in form and substance reasonably satisfactory to the Administrative Agent, (C) the New Holdings shall have delivered to the Administrative Agent a certificate of a Responsible Officer stating that such substitution and any supplements to the Loan Documents preserve the enforceability of the Guaranty and the perfection and priority of the Liens under the Collateral Documents, (D) if reasonably requested by the Administrative Agent, an opinion of counsel in form and substance reasonably satisfactory to the Administrative Agent shall be delivered by the Borrower to the Administrative Agent to the effect that, without limitation, such substitution does not violate this Agreement or any other Loan Document, (E) the Capital Stock of the Borrower owned by, and substantially all of the other assets of, the Previous Holdings are contributed or otherwise transferred to such New Holdings or other Holdings and pledged to secure the Obligations and (F) Event of Default has occurred and is continuing at the time of such substitution and such substitution does not result in any Event of Default or material tax liability; provided, further, that if each of the foregoing is satisfied, the Previous Holdings shall be automatically released from all its obligations under the Loan Documents and any reference to Holdings in the Loan Documents shall be meant to refer to the New Holdings.
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Identified Participating Lenders has the meaning specified in Section 2.03(a)(iv)(C)(3).
Identified Qualifying Lenders has the meaning specified in Section 2.03(a)(iv)(D)(3).
IFRS means international accounting standards as promulgated by the International Accounting Standards Board.
Immediate Family Members means with respect to any individual, such individuals child, stepchild, grandchild or more remote descendant, parent, stepparent, grandparent, spouse, former spouse, qualified domestic partner, sibling, mother-in-law, father-in-law, son-in-law and daughter-in-law (including adoptive relationships) and any trust, partnership or other bona fide estate-planning vehicle the only beneficiaries of which are any of the foregoing individuals or any private foundation or fund that is controlled by any of the foregoing individuals or any donor-advised fund of which any such individual is the donor.
Incremental Amendment has the meaning specified in Section 2.12(f).
Incremental Facility Closing Date has the meaning specified in Section 2.12(d).
Incremental Loan Request has the meaning specified in Section 2.12(a).
Incremental Term Commitments has the meaning specified in Section 2.12(a).
Incremental Term Lender has the meaning specified in Section 2.12(c).
Incremental Term Loan has the meaning specified in Section 2.12(b).
Indebtedness means, with respect to any Person, without duplication:
(a) any indebtedness (including principal and premium) of such Person, whether or not contingent:
(i) in respect of borrowed money;
(ii) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers acceptances (or, without duplication, reimbursement agreements in respect thereof);
(iii) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations) due more than twelve months after such property is acquired, except (i) any such balance that constitutes an obligation in respect of a commercial letter of credit, a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business and (ii) any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and is not paid after becoming due and payable; or
(iv) representing the net obligations under any Hedging Obligations;
if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP; provided that Indebtedness of any Parent Entity of the Borrower appearing upon the balance sheet of the Borrower solely by reason of push-down accounting under GAAP shall be excluded;
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(b) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (a) of this definition of a third Person (whether or not such items would appear upon the balance sheet of the such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and
(c) to the extent not otherwise included, the obligations of the type referred to in clause (a) of this definition of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;
provided that notwithstanding the foregoing, Indebtedness shall be deemed not to include (a) Contingent Obligations incurred in the ordinary course of business or (b) obligations under or in respect of Qualified Securitization Facilities.
Indemnified Liabilities has the meaning specified in Section 10.05.
Indemnitees has the meaning specified in Section 10.05.
Information has the meaning specified in Section 10.08.
Initial Term Loans means the Term Loans made by the Lenders on the Closing Date to the Borrower pursuant to Section 2.01.
Intercompany Note means the Intercompany Note dated as of May 28, 2010 executed by Holdings, the Borrower and each Restricted Subsidiary of the Borrower party thereto.
Intercreditor Agreements means the Crossing Lien Intercreditor Agreement, the Equal Priority Intercreditor Agreement and any Customary Intercreditor Agreement.
Interest Payment Date means, (a) as to any Loan of any Class other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the applicable Maturity Date of the Loans of such Class; provided that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan of any Class, the last Business Day of each March, June, September and December and the applicable Maturity Date of the Loans of such Class.
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 months thereafter, or to the extent consented to by each applicable Lender, nine or twelve months (or such period of less than one month as may be consented to by each applicable Lender), as selected by the Borrower in its Committed Loan Notice; provided that:
(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period (other than an Interest Period having a duration of less than one month) 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
(c) no Interest Period shall extend beyond the applicable Maturity Date for the Class of Loans of which such Eurodollar Rate Loan is a part.
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Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB- (or the equivalent) by S&P or, if the applicable instrument is not then rated by Moodys or S&P, an equivalent rating by any other Rating Agency.
Investment Grade Securities means:
(a) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);
(b) debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Borrower and their Subsidiaries;
(c) investments in any fund that invests exclusively in investments of the type described in clauses (a) and (b) which fund may also hold immaterial amounts of cash pending investment or distribution; and
(d) corresponding instruments in countries other than the United States customarily utilized for high quality investments.
Investments means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, credit card and debit card receivables, trade credit, advances to customers and distributors, commission, travel and similar advances to employees, directors, officers, managers, distributors and consultants in each case made in the ordinary course of business), and purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person. For purposes of the definitions of Permitted Investments and Unrestricted Subsidiary and Section 7.06:
(a) Investments shall include the portion (proportionate to the Borrowers Equity Interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Borrower at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Borrower shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary in an amount (if positive) equal to:
(i) the Borrowers Investment in such Subsidiary at the time of such redesignation; less
(ii) the portion (proportionate to the Borrowers Equity Interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and
(b) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer.
The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received in cash by the Borrower or any Restricted Subsidiary in respect of such Investment.
IP Rights has the meaning specified in Section 5.15.
IRS means Internal Revenue Service of the United States.
Junior Financing has the meaning specified in the definition of Restricted Payment.
Junior Financing Documentation means any documentation governing any Junior Financing.
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Latest Maturity Date means, at any date of determination, the latest maturity or expiration date applicable to any Loan or Commitment hereunder at such time, including the latest maturity or expiration date of any Initial Term Loan, any Incremental Term Loan, any Other Term Loan, any Replacement Loan or any Extended Term Loan, in each case as extended in accordance with this Agreement from time to time.
Laws means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities and executive orders, 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.
LCA Election has the meaning specified in Section 1.10.
LCA Test Date has the meaning specified in Section 1.10.
Lender has the meaning specified in the introductory paragraph to this Agreement and, as context requires, includes their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender. For avoidance of doubt, each Additional Lender is a Lender to the extent any such Person has executed and delivered a Refinancing Amendment, an Incremental Amendment or an amendment in respect of Replacement Loans, as the case may be, and to the extent such Refinancing Amendment, Incremental Amendment or amendment in respect of Replacement Loans shall have become effective in accordance with the terms hereof and thereof, and each Extending Term Lender shall continue to be a Lender. As of the Closing Date, Schedule 2.01 sets forth the name of each Lender.
Lending Office means, as to any Lender, the office or offices of such Lender described as such in such Lenders Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.
LIBOR has the meaning specified in the definition of Eurodollar Rate.
Lien means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.
Limited Condition Acquisition means any acquisition by one or more of the Borrower and its Restricted Subsidiaries of any assets, business or Person permitted by this Agreement whose consummation is not conditioned on the availability of, or on obtaining, third party financing.
Loan means an extension of credit under Article II by a Lender to the Borrower in the form of a Term Loan.
Loan Documents means, collectively, (a) this Agreement, (b) the Term Notes, (c) any Refinancing Amendment, Incremental Amendment, Extension Amendment or amendment in respect of Replacement Loans, (d) the Guaranty, (e) the Collateral Documents and (f) the Intercreditor Agreements.
Loan Parties means, collectively, (a) Holdings, (b) the Borrower and (c) each Subsidiary Guarantor.
Management Fee Agreement means, collectively, (a) the transaction and monitoring fee letter agreement between the Borrower and the Sponsor dated as of May 28, 2010, pursuant to which the Sponsor agrees to provide certain advisory services to Holdings and the Borrower in exchange for certain fees and (b) the indemnification agreement among Accelerate Holdings Corp., Holdings, the Borrower and the Sponsor dated as of May 28, 2010.
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Management Stockholders means, means the management officers or employees of the Borrower or its Subsidiaries who are investors in Holdings or any Parent Entity thereof.
Margin Stock has the meaning set forth in Regulation U of the Board of Governors of the United States Federal Reserve System, or any successor thereto.
Material Adverse Effect means a material adverse effect on (a) the business, assets, operations or financial condition of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower and the other Loan Parties (taken as a whole) to perform their obligations under the Loan Documents or (c) the rights of, or remedies available to the Agents or the Lenders under the Loan Documents.
Material Subsidiary means, as of the Closing Date and thereafter at any date of determination, each Restricted Subsidiary of the Borrower (a) whose Total Assets as of the last day of the Test Period most recently ended on or prior to such date of determination were equal to or greater than 5.00% of Total Assets at such date or (b) whose gross revenues for such Test Period were equal to or greater than 5.00% of the consolidated gross revenues of the Borrower and the Restricted Subsidiaries for such Test Period, in each case determined in accordance with GAAP; provided that if at any time Restricted Subsidiaries that are Domestic Subsidiaries but not Guarantors solely because they do not meet the thresholds set forth in clauses (a) or (b) comprise in the aggregate more than 5.00% of Total Assets as of the last day of the Test Period most recently ended on or prior to such date of determination or more than 5.00% of the consolidated gross revenues of the Borrower and the Restricted Subsidiaries for such Test Period, then the Borrower shall, not later than forty-five (45) days after the date by which financial statements for such quarter are required to be delivered pursuant to this Agreement (or such longer period as the Administrative Agent may agree in its reasonable discretion), (i) designate in writing to the Administrative Agent one or more of such Restricted Subsidiaries that are Domestic Subsidiaries as Material Subsidiaries to the extent required such that the foregoing condition ceases to be true and (ii) comply with the provisions of Section 6.11 applicable to such Subsidiary.
Maturity Date means (i) with respect to the Initial Term Loans that have not been extended pursuant to Section 2.14, June 1, 2018 (the Original Term Loan Maturity Date), (ii) with respect to any Class of Extended Term Loans, the final maturity date as specified in the applicable Extension Amendment, (iii) with respect to any Other Term Loans, the final maturity date as specified in the applicable Refinancing Amendment, (iv) with respect to any Class of Replacement Loans, the final maturity date as specified in the applicable amendment to this Agreement in respect of such Replacement Loans and (v) with respect to any Incremental Loan, the final maturity date as specified in the applicable Incremental Amendment; provided, in each case, that if such day is not a Business Day, the applicable Maturity Date shall be the Business Day immediately succeeding such day.
Maximum ABL Facility Amount means the sum of (i) the Revolving Commitments (as defined in the ABL Credit Agreement) under the ABL Credit Agreement as in effect on the Closing Date plus (ii) any additional Revolving Commitment Increases (as defined in the ABL Credit Agreement) permitted to be incurred pursuant to Section 2.23 of the ABL Credit Agreement as in effect on the Closing Date.
Maximum Rate has the meaning specified in Section 10.10.
MNPI has the meaning specified in Section 6.02.
Moodys means Moodys Investors Service, Inc. and any successor to its rating agency business.
Mortgage Policies has the meaning specified in the definition of Real Property Collateral Requirements.
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Mortgaged Properties has the meaning specified in the definition of Real Property Collateral Requirement.
Mortgages means collectively, means any mortgage, deed of trust or other agreement entered into by the owner of a Mortgaged Property and the Collateral Agent, which conveys or evidences a Lien in favor of the Collateral Agent, for the benefit of the Lenders, on such Mortgaged Property, substantially in the form of Exhibit O (with such changes thereto as may be necessary to account for local law matters) or otherwise in such form as agreed between the Borrower and the Collateral Agent.
Multiemployer Plan means any multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA in respect of which a Borrower or any ERISA Affiliate is an employer (as defined in Section 3(5) of ERISA.
Net Cash Proceeds means:
(a) with respect to the Disposition of any asset by the Borrower or any of the Restricted Subsidiaries or any Casualty Event, the excess, if any, of (i) the sum of gross cash proceeds received in connection with such Disposition or Casualty Event (including any cash and Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received and, with respect to any Casualty Event, any insurance proceeds or condemnation awards in respect of such Casualty Event actually received by or paid to or for the account of the Borrower or any of the Restricted Subsidiaries) over (ii) the sum of (A) the principal amount, premium or penalty, if any, interest, breakage costs and other amounts on any Indebtedness that is secured by the asset subject to such Disposition or Casualty Event and required to be repaid in connection with such Disposition or Casualty Event (other than Indebtedness under the Loan Documents, the Senior Notes Documents, Credit Agreement Refinancing Indebtedness and Permitted Incremental Equivalent Debt), (B) the out-of-pocket fees and expenses (including attorneys fees, accountants fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees) actually incurred by the Borrower or such Restricted Subsidiary in connection with such Disposition or Casualty Event (other than those payable to the Borrower or any Restricted Subsidiary), (C) taxes or distributions made pursuant to Section 7.06(b)(xiii)(A) or Section 7.06(b)(xiii)(B) paid or reasonably estimated to be payable in connection therewith (including taxes imposed on the distribution or repatriation of any such Net Cash Proceeds), (D) in the case of any Disposition or Casualty Event by a non-wholly owned Restricted Subsidiary, the pro rata portion of the Net Cash Proceeds thereof (calculated without regard to this clause (D)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Restricted Subsidiary as a result thereof, and (E) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Borrower or any Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, it being understood that Net Cash Proceeds shall include the amount of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in this clause (E); provided that (x) no net cash proceeds calculated in accordance with the foregoing realized in a single transaction or series of related transactions shall constitute Net Cash Proceeds unless such net cash proceeds shall exceed $15,000,000 and (y) no such net cash proceeds shall constitute Net Cash Proceeds under this clause (a) in any fiscal year until the aggregate amount of all such net cash proceeds in such fiscal year shall exceed $25,000,000 (and thereafter only net cash proceeds in excess of such amount shall constitute Net Cash Proceeds under this clause (a)); and
(b) (i) with respect to the incurrence or issuance of any Indebtedness by the Borrower or any Restricted Subsidiary or any Permitted Equity Issuance by the Borrower or any Parent Entity of the Borrower, the excess, if any, of (A) the sum of the cash and Cash Equivalents received in connection with such incurrence or issuance over (B) all taxes paid or reasonably estimated to be payable, and all fees (including investment banking fees, underwriting fees and discounts), commissions, costs and other out-of-pocket expenses and other customary expenses incurred, by the Borrower or such Restricted
36
Subsidiary in connection with such incurrence, sale or issuance and (ii) with respect to any Permitted Equity Issuance by any Parent Entity of the Borrower, the amount of cash from such Permitted Equity Issuance contributed to the capital of the Borrower.
Net Income means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.
Non-Cash Charges has the meaning specified in the definition of EBITDA.
Non-Consenting Lender has the meaning specified in Section 3.07.
Non-Excluded Taxes means all 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.
Non-Loan Party means any Subsidiary of the Borrower that is not a Loan Party.
Notes Collateral has the meaning ascribed to Collateral in the Senior Notes Indenture.
Obligations means 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, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and any of their Subsidiaries to the extent they have obligations under the Loan Documents) include the obligation (including guarantee obligations) to pay principal, interest, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by any Loan Party under any Loan Document.
OFAC has the meaning specified in Section 5.18.
Offered Amount has the meaning specified in Section 2.03(a)(iv)(D)(1).
Offered Discount has the meaning specified in Section 2.03(a)(iv)(D)(1).
OID means original issue discount.
Organizational 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.
Original Term Loan Maturity Date has the meaning specified in the definition of Maturity Date.
Other Applicable Indebtedness has the meaning specified in Section 2.03(b)(ii)(A).
Other Taxes means any and all present or future stamp or documentary Taxes or any other similar excise or property Taxes arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.
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Other Term Loan Commitments means one or more Classes of Term Loan commitments hereunder that result from a Refinancing Amendment.
Other Term Loans means one or more Classes of Term Loans that result from a Refinancing Amendment.
Outstanding Amount means as of any date, the outstanding principal amount of Term Loans after giving effect to any borrowings and prepayments or repayments thereof occurring on such date.
Overnight Rate means, for any day, the greater of (a) the Federal Funds Rate and (b) an overnight rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
Parent Entity means any Person that is a direct or indirect parent (which may be organized as, among other things, a partnership) of Holdings and/or the Borrower (for the avoidance of doubt, in the case of the Borrower, including Holdings), as applicable.
Participant has the meaning specified in Section 10.07(d).
Participant Register has the meaning specified in Section 10.07(e).
Participating Lender has the meaning specified in Section 2.03(a)(iv)(C)(2).
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 any Loan Party or any of their respective ERISA Affiliates or to which any Loan Party or any of their respective ERISA Affiliates 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 in the preceding five plan years.
Perfection Certificate has the meaning specified in the Security Agreement.
Permitted Acquisition has the meaning specified in the definition of Permitted Investments.
Permitted Equal Priority Refinancing Debt means any secured Indebtedness incurred by the Borrower and/or any Guarantor in the form of one or more series of senior secured notes, bonds or debentures (and, if applicable, any Registered Equivalent Notes issued in exchange therefor); provided that (i) such Indebtedness is secured by Liens on all or a portion of the Collateral on a basis that is equal in priority to the Liens on the Collateral securing the Obligations (but without regard to the control of remedies) and is not secured by any property or assets of the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness satisfies the applicable requirements set forth in the provisos to the definition of Credit Agreement Refinancing Indebtedness, (iii) such Indebtedness is not at any time guaranteed by any Subsidiary of the Borrower other than Subsidiaries that are Guarantors and (iv) the Borrower, the holders of such Indebtedness (or their Senior Representative) and the Administrative Agent and/or Collateral Agent shall be party to a Customary Intercreditor Agreement providing that the Liens on the Collateral securing such obligations shall rank equal in priority to the Liens on the Collateral securing the Obligations (but without regard to the control of remedies).
Permitted Equity Issuance means any sale or issuance of any Equity Interests (other than Disqualified Stock) of the Borrower or any Parent Entity thereof, in each case to the extent permitted hereunder.
Permitted Holder means any of (a) the Sponsor, (b) the Management Stockholders and (c) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided that, in the case of such group and without giving effect to the
38
existence of such group or any other group, such Sponsor and Management Stockholders, collectively, have beneficial ownership of more than 50.0% of the total voting power of the Voting Stock of the Borrower or any of its direct or indirect parent companies.
Permitted Incremental Equivalent Debt means Indebtedness issued, incurred or otherwise obtained by the Borrower and/or any Guarantor in respect of one or more series of senior unsecured notes, senior secured equal priority or junior priority notes or subordinated notes (in each case issued in a public offering, Rule 144A or other private placement or bridge financing in lieu of the foregoing (and any Registered Equivalent Notes issued in exchange therefor)), junior lien or unsecured loans or secured or unsecured mezzanine Indebtedness that, in each case, if secured, will be secured by Liens on the Collateral that rank on an equal priority or junior priority basis with the Liens on Collateral securing the Obligations, and that are issued or made in lieu of Incremental Term Commitments; provided that (i) the aggregate principal amount of all Permitted Incremental Equivalent Debt shall not exceed the Available Incremental Amount, (ii) such Permitted Incremental Equivalent Debt shall not be subject to any Guaranty by any Person other than a Loan Party, (iii) in the case of Permitted Incremental Equivalent Debt that is secured, the obligations in respect thereof shall not be secured by any Lien on any asset of the Borrower or any Restricted Subsidiary other than any asset constituting Collateral, (iv) if such Permitted Incremental Equivalent Debt is secured, such Permitted Incremental Equivalent Debt shall be subject to an applicable Customary Intercreditor Agreement, (v) the terms of such Permitted Incremental Equivalent Debt do not provide for any scheduled amortization or mandatory repayment, mandatory redemption, mandatory offer to purchase or sinking fund obligation prior to the date that is 91 days after the Latest Maturity Date at the time of incurrence, issuance or obtainment of such Permitted Incremental Equivalent Debt, other than customary prepayments, repurchases or redemptions of or offers to prepay, redeem or repurchase upon a change of control, asset sale event or casualty or condemnation event, customary prepayments, redemptions or repurchases or offers to prepay, redeem or repurchase based on excess cash flow (in the case of loans) and customary acceleration rights upon an event of default and (vi) notwithstanding clause (i) above, any Permitted Incremental Equivalent Debt which is to be unsecured shall not be required to comply with the test set forth in Section 2.12(d)(iii)(B), but rather shall not exceed an amount such that the Senior Net Leverage Ratio does not exceed 4.00 to 1.00 or in the case of any Permitted Incremental Equivalent Debt which is to be secured such that the Secured Net Leverage Ratio does not exceed 4.00 to 1.00, in each case, as of the end of the Test Period most recently ended on or prior to such date of issuance, incurrence or obtaining after giving pro forma effect to such Permitted Incremental Equivalent Debt and any Incremental Term Commitments (assuming the cash proceeds of any Permitted Incremental Equivalent Debt are not netted in the calculation of Consolidated Total Indebtedness for purposes of calculating the Senior Net Leverage Ratio or Secured Net Leverage Ratio, as applicable); and, provided, further, that Permitted Incremental Equivalent Debt may be incurred in the form of a bridge or other interim credit facility intended to be refinanced or replaced with long-term indebtedness (so long as such credit facility includes customary rollover provisions), in which case, on or prior to the first anniversary of the incurrence of such bridge or other credit facility, clause (v) of the first proviso in this definition shall not prohibit the inclusion of customary terms for bridge facilities, including customary mandatory prepayment, repurchase or redemption provisions.
Permitted Incremental Equivalent Debt Documents means any document or instrument (including any guarantee, security agreement or mortgage and which may include any or all of the Loan Documents) issued or executed and delivered with respect to any Permitted Incremental Equivalent Debt by any Loan Party.
Permitted Incremental Equivalent Debt Obligations means, if any secured Permitted Incremental Equivalent Debt has been incurred or issued and is outstanding, all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any applicable Permitted Incremental Equivalent Debt Documents, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
Permitted Incremental Equivalent Debt Secured Parties means the holders from time to time of any secured Permitted Incremental Equivalent Debt Obligations (and any Senior Representative on their behalf).
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Permitted Indebtedness means:
(a) [Reserved];
(b) the incurrence of Indebtedness pursuant to the Loan Documents;
(c) the incurrence of Indebtedness pursuant to:
(i) Credit Facilities; provided that the aggregate principal amount of Indebtedness outstanding pursuant to this clause (c)(i) does not exceed an amount equal to the greater of (A) the Maximum ABL Facility Amount and (B) the Borrowing Base at the time such debt is incurred,
(ii) the Senior Notes Documents;
(iii) the Senior Subordinated Notes Documents; and
(iv) any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) Indebtedness described in clauses (i) through (iii) above (and any Refinancing Indebtedness in respect thereof);
(d) Indebtedness of the Borrower and the Restricted Subsidiaries in existence on the Closing Date and set forth on Schedule 7.03 and any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof);
(e) Indebtedness (including Capitalized Lease Obligations) incurred or issued by the Borrower or any Restricted Subsidiary to finance the purchase, lease or improvement of property (real or personal), equipment or other assets, including assets that are used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets in an aggregate principal amount not to exceed (as of the date such Indebtedness is issued, incurred or otherwise obtained) the greater of (A) $65,000,000 and (B) 2.50% of Total Assets, and any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof);
(f) Indebtedness incurred by the Borrower or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit, bank guarantees, bankers acceptances, warehouse receipts, or similar instruments issued or created in the ordinary course of business, including letters of credit 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, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance; provided that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;
(g) Indebtedness arising from agreements of the Borrower or any Restricted Subsidiary providing for indemnification, adjustment of purchase price, earnouts or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition;
(h) Indebtedness of the Borrower owing to a Restricted Subsidiary; provided that any such Indebtedness owing to any Restricted Subsidiary that is not a Loan Party is expressly subordinated to the Obligations pursuant to the Intercompany Note; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Borrower or
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another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien (but not foreclosure thereon)) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (h);
(i) Indebtedness of a Restricted Subsidiary owing to the Borrower or another Restricted Subsidiary to the extent constituting a Permitted Investment or an Investment otherwise permitted by Section 7.06; provided that any such Indebtedness owing by a Loan Party to a Restricted Subsidiary that is not a Loan Party is expressly subordinated to the Obligations pursuant to the Intercompany Note; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary that is the lender ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Borrower or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien (but not foreclosure thereon)) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (i);
(j) [Reserved];
(k) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of (i) limiting interest rate risk with respect to any Indebtedness permitted to be incurred hereunder, (ii) fixing or hedging currency exchange rate risk with respect to any currency exchanges, or (iii) fixing or hedging commodity price risk with respect to any commodity purchases or sales;
(l) obligations in respect of self-insurance and obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any Restricted Subsidiary or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business, including (but not limited to) those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(m) (i) Indebtedness of the Borrower or any Restricted Subsidiary in an aggregate principal amount up to 100.0% of the Net Cash Proceeds received by the Borrower since immediately after the Closing Date from the issue or sale of Equity Interests of the Borrower or cash contributed to the capital of the Borrower (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Borrower or any Subsidiary thereof) as determined in accordance with clause (c) of the definition of Available Amount to the extent such Net Cash Proceeds or cash have not been applied pursuant to such clause to make Restricted Payments or to make other Investments, payments or exchanges permitted by Section 7.06 or to make Permitted Investments (other than Permitted Investments specified in clauses (a), (b) and (c) of the definition thereof) and Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness, and (ii) Indebtedness of the Borrower or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount that, when aggregated with the principal amount of all other Indebtedness then outstanding and incurred pursuant to this clause (m)(ii), does not exceed (as of the date such Indebtedness is issued, incurred or otherwise obtained) the greater of (A) $70,000,000 and (B) 4.75% of Total Assets, and Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof) (it being understood that any Indebtedness incurred pursuant to this clause (m) shall cease to be deemed incurred or outstanding for purposes of this clause (m) but shall be deemed incurred for the purposes of clause (bb) below from and after the first date on which the Borrower or such Restricted Subsidiary could have incurred such Indebtedness under Section 7.03 without reliance on this clause (m));
(n) Vendor Debt, advances and similar financings in a an aggregate principal amount not to exceed $50,000,000;
(o) Indebtedness constituting Permitted Incremental Equivalent Debt and any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof);
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(p) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of its incurrence;
(q) Indebtedness of the Borrower or any Restricted Subsidiary supported by a letter of credit that is incurred under clause (c)(i) of this definition, in a principal amount not in excess of the stated amount of such letter of credit;
(r) (i) any guarantee by the Borrower or a Restricted Subsidiary of Indebtedness of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under Section 7.03, Section 7.06 or the definition of Permitted Investments and (ii) any guarantee by a Restricted Subsidiary of Indebtedness of the Borrower or a Restricted Subsidiary;
(s) Indebtedness issued by the Borrower or any Restricted Subsidiary to future, present or former employees, directors, officers, managers and consultants thereof, their respective Controlled Investment Affiliates or Immediate Family Members, in each case to finance the purchase or redemption of Equity Interests of the Borrower or any Parent Entity thereof to the extent described in Section 7.06(b)(iv);
(t) customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;
(u) Indebtedness in respect of Cash Management Obligations, Cash Management Services and other Indebtedness in respect of netting services, automatic clearing house arrangements, employees credit or purchase cards, overdraft protections and similar arrangements in each case incurred in the ordinary course of business;
(v) Indebtedness incurred by a Restricted Subsidiary in connection with bankers acceptances, discounted bills of exchange or the discounting or factoring of receivables for credit management purposes, in each case incurred or undertaken in the ordinary course of business on arms length commercial terms on a recourse basis;
(w) Indebtedness of the Borrower or any Restricted Subsidiary consisting of (a) the financing of insurance premiums or (b) take-or-pay obligations contained in supply arrangements in each case, incurred in the ordinary course of business;
(x) (A) the incurrence of Indebtedness of the Foreign Subsidiaries of the Borrower in an amount not to exceed (as of the date such Indebtedness is incurred or committed) the greater of (i) $35,000,000 and (ii) 1.50% of Total Assets and (B) the incurrence of Indebtedness of the Foreign Subsidiaries of the Borrower in an amount not to exceed at any one time outstanding the Borrowing Base of such Foreign Subsidiaries, and any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof);
(y) (i) Indebtedness incurred, issued or assumed in connection with any Permitted Acquisition or other acquisition in an amount not to exceed the sum of (A) $20,000,000 and (B) an additional amount such that that after giving pro forma effect to such Permitted Acquisition or other acquisition and the assumption, incurrence or issuance of such Indebtedness incurred pursuant to this clause (y):
(A) at least $1.00 of Permitted Ratio Debt would be permitted to be incurred; or
(B) the Fixed Charge Coverage Ratio (following such Permitted Acquisition or other acquisition and the assumption, incurrence or issuance of such Indebtedness) would be equal to or greater than the Fixed Charge Coverage Ratio in effect immediately prior to such Permitted Acquisition or other acquisition and such assumption, incurrence or issuance of such Indebtedness;
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(C) the Consolidated Net Leverage Ratio (following such Permitted Acquisition or other acquisition and the assumption, incurrence or issuance of such Indebtedness) (x) would not exceed 5.00 to 1.00 or (y) would be less than the Consolidated Net Leverage Ratio immediately prior to such Permitted Acquisition or other acquisition and such assumption, incurrence or issuance of such Indebtedness; and
(ii) any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof);
(z) Indebtedness of the Borrower or any Restricted Subsidiary undertaken in connection with cash management and related activities with respect to any Subsidiary or joint venture in the ordinary course of business;
(aa) Indebtedness constituting Credit Agreement Refinancing Indebtedness and any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness;
(bb) Indebtedness constituting Permitted Ratio Debt and any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) such Indebtedness (and any Refinancing Indebtedness in respect thereof);
(cc) Indebtedness consisting of obligations of the Borrower or any Restricted Subsidiary under deferred compensation or other similar arrangements with employees incurred by such Person in connection with the Transactions, the Hercules Transactions, any Permitted Acquisition or any other Investment or other acquisition permitted hereunder; and
(dd) Indebtedness representing deferred compensation to employees of the Borrower (or any Parent Entity thereof) or any Restricted Subsidiary incurred in the ordinary course of business.
Permitted Investments means:
(a) any Investment (i) in any Loan Party, (ii) by any Restricted Subsidiary that is a Non-Loan Party in any other Restricted Subsidiary that is a Non-Loan Party and (iii) by any Loan Party in any Restricted Subsidiary that is a Non-Loan Party; provided that the aggregate amount of Investments (other than as a result of the transfer of Equity Interests or Indebtedness of any Restricted Subsidiary that is a Non-Loan Party to any other Restricted Subsidiary that is a Non-Loan Party) outstanding at any time pursuant to the immediately preceding subclause (iii), together with, but without duplication of, Investments made by any Loan Party in any Non-Loan Party pursuant to clause (c) below, shall not exceed the greater of (x) $35,000,000 and (y) 1.50% of Total Assets;
(b) any Investment in, or that at the time of making such Investment was, Cash Equivalents or Investment Grade Securities;
(c) any Investment (each such Investment, a Permitted Acquisition) by the Borrower or any Restricted Subsidiary in a Person that is engaged in a business permitted pursuant to Section 7.07 if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary; or (b) such Person, in one transaction or a series of related transactions, is amalgamated, merged or consolidated with or into, or transfers or conveys substantially all of its assets (or assets constituting a business unit, a line of business or a division of such Person) to, or such Person is liquidated into, the Borrower or a Restricted Subsidiary provided, that the aggregate amount of Investments made by Loan Parties in Persons that do not become Loan Parties pursuant to this clause (c), together with, but without duplication of, Investments by any Loan
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Party in any Non-Loan Party pursuant to clause (a) above, shall not exceed an aggregate amount outstanding from time to time equal to the greater of $35,000,000 and 1.50% of Total Assets; and, in each case, any Investment held by such Person; provided further, that such Investment was not acquired by such Person in contemplation of such acquisition, merger, amalgamation, consolidation or transfer; provided further that with respect to each Permitted Acquisition described in this clause (c):
(A) the Borrower shall comply with Section 6.11 and Section 7.12 to the extent applicable;
(B) immediately before and immediately after giving pro forma effect to any such Investment under this clause (c), no Event of Default under Section 8.01(a) or (f) shall have occurred and be continuing at the time of entry into the definitive documentation pursuant to which the Permitted Acquisition was consummated; and
(C) the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the Borrower, on behalf of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this clause (c) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition;
(d) any Investment in securities or other assets not constituting Cash Equivalents or Investment Grade Securities and received in connection with a Disposition made pursuant to Section 7.05 or any other disposition of assets not constituting a Disposition;
(e) any Investment existing, or contemplated, on the Closing Date or made pursuant to binding commitments in effect on the Closing Date, in each of the foregoing cases, as set forth on Schedule 7.06, or an Investment consisting of any extension, replacement, reinvestment, modification or renewal of any such Investment or binding commitment existing, or contemplated, on the Closing Date; provided that the amount of any such Investment may be increased in such extension, replacement, reinvestment, modification or renewal only (a) as required by the terms of such Investment or binding commitment as in existence, or contemplated, on the Closing Date (including as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities) or (b) as otherwise permitted under this Agreement;
(f) any Investment acquired by the Borrower or any Restricted Subsidiary:
(i) 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;
(ii) in exchange for any other Investment, accounts receivable or indorsements for collection or deposit held by the Borrower or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of, or settlement of delinquent accounts and disputes with or judgments against, the issuer of such other Investment, accounts receivable or endorsements for collection or deposit (including any trade creditor or customer);
(iii) in satisfaction of judgments against other Persons;
(iv) as a result of a foreclosure by the Borrower or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; or
(v) as a result of the settlement, compromise or resolution of litigation, arbitration or other disputes with Persons who are not Affiliates;
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(g) Hedging Obligations permitted under Section 7.03;
(h) Investments the payment for which consists of Equity Interests (other than Disqualified Stock) of the Borrower or any Parent Entity thereof; provided that the proceeds from such Equity Interests will not increase the Available Amount;
(i) guarantees of Indebtedness of the Borrower or a Restricted Subsidiary permitted under Section 7.03, performance guarantees and Contingent Obligations (other than in respect of Indebtedness) incurred in the ordinary course of business and the creation of Liens on the assets of the Borrower or any Restricted Subsidiary in compliance with Section 7.01;
(j) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of Section 7.08 (except transactions described in clause (b) of the first proviso in such Section);
(k) Investments consisting of (i) purchases or other acquisitions of inventory, supplies, material or equipment or (ii) the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;
(l) [Reserved];
(m) Investments in or relating to a Securitization Subsidiary that, in the good faith determination of the Borrower are necessary or advisable to effect any Qualified Securitization Facility or any repurchase obligation in connection therewith;
(n) loans and advances to, or guarantees of Indebtedness of, employees, directors, officers, managers, distributors and consultants not in excess of $25,000,000 outstanding at any one time, in the aggregate;
(o) loans and advances to employees, directors, officers, managers, distributors and consultants for business-related travel expenses, moving expenses and other similar expenses or payroll advances, in each case incurred in the ordinary course of business or consistent with past practices or to any future or present employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any of its Subsidiaries or any of its Parent Entities to fund such Persons purchase of Equity Interests of any Parent Entity;
(p) advances, loans or extensions of trade credit in the ordinary course of business by the Borrower or any Restricted Subsidiary and any leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Borrower and the Restricted Subsidiaries, taken as a whole, or (ii) secure any Indebtedness;
(q) any Investment in any Subsidiary or any joint venture in connection with intercompany cash management arrangements or related activities arising in the ordinary course of business;
(r) Investments consisting of purchases and acquisitions of assets or services in the ordinary course of business;
(s) Investments made in the ordinary course of business in connection with obtaining, maintaining or renewing client contacts and loans or advances made to distributors in the ordinary course of business;
(t) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and similar deposits entered into as a result of the operations of the business in the ordinary course of business;
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(u) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection of deposit and Article 4 customary trade arrangements with customers consistent with past practices;
(v) guarantees by the Borrower or any Restricted Subsidiary of obligations of any Restricted Subsidiary in the ordinary course of business;
(w) Investments made by any Restricted Subsidiary that is not a Loan Party to the extent that such Investments are financed with the proceeds received by such Restricted Subsidiary from an Investment in such Restricted Subsidiary permitted by this Agreement;
(x) other Investments in an aggregate amount taken together with all other Investments made pursuant to this clause (x) not to exceed at any one time outstanding (as of the date such Investment is made) the greater of (a) $100,000,000 and (b) 5.00% of Total Assets;
(y) other Investments so long as immediately after giving effect to any Investment pursuant to this clause (y), the Consolidated Net Leverage Ratio as of the last day of the Test Period most recently ended on or prior to the date such Investment is made would be less than or equal to 4.50 to 1.00;
(z) Investments resulting from the Transactions and the Hercules Transactions; and
(aa) Investments in a Similar Business taken together with all other Investments made pursuant to this clause (aa) that are that time outstanding, not to exceed the greater of $50,000,000 and 2.00% of Total Assets.
Permitted Junior Priority Refinancing Debt means secured Indebtedness incurred by the Borrower and/or any Guarantor in the form of one or more series of junior lien secured notes, bonds or debentures or junior lien secured loans (and, if applicable, any Registered Equivalent Notes issued in exchange therefor); provided that (i) such Indebtedness is secured by a Lien on all or a portion of the Collateral ranking on a junior priority basis to the Liens on Collateral securing the Obligations and any other First Lien Obligations and is not secured by any property or assets of the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness satisfies the applicable requirements set forth in the provisos in the definition of Credit Agreement Refinancing Indebtedness (provided that such Indebtedness may be secured by a Lien on Collateral that ranks junior to the Liens on Collateral securing the Obligations and any other First Lien Obligations, notwithstanding any provision to the contrary contained in the definition of Credit Agreement Refinancing Indebtedness), (iii) the holders of such Indebtedness (or their Senior Representative) shall be party to a Customary Intercreditor Agreement providing that the Liens on Collateral securing such obligations shall rank junior to the Liens on Collateral securing the Obligations, and (iv) such Indebtedness is not at any time guaranteed by any Subsidiary of the Borrower other than Subsidiaries that are Guarantors.
Permitted Liens means, with respect to any Person:
(a) pledges, deposits or security by such Person under workers compensation laws, unemployment insurance, employers health tax, and other social security laws or similar or other insurance related obligations (including, but not limited to, in respect of deductibles, self-insured retention amounts and premiums and adjustments thereto) 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, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;
(b) Liens imposed by law, such as landlords, carriers, warehousemens, materialmens, repairmens and mechanics Liens, in each case for sums not yet overdue for a period of more than 30 days
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or being contested in good faith by appropriate actions and other Liens arising out of or securing judgments or awards against such Person (including for payment of money not constituting an Event of Default under Section 8.01(g)) with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if such Liens are adequately bonded or adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;
(c) Liens for Taxes, assessments or other governments charges not yet overdue for a period of more than 30 days or not yet payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;
(d) Liens in favor of issuers of performance, surety, bid, indemnity, warranty, release, appeal or similar bonds or with respect to other regulatory requirements or letters of credit or bankers acceptances issued, and completion guarantees provided for, in each case, issued pursuant to the request of and for the account of such Person in the ordinary course of its business or consistent with past practice prior to the Closing Date;
(e) (i) minor survey exceptions, minor encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights-of-way, servitudes, sewers, electric lines, drains, telegraph, telephone and cable television lines and other similar purposes, or zoning, building codes or other restrictions (including minor defects and irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially impair their use in the operation of the business of such Person and (ii) all matters shown on the Mortgage Policies (if any);
(f) Liens securing obligations relating to any Indebtedness permitted to be incurred pursuant to clause (e), (m)(ii), (x) or (y) of the definition of Permitted Indebtedness; provided that (a) Liens securing obligations relating to any Refinancing Indebtedness permitted to be incurred pursuant to clauses (e), (m)(ii) and (y) of the definition of Permitted Indebtedness relate only to obligations relating to Refinancing Indebtedness that (x) is secured by Liens on the same assets as the assets securing the Refinanced Indebtedness (other than after-acquired property that is (A) affixed or incorporated into the property covered by such Lien, (B) after-acquired property subject to a Lien securing such Indebtedness, the terms of which Indebtedness require or include a pledge of after-acquired property (it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition) and (C) the proceeds and products thereof) or (y) Refinances Indebtedness issued under clause (e) of the definition of Permitted Indebtedness, (b) Liens securing obligations relating to Indebtedness permitted to be incurred pursuant to clause (x) of the definition of Permitted Indebtedness extend only to the assets of Foreign Subsidiaries, (c) Liens securing obligations relating to any Indebtedness permitted to be incurred pursuant to clause (y) of the definition of Permitted Indebtedness are solely on acquired property or the assets of the acquired entity (other than after-acquired property that is (A) affixed or incorporated into the property covered by such Lien, (B) after-acquired property subject to a Lien securing such Indebtedness, the terms of which Indebtedness require or include a pledge of after-acquired property (it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition) and (C) the proceeds and products thereof), (d) Liens securing obligations relating to any Indebtedness to be incurred pursuant to clause (e) of the definition of Permitted Indebtedness extend only to the assets so purchased, leased or improved and any accessions or extensions thereof and customary security deposits and (e) in the case of consensual Liens on Collateral securing obligations under clause (m)(ii) of the definition of Permitted Indebtedness, at the election of the Borrower, the secured parties in respect of such Indebtedness (or a Senior Representative thereof on behalf of such holders) shall have entered into a Customary Intercreditor Agreement;
(g) Liens existing on the Closing Date or pursuant to agreements in existence on the Closing Date and, in each case, described on Schedule 7.01;
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(h) Liens on property or shares of stock or other assets of a Person at the time such Person becomes a Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, that such Liens may not extend to any other property or other assets owned by the Borrower or any Restricted Subsidiary (other than after-acquired property that is (A) affixed or incorporated into the property covered by such Lien, (B) except in the case of a Loan Party, after-acquired property subject to a Lien securing such Indebtedness, the terms of which Indebtedness require or include a pledge of after-acquired property (it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition) and (C) the proceeds and products thereof);
(i) Liens on property or other assets at the time the Borrower or a Restricted Subsidiary acquired the property or such other assets, including any acquisition by means of a merger, amalgamation or consolidation with or into the Borrower or any Restricted Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition, amalgamation, merger or consolidation; provided, further, that the Liens may not extend to any other property owned by the Borrower or any Restricted Subsidiary (other than after-acquired property that is (A) affixed or incorporated into the property covered by such Lien and (B) the proceeds and products thereof);
(j) Liens securing obligations relating to any Indebtedness or other obligations of a Restricted Subsidiary owing to the Borrower or another Restricted Subsidiary permitted to be incurred in accordance with Section 7.03;
(k) Liens securing Hedging Obligations; provided that, with respect to Hedging Obligations relating to Indebtedness, such Indebtedness is secured by a Lien on the same property securing such Hedging Obligations;
(l) Liens on specific items of inventory or other goods (other than tire inventory) and proceeds of any Person securing such Persons accounts payable or similar trade obligations in respect of bankers acceptances or trade letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(m) leases, sub-leases, licenses or sub-licenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Borrower and the Restricted Subsidiaries, taken as a whole, or (ii) secure any Indebtedness;
(n) Liens arising from Uniform Commercial Code (or equivalent statute) financing statement filings regarding operating leases or consignments entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business;
(o) Liens in favor of any Loan Party;
(p) Liens on accounts receivable, Securitization Assets and related assets incurred in connection with a Qualified Securitization Facility;
(q) Liens to secure any Refinancing (or successive Refinancing) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (g), (h) and (i); provided that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus accessions, additions and improvements on such property (and after-acquired property that is (A) affixed or incorporated into the property covered by such Lien, (B) after-acquired property subject to a Lien securing such Indebtedness, the terms of which Indebtedness require or include a pledge of after-acquired property (it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition) and (C) the proceeds and products thereof)), and (b) the Indebtedness secured by such Lien at such time is not increased by any amount greater than an amount necessary to pay any fees and expenses, including premiums and accrued and unpaid interest, related to such Refinancing;
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(r) deposits made or other security provided in the ordinary course of business to secure liability to insurance carriers;
(s) other Liens securing obligations in an aggregate amount not to exceed (as of the date any such Lien is incurred) the greater of (a) $35,000,000 and (b) 2.50% of Total Assets; provided that such Liens are subordinated to the Liens securing the Obligations in accordance with, and are otherwise subject to, the terms of the Crossing Lien Intercreditor Agreement or such other Customary Intercreditor Agreement which subordinates such Liens on the Collateral to the Liens on the Collateral securing the Obligations;
(t) Liens created in connection with Vendor Debt that encumber all or any part of the inventory supplied by such vendor and any books and records, documents and instruments, letter of credit rights and supporting obligations and any proceeds or products relating to such inventory, in each case existing on the Closing Date or hereafter created and existing;
(u) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(v) Liens (a) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (b) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (c) in favor of banking institutions arising as a matter of law or under general terms and conditions encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;
(w) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 7.06; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;
(x) Liens encumbering reasonable customary deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(y) Liens that are contractual rights of set-off (a) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (b) relating to pooled deposit or sweep accounts of the Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and the Restricted Subsidiaries or (c) relating to purchase orders and other agreements entered into with customers of the Borrower or any Restricted Subsidiary in the ordinary course of business;
(z) Liens securing obligations owed by Holdings, the Borrower or any Restricted Subsidiary to any lender, agent, arranger or any other Person under the Credit Facilities and the Senior Notes Documents (including, in either case, any Refinancing Indebtedness in respect thereof) or any Affiliate of such a lender, agent, arranger or other Person in respect of any Cash Management Obligations or Cash Management Services or Hedging Obligations, which Liens shall be subject to (i) in the case of Liens under Senior Notes Documents, the Equal Priority Intercreditor Agreement and (ii) in the case of Liens under Credit Facilities, the Crossing Lien Intercreditor Agreement;
(aa) any encumbrance or restriction (including put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;
(bb) Liens arising out of conditional sale, title retention, consignment or similar arrangements with vendors for the sale or purchase of goods (other than tire inventory) entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business;
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(cc) Liens solely on any cash earnest money deposits made by the Borrower or any Restricted Subsidiary in connection with any letter of intent or purchase agreement;
(dd) ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located;
(ee) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
(ff) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;
(gg) Liens on the assets of Restricted Subsidiaries that are not Loan Parties securing Indebtedness of such Subsidiaries that is permitted by Section 7.03;
(hh) Liens arising solely from precautionary UCC financing statements or similar filings;
(ii) Liens securing obligations under: (i) the Loan Documents to secure the Obligations or permitted in respect of any Mortgaged Property by the terms of the applicable Mortgage (including any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) the Indebtedness incurred under the Loan Documents (and any Refinancing Indebtedness in respect thereof), (ii) (x) Indebtedness outstanding pursuant to clause (c)(i) of the definition of Permitted Indebtedness so long as such Liens are subject to the terms of the Crossing Lien Intercreditor Agreement or an applicable Customary Intercreditor Agreement and (y) Indebtedness outstanding pursuant to clause (c)(ii) of the definition of Permitted Indebtedness so long as such Liens are subject to the terms of the Crossing Lien Intercreditor Agreement or an applicable Customary Intercreditor Agreement (including any Refinancing Indebtedness incurred, issued or otherwise obtained to Refinance (in whole or in part) Indebtedness described in clauses (x) and (y) above (and any Refinancing Indebtedness in respect thereof)), (iii) the documentation (including any Permitted Incremental Equivalent Debt Documents) governing any Indebtedness permitted to be incurred under clause (o) of the definition of Permitted Indebtedness (provided that such Liens do not extend to any assets that are not Collateral) and (iv) the documentation governing any Indebtedness permitted to be incurred pursuant to clause (aa) of the definition of Permitted Indebtedness (provided that such Liens do not extend to any assets that are not Collateral); provided that, (A) in the case of Liens on Collateral securing Permitted Incremental Equivalent Debt Obligations or Credit Agreement Refinancing Indebtedness that constitute First Lien Obligations pursuant to subclause (iii) or (iv) above, the applicable Permitted Incremental Equivalent Debt Secured Parties or parties to such Credit Agreement Refinancing Indebtedness (or a Senior Representative thereof on behalf of such holders) shall have entered into the Crossing Lien Intercreditor Agreement or a Customary Intercreditor Agreement which agreement shall provide that the Liens on Collateral securing such Permitted Incremental Equivalent Debt Obligations or Credit Agreement Refinancing Indebtedness shall rank equal in priority to the Liens on Collateral securing the Obligations (but without regard to control of remedies) and (B) in the case of Liens on Collateral securing Permitted Incremental Equivalent Debt Obligations or Credit Agreement Refinancing Indebtedness pursuant to subclause (iii) or (iv) above that rank junior to the Liens on the Collateral securing the Obligations and the Liens on the ABL Collateral, the applicable Permitted Incremental Equivalent Debt Secured Parties or parties to such Credit Agreement Refinancing Indebtedness (or a Senior Representative thereof on behalf of such holders) shall have entered into a Customary Intercreditor Agreement described in clause (c) of the definition thereof;
(jj) Liens to secure Indebtedness incurred pursuant to clause (bb) of the definition of Permitted Indebtedness; provided that the Secured Net Leverage Ratio for the Test Period most recently ended on or prior to such date of determination, calculated on a pro forma basis after giving effect to the incurrence of such Lien (and without netting any cash received from the incurrence of such Indebtedness), the related Indebtedness and the application of net proceeds therefrom would be no greater than 4.00 to 1.00; provided further that, (A) in the case of Liens on Collateral securing such Indebtedness that constitutes First Lien Obligations, the applicable parties to such Indebtedness (or a Senior Representative thereof on behalf of such holders) shall have entered into the Crossing Lien Intercreditor Agreement or a
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Customary Intercreditor Agreement which agreement shall provide that the Liens on Collateral securing such Indebtedness shall rank equal in priority to the Liens on Collateral securing the Obligations (but without regard to control of remedies)and (B) in the case of Liens on Collateral securing such Indebtedness that rank junior to the Liens on the Collateral securing the Obligations and the Liens on the ABL Collateral, the applicable parties to such Indebtedness (or a Senior Representative thereof on behalf of such holders) shall have entered into a Customary Intercreditor Agreement described in clause (c) of the definition thereof. Without any further consent of the Lenders, the Administrative Agent and the Collateral Agent shall be authorized to negotiate, execute and deliver on behalf of the Secured Parties any intercreditor agreement or any amendment (or amendment and restatement) to the Collateral Documents or a Customary Intercreditor Agreement to effect the provisions contemplated by this clause (jj);
(kk) Liens arising pursuant to Section 107(l) of the Comprehensive Environmental Response, Compensation and Liability Act or similar provision of any Environmental Law, unless (i) such Lien, by the action of the lienholder, or by operation of law, takes priority over any Lien filed pursuant to this Agreement or any other Loan Document on the property upon which it is a Lien, and (ii) the cost to the Borrower and the Restricted Subsidiaries, taken as a whole, of satisfying such Lien, in the aggregate with any other such Liens, would reasonably be expected to exceed $15,000,000, except to the extent the obligations relating to such Liens are not yet due and payable or such Liens are being contested in good faith by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP; and
(ll) Liens consisting of an agreement to Dispose of any property in a Disposition permitted under Section 7.05 to the extent such Disposition would have been permitted on the date of the creation of such Lien;
For purposes of this definition, the term Indebtedness shall be deemed to include interest on such Indebtedness.
Permitted Ratio Debt means, at any time, Indebtedness incurred or issued by the Borrower or any Restricted Subsidiary if the Fixed Charge Coverage Ratio for the Test Period most recently ended on or prior to such time would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom); provided, that Restricted Subsidiaries that are Non-Loan Parties may not incur or issue Indebtedness pursuant to this definition if, after giving pro forma effect to such incurrence or issuance as described above, the aggregate amount of Indebtedness of Non-Loan Parties incurred or issued pursuant to this definition then outstanding would exceed (as of the date such Indebtedness is issued, incurred or otherwise obtained) the greater of (x) $40,000,000 and (y) 1.75% of Total Assets.
Permitted Unsecured Refinancing Debt means unsecured Indebtedness incurred by the Borrower and/or the Guarantors in the form of one or more series of senior unsecured notes, bonds or debentures or loans (and, if applicable, any Registered Equivalent Notes issued in exchange therefor); provided that (i) such Indebtedness satisfies the applicable requirements set forth in the provisos in the definition of Credit Agreement Refinancing Indebtedness and (ii) such Indebtedness is not at any time guaranteed by any Subsidiary of the Borrower other than Subsidiaries that are Guarantors.
Person means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Plan means any material employee benefit plan (as such term is defined in Section 3(3) of ERISA), other than a Foreign Plan, established or maintained by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any of their respective ERISA Affiliates.
Platform has the meaning specified in Section 6.02.
Pounds shall mean the lawful currency of the United Kingdom.
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Preferred Stock means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.
Previously Absent Financial Maintenance Covenant means, at any time (x) any financial maintenance covenant that is not included in this Agreement at such time and (y) any financial maintenance covenant that is included in this Agreement at such time but with covenant levels and component definitions (to the extent relating to such financial maintenance covenant) in this Agreement that are less restrictive on the Borrower and the Restricted Subsidiaries than those in the applicable Incremental Amendment, Refinancing Amendment, Extension Amendment or amendment in respect of Replacement Loans or any documents relating to Credit Agreement Refinancing Indebtedness or Refinancing Indebtedness.
Pro Forma Balance Sheet has the meaning specified in Section 5.05(a)(ii).
Pro Forma Financial Statements has the meaning specified in Section 5.05(a)(ii).
Pro Rata Share means, with respect to each Lender at any time a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitments and, if applicable and without duplication, Term Loans of such Lender under the applicable Facility or Facilities at such time and the denominator of which is the amount of the Aggregate Commitments under the applicable Facility or Facilities and, if applicable and without duplication, Term Loans under the applicable Facility or Facilities at such time.
Projections has the meaning specified in Section 6.01(c).
Public Lender has the meaning specified in Section 6.02.
Qualified Proceeds means the fair market value of assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business.
Qualified Securitization Facility means any Securitization Facility that meets the following conditions: (a) the board of directors of the Borrower shall have determined in good faith that such Securitization Facility (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Borrower and the applicable Securitization Subsidiary, (b) all sales and/or contributions of Securitization Assets and related assets to the applicable Securitization Subsidiary are made at fair market value (as determined in good faith by the Borrower) and (c) the financing terms, covenants, termination events and other provisions thereof shall be market terms (as determined in good faith by the Borrower).
Qualifying IPO means the issuance by the Borrower, or any Parent Entity thereof, of its common Equity Interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering).
Qualifying Lender has the meaning specified in Section 2.03(a)(iv)(D)(3).
Quarterly Financial Statements means the unaudited consolidated balance sheets and the related statements of operations and cash flows for the fiscal quarters then ended, together with the notes of the Acquired Company and its Subsidiaries as of each fiscal quarter subsequent to December 31, 2013 and ended at least 45 days prior to the Closing Date.
Rating Agencies means Moodys and S&P or if Moodys or S&P or both shall not make a rating on the relevant obligations publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Borrower which shall be substituted for Moodys or S&P or both, as the case may be.
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Real Property Collateral Requirements means, with respect to each owned real property of the Borrower or any Subsidiary Guarantor, including each other parcel of real property and improvements thereto, for which a Mortgage is granted pursuant to Section 12.13 (each a Mortgaged Property), each of the following, in form and substance reasonably satisfactory to the Collateral Agent:
(a) a Mortgage on such Mortgaged Property;
(b) evidence that a counterpart of the Mortgage has been recorded or delivered to the appropriate title insurance company subject to arrangements reasonably satisfactory to the Collateral Agent for the prompt recording thereof;
(c) an ALTA or other mortgagees title policy or amendment thereto (or a marked unconditional binder thereof insuring the Lien of the Mortgage at ordinary rates) (the Mortgage Policies);
(d) an opinion of counsel in the state in which such Mortgaged Property is located as to the recordability and enforceability of the applicable Mortgage in the relevant jurisdiction; and
(e) a flood zone certificate in favor of the Collateral Agent, and, if any Mortgaged Property with improvements located thereon is being identified as being within a special flood hazard area, flood insurance in an amount required by applicable law.
Reference Rate means with respect to the calculation of the All-In Yield in the case of Loans of an applicable Class that includes a Eurodollar Rate floor, an interest rate per annum equal to the rate per annum equal to LIBOR, as published by Reuters (or such other commercially available source providing quotations of LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, on such day for Dollar deposits with a term of three months, or if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on such day with a term of three months would be offered by the Administrative Agents London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m., London time, on such date.
Refinance, Refinancing and Refinanced shall have the meanings provided in the definition of the term Refinancing Indebtedness.
Refinanced Indebtedness has the meaning provided in the definition of the term Refinancing Indebtedness.
Refinanced Loans has the meaning specified in Section 10.01.
Refinancing Amendment means an amendment to this Agreement in form and substance reasonably satisfactory to the Administrative Agent and the Borrower executed by each of (a) the Borrower, (b) the Administrative Agent and (c) each Additional Lender and Lender that agrees to provide any portion of the Other Term Loans or Other Term Loan Commitments being incurred or provided pursuant thereto, in accordance with Section 2.13.
Refinancing Indebtedness means, with respect to any Indebtedness (the Refinanced Indebtedness), any Indebtedness issued, incurred or otherwise obtained in exchange for or as a replacement of (including by entering into alternative financing arrangements in respect of such exchange or replacement (in whole or in part), including by adding or replacing lenders, creditors, agents, borrowers and/or guarantors, and including in each case, but not limited to, after the original instrument giving rise to such Indebtedness has been terminated and including, in each case, by entering into any credit agreement, loan agreement, note purchase agreement, indenture or other agreement), or the net proceeds of which are to be used for the purpose of modifying, extending, refinancing, renewing, replacing, redeeming, repurchasing, defeasing, amending, supplementing, restructuring, repaying or refunding (collectively to Refinance or a Refinancing or Refinanced), such Refinanced
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Indebtedness (or previous refinancing thereof constituting Refinancing Indebtedness); provided that (A) except to the extent otherwise permitted under this Agreement (subject to a dollar for dollar usage of any other basket set forth in the definition of Permitted Indebtedness, if applicable), the principal amount (or accreted value, if applicable) of any such Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Refinanced Indebtedness outstanding immediately prior to such Refinancing except by an amount equal to the unpaid accrued interest and premium (including any tender premiums) and penalties (if any) thereon plus other amounts paid and fees and expenses incurred in connection with such Refinancing plus an amount equal to any existing commitment unutilized and letters of credit undrawn thereunder, (B) if the Indebtedness being Refinanced is Indebtedness permitted by clauses (c), (d) and (o) of the definition of Permitted Indebtedness, the direct and contingent obligors with respect to such Refinancing Indebtedness are not changed (except that any Loan Party may be added as an additional direct or contingent obligor in respect of such Refinancing Indebtedness), (C) other than with respect to a Refinancing in respect of Indebtedness permitted pursuant to clause (e) of the definition of Permitted Indebtedness, such Refinancing Indebtedness shall have a final maturity date equal to or later than the final maturity date of, and shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Refinanced Indebtedness (without giving effect to any amortization or prepayments thereof prior to the time of such Refinancing) as of the date of determination, and (D) if the Indebtedness being Refinanced is Indebtedness permitted by clauses (d) and (o) of the definition of Permitted Indebtedness, the terms and conditions of any such Refinancing Indebtedness, taken as a whole, are no more restrictive on the Borrower than the terms and conditions of the Refinanced Indebtedness being Refinanced (including, if applicable, as to collateral priority and subordination, but excluding as to interest rates (including through fixed exchange rates), interest rate margins, rate floors, fees, funding discounts, original issue discount and redemption or prepayment terms and premiums (provided that such terms and conditions shall not be deemed to be more restrictive on the Borrower solely as a result of the inclusion in the documentation governing such Refinancing Indebtedness of a Previously Absent Financial Maintenance Covenant so long as the Administrative Agent shall have been given prompt written notice thereof and this Agreement is amended to include such Previously Absent Financial Maintenance Covenant for the benefit of each Facility (provided, however, that if (x) the documentation governing the Refinancing Indebtedness that includes a Previously Absent Financial Maintenance Covenant consists of a revolving credit facility (whether or not the documentation therefor includes any other facilities) and (y) such Previously Absent Financial Maintenance Covenant is a springing financial maintenance covenant, the Previously Absent Financial Maintenance Covenant shall not be required to be included in this Agreement for the benefit of any Term Facility hereunder and such Refinancing Indebtedness shall not be deemed less favorable to the Lenders solely as a result of such Previously Absent Financial Maintenance Covenant benefiting only such revolving credit facilities); provided that a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement in clause (D) shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees).
Refunding Capital Stock has the meaning specified in Section 7.06(b)(ii).
Register has the meaning specified in Section 10.07(c).
Registered Equivalent Notes means, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act, substantially identical notes (having the same Guarantees) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.
Rejection Notice has the meaning specified in Section 2.03(b)(v).
Related Indemnified Person of an Indemnitee means (1) any controlling Person or controlled Affiliate of such Indemnitee, (2) the respective directors, officers, or employees of such Indemnitee or any of its controlling Persons or controlled Affiliates and (3) the respective agents of such Indemnitee or any of its controlling Persons or controlled Affiliates, in the case of this clause (3), acting at the instructions of such Indemnitee, controlling Person or such controlled Affiliate; provided that each reference to a controlled Affiliate or controlling Person in this definition pertains to a controlled Affiliate or controlling Person involved in the negotiation of this
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Agreement or the syndication of the Facilities. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
Related Person means, with respect to any Person, (a) any Affiliate of such Person and (b) the respective directors, officers, employees, agents and other representatives of such Person or any of its Affiliates.
Release means any release, spill, emission, discharge, deposit, disposal, leaking, pumping, pouring, dumping, emptying, injection or leaching into the Environment.
Replacement Loans has the meaning specified in Section 10.01.
Reportable Event means, with respect to any Pension Plan, any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder, other than events for which the thirty (30) day notice period has been waived.
Required Facility Lenders means, as of any date of determination, with respect to one or more Facilities, Lenders having more than 50% of the sum of (a) the Total Outstandings under such Facility or Facilities and (b) the aggregate unused Commitments under such Facility or Facilities; provided that, to the same extent specified in Section 10.07(i) with respect to determination of Required Lenders, the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Facility Lenders unless the action in question affects such Affiliated Lender in a disproportionately adverse manner than its effect on the other Lenders.
Required Lenders means, as of any date of determination, Lenders having more than 50% of the sum of the (a) Total Outstandings and (b) aggregate unused Term Commitments; provided that the Loans of any Affiliated Lender shall in each case be excluded for purposes of making a determination of Required Lenders unless the action in question affects such Affiliated Lender in a disproportionately adverse manner than its effect on the other Lenders.
Responsible Officer means, with respect to a Person, the chief executive officer, chief operating officer, president, vice president, chief financial officer, treasurer or assistant treasurer or other similar officer or Person performing similar functions, of such Person. With respect to any document delivered by a Loan Party on the Closing Date, Responsible Officer includes any secretary or assistant secretary of such Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. Unless otherwise specified, all references herein to a Responsible Officer shall refer to a Responsible Officer of the Borrower.
Restricted Investment means any Investment other than any Permitted Investments.
Restricted Payment means (i) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of the Borrower or any Restricted Subsidiary (in each case, solely in such Persons capacity as holder of such Equity Interests) other than dividends or distributions (A) solely in Equity Interests (other than Disqualified Stock) of the Borrower or (B) by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a wholly owned Restricted Subsidiary, the applicable Loan Party or Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities, or any payment (other than a payment constituting a Permitted Investment) (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to the Borrowers or any Restricted Subsidiarys stockholders, partners or members
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(or the equivalent Persons thereof), (ii) any prepayment, redemption, purchase, defeasance or other satisfaction prior to the scheduled maturity thereof in any manner (it being understood that payments of regularly scheduled principal, interest and mandatory prepayments shall be permitted) of obligations under the Senior Subordinated Note Documents and any Refinancing thereof (other than Indebtedness constituting First Lien Obligations) or any other Subordinated Indebtedness of any Borrower or any Subsidiary Guarantor (collectively, Junior Financing) and (iii) any Restricted Investment.
Restricted Subsidiary means, at any time, any direct or indirect Subsidiary of the Borrower (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided that upon an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of Restricted Subsidiary.
S&P means Standard & Poors, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
Sale and Lease-Back Transaction means any arrangement providing for the leasing by the Borrower or any Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by the Borrower or such Restricted Subsidiary to a third Person in contemplation of such leasing.
Same Day Funds means disbursements and payments in immediately available funds.
SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Secured Indebtedness means any Indebtedness of the Borrower or any Restricted Subsidiary secured by a Lien.
Secured Net Leverage Ratio means the Consolidated Net Leverage Ratio but excluding from the numerator all Indebtedness described in clause (a)(1) of the definition of Consolidated Total Indebtedness other than Secured Indebtedness.
Secured Parties means, collectively, the Administrative Agent, the Lenders, each Supplemental Administrative Agent and each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.01 or 9.07.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
Securitization Assets means the accounts receivable, royalty and other similar rights to payment and any other assets related thereto subject to a Qualified Securitization Facility and the proceeds thereof.
Securitization Facility means any of one or more receivables securitization financing facilities as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, the Obligations of which are non-recourse (except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to the Borrower or any Restricted Subsidiary (other than a Securitization Subsidiary) pursuant to which the Borrower or any Restricted Subsidiary sells or grants a security interest in its accounts receivable or assets related thereto to either (a) a Person that is not a Restricted Subsidiary or (b) a Securitization Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.
Securitization Fees means distributions or payments made directly or by means of discounts with respect to any participation interest issued or sold in connection with, and other fees paid to a Person that is not a Securitization Subsidiary in connection with, any Qualified Securitization Facility.
Securitization Subsidiary means any Subsidiary formed for the purpose of, and that solely engages only in one or more Qualified Securitization Facilities and other activities reasonably related thereto.
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Security Agreement means, collectively, that certain Security Agreement dated as of the date hereof among the Collateral Agent and the grantors party thereto, together with supplements or joinders thereto executed and delivered pursuant to Section 6.11.
Senior Net Leverage Ratio means the Consolidated Net Leverage Ratio but excluding from the numerator all Indebtedness described in clause (a)(1) of the definition of Consolidated Total Indebtedness other than Indebtedness of the Borrower and the Restricted Subsidiaries that is not Subordinated Indebtedness.
Senior Notes means the Borrowers 9.750% Senior Secured Fixed Rate Notes due 2017, in an initial aggregate principal amount of $250,000,000.
Senior Notes Documents means the Senior Notes Indenture and all other instruments, agreements and other documents evidencing the Senior Notes or providing for any Guarantee or other right in respect thereof.
Senior Notes Indenture means the indenture under which the Senior Notes are issued.
Senior Representative means, with respect to any series of Indebtedness, the trustee, administrative agent, collateral agent, security agent or similar agent under the indenture or agreement pursuant to which such Indebtedness is issued, incurred or otherwise obtained, as the case may be, and each of their successors in such capacities.
Senior Subordinated Notes means the Borrowers 11.50% Senior Subordinated Notes due 2018, in an initial aggregate principal amount of $425,000,000.
Senior Subordinated Notes Documents means the Senior Subordinated Notes Indenture and all other instruments, agreements and other documents evidencing the Senior Subordinated Notes or providing for any Guarantee or other right in respect thereof.
Senior Subordinated Notes Indenture means the indenture under which the Senior Subordinated Notes are issued.
Similar Business means (1) any business engaged in by the Borrower or any Restricted Subsidiary on the Closing Date, and (2) any business or other activities that are reasonably similar, ancillary, complementary or related to, or a reasonable extension, development or expansion of, the businesses in which the Borrower and the Restricted Subsidiaries are engaged on the Closing Date.
Solicited Discount Proration has the meaning specified in Section 2.03(a)(iv)(D)(3).
Solicited Discounted Prepayment Amount has the meaning specified in Section 2.03(a)(iv)(D)(1).
Solicited Discounted Prepayment Notice means a written notice of the Borrowers Solicited Discounted Prepayment Offers made pursuant to Section 2.03(a)(iv)(D) substantially in the form of Exhibit J.
Solicited Discounted Prepayment Offer means the written offer by each Lender, substantially in the form of Exhibit M, submitted following the Administrative Agents receipt of a Solicited Discounted Prepayment Notice.
Solicited Discounted Prepayment Response Date has the meaning specified in Section 2.03(a)(iv)(D)(1).
SPC has the meaning specified in Section 10.07(g).
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Specified Acquisition Agreement Representations means such of the representations and warranties made by or with respect to the Acquired Company and its Subsidiaries in the Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower has the right to, pursuant to the Acquisition Agreement, terminate its obligations under the Acquisition Agreement or decline to consummate the Acquisition as a result of a breach of such representations and warranties.
Specified Discount has the meaning specified in Section 2.03(a)(iv)(B)(1).
Specified Discount Prepayment Amount has the meaning specified in Section 2.03(a)(iv)(B)(1).
Specified Discount Prepayment Notice means a written notice of the Borrowers Offer of Specified Discount Prepayment made pursuant to Section 2.03(a)(iv)(B) substantially in the form of Exhibit L.
Specified Discount Prepayment Response means the written response by each Lender, substantially in the form of Exhibit N, to a Specified Discount Prepayment Notice.
Specified Discount Prepayment Response Date has the meaning specified in Section 2.03(a)(iv)(B)(1).
Specified Discount Proration has the meaning specified in Section 2.03(a)(iv)(B)(3).
Specified Representations means those representations and warranties made by the Borrower in Sections 5.01(a) (with respect to the organizational existence of the Loan Parties only (other than the Acquired Company and its Subsidiaries acquired in the Acquisition)), 5.01(b)(ii), 5.02, 5.03(b), 5.03(c) (for purposes of this definition, replacing the reference at the end of Section 5.03 to Material Adverse Effect with a reference to Closing Date Material Adverse Effect), 5.13, 5.16, 5.18 (with respect to the incurrence of the Term Loans on the Closing Date only and the use of the proceeds thereof) and 5.19.
Specified Transaction means, with respect to any period, any acquisition, Investment, sale, transfer or other Disposition of assets or property other than in the ordinary course, incurrence, issuance, obtaining, assumption, Refinancing, prepayment, redemption, repurchase, defeasance, extinguishment, retirement or repayment of Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility or line of credit unless such Indebtedness has been permanently repaid and not replaced), Restricted Payment, Subsidiary designation, Incremental Term Loan, provision of Incremental Term Commitment or other event that by the terms of the Loan Documents requires pro forma compliance with a test or covenant hereunder or requires such test or covenant to be calculated on a pro forma basis.
Sponsor means any of TPG Capital, L.P., TPG Advisors VI, Inc., TPG Convoy Holdings, L.P., TPG Convoy Holdings II, L.P. and any of their respective Affiliates and funds or partnerships managed or advised by any of them or any of their respective Affiliates, but not including, however, any portfolio company of any of the foregoing.
Submitted Amount has the meaning specified in Section 2.03(a)(iv)(C)(1).
Submitted Discount has the meaning specified in Section 2.03(a)(iv)(C)(1).
Subordinated Indebtedness means any Indebtedness of any Loan Party that is by its terms subordinated in right of payment to the Obligations of such Loan Party arising under the Loans or the Guaranty of the Loans.
Subsidiary means, with respect to any Person:
(a) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50.0% of the total voting power of
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shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and
(b) any partnership, joint venture, limited liability company or similar entity of which:
(i) more than 50.0% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and
(ii) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.
Subsidiary Guarantor means each Subsidiary of the Borrower, if any, that provides a Guaranty of the Obligations in accordance with the terms of this Agreement.
Successor Borrower has the meaning specified in Section 7.04(d).
Successor Holdings has the meaning specified in Section 7.04(e).
Supplemental Administrative Agent and Supplemental Administrative Agents have the meanings specified in Section 9.15(a).
Tax means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, imposed by any Governmental Authority, including any interest, additions to tax and penalties applicable thereto.
Tax Distributions means Restricted Payments in an amount intended to enable any direct and indirect equity owners of the Borrower to pay income Taxes incurred by such direct and indirect equity owners in any taxable period which are attributable to the income and/or gain of the Borrower (but only for so long as the Borrower is classified as a disregarded entity, partnership or other pass-through entity for U.S. federal income tax purposes); provided that any such Restricted Payment: (A) shall be in an amount determined by multiplying the higher of the maximum combined U.S. federal and state ordinary income tax rate applicable to individuals or corporations, in each case resident in the state of California, (without taking into account the deductibility of state taxes in computing U.S. federal income taxes) by the amount of the net income and/or gain attributable to such direct or indirect equity owner; (B) shall only be made to the extent that the amount described in clause (A) exceeds the amount of distributions made to the applicable direct or indirect equity owner in or with respect to such taxable period, other than any distributions made pursuant to the provisions of Section 7.06 (other than Section 7.06(b)(xiii)(B)); and (C) shall be reduced by any cumulative net loss attributable to such direct or indirect equity owner with respect to all prior taxable periods beginning after the Closing Date, but only to the extent such loss has not previously reduced any Restricted Payment by reason of this clause (C); provided, further, that the Borrower will provide to the Administrative Agent promptly following a request therefor calculations supporting the amount of any Tax Distributions made pursuant to Section 7.06(b)(xiii)(B)(ii).
Tax Group has the meaning specified in Section 7.06(b)(xiii)(B).
Tax Indemnitee as defined in Section 3.01(e).
Term B Commitments means, as to each Term Lender, its obligation to make an Initial Term Loan to the Borrower pursuant to Section 2.01 in an aggregate amount not to exceed the amount specified opposite such Lenders name under on Schedule 2.01 under the caption Term B Commitment or in the Assignment and Assumption (or Affiliated Lender Assignment and Assumption) pursuant to which such Term Lender becomes a
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party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement (including pursuant to Section 2.12, 2.13 or 2.14). The initial aggregate amount of the Term B Commitments is $300,000,000.
Term Borrowing means a Borrowing of any Term Loans.
Term Commitment means, as to each Term Lender, its obligation to make a Term Loan to the Borrower hereunder, expressed as an amount representing the maximum principal amount of the Term Loan to be made by such Term Lender under this Agreement, as such commitment may be (a) reduced from time to time pursuant to this Agreement and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Term Lender pursuant to an Assignment and Assumption, (ii) an Incremental Amendment, (iii) a Refinancing Amendment, (iv) an Extension Amendment or (v) an amendment in respect of Replacement Loans. The initial amount of each Term Lenders Term Commitment is specified on Schedule 2.01 under the caption Term B Commitment or, otherwise, in the Assignment and Assumption (or Affiliated Lender Assignment and Assumption), Incremental Amendment, Refinancing Amendment, Extension Amendment or amendment in respect of Replacement Loans pursuant to which such Lender shall have assumed its Commitment, as the case may be.
Term Facility means any Facility consisting of Term Loans and/or Term Commitments.
Term Lender means, at any time, any Lender that has a Term Commitment or a Term Loan at such time.
Term Loan means any Initial Term Loan, Incremental Term Loan, Other Term Loan, Extended Term Loan or Replacement Loan, as the context may require.
Term Loan Extension Request has the meaning provided in Section 2.14(a).
Term Loan Extension Series has the meaning provided in Section 2.14(a).
Term Loan Increase has the meaning specified in Section 2.12(a).
Term Note means a promissory note of the Borrower payable to any Term Lender or its registered assigns, in substantially the form of Exhibit B hereto, evidencing the aggregate Indebtedness of the Borrower(s) to such Term Lender resulting from the Term Loans made by such Term Lender.
Test Period in effect at any time means the most recent period of four consecutive fiscal quarters of the Borrower ended on or prior to such time (taken as one accounting period) in respect of which, subject to Section 1.07(a), internal financial statements of the Borrower are available (as determined in the good faith of the Borrower); provided that, prior to the first date that internal financial statements of the Borrower are available, the Test Period in effect shall be the period of four consecutive fiscal quarters of the Borrower ended December 31, 2013.
Threshold Amount means $25,000,000.
Total Assets means, at any time, the total assets of the Borrower and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, as shown on the then most recent balance sheet of the Borrower or such other Person as may be expressly stated.
Total Outstandings means the aggregate Outstanding Amount of all Loans.
Transaction Expenses means any fees or expenses incurred or paid by Holdings and Parent Entities thereof, the Borrower or any Restricted Subsidiary or the Sponsor in connection with the (i) Transactions and (ii) the Hercules Transactions, including payments to officers, employees and directors as change of control payments, severance payments, special or retention bonuses and charges for repurchase or rollover of, or modifications to, stock options.
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Transactions means, collectively, (a) the Acquisition, (b) the execution and delivery of this Agreement and the funding of the Initial Term Loans and ABL Revolving Loans on the Closing Date, (c) the Closing Date Release, (d) the consummation of any other transactions in connection with the Acquisition Agreements, and (e) the payment of the fees and expenses incurred in connection with any of the foregoing.
Treasury Capital Stock has the meaning assigned to such term in Section 7.06(b)(ii).
Type means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.
Uniform Commercial Code or UCC means the Uniform Commercial Code or any successor provision thereof as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code or any successor provision thereof (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
United States and U.S. mean the United States of America.
United States Tax Compliance Certificate has the meaning specified in Section 3.01(c)(ii)(C).
Unrestricted Subsidiary means:
(a) any Subsidiary of the Borrower which at the time of determination is an Unrestricted Subsidiary (as designated by the Borrower, as provided below); and
(b) any Subsidiary of an Unrestricted Subsidiary.
The Borrower may designate any Subsidiary of the Borrower to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Borrower or any Subsidiary thereof (other than solely any Subsidiary of the Subsidiary to be so designated); provided that:
(a) any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Borrower;
(b) such designation shall be deemed to be an Investment;
(c) each of (a) the Subsidiary to be so designated and (b) its Subsidiaries has not, at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Borrower or any Restricted Subsidiary;
(d) no Default or Event of Default has occurred and is continuing at the time of such designation; and
(e) if the Fixed Charge Coverage Ratio for the Test Period most recently ended calculated on a pro forma basis after giving effect to any such designation does not exceed 2.00 to 1.00, then (x) Total Assets of such designated Subsidiary determined as of the last day of the Test Period most recently ended on or prior to the date of such designation shall not exceed $10,000,000, (y) the EBITDA of such designated Subsidiary determined as of the last day of the Test Period most recently ended on or prior to the date of such designation shall not exceed $5,000,000 and (z) the EBITDA of all Unrestricted Subsidiaries determined as of the last day of the Test Period most recently ended on or prior to the date of such designation shall not exceed $50,000,000 in the aggregate.
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Any such designation by the Borrower shall be notified by a Responsible Officer of the Borrower to the Administrative Agent by promptly filing with the Administrative Agent a copy of the resolution of the board of directors of the Borrower or any committee thereof giving effect to such designation and a certificate of such Responsible Officer certifying that such designation complied with the foregoing provisions.
U.S. Lender means any Lender that is not a Foreign Lender.
USA PATRIOT Act means The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Public Law No. 107-56 (signed into law October 26, 2001)), as amended or modified from time to time.
Vendor Debt means any Indebtedness of the Borrower or any Subsidiary to any vendor of tires.
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
Weighted Average Life to Maturity means, when applied to any Indebtedness, at any date, the quotient obtained by dividing:
(a) the sum of the products of the number of years (calculated to the nearest one-twelfth) from the date of determination to the date of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such payment; by
(b) the sum of all such payments.
wholly owned means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) directors qualifying shares and (y) nominal shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person.
Withdrawal Liability means the liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such term is defined in Part I of Subtitle E of Title IV of ERISA.
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 meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) The words herein, hereto, hereof and hereunder and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.
(c) References in this Agreement to an Exhibit, Schedule, Article, Section, clause or sub-clause refer (A) to the appropriate Exhibit or Schedule to, or Article, Section, clause or sub-clause in this Agreement or (B) to the extent such references are not present in this Agreement, to the Loan Document in which such reference appears.
(d) The term including is by way of example and not limitation.
(e) 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.
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(f) 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.
(g) 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.
(h) For purposes of determining compliance with any Section of Article VII, in the event that any Lien, Investment, Indebtedness, Disposition, Restricted Payment, Affiliate Transaction, Contractual Obligation, or prepayment of Indebtedness meets the criteria of one or more of the categories of transactions permitted pursuant to any clause of such Sections, such transaction (or portion thereof) at any time, shall be permitted under one or more of such clauses as determined by the Borrower in its sole discretion at such time.
SECTION 1.03 Accounting Terms. 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, except as otherwise specifically prescribed herein.
SECTION 1.04 Rounding. Any financial ratios required to be satisfied in order for a specific action to be permitted under this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
SECTION 1.05 References to Agreements, Laws, Etc. Unless otherwise expressly provided herein, (a) references to Organizational Documents, agreements (including the Loan Documents, the ABL Credit Documents, the Senior Notes Documents and the Senior Subordinated Notes Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.
SECTION 1.06 Times of Day and Timing of Payment and Performance. Unless otherwise specified, all references herein to times of day shall be references to New York time (daylight or standard, as applicable). When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day.
SECTION 1.07 Pro Forma and Other Calculations.
(a) Notwithstanding anything to the contrary herein, financial ratios and tests, including the Senior Net Leverage Ratio, the Secured Net Leverage Ratio, the Consolidated Net Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated in the manner prescribed by this Section 1.07; provided that, notwithstanding anything to the contrary in clauses (b), (c), (d) or (e) of this Section 1.07, when calculating the Senior Net Leverage Ratio for purposes of (i) the definition of Applicable Rate, and (ii) Section 2.03(b)(i), the events described in this Section 1.07 that occurred subsequent to the end of the applicable Test Period shall not be given pro forma effect; provided however that voluntary prepayments made pursuant to Section 2.03(a) during any fiscal year (without duplication of any prepayments in such fiscal year that reduced the amount of Excess Cash Flow required to be repaid pursuant to Section 2.03(b)(i) for any prior fiscal year) shall be given pro forma effect after such fiscal year-end and prior to the time such prepayment pursuant to Section 2.03(b)(i) is due but shall not be given pro forma effect thereafter. In addition, whenever a financial ratio or test is to be calculated on a pro forma basis, the reference to Test Period for purposes of calculating such financial ratio or test shall be deemed to be a reference to, and shall be based on, the most recently ended Test Period for which internal financial statements of the Borrower are available (as determined in good faith by the Borrower).
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(b) For purposes of calculating any financial ratio or test (or Total Assets), Specified Transactions (with any incurrence or repayment of any Indebtedness in connection therewith to be subject to clause (d) of this Section 1.07) that have been made (i) during the applicable Test Period or (ii) subsequent to such Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made shall be calculated on a pro forma basis assuming that all such Specified Transactions (and any increase or decrease in EBITDA and the component financial definitions used therein attributable to any Specified Transaction) had occurred on the first day of the applicable Test Period (or, in the case of Total Assets, on the last day of the applicable Test Period). If since the beginning of any applicable Test Period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any Restricted Subsidiary since the beginning of such Test Period shall have made any Specified Transaction that would have required adjustment pursuant to this Section 1.07, then such financial ratio or test (or Total Assets) shall be calculated to give pro forma effect thereto in accordance with this Section 1.07.
(c) Whenever pro forma effect is to be given to a Specified Transaction, the pro forma calculations shall be made in good faith by a Financial Officer of the Borrower and may include, for the avoidance of doubt, the amount of run-rate cost savings, operating expense reductions and synergies projected by the Borrower in good faith to result from or relating to any Specified Transaction (including the Transactions) which is being given pro forma effect that have been realized or are expected to be realized and for which the actions necessary to realize such cost savings, operating expense reductions and synergies are taken, committed to be taken or with respect to which substantial steps have been taken or are expected to be taken (in the good faith determination of the Borrower) (calculated on a pro forma basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of such period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period and run-rate means the full recurring benefit for a period that is associated with any action taken, committed to be taken or with respect to which substantial steps have been taken or are expected to be taken (including any savings expected to result from the elimination of a public targets compliance costs with public company requirements) net of the amount of actual benefits realized during such period from such actions, and any such adjustments shall be included in the initial pro forma calculations of such financial ratios or tests and during any subsequent Test Period in which the effects thereof are expected to be realized) relating to such Specified Transaction; provided that (A) such amounts are reasonably identifiable and factually supportable in the good faith judgment of the Borrower, (B) such actions are taken, committed to be taken or with respect to which substantial steps have been taken or are expected to be taken no later than twelve (12) months after the date of such Specified Transaction and (C) no amounts shall be added to the extent duplicative of any amounts that are otherwise added back in computing EBITDA (or any other components thereof), whether through a pro forma adjustment or otherwise, with respect to such period.
(d) In the event that the Borrower or any Restricted Subsidiary incurs (including by assumption or guarantees), issues or repays (including by redemption, repurchase, repayment, retirement or extinguishment) any Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility or line of credit unless such Indebtedness has been permanently repaid and not replaced), in each case included in the calculations of any financial ratio or test, (i) during the applicable Test Period or (ii) subsequent to the end of the applicable Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made, then such financial ratio or test shall be calculated giving pro forma effect to such incurrence, issuance, repayment or redemption of Indebtedness, in each case to the extent required, as if the same had occurred on the last day of the applicable Test Period (except in the case of the Fixed Charge Coverage Ratio (or similar ratio), in which case such incurrence, assumption, guarantee, issuance, redemption, repurchase, repayment, retirement or extinguishment of Indebtedness will be given effect, as if the same had occurred on the first day of the applicable Test Period).
(e) If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of the event for which the calculation of the Fixed Charge Coverage Ratio is made had been the applicable rate for the entire period (taking into account any interest hedging arrangements applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a Financial Officer of the Borrower to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be determined to have been based upon the rate actually
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chosen, or if none, then based upon such optional rate chosen as the Borrower or applicable Restricted Subsidiary may designate. For purposes of making the computations referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Borrower may designate.
(f) Notwithstanding anything to the contrary in this Section 1.07 or in any classification under GAAP of any Person, business, assets or operations in respect of which a definitive agreement for the Disposition thereof has been entered into as discontinued operations, no pro forma effect shall be given to any discontinued operations (and the EBITDA attributable to any such Person, business, assets or operations shall not be excluded for any purposes hereunder) until such Disposition shall have been consummated.
(g) Any determination of Total Assets shall be made by reference to the last day of the Test Period most recently ended on or prior to the relevant date of determination.
SECTION 1.08 Available Amount Transaction. If more than one action occurs on any given date the permissibility of the taking of which is determined hereunder by reference to the amount of the Available Amount immediately prior to the taking of such action, the permissibility of the taking of each such action shall be determined independently and in no event may any two or more such actions be treated as occurring simultaneously, i.e., each transaction must be permitted under the Available Amount as so calculated.
SECTION 1.09 Currency Generally.
(a) For purposes of determining compliance with Sections 7.01, 7.03 and 7.06 and the definition of Permitted Investments with respect to any amount of Indebtedness or Investment in a currency other than Dollars, no Default shall be deemed to have occurred solely as a result of changes in rates of currency exchange occurring after the time such Indebtedness or Investment is incurred (so long as such Indebtedness or Investment, at the time incurred, made or acquired, was permitted hereunder).
(b) For purposes of determining the Secured Net Leverage Ratio, the Senior Net Leverage Ratio and the Consolidated Net Leverage Ratio, the amount of Indebtedness shall reflect the currency translation effects, determined in accordance with GAAP, of Hedging Obligations permitted hereunder for currency exchange risks with respect to the applicable currency in effect on the date of determination of the Dollar equivalent of such Indebtedness.
SECTION 1.10 Limited Condition Acquisitions.
(a) In connection with any action being taken in connection with a Limited Condition Acquisition, for purposes of determining compliance with any provision of this Agreement which requires that no Default, Event of Default or specified Event of Default, as applicable, has occurred, is continuing or would result from any such action, as applicable, such condition shall, at the option of the Borrower, be deemed satisfied, so long as no Default, Event of Default or specified Event of Default, as applicable, exists on the date into which the definitive agreements for such Limited Condition Acquisition are entered. For the avoidance of doubt, if the Borrower has exercised its option under the first sentence of this clause (a), and any Default or Event of Default occurs following the date the definitive agreements for the applicable Limited Condition Acquisition were entered into and prior to the consummation of such Limited Condition Acquisition, any such Default or Event of Default shall be deemed to not have occurred or be continuing for purposes of determining whether any action being taken in connection with such Limited Condition Acquisition is permitted hereunder.
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(b) In connection with any action being taken in connection with a Limited Condition Acquisition, for purposes of:
(i) determining compliance with any provision of this Agreement which requires the calculation of the Fixed Charge Coverage Ratio, the Consolidated Net Leverage Ratio, Secured Net Leverage Ratio or the Senior Net Leverage Ratio; or
(ii) testing baskets set forth in this Agreement (including baskets measured as a percentage of Total Assets);
in each case, at the option of the Borrower (the Borrowers election to exercise such option in connection with any Limited Condition Acquisition, an LCA Election), the date of determination of whether any such action is permitted hereunder shall be deemed to be the date on which the definitive agreements for such Limited Condition Acquisition are entered into (the LCA Test Date), and if, after giving pro forma effect to the Limited Condition Acquisition and the other transactions to be entered into in connection therewith (including (i) any incurrence of Indebtedness and the use of proceeds thereof) as if they had occurred at the beginning of the most recent Test Period ended prior to the LCA Test Date for which consolidated financial statements of the Borrower are available, the Borrower could have taken such action on the relevant LCA Test Date in compliance with such ratio or basket, such ratio or basket shall be deemed to have been complied with. For the avoidance of doubt, if the Borrower has made an LCA Election and any of the ratios or baskets for which compliance was determined or tested as of the LCA Test Date are exceeded as a result of fluctuations in any such ratio or basket, including due to fluctuations in consolidated EBITDA or Total Assets of the Borrower or the Person subject to such Limited Condition Acquisition, at or prior to the consummation of the relevant transaction or action, such baskets or ratios will not be deemed to have been exceeded as a result of such fluctuations. If the Borrower has made an LCA Election for any Limited Condition Acquisition, then in connection with any subsequent calculation of any ratio availability with respect to the incurrence of Indebtedness or Liens, or the making of Restricted Payments, Dispositions, mergers, the conveyance, lease or other transfer of all or substantially all of the assets of the Borrower or the designation of an Unrestricted Subsidiary on or following the relevant LCA Test Date and prior to the earlier of the date on which such Limited Condition Acquisition is consummated or the definitive agreement for such Limited Condition Acquisition is terminated or expires without consummation of such Limited Condition Acquisition, any such ratio shall be calculated on a pro forma basis assuming such Limited Condition Acquisition and other transactions in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) have been consummated.
ARTICLE II
The Commitments and Borrowings
SECTION 2.01 Term Borrowings. Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make to the Borrower on the Closing Date one or more Initial Term Loans denominated in Dollars in an aggregate principal amount equal to such Term Lenders Term B Commitment on the Closing Date. Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed. The Initial Term Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.
SECTION 2.02 Borrowings, Conversions and Continuations of Loans.
(a) Each Term Borrowing, each conversion of Term Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrowers irrevocable notice to the Administrative Agent (provided that the notice in respect of the Initial Term Loans or in connection with any Permitted Acquisition or other acquisition permitted under this Agreement, may be conditioned on the closing of the Acquisition or such Permitted Acquisition or other acquisition, as applicable), which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 12:00 p.m., New York time, (i) three (3) Business Days prior to the requested date of any Borrowing or continuation of Eurodollar Rate Loans or any conversion of Base Rate Loans to Eurodollar Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans; provided, that the notice referred to in subclause (i) above may be delivered no later than one (1) Business Day prior to the Closing Date in the case of the Initial Term Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Except as provided in Sections 2.12, 2.13 and 2.14, each Borrowing of, conversion to or continuation of Eurodollar
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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 2.12, 2.13 and 2.14, each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Term Borrowing, a conversion of Term Loans from one Type to the other or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Class and Type of Loans to be borrowed or to which existing Term Loans are to be converted, (v) if applicable, the duration of the Interest Period with respect thereto and (vi) wire instructions of the account(s) to which funds are to be disbursed. If the Borrower fails to specify a Type of Loan to be made in a Committed Loan Notice, then the applicable Loans shall be made as Eurodollar Rate Loans with an Interest Period of one (1) month. If the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made or continued as the same Type of Loan, which if a Eurodollar Rate Loan, shall have a one-month Interest Period. Any such automatic continuation of Eurodollar 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 the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one (1) month.
(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share or other applicable share provided for under this Agreement of the applicable Class of Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic continuation of Eurodollar Rate Loans or continuation of Loans described in Section 2.02(a). In the case of each Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in Same Day Funds at the Administrative Agents Office not later than, in the case of Borrowing on the Closing Date, 10:00 a.m., New York time, and otherwise 2:00 p.m., New York time, on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.01 for the Borrowing on the Closing Date, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account(s) of the Borrower on the books of the Administrative Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided by the Borrower to (and reasonably acceptable to) the Administrative Agent.
(c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan, unless the Borrower pays the amount due, if any, under Section 3.05 in connection therewith. Upon the occurrence and during the continuation of an Event of Default, the Administrative Agent or the Required Facility Lenders under the applicable Facility may require by notice to the Borrower that no Loans may be converted to or continued as Eurodollar Rate Loans.
(d) The Administrative Agent shall promptly notify the Borrower 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 when Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in the Administrative Agents prime rate used in determining the Base Rate promptly following the public announcement of such change.
(e) After giving effect to all Term Borrowings, all conversions of Term Loans from one Type to the other, and all continuations of Term Loans as the same Type, there shall not be more than five (5) Interest Periods in effect unless otherwise agreed between the Borrower and the Administrative Agent; provided that after the establishment of any new Class of Loans pursuant to an Incremental Amendment, a Refinancing Amendment, an Extension Amendment or an amendment in respect of Replacement Loans, the number of Interest Periods otherwise permitted by this Section 2.02(e) shall increase by three (3) Interest Periods for each applicable Class so established.
(f) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.
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(g) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing, or, in the case of any Borrowing of Base Rate Loans, prior to 1:00 p.m., New York time, on the date of such Borrowing, that such Lender will not make available to the Administrative Agent such Lenders Pro Rata Share of such Borrowing, the Administrative Agent may assume that such Lender has made such Pro Rata Share available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (b) above, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, each of such Lender and the Borrower severally agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Overnight Rate plus any administrative, processing, or similar fees customarily charged by the Administrative Agent in accordance with the foregoing. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section 2.02(g) shall be conclusive in the absence of manifest error. If the 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 Borrower the amount of such interest paid by the 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 Lenders Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
SECTION 2.03 Prepayments.
(a) Optional.
(i) The Borrower may, upon notice to the Administrative Agent by the Borrower, at any time or from time to time voluntarily prepay any Class or Classes of Term Loans in whole or in part without premium (except as set forth in Section 2.15) or penalty; provided that (1) such notice must be received by the Administrative Agent not later than 12:00 p.m., New York time, (A) three (3) Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (2) any partial prepayment of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof or, if less, the entire principal amount thereof then outstanding; and (3) any prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Class(es) and Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Appropriate Lender of its receipt of each such notice, and of the amount of such Lenders Pro Rata Share or other applicable share provided for under this Agreement of such prepayment. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. In the case of each prepayment of the Loans pursuant to this Section 2.03(a), the Borrower may in its sole discretion select the Borrowing or Borrowings (and the order of maturity of principal payments) to be repaid, and such payment shall be paid to the Appropriate Lenders in accordance with their respective Pro Rata Shares or other applicable share provided for under this Agreement.
(ii) [Reserved].
(iii) Voluntary prepayments of any Class of Term Loans permitted hereunder shall be applied to the remaining scheduled installments of principal thereof pursuant to Section 2.05 (or pursuant to the applicable Extension Amendment, Incremental Amendment, Refinancing Amendment, amendment in respect of any Replacement Loans or otherwise) in a manner determined at the discretion of the Borrower and specified in the notice of prepayment (and absent such direction, in direct order of maturity). Each prepayment in respect of any Term Loans pursuant to this Section 2.03 may be applied to
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any Class of Term Loans as directed by the Borrower. For the avoidance of doubt, the Borrower may (i) prepay Term Loans of an Existing Term Loan Class pursuant to this Section 2.03 without any requirement to prepay Extended Term Loans that were converted or exchanged from such Existing Term Loan Class and (ii) prepay Extended Term Loans pursuant to this Section 2.03 without any requirement to prepay Term Loans of an Existing Term Loan Class that were converted or exchanged for such Extended Term Loans. In the event that the Borrower does not specify the order in which to apply prepayments to reduce scheduled installments of principal or as between Classes of Term Loans, the Borrower shall be deemed to have elected that such proceeds be applied to reduce the scheduled installments of principal in direct order of maturity on a pro-rata basis among Term Loan Classes.
(iv) Notwithstanding anything in any Loan Document to the contrary, so long as no Default or Event of Default has occurred and is continuing, any Borrower Party may (i) purchase outstanding Term Loans on a non-pro rata basis through open market purchases or (ii) prepay the outstanding Term Loans, which shall, in each case, for the avoidance of doubt, be automatically and permanently canceled immediately upon acquisition by the Borrower Parties, and in the case of this clause (ii) only, which shall be prepaid on the following basis:
(A) The Borrower Party shall have the right to make a voluntary prepayment of Loans at a discount to par pursuant to a Borrower Offer of Specified Discount Prepayment, Borrower Solicitation of Discount Range Prepayment Offers or Borrower Solicitation of Discounted Prepayment Offers (any such prepayment, the Discounted Term Loan Prepayment), in each case made in accordance with this Section 2.03(a)(iv); provided that no Borrower Party shall initiate any action under this Section 2.03(a)(iv) in order to make a Discounted Term Loan Prepayment unless (I) at least ten (10) Business Days shall have passed since the consummation of the most recent Discounted Term Loan Prepayment as a result of a prepayment made by a Borrower Party on the applicable Discounted Prepayment Effective Date; or (II) at least three (3) Business Days shall have passed since the date the Borrower Party was notified that no Term Lender was willing to accept any prepayment of any Term Loan at the Specified Discount, within the Discount Range or at any discount to par value, as applicable, or in the case of Borrower Solicitation of Discounted Prepayment Offers, the date of the Borrower Partys election not to accept any Solicited Discounted Prepayment Offers.
(B) (1) Subject to the proviso to subsection (A) above, the Borrower Party may from time to time offer to make a Discounted Term Loan Prepayment by providing the Auction Agent with five (5) Business Days notice in the form of a Specified Discount Prepayment Notice; provided that (I) any such offer shall be made available, at the sole discretion of the Borrower Party, to (x) each Term Lender and/or (y) each Term Lender with respect to any Class of Term Loans on an individual Class basis, (II) any such offer shall specify the aggregate principal amount offered to be prepaid (the Specified Discount Prepayment Amount) with respect to each applicable Class, the Class or Classes of Term Loans subject to such offer and the specific percentage discount to par (the Specified Discount) of such Term Loans to be prepaid (it being understood that different Specified Discounts and/or Specified Discount Prepayment Amounts may be offered with respect to different Classes of Term Loans and, in such event, each such offer will be treated as a separate offer pursuant to the terms of this Section 2.03(a)(iv)(B)), (III) the Specified Discount Prepayment Amount shall be in an aggregate amount not less than $5,000,000 and whole increments of $1,000,000 in excess thereof and (IV) each such offer shall remain outstanding through the Specified Discount Prepayment Response Date. The Auction Agent will promptly provide each Appropriate Lender with a copy of such Specified Discount Prepayment Notice and a form of the Specified Discount Prepayment Response to be completed and returned by each such Term Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., New York time, on the third Business Day after the date of delivery of such notice to such Lenders (the Specified Discount Prepayment Response Date).
(2) Each Term Lender receiving such offer shall notify the Auction Agent (or its delegate) by the Specified Discount Prepayment Response Date whether or not it agrees to accept a prepayment of any of its applicable then outstanding Term Loans at the
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Specified Discount and, if so (such accepting Lender, a Discount Prepayment Accepting Lender), the amount and the Classes of such Lenders Term Loans to be prepaid at such offered discount. Each acceptance of a Discounted Term Loan Prepayment by a Discount Prepayment Accepting Lender shall be irrevocable. Any Term Lender whose Specified Discount Prepayment Response is not received by the Auction Agent by the Specified Discount Prepayment Response Date shall be deemed to have declined to accept the applicable Borrower Offer of Specified Discount Prepayment.
(3) If there is at least one Discount Prepayment Accepting Lender, the relevant Borrower Party will make a prepayment of outstanding Term Loans pursuant to this paragraph (B) to each Discount Prepayment Accepting Lender in accordance with the respective outstanding amount and Classes of Term Loans specified in such Lenders Specified Discount Prepayment Response given pursuant to subsection (2) above; provided that, if the aggregate principal amount of Term Loans accepted for prepayment by all Discount Prepayment Accepting Lenders exceeds the Specified Discount Prepayment Amount, such prepayment shall be made pro rata among the Discount Prepayment Accepting Lenders in accordance with the respective principal amounts accepted to be prepaid by each such Discount Prepayment Accepting Lender and the Auction Agent (in consultation with such Borrower Party and subject to rounding requirements of the Auction Agent made in its reasonable discretion) will calculate such proration (the Specified Discount Proration). The Auction Agent shall promptly, and in any case within three (3) Business Days following the Specified Discount Prepayment Response Date, notify (I) the relevant Borrower Party of the respective Term Lenders responses to such offer, the Discounted Prepayment Effective Date and the aggregate principal amount of the Discounted Term Loan Prepayment and the Classes to be prepaid, (II) each Term Lender of the Discounted Prepayment Effective Date, and the aggregate principal amount and the Classes of Term Loans to be prepaid at the Specified Discount on such date and (III) each Discount Prepayment Accepting Lender of the Specified Discount Proration, if any, and confirmation of the principal amount, Class and Type of Term Loans of such Lender to be prepaid at the Specified Discount on such date. Each determination by the Auction Agent of the amounts stated in the foregoing notices to the Borrower Party and such Term Lenders shall be conclusive and binding for all purposes absent manifest error. The payment amount specified in such notice to the Borrower Party shall be due and payable by such Borrower Party on the Discounted Prepayment Effective Date in accordance with subsection (F) below (subject to subsection (J) below).
(C) (1) Subject to the proviso to subsection (A) above, the Borrower Party may from time to time solicit Discount Range Prepayment Offers by providing the Auction Agent with five (5) Business Days notice in the form of a Discount Range Prepayment Notice; provided that (I) any such solicitation shall be extended, at the sole discretion of such Borrower Party, to (x) each Term Lender and/or (y) each Term Lender with respect to any Class of Term Loans on an individual Class basis, (II) any such notice shall specify the maximum aggregate principal amount of the relevant Term Loans (the Discount Range Prepayment Amount), the Class or Classes of Term Loans subject to such offer and the maximum and minimum percentage discounts to par (the Discount Range) of the principal amount of such Term Loans with respect to each relevant Class of Term Loans willing to be prepaid by such Borrower Party (it being understood that different Discount Ranges and/or Discount Range Prepayment Amounts may be offered with respect to different Classes of Term Loans and, in such event, each such offer will be treated as separate offer pursuant to the terms of this Section 2.03(a)(iv)(C)), (III) the Discount Range Prepayment Amount shall be in an aggregate amount not less than $5,000,000 and whole increments of $1,000,000 in excess thereof and (IV) each such solicitation by the Borrower Party shall remain outstanding through the Discount Range Prepayment Response Date. The Auction Agent will promptly provide each Appropriate Lender with a copy of such Discount Range Prepayment Notice and a form of the Discount Range Prepayment Offer to be submitted by a responding Term Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., New York time, on the third Business Day after the date of delivery of such notice to such Lenders (the Discount Range Prepayment Response Date). Each Term Lenders Discount Range Prepayment Offer shall be irrevocable and shall specify a discount to par within the Discount
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Range (the Submitted Discount) at which such Lender is willing to allow prepayment of any or all of its then outstanding Term Loans of the applicable Class or Classes and the maximum aggregate principal amount and Classes of such Lenders Term Loans (the Submitted Amount) such Term Lender is willing to have prepaid at the Submitted Discount. Any Term Lender whose Discount Range Prepayment Offer is not received by the Auction Agent by the Discount Range Prepayment Response Date shall be deemed to have declined to accept a Discounted Term Loan Prepayment of any of its Term Loans at any discount to their par value within the Discount Range.
(2) The Auction Agent shall review all Discount Range Prepayment Offers received on or before the applicable Discount Range Prepayment Response Date and shall determine (in consultation with such Borrower Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) the Applicable Discount and Term Loans to be prepaid at such Applicable Discount in accordance with this subsection (C). The relevant Borrower Party agrees to accept on the Discount Range Prepayment Response Date all Discount Range Prepayment Offers received by Auction Agent by the Discount Range Prepayment Response Date, in the order from the Submitted Discount that is the largest discount to par to the Submitted Discount that is the smallest discount to par, up to and including the Submitted Discount that is the smallest discount to par within the Discount Range (such Submitted Discount that is the smallest discount to par within the Discount Range being referred to as the Applicable Discount) which yields a Discounted Term Loan Prepayment in an aggregate principal amount equal to the lower of (I) the Discount Range Prepayment Amount and (II) the sum of all Submitted Amounts. Each Term Lender that has submitted a Discount Range Prepayment Offer to accept prepayment at a discount to par that is larger than or equal to the Applicable Discount shall be deemed to have irrevocably consented to prepayment of Term Loans equal to its Submitted Amount (subject to any required proration pursuant to the following subsection (3)) at the Applicable Discount (each such Term Lender, a Participating Lender).
(3) If there is at least one Participating Lender, the relevant Borrower Party will prepay the respective outstanding Term Loans of each Participating Lender in the aggregate principal amount and of the Classes specified in such Lenders Discount Range Prepayment Offer at the Applicable Discount; provided that if the Submitted Amount by all Participating Lenders offered at a discount to par greater than the Applicable Discount exceeds the Discount Range Prepayment Amount, prepayment of the principal amount of the relevant Term Loans for those Participating Lenders whose Submitted Discount is a discount to par greater than or equal to the Applicable Discount (the Identified Participating Lenders) shall be made pro rata among the Identified Participating Lenders in accordance with the Submitted Amount of each such Identified Participating Lender and the Auction Agent (in consultation with such Borrower Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) will calculate such proration (the Discount Range Proration). The Auction Agent shall promptly, and in any case within five (5) Business Days following the Discount Range Prepayment Response Date, notify (I) the relevant Borrower Party of the respective Term Lenders responses to such solicitation, the Discounted Prepayment Effective Date, the Applicable Discount, and the aggregate principal amount of the Discounted Term Loan Prepayment and the Classes to be prepaid, (II) each Term Lender of the Discounted Prepayment Effective Date, the Applicable Discount, and the aggregate principal amount and Classes of Term Loans to be prepaid at the Applicable Discount on such date, (III) each Participating Lender of the aggregate principal amount and Classes of such Term Lender to be prepaid at the Applicable Discount on such date, and (IV) if applicable, each Identified Participating Lender of the Discount Range Proration. Each determination by the Auction Agent of the amounts stated in the foregoing notices to the relevant Borrower Party and Term Lenders shall be conclusive and binding for all purposes absent manifest error. The payment amount specified in such notice to the Borrower Party shall be due and payable by such Borrower Party on the Discounted Prepayment Effective Date in accordance with subsection (F) below (subject to subsection (J) below).
(D) (1) Subject to the proviso to subsection (A) above, the Borrower Party may from time to time solicit Solicited Discounted Prepayment Offers by providing the Auction
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Agent with five (5) Business Days notice in the form of a Solicited Discounted Prepayment Notice; provided that (I) any such solicitation shall be extended, at the sole discretion of such Borrower Party, to (x) each Term Lender and/or (y) each Lender with respect to any Class of Term Loans on an individual Class basis, (II) any such notice shall specify the maximum aggregate amount of the Term Loans (the Solicited Discounted Prepayment Amount) and the Class or Classes of Term Loans the applicable Borrower Party is willing to prepay at a discount (it being understood that different Solicited Discounted Prepayment Amounts may be offered with respect to different Classes of Term Loans and, in such event, each such offer will be treated as separate offer pursuant to the terms of this Section 2.03(a)(iv)(D)), (III) the Solicited Discounted Prepayment Amount shall be in an aggregate amount not less than $5,000,000 and whole increments of $1,000,000 in excess thereof and (IV) each such solicitation by the Borrower Party shall remain outstanding through the Solicited Discounted Prepayment Response Date. The Auction Agent will promptly provide each Appropriate Lender with a copy of such Solicited Discounted Prepayment Notice and a form of the Solicited Discounted Prepayment Offer to be submitted by a responding Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., New York time, on the third Business Day after the date of delivery of such notice to such Term Lenders (the Solicited Discounted Prepayment Response Date). Each Term Lenders Solicited Discounted Prepayment Offer shall (x) be irrevocable, (y) remain outstanding until the Acceptance Date, and (z) specify both a discount to par (the Offered Discount) at which such Term Lender is willing to allow prepayment of its then outstanding Term Loan and the maximum aggregate principal amount and Classes of such Term Loans (the Offered Amount) such Term Lender is willing to have prepaid at the Offered Discount. Any Term Lender whose Solicited Discounted Prepayment Offer is not received by the Auction Agent by the Solicited Discounted Prepayment Response Date shall be deemed to have declined prepayment of any of its Term Loans at any discount.
(2) The Auction Agent shall promptly provide the relevant Borrower Party with a copy of all Solicited Discounted Prepayment Offers received on or before the Solicited Discounted Prepayment Response Date. Such Borrower Party shall review all such Solicited Discounted Prepayment Offers and select the largest of the Offered Discounts specified by the relevant responding Term Lenders in the Solicited Discounted Prepayment Offers that is acceptable to the Borrower Party (the Acceptable Discount), if any. If the Borrower Party elects to accept any Offered Discount as the Acceptable Discount, then as soon as practicable after the determination of the Acceptable Discount, but in no event later than by the third Business Day after the date of receipt by such Borrower Party from the Auction Agent of a copy of all Solicited Discounted Prepayment Offers pursuant to the first sentence of this subsection (2) (the Acceptance Date), the Borrower Party shall submit an Acceptance and Prepayment Notice to the Auction Agent setting forth the Acceptable Discount. If the Auction Agent shall fail to receive an Acceptance and Prepayment Notice from the Borrower Party by the Acceptance Date, such Borrower Party shall be deemed to have rejected all Solicited Discounted Prepayment Offers.
(3) Based upon the Acceptable Discount and the Solicited Discounted Prepayment Offers received by Auction Agent by the Solicited Discounted Prepayment Response Date, within three (3) Business Days after receipt of an Acceptance and Prepayment Notice (the Discounted Prepayment Determination Date), the Auction Agent will determine (in consultation with such Borrower Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) the aggregate principal amount and the Classes of Term Loans (the Acceptable Prepayment Amount) to be prepaid by the relevant Borrower Party at the Acceptable Discount in accordance with this Section 2.03(a)(iv)(D). If the Borrower Party elects to accept any Acceptable Discount, then the Borrower Party agrees to accept all Solicited Discounted Prepayment Offers received by Auction Agent by the Solicited Discounted Prepayment Response Date, in the order from largest Offered Discount to smallest Offered Discount, up to and including the Acceptable Discount. Each Term Lender that has submitted a Solicited Discounted Prepayment Offer with an Offered Discount that is greater than or equal to the Acceptable Discount shall be deemed to have irrevocably consented to prepayment of Term Loans equal to its Offered Amount (subject to any required pro-rata reduction pursuant to
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the following sentence) at the Acceptable Discount (each such Lender, a Qualifying Lender). The Borrower Party will prepay outstanding Term Loans pursuant to this subsection (D) to each Qualifying Lender in the aggregate principal amount and of the Classes specified in such Lenders Solicited Discounted Prepayment Offer at the Acceptable Discount; provided that if the aggregate Offered Amount by all Qualifying Lenders whose Offered Discount is greater than or equal to the Acceptable Discount exceeds the Solicited Discounted Prepayment Amount, prepayment of the principal amount of the Term Loans for those Qualifying Lenders whose Offered Discount is greater than or equal to the Acceptable Discount (the Identified Qualifying Lenders) shall be made pro rata among the Identified Qualifying Lenders in accordance with the Offered Amount of each such Identified Qualifying Lender and the Auction Agent (in consultation with such Borrower Party and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) will calculate such proration (the Solicited Discount Proration). On or prior to the Discounted Prepayment Determination Date, the Auction Agent shall promptly notify (I) the relevant Borrower Party of the Discounted Prepayment Effective Date and Acceptable Prepayment Amount comprising the Discounted Term Loan Prepayment and the Classes to be prepaid, (II) each Term Lender of the Discounted Prepayment Effective Date, the Acceptable Discount, and the Acceptable Prepayment Amount of all Term Loans and the Classes to be prepaid to be prepaid at the Applicable Discount on such date, (III) each Qualifying Lender of the aggregate principal amount and the Classes of such Term Lender to be prepaid at the Acceptable Discount on such date, and (IV) if applicable, each Identified Qualifying Lender of the Solicited Discount Proration. Each determination by the Auction Agent of the amounts stated in the foregoing notices to such Borrower Party and Term Lenders shall be conclusive and binding for all purposes absent manifest error. The payment amount specified in such notice to such Borrower Party shall be due and payable by such Borrower Party on the Discounted Prepayment Effective Date in accordance with subsection (F) below (subject to subsection (J) below).
(E) In connection with any Discounted Term Loan Prepayment, the Borrower Parties and the Term Lenders acknowledge and agree that the Auction Agent may require as a condition to any Discounted Term Loan Prepayment, the payment of customary fees and expenses from a Borrower Party in connection therewith.
(F) If any Term Loan is prepaid in accordance with subsections (B) through (D) above, a Borrower Party shall prepay such Term Loans on the Discounted Prepayment Effective Date. The relevant Borrower Party shall make such prepayment to the Administrative Agent, for the account of the Discount Prepayment Accepting Lenders, Participating Lenders, or Qualifying Lenders, as applicable, at the Administrative Agents Office in immediately available funds not later than 12:00 p.m., New York time, on the Discounted Prepayment Effective Date and all such prepayments shall be applied to the remaining principal installments of the relevant Class(es) of Loans on a pro rata basis across such installments. The Term Loans so prepaid shall be accompanied by all accrued and unpaid interest on the par principal amount so prepaid up to, but not including, the Discounted Prepayment Effective Date. Each prepayment of the outstanding Term Loans pursuant to this Section 2.03(a)(iv) shall be paid to the Discount Prepayment Accepting Lenders, Participating Lenders, or Qualifying Lenders, as applicable, and shall be applied to the relevant Term Loans of such Lenders in accordance with their respective Pro Rata Share or other applicable share provided for under this Agreement. The aggregate principal amount of the Classes and installments of the relevant Term Loans outstanding shall be deemed reduced by the full par value of the aggregate principal amount of the Classes of Term Loans prepaid on the Discounted Prepayment Effective Date in any Discounted Term Loan Prepayment. In connection with each prepayment pursuant to this Section 2.03(a)(iv), the relevant Borrower Party shall make a customary representation to the assigning or assignee Term Lenders, as applicable, that it does not possess material non-public information (or material information of the type that would not be public if the Borrower or any Parent Entity were a publicly-reporting company) with respect to the Borrower and its Subsidiaries that either (1) has not been disclosed to the Term Lenders generally (other than Term Lenders that have elected not to receive such information) or (2) if not disclosed to the Term Lenders, would reasonably be expected to have a material effect on, or otherwise be material to (A) a Term Lenders decision to participate in any
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such Discounted Term Loan Prepayment or (B) the market price of such Term Loans (for the avoidance of doubt, no such representation will be required in the case of open market purchases by Affiliated Lenders, which may possess such material non-public information), or shall make a statement that such representation cannot be made.
(G) To the extent not expressly provided for herein, each Discounted Term Loan Prepayment shall be consummated pursuant to procedures consistent with the provisions in this Section 2.03(a)(iv), established by the Auction Agent acting in its reasonable discretion and as reasonably agreed by the Borrower.
(H) Notwithstanding anything in any Loan Document to the contrary, for purposes of this Section 2.03(a)(iv), each notice or other communication required to be delivered or otherwise provided to the Auction Agent (or its delegate) shall be deemed to have been given upon Auction Agents (or its delegates) actual receipt during normal business hours of such notice or communication; provided that any notice or communication actually received outside of normal business hours shall be deemed to have been given as of the opening of business on the next Business Day.
(I) Each of the Borrower Parties and the Term Lenders acknowledge and agree that the Auction Agent may perform any and all of its duties under this Section 2.03(a)(iv) by itself or through any Affiliate of the Auction Agent and expressly consents to any such delegation of duties by the Auction Agent to such Affiliate and the performance of such delegated duties by such Affiliate. The exculpatory provisions pursuant to this Agreement shall apply to each Affiliate of the Auction Agent and its respective activities in connection with any Discounted Term Loan Prepayment provided for in this Section 2.03(a)(iv) as well as activities of the Auction Agent.
(J) The Borrower Party shall have the right, by written notice to the Auction Agent, to revoke in full (but not in part) its offer to make a Discounted Term Loan Prepayment and rescind the applicable Specified Discount Prepayment Notice, Discount Range Prepayment Notice or Solicited Discounted Prepayment Notice therefor at its discretion at any time on or prior to the applicable Specified Discount Prepayment Response Date (and if such offer is revoked pursuant to the preceding clauses, any failure by such Borrower Party to make any prepayment to a Lender, as applicable, pursuant to this Section 2.03(a)(iv) shall not constitute a Default or Event of Default under Section 8.01 or otherwise).
(b) Mandatory.
(i) Within five (5) Business Days after financial statements have been delivered pursuant to Section 6.01(a) (commencing with financial statements for the fiscal year ending December 31, 2014; provided that the Excess Cash Flow for the fiscal year ending December 31, 2014 shall be calculated solely with respect to each full fiscal quarter therein occurring after the Closing Date) and the related Compliance Certificate has been delivered pursuant to Section 6.02(a), the Borrower shall, subject to clauses (b)(v) and (vi) of this Section 2.03, prepay, or cause to be prepaid, an aggregate principal amount of Term Loans equal to (A) 50% (such percentage as it may be reduced as described below, the ECF Percentage) of Excess Cash Flow, if any, for the fiscal year (or the relevant portion thereof in the case of the 2013 fiscal year) covered by such financial statements minus (B) the sum of all voluntary prepayments of Term Loans made pursuant to Section 2.03(a)(i) or 2.03(a)(iv) (in an amount, in the case of prepayments pursuant to Section 2.03(a)(iv), equal to the discounted amount actually paid in respect of the principal amount of such Term Loans and only to the extent that such Loans have been cancelled) and voluntary prepayments of the Senior Notes and (ii) all voluntary prepayments of loans under the ABL Credit Agreement and any other revolving facility that is secured, in whole or in part (in each case, to the extent accompanied by a permanent reduction in the corresponding revolving commitments), in the case of each of the immediately preceding clauses (i) and (ii), made during such fiscal year (without duplication of any prepayments in such fiscal year that reduced the amount of Excess Cash Flow required to be repaid pursuant to this Section 2.03(b)(i) for any prior fiscal year) or after such fiscal year-end and prior to the
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time such prepayment pursuant to this Section 2.03(b)(i) is due and to the extent such prepayments are not funded with Excluded Proceeds; provided that (x) the ECF Percentage shall be 25% if the Secured Net Leverage Ratio as of the end of the fiscal year covered by such financial statements was less than or equal to 3.25 to 1.00 and greater than 2.75 to 1.00 and (y) the ECF Percentage shall be 0% if the Secured Net Leverage Ratio as of the end of the fiscal year covered by such financial statements was less than or equal to 2.75 to 1.00.
(ii) (A) If (x) the Borrower or any Restricted Subsidiary Disposes of any property or assets (other than any Disposition of any property or assets permitted by Section 7.05(a), (b), (c), (d) (to the extent constituting a Disposition to the Borrower or a Restricted Subsidiary that is a Guarantor), (e), (g), (h), (i), (k), (l), (m), (n), (o), (p), (q), (r), (s) or (t) or the Disposition of the Commercial and Retread Business) or (y) any Casualty Event occurs, which results in the realization or receipt by the Borrower or such Restricted Subsidiary of Net Cash Proceeds, the Borrower shall prepay, or cause to be prepaid, on or prior to the date which is ten (10) Business Days after the date of the realization or receipt by the Borrower or such Restricted Subsidiary of such Net Cash Proceeds, subject to clause (B) of this Section 2.03(b)(ii) and clauses (b)(v) and (vi) of this Section 2.03, an aggregate principal amount of Term Loans equal to 100% of all Net Cash Proceeds realized or received; provided, that if at the time that any such prepayment would be required, the Borrower (or any Restricted Subsidiary) are required to offer to repurchase the Senior Notes or Permitted Incremental Equivalent Debt or any Credit Agreement Refinancing Indebtedness secured on an equal priority basis with the Obligations (or any Refinancing Indebtedness in respect thereof that is secured on an equal priority basis with the Obligations) pursuant to the terms of the documentation governing such Indebtedness with the net proceeds of such Disposition or Casualty Event (such Permitted Incremental Equivalent Debt and Credit Agreement Refinancing Indebtedness secured on an equal priority basis with the Obligations (or such Refinancing Indebtedness in respect of any of the foregoing that is secured on an equal priority basis with the Obligations) required to be offered to be so repurchased, Other Applicable Indebtedness), then the Borrower (or any Restricted Subsidiary) may apply such Net Cash Proceeds on a pro rata basis (determined on the basis of the aggregate outstanding principal amount of the Term Loans and Other Applicable Indebtedness at such time; provided that the portion of such net proceeds allocated to the Other Applicable Indebtedness shall not exceed the amount of such net proceeds required to be allocated to the Other Applicable Indebtedness pursuant to the terms thereof, and the remaining amount, if any, of such net proceeds shall be allocated to the Term Loans in accordance with the terms hereof) to the prepayment of the Term Loans and to the repurchase or prepayment of Other Applicable Indebtedness, and the amount of prepayment of the Term Loans that would have otherwise been required pursuant to this Section 2.03(b)(ii)(A) shall be reduced accordingly; provided, further, that to the extent the holders of Other Applicable Indebtedness decline to have such indebtedness repurchased or prepaid, the declined amount shall promptly (and in any event within ten (10) Business Days after the date of such rejection) be applied to prepay the Term Loans in accordance with the terms hereof; provided, further, that no prepayment shall be required pursuant to this Section 2.03(b)(ii)(A) with respect to such portion of such Net Cash Proceeds that the Borrower shall have, on or prior to such date, given written notice to the Administrative Agent of its intent to reinvest (or entered into a binding commitment to reinvest) in accordance with Section 2.03(b)(ii)(B).
(B) With respect to any Net Cash Proceeds realized or received with respect to any Disposition (other than any Disposition specifically excluded from the application of Section 2.03(b)(ii)(A)) or any Casualty Event, at the option of the Borrower, the Borrower and the Restricted Subsidiaries may reinvest all or any portion of such Net Cash Proceeds in assets useful for their business within (x) twelve (12) months following receipt of such Net Cash Proceeds or (y) if the Borrower or any Restricted Subsidiary enters into a legally binding commitment to reinvest such Net Cash Proceeds within twelve (12) months following receipt thereof, within the later of (1) twelve (12) months following receipt thereof and (2) one hundred eighty (180) days of the date of such legally binding commitment; provided, that if any Net Cash Proceeds are no longer intended to be or cannot be so reinvested at any time after delivery of a notice of reinvestment election, and subject to clauses (v) and (vi) of this Section 2.03(b), an amount equal to any such Net Cash Proceeds shall be applied within five (5) Business Days after the Borrower reasonably determines that such Net Cash Proceeds are no longer intended to be or cannot be so reinvested to the prepayment of the Term Loans as set forth in this Section 2.03.
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(iii) If the Borrower or any Restricted Subsidiary incurs or issues any Indebtedness (A) not expressly permitted to be incurred or issued pursuant to Section 7.03 or (B) that constitutes Credit Agreement Refinancing Indebtedness or Other Term Loans, the Borrower shall prepay, or cause to be prepaid, an aggregate principal amount of Term Loans of Class or Classes being refinanced (in each case, as directed by the Borrower) equal to 100% of all Net Cash Proceeds received therefrom on or prior to the date which is five (5) Business Days after the receipt by the Borrower or such Restricted Subsidiary of such Net Cash Proceeds.
(iv) (A) Except as otherwise set forth in any Refinancing Amendment, Extension Amendment or Incremental Amendment, each prepayment of Term Loans required by Section 2.03(b)(i), (ii) and (iii)(A) shall be allocated to the Classes of Term Loans outstanding based upon the then outstanding principal amounts of the respective Classes of Term Loans, pro rata, based upon the applicable remaining scheduled installments of principal due in respect of each such Class of Term Loans, shall be applied pro rata to Term Lenders within each Class, based upon the outstanding principal amounts owing to each such Term Lender under each such Class of Term Loans and shall be applied to reduce such remaining scheduled installments of principal within each such Class in direct order of maturity; provided that with respect to the allocation of such prepayments under this clause (A) between an Existing Term Loan Class and Extended Term Loans of the same Term Loan Extension Series, the Borrower may allocate such prepayments as the Borrower may specify, subject to the limitation that the Borrower shall not allocate to Extended Term Loans of any Term Loan Extension Series any such mandatory prepayment unless such prepayment under this clause (A) is accompanied by at least a pro rata prepayment, based upon the applicable remaining scheduled installments of principal due in respect thereof, of the Term Loans of the Existing Term Loan Class, if any, from which such Extended Term Loans were converted or exchanged (or such Term Loans of the Existing Term Loan Class have otherwise been repaid in full) and (B) each prepayment of Term Loans required by Section 2.03(b)(iii)(B) shall be allocated to any Class or Classes of Term Loans outstanding as directed by the Borrower (subject to the requirement that the proceeds shall be applied to prepay or repay the applicable Refinanced Indebtedness), shall be applied pro rata to Term Lenders within each such Class, based upon the outstanding principal amounts owing to each such Term Lender under each such Class or Classes of Term Loans and shall be applied to reduce such remaining scheduled installments of principal within each such Class or Classes in direct order of maturity.
(v) The Borrower shall notify the Administrative Agent in writing of any mandatory prepayment of Term Loans required to be made pursuant to clauses (i) through (iii) of this Section 2.03(b) at least three (3) Business Days prior to the date of such prepayment. Each such notice shall specify the date of such prepayment and provide a reasonably detailed calculation of the aggregate amount of such prepayment to be made by the Borrower. The Administrative Agent will promptly notify each Appropriate Lender of the contents of the Borrowers prepayment notice and of such Appropriate Lenders Pro Rata Share of the prepayment or other applicable share provided for under this Agreement. Each Term Lender may reject all or a portion of its Pro Rata Share, or other applicable share provided for under this Agreement, of any mandatory prepayment (such declined amounts, the Declined Proceeds) of Term Loans required to be made pursuant to clauses (i) and (ii) of this Section 2.03(b) by providing written notice (each, a Rejection Notice) to the Administrative Agent and the Borrower no later than 5:00 p.m., New York time, two (2) Business Days after the date of such Lenders receipt of notice from the Administrative Agent regarding such prepayment. Each Rejection Notice from a given Lender shall specify the principal amount of the mandatory repayment of Term Loans to be rejected by such Lender. If a Term Lender fails to deliver a Rejection Notice to the Administrative Agent within the time frame specified above or such Rejection Notice fails to specify the principal amount of the Term Loans to be rejected, any such failure will be deemed an acceptance of the total amount of such mandatory prepayment of Term Loans. Subject to the terms of the ABL Credit Documents, any Declined Proceeds remaining shall be retained by the Borrower.
(vi) Notwithstanding any other provisions of this Section 2.03(b), (A) to the extent that any or all of the Net Cash Proceeds of any Disposition by a Foreign Subsidiary giving rise to a prepayment event pursuant to Section 2.03(b)(ii) (a Foreign Disposition), the Net Cash Proceeds of any Casualty Event from a Foreign Subsidiary (a Foreign Casualty Event), or Excess Cash Flow are prohibited or delayed by applicable local law from being repatriated to the United States, the portion of
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such Net Cash Proceeds or Excess Cash Flow so affected will not be required to be applied to repay Term Loans at the times provided in this Section 2.03(b) but may be retained by the applicable Foreign Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Borrower hereby agreeing to cause the applicable Foreign Subsidiary to promptly take all actions reasonably required by the applicable local law to permit such repatriation), and once such repatriation of any of such affected Net Cash Proceeds or Excess Cash Flow is permitted under the applicable local law, such repatriation will be promptly effected and an amount equal to such repatriated Net Cash Proceeds or Excess Cash Flow will be promptly (and in any event not later than two (2) Business Days after such repatriation) applied (net of additional taxes payable or reserved against as a result thereof) to the repayment of the Term Loans pursuant to this Section 2.03(b) to the extent otherwise provided herein and (B) to the extent that the Borrower has determined in good faith that repatriation of any of or all the Net Cash Proceeds of any Foreign Disposition, any Foreign Casualty Event or Excess Cash Flow would have a material adverse tax cost consequence (taking into account any foreign tax credit or benefit actually realized in connection with such repatriation) with respect to such Net Cash Proceeds or Excess Cash Flow, the Net Cash Proceeds or Excess Cash Flow so affected may be retained by the applicable Foreign Subsidiary.
(c) Interest, Funding Losses, Etc. All prepayments under this Section 2.03 shall be accompanied by all accrued interest thereon, together with, in the case of any such prepayment of a Eurodollar Rate Loan on a date prior to the last day of an Interest Period therefor, any amounts owing in respect of such Eurodollar Rate Loan pursuant to Section 3.05.
Notwithstanding any of the other provisions of this Section 2.03, so long as no Event of Default shall have occurred and be continuing, if any prepayment of Eurodollar Rate Loans is required to be made under this Section 2.03 prior to the last day of the Interest Period therefor, in lieu of making any payment pursuant to this Section 2.03 in respect of any such Eurodollar Rate Loan prior to the last day of the Interest Period therefor, the Borrower may, in their sole discretion, deposit an amount sufficient to make any such prepayment otherwise required to be made thereunder together with accrued interest to the last day of such Interest Period into a Cash Collateral Account until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of such Loans in accordance with this Section 2.03. Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall also be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of the outstanding Loans in accordance with the relevant provisions of this Section 2.03. Such deposit shall be deemed to be a prepayment of such Loans by the Borrower for all purposes under this Agreement.
SECTION 2.04 Termination of Commitments. The Term B Commitment of each Term Lender on the Closing Date shall be automatically and permanently reduced to $0 upon the making of such Lenders Initial Term Loans pursuant to Section 2.01.
SECTION 2.05 Repayment of Loans. The Borrower shall repay to the Administrative Agent for the ratable account of the Appropriate Lenders (i) on the last Business Day of each March, June, September and December, commencing with the last Business Day of June, 2014, an aggregate principal amount equal to 0.25% of the aggregate principal amount of all Initial Term Loans outstanding on the Closing Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 8.03) and (ii) on the Maturity Date for the Initial Term Loans, the aggregate principal amount of all Initial Term Loans outstanding on such date.
SECTION 2.06 Interest.
(a) Subject to the provisions of Section 2.06(b), (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 Eurodollar Rate for such Interest Period plus the Applicable Rate and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.
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(b) During the continuance of an Event of Default under Section 8.01(a), the Borrower shall pay interest on past due amounts hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. 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 2.07 Fees. The Borrower shall pay to the Agents such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever (except as expressly agreed between the Borrower and the applicable Agent).
SECTION 2.08 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 days 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 2.10(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 any Restricted Subsidiary or for any other reason, the Borrower, Holdings or the Lenders determine that (i) the Consolidated Net Leverage Ratio of the Borrower and its Restricted Subsidiaries as calculated by the Borrower or Holdings as of any applicable date was inaccurate and (ii) a proper calculation of such Consolidated Net Leverage Ratio would have resulted in a higher Applicable Rate for such period, the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders on demand by the Administrative Agent within ten Business Days (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code, automatically and without further action by the Administrative Agent or any Lender), 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 paragraph shall not limit the rights of the Administrative Agent or any Lender, as the case may be, under Article VIII.
SECTION 2.09 Evidence of Indebtedness.
(a) The Borrowings extended by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the Borrower, in each case in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be prima facie evidence absent manifest error of the amount of the Borrowings extended by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent, as set forth in the Register, in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Term Note payable to such Lender, which shall evidence such Lenders Loans in addition to such accounts or records. Each Lender may attach schedules to its Term Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.
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(b) 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.
(c) Entries made in good faith by the Administrative Agent in the Register pursuant to Sections 2.09(a) and (b), and by each Lender in its account or accounts pursuant to Sections 2.09(a) and (b), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement and the other Loan Documents.
SECTION 2.10 Payments Generally.
(a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agents Office for payment and in Same Day Funds not later than 2:00 p.m., New York time, on the date specified herein. The Administrative Agent will promptly distribute to each Appropriate 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 Lenders Lending Office. Any payments under this Agreement that are made later than 2:00 p.m., New York time, shall be deemed to have been made on the next succeeding Business Day (but the Administrative Agent may extend such deadline for purposes of computing interest and fees (but not beyond the end of such day) in its sole discretion whether or not such payments are in process).
(b) If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(c) Unless the Borrower or any Lender has notified the Administrative Agent, prior to the date, or in the case of any Borrowing of Base Rate Loans, prior to 1:00 p.m. on the date of such Borrowing, any payment is required to be made by it to the Administrative Agent hereunder (in the case of the Borrower, for the account of any Lender hereunder or, in the case of the Lenders, for the account of the Borrower), that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in Same Day Funds, then:
(i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in Same Day Funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in Same Day Funds at the applicable Overnight Rate from time to time in effect; and
(ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in Same Day Funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the Compensation Period) at a rate per annum equal to the applicable Overnight Rate from time to time in effect. When such Lender makes payment to the Administrative Agent (together with all accrued interest thereon), then such payment amount (excluding the amount of any interest which may have accrued and been paid in respect of such late payment) shall constitute such Lenders Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agents demand therefor, the Administrative Agent
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may make a demand therefor upon the Borrower, and the Borrower shall pay such amount, or cause such amount to be paid, to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this Section 2.10(c) shall be conclusive, absent manifest error.
(d) 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 Borrower by the Administrative Agent because the conditions to the applicable Borrowing set forth in Section 4.01 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.
(e) The obligations of the Lenders hereunder to make Loans are several and not joint. The failure of any Lender to make any Loan 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.
(f) 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.
(g) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the order of priority set forth in Section 8.03 (or otherwise expressly set forth herein). If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each of the Lenders in accordance with such Lenders Pro Rata Share or other applicable share provided for under this Agreement of the sum of the Outstanding Amount of all Loans outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.
SECTION 2.11 Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender shall obtain payment in respect of any principal of or interest on account of the Loans made by it (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans of such Class made by them as shall be necessary to cause such purchasing Lender to share the excess payment in respect of any principal of or interest on such Loans of such Class pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lenders ratable share (according to the proportion of (i) the amount of such paying Lenders required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. For avoidance of doubt, the provisions of this Section 2.11 shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement as in effect from time to time or (B) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant permitted hereunder. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by applicable Law, exercise all its rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be
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conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.11 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section 2.11 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.
SECTION 2.12 Incremental Facilities.
(a) Incremental Loan Request. The Borrower may at any time or from time to time after the Closing Date, by notice to the Administrative Agent (an Incremental Loan Request), request one or more new commitments which may be of the same Class as any outstanding Term Loans (a Term Loan Increase) or a new Class of term loans (collectively with any Term Loan Increase, the Incremental Term Commitments), whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders. Each Incremental Loan Request from the Borrower pursuant to this Section 2.12 shall set forth the requested amount and proposed terms of the relevant Incremental Term Commitments.
(b) Incremental Term Loans. Any Incremental Term Loans effected through the establishment of one or more new term loans made on an Incremental Facility Closing Date (other than a Term Loan Increase) shall be designated a separate Class of Incremental Term Loans for all purposes of this Agreement. On any Incremental Facility Closing Date on which any Incremental Term Commitments of any Class are effected (including through any Term Loan Increase), subject to the satisfaction of the terms and conditions in this Section 2.12, (i) each Incremental Term Lender of such Class shall make a Loan to the Borrower (an Incremental Term Loan) in an amount equal to its Incremental Term Commitment of such Class and (ii) each Incremental Term Lender of such Class shall become a Lender hereunder with respect to the Incremental Term Commitment of such Class and the Incremental Term Loans of such Class made pursuant thereto. Notwithstanding the foregoing, Incremental Term Loans may have identical terms to any of the Term Loans and be treated as the same Class as any of such Term Loans.
(c) Incremental Term Lenders. Incremental Term Loans may be made by any existing Lender (but no existing Lender will have an obligation to make any Incremental Term Commitment (or Incremental Term Loan), nor will the Borrower have any obligation to approach any existing Lenders to provide any Incremental Term Commitment (or Incremental Term Loan)) or by any Additional Lender (each such existing Lender or Additional Lender providing such Loan or Commitment, an Incremental Term Lender); provided that (i) the Administrative Agent shall have consented to such Additional Lenders making such Incremental Term Loans to the extent such consent, if any, would be required under Section 10.07(b) for an assignment of Loans to such Additional Lender and (ii) with respect to Incremental Term Commitments, any Affiliated Lender providing an Incremental Term Commitment shall be subject to the same restrictions set forth in Section 10.07(h) as they would otherwise be subject to with respect to any purchase by or assignment to such Affiliated Lender of Term Loans.
(d) Effectiveness of Incremental Amendment. The effectiveness of any Incremental Amendment shall be subject to the satisfaction on the date thereof (the Incremental Facility Closing Date) of each of the following conditions:
(i) no Default or Event of Default shall exist after giving effect to such Incremental Term Commitments; provided that, with respect to any Incremental Amendment the primary purpose of which is to finance an acquisition permitted by this Agreement, the requirement pursuant to this clause (d)(i) shall be that no Event of Default under Section 8.01(a) or (f) shall exist after giving effect to such Incremental Term Commitments (in the case of an acquisition which is a Limited Condition Acquisition, such determination to be subject to Section 1.10);
(ii) each Incremental Term Commitment shall be in an aggregate principal amount that is not less than $10,000,000 and shall be in an increment of $1,000,000 (provided that such amount may be less than $10,000,000 if such amount represents all remaining availability under the limit set forth clause (iii) of this Section 2.12(d)); and
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(iii) the aggregate principal amount of Incremental Term Loans together with the aggregate principal amount of Permitted Incremental Equivalent Debt, calculated on a pro forma basis after giving effect to any such incurrence, shall not result in a Secured Net Leverage Ratio for the Test Period most recently ended in excess of 4.00 to 1.00 (calculating the Secured Net Leverage Ratio without netting the cash proceeds from such Incremental Term Loans) (the Available Incremental Amount).
(e) Required Terms. The terms, provisions and documentation of the Incremental Term Loans and Incremental Term Commitments of any Class and any Term Loan Increase shall be as agreed between the Borrower and the applicable Incremental Term Lenders providing such Incremental Term Commitments, and except as otherwise set forth herein, to the extent not identical to the Term Loans existing on the Incremental Facility Closing Date, shall be reasonably satisfactory to Administrative Agent; provided that the documentation governing any Incremental Term Loans may include any Previously Absent Financial Maintenance Covenant so long as the Administrative Agent shall have been given prompt written notice thereof and this Agreement is amended to include such Previously Absent Financial Maintenance Covenant for the benefit of each Facility; provided, further, that in the case of a Term Loan Increase, the terms, provisions and documentation of such Term Loan Increase shall be identical (other than with respect to upfront fees, OID or similar fees, it being understood that, if required to consummate such Term Loan Increase transaction, the interest rate margins and rate floors may be increased and additional upfront or similar fees may be payable to the lenders providing the Term Loan Increase) to the applicable Term Loans being increased, in each case, as existing on the Incremental Facility Closing Date. In any event:
(i) the Incremental Term Loans:
(A) shall rank equal in priority in right of payment and of security with the Initial Term Loans,
(B) shall not mature earlier than the Original Term Loan Maturity Date,
(C) shall have a Weighted Average Life to Maturity not shorter than the remaining Weighted Average Life to Maturity of the Initial Term Loans on the date of incurrence of such Incremental Term Loans (without giving effect to any amortization or prepayment of Term Loans prior to the time of such incurrence),
(D) shall have an Applicable Rate and, subject to clauses (e)(i)(B) and (e)(i)(C) above and clause (e)(ii) below, amortization determined by the Borrower and the applicable Incremental Term Lenders, and
(E) may participate on a pro rata basis or less than pro rata basis (but, except as otherwise permitted by this Agreement, not on a greater than pro rata basis) in any mandatory prepayments of Term Loans under Section 2.03(b)(i), (ii) or (iii)(A), as specified in the applicable Incremental Amendment.
(ii) the amortization schedule applicable to any Incremental Term Loans and the All-In Yield applicable to the Incremental Term Loans of each Class shall be determined by the Borrower and the applicable Incremental Term Lenders and shall be set forth in each applicable Incremental Amendment; provided, however, that with respect to any Loans made under Incremental Term Commitments within twelve (12) months after the Closing Date, the All-In Yield applicable to such Incremental Term Loans shall not be greater than the applicable All-In Yield payable pursuant to the terms of this Agreement as amended through the date of such calculation with respect to Initial Term Loans plus 50 basis points per annum unless the interest rate (together with, as provided in the proviso below, the Eurodollar Rate floor) with respect to the Initial Term Loans is increased so as to cause the then applicable All-In Yield under this Agreement on the Initial Term Loans to equal the All-In Yield then applicable to the Incremental Term Loans minus 50 basis points; provided that any increase in All-In Yield on the Initial Term Loans due to the application of a Eurodollar Rate floor on any Incremental Term Loan shall be effected solely through an increase in (or implementation of, as applicable) the Eurodollar Rate floor applicable to such Loans.
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(f) Incremental Amendment. Commitments in respect of Incremental Term Loans shall become Commitments, under this Agreement pursuant to an amendment (an Incremental Amendment) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Incremental Term Lender providing such Incremental Term Commitments and the Administrative Agent. The Incremental Amendment may, without the consent of any other Loan Party, Agent or Lender, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.12. For the avoidance of doubt, unless otherwise required by the Incremental Term Lenders, the effectiveness of any Incremental Amendment shall not be subject to the bring-down of the representations and warranties of the Borrower and each other Loan Party contained in this Agreement or any other Loan Document on and as of the date of such Borrowing of Incremental Term Loans; provided, however, that with respect to any Incremental Term Loans to finance an acquisition permitted by this Agreement, the condition to the availability or borrowing of such Incremental Term Loans that the Specified Representations as they relate to the target of such acquisition (conformed as necessary for such acquisition) be true and correct in all material respects as of the date of such Borrowing, may not be waived without the consent of the Required Lenders. In connection with any Incremental Amendment, the Borrower shall, if reasonably requested by the Administrative Agent, deliver customary reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that such Incremental Term Loans are provided with the benefit of the applicable Loan Documents. The Borrower will use the proceeds of the Incremental Term Loans for any purpose not prohibited by this Agreement. No Lender shall be obligated to provide any Incremental Term Commitments or Incremental Term Loans unless it so agrees.
(g) This Section 2.12 shall supersede any provisions in Section 2.10, 2.11 or 10.01 to the contrary. For the avoidance of doubt, any of the provisions of this Section 2.12 may be amended with the consent of the Required Lenders. For the avoidance of doubt, no Incremental Amendment shall effect any amendments that would require the consent of each affected Lender or all Lenders pursuant to the proviso in the first paragraph of Section 10.01, unless each such Lender has, or all such Lenders have, as the case may, given its or their consent to such amendment.
SECTION 2.13 Refinancing Amendments.
(a) At any time after the Closing Date, the Borrower may obtain, from any Lender or any Additional Lender, Other Term Loans to refinance all or any portion of the applicable Class or Classes of Loans then outstanding under this Agreement which will be made pursuant to Other Term Loan Commitments, pursuant to a Refinancing Amendment; provided that such Other Term Loans (i) may rank equal in priority in right of payment and of security with the other Loans and Commitments hereunder, (ii)(A) will have interest rates (including through fixed interest rates), interest margins, rate floors, upfront fees, funding discounts, original issue discounts and prepayment terms and premiums as may be agreed by the Borrower and the Lenders thereof and/or (B) additional fees and/or premiums may be payable to the Lenders providing such Other Term Loans in addition to any of the items contemplated by the preceding clause (A), in each case, to the extent provided in the applicable Refinancing Amendment, (iii) may have optional prepayment terms (including call protection and prepayment terms and premiums) as may be agreed between the Borrower and the Lenders thereof, (iv) will have a final maturity date no earlier than, and will have a Weighted Average Life to Maturity equal to or greater than, the Loans being refinanced (except by virtue of amortization or prepayment of the Loans prior to the time of such refinancing) and (v) will have such other terms and conditions (other than as provided in foregoing clauses (ii) through (iv)) that are identical in all material respects to, or (taken as a whole) are no more restrictive on the Borrower than those applicable to the Loans being refinanced (provided that such terms shall not be deemed to be more restrictive solely as a result of the inclusion in the documentation governing such Other Term Loan Commitments and Other Term Loans of a Previously Absent Financial Maintenance Covenant so long as the Administrative Agent shall be given prompt written notice thereof and this Agreement is amended to include such Previously Absent Financial Maintenance Covenant for the benefit of each Facility); provided, further, that the terms and conditions applicable to such Other Term Loan Commitments and Other Term Loans may provide for any additional or different financial or other covenants or other provisions that are agreed between the Borrower and the Lenders thereof and applicable only during periods after the Latest Maturity Date in respect of Term Loans that is in effect immediately prior to the date in respect of the Class of Loans being refinanced that is in effect on the date such Other Term Loan Commitments and Other Term Loans are incurred or obtained. Any Other Term Loans may participate on a pro rata basis or on a
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less than pro rata basis (but, except as otherwise permitted by this Agreement, not on a greater than pro rata basis) in any mandatory prepayments under Section 2.03(b)(i), (ii) or (iii)(A), as specified in the applicable Refinancing Amendment. In connection with any Refinancing Amendment, the Borrower shall, if reasonably requested by the Administrative Agent, deliver customary reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that such Other Term Loans are provided with the benefit of the applicable Loan Documents.
(b) Each Class of Other Term Loan Commitments and Other Term Loans incurred under this Section 2.13 shall be in an aggregate principal amount that is not less than $20,000,000 (or such lesser amount as the Administrative Agent may determine in its sole discretion). The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Other Term Loan Commitments and Other Term Loans incurred pursuant thereto (including any amendments necessary to treat the Other Term Loans and/or Other Term Loan Commitments as Loans and Commitments). Any Refinancing Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.13.
(c) This Section 2.13 shall supersede any provisions in Section 2.10, 2.11 or 10.01 to the contrary. For the avoidance of doubt, any of the provisions of this Section 2.13 may be amended with the consent of the Required Lenders. For the avoidance of doubt, no Refinancing Amendment shall effect any amendments that would require the consent of each affected Lender or all Lenders pursuant to the proviso in the first paragraph of Section 10.01, unless each such Lender has, or all such Lenders have, as the case may be, given its or their consent to such amendment. No Lender shall be under any obligation to provide any Other Term Loan Commitment unless such Lender executes a Refinancing Amendment.
SECTION 2.14 Extensions of Loans.
(a) Extension of Term Loans. The Borrower, at any time and from time to time request that all or a portion of the Term Loans of any Class (each, an Existing Term Loan Class) be converted or exchanged to extend the scheduled Maturity Date(s) of any payment of principal with respect to all or a portion of any principal amount of such Term Loans (any such Term Loans which have been so extended, Extended Term Loans) and to provide for other terms consistent with this Section 2.14. Prior to entering into any Extension Amendment with respect to any Extended Term Loans, the Borrower shall provide written notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the applicable Existing Term Loan Class, with such request offered equally to all such Lenders of such Existing Term Loan Class) (each, a Term Loan Extension Request) setting forth the proposed terms of the Extended Term Loans to be established, which terms shall be identical in all material respects to the Term Loans of the Existing Term Loan Class from which they are to be extended except that (i) the scheduled final maturity date shall be extended and all or any of the scheduled amortization payments, if any, of all or a portion of any principal amount of such Extended Term Loans may be delayed to later dates than the scheduled amortization, if any, of principal of the Term Loans of such Existing Term Loan Class (with any such delay resulting in a corresponding adjustment to the scheduled amortization payments reflected in the Extension Amendment, the Incremental Amendment, the Refinancing Amendment or any other amendment, as the case may be, with respect to the Existing Term Loan Class from which such Extended Term Loans were extended, in each case as more particularly set forth in Section 2.14(b) below), (ii)(A) the interest rates (including through fixed interest rates), interest margins, rate floors, upfront fees, funding discounts, original issue discounts and voluntary prepayment terms and premiums with respect to the Extended Term Loans may be different than those for the Term Loans of such Existing Term Loan Class and/or (B) additional fees and/or premiums may be payable to the Lenders providing such Extended Term Loans in addition to any of the items contemplated by the preceding clause (A), in each case, to the extent provided in the applicable Extension Amendment, (iii) the Extended Term Loans may have optional prepayment terms (including call protection and prepayment terms and premiums) as may be agreed between the Borrower and the Lenders thereof, (iv) any Extended Term Loans may participate on a pro rata basis or less than a pro rata basis (but, except as otherwise permitted by this Agreement, not greater than a pro rata basis) in any mandatory prepayments under Section 2.03(b)(i), (ii) or (iii)(A), in each case as specified in the respective Term Loan Extension Request, and (v) the Extension Amendment may provide for other covenants
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and terms that apply to any period after the Latest Maturity Date in respect of Term Loans that is in effect immediately prior to the establishment of such Extended Term Loans. No Lender shall have any obligation to agree to have any of its Term Loans of any Existing Term Loan Class converted into Extended Term Loans pursuant to any Term Loan Extension Request. Any Extended Term Loans extended pursuant to any Term Loan Extension Request shall be designated a series (each, a Term Loan Extension Series) of Extended Term Loans for all purposes of this Agreement and shall constitute a separate Class of Loans from the Existing Term Loan Class from which they were extended; provided that any Extended Term Loans amended from an Existing Term Loan Class may, to the extent provided in the applicable Extension Amendment, be designated as an increase in any previously established Term Loan Extension Series with respect to such Existing Term Loan Class.
(b) Extension Request. The Borrower shall provide the applicable Term Loan Extension Request to the Administrative Agent at least five (5) Business Days (or such shorter period as the Administrative Agent may determine in its sole discretion) prior to the date on which Lenders under the applicable Existing Term Loan Class are requested to respond. Any Lender holding a Term Loan under an Existing Term Loan Class (each, an Extending Term Lender) wishing to have all or a portion of its Term Loans of an Existing Term Loan Class or Existing Term Loan Classes, as applicable, subject to such Term Loan Extension Request converted or exchanged into Extended Term Loans shall notify the Administrative Agent (each, an Extension Election) on or prior to the date specified in such Term Loan Extension Request of the amount of its Term Loans which it has elected to convert or exchange into Extended Term Loans. In the event that the aggregate principal amount of Term Loans subject to Extension Elections exceeds the amount of Extended Term Loans requested pursuant to the Term Loan Extension Request, Term Loans subject to Extension Elections shall be converted or exchanged into Extended Term Loans on a pro rata basis (subject to such rounding requirements as may be established by the Administrative Agent) based on the aggregate principal amount of Term Loans included in each such Extension Election or as may be otherwise agreed to in the applicable Extension Amendment.
(c) Extension Amendment. Extended Term Loans shall be established pursuant to an amendment (each, a Extension Amendment) to this Agreement (which, except to the extent expressly contemplated by the penultimate sentence of this Section 2.14(c) and notwithstanding anything to the contrary set forth in Section 10.01, shall not require the consent of any Lender other than the Extending Term Lenders with respect to the Extended Term Loans established thereby, as the case may be) executed by the Borrower, the Administrative Agent and the Extending Term Lenders. Each request for a Term Loan Extension Series of Extended Term Loans proposed to be incurred under this Section 2.14 shall be in an aggregate principal amount that is not less than $20,000,000 (or such lesser amount as the Administrative Agent may determine in its sole discretion) (it being understood that the actual principal amount thereof provided by the applicable Lenders may be lower than such minimum amount). In addition to any terms and changes required or permitted by Section 2.14(a), each of the parties hereto agrees that this Agreement and the other Loan Documents may be amended pursuant to an Extension Amendment, without the consent of any other Lenders, to the extent necessary to (i) in respect of each Extension Amendment in respect of Extended Term Loans, amend the scheduled amortization payments pursuant to Section 2.05 or the applicable Incremental Amendment, Extension Amendment, Refinancing Amendment or other amendment, as the case may be, with respect to the Existing Term Loan Class from which the Extended Term Loans were exchanged to reduce each scheduled repayment amount for the Existing Term Loan Class in the same proportion as the amount of Term Loans of the Existing Term Loan Class is to be reduced pursuant to such Extension Amendment (it being understood that the amount of any repayment amount payable with respect to any individual Term Loan of such Existing Term Loan Class that is not an Extended Term Loan shall not be reduced as a result thereof); (ii) reflect the existence and terms of the Extended Term Loans incurred pursuant thereto; (iii) modify the prepayments set forth in Section 2.03 to reflect the existence of the Extended Term Loans and the application of prepayments with respect thereto and (iv) effect such other amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.14, and the Lenders hereby expressly authorize the Administrative Agent to enter into any such Extension Amendment. In connection with any Extension Amendment, the Borrower shall, if reasonably requested by the Administrative Agent, deliver customary reaffirmation agreements and/or such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent in order to ensure that such Extended Term Loans are provided with the benefit of the applicable Loan Documents.
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(d) Notwithstanding anything to the contrary contained in this Agreement, on any date on which any Existing Term Loan Class and is converted or exchanged to extend the related scheduled maturity date(s) in accordance with paragraphs (a) and (b) of this Section 2.14, in the case of the existing Term Loans of each Extending Term Lender, the aggregate principal amount of such existing Loans shall be deemed reduced by an amount equal to the aggregate principal amount of Extended Term Loans so converted or exchanged by such Lender on such date, and the Extended Term Loans shall be established as a separate Class of Loans (together with any other Extended Term Loans so established on such date), except as otherwise provided under Section 2.14(a).
(e) In the event that the Administrative Agent determines in its sole discretion that the allocation of Extended Term Loans of a given Term Loan Extension Series to a given Lender was incorrectly determined as a result of manifest administrative error in the receipt and processing of an Extension Election timely submitted by such Lender in accordance with the procedures set forth in the applicable Extension Amendment, then the Administrative Agent, the Borrower and such affected Lender may (and hereby are authorized to), in their sole discretion and without the consent of any other Lender, enter into an amendment to this Agreement and the other Loan Documents (each, a Corrective Extension Amendment) within 15 days following the effective date of such Extension Amendment, as the case may be, which Corrective Extension Amendment shall (i) provide for the conversion or exchange and extension of Term Loans under the Existing Term Loan Class, in such amount as is required to cause such Lender to hold Extended Term Loans of the applicable Term Loan Extension Series into which such other Term Loans were initially converted or exchanged, as the case may be, in the amount such Lender would have held had such administrative error not occurred and had such Lender received the minimum allocation of the applicable Loans or Commitments to which it was entitled under the terms of such Extension Amendment, in the absence of such error, (ii) be subject to the satisfaction of such conditions as the Administrative Agent, the Borrower and such Lender may agree, and (iii) effect such other amendments of the type (with appropriate reference and nomenclature changes) described in the penultimate sentence of Section 2.14(c).
(f) No conversion or exchange of Loans or Commitments pursuant to any Extension Amendment in accordance with this Section 2.14 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.
(g) This Section 2.14 shall supersede any provisions in Section 2.10, 2.11 or 10.01 to the contrary. For the avoidance of doubt, any of the provisions of this Section 2.14 may be amended with the consent of the Required Lenders. For the avoidance of doubt, no Extension Amendment shall effect any amendments that would require the consent of each affected Lender or all Lenders pursuant to the proviso in the first paragraph of Section 10.01, unless each such Lender has, or all such Lenders have, as the case may be, given its or their consent to such amendment.
SECTION 2.15 Prepayment Premium.
In the event that, on or prior to the first anniversary of the Closing Date, the Borrower make any prepayment of Initial Term Loans pursuant to Section 2.03(a)(i) or 2.03(b)(iii), the Borrower shall pay to the Administrative Agent, for the ratable account of each applicable Lender, a prepayment premium of 1.00% of the aggregate principal amount of the Initial Term Loans being prepaid.
ARTICLE III
Taxes, Increased Costs Protection and Illegality
SECTION 3.01 Taxes.
(a) Except as required by applicable Law, any and all payments by any Loan Party to or for the account of any Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any Taxes.
(b) If any Loan Party or any other applicable withholding agent is required by applicable Law to make any deduction or withholding on account of any Taxes from any sum paid or payable by any Loan
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Party to any Lender or Agent under any of the Loan Documents: (i) the applicable Loan Party shall notify the Administrative Agent of any such requirement or any change in any such requirement as soon as such Loan Party becomes aware of it; (ii) the applicable Loan Party or other applicable withholding agent shall make such deduction or withholding and pay to the relevant Governmental Authority any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Loan Party) for its own account or (if that liability is imposed on the Lender or Agent) on behalf of and in the name of the Lender or Agent (as applicable); (iii) if the Tax in question is a Non-Excluded Tax or Other Tax, the sum payable to such Lender or Agent (as applicable) shall be increased by such Loan Party to the extent necessary to ensure that, after the making of any required deduction or withholding for Non-Excluded Taxes or Other Taxes (including any deductions or withholdings for Non-Excluded Taxes or Other Taxes attributable to any payments required to be made under this Section 3.01), the Lender or the Agent (as applicable), receives on the due date a net sum equal to what it would have received had no such deduction or withholding been required or made; and (iv) within thirty days after paying any sum from which it is required by Law to make any deduction or withholding, and within thirty days after the due date of payment of any Tax which it is required by clause (ii) above to pay, the Borrower making such payments shall deliver to the Administrative Agent evidence reasonably satisfactory to the other affected parties of such deduction or withholding and of the remittance thereof to the relevant Governmental Authority.
(c) Status of Lender. Each Lender shall, at such times as are reasonably requested by the Borrower or the Administrative Agent, provide the Borrower and the Administrative Agent with any documentation prescribed by Laws or reasonably requested by the Borrower or the Administrative Agent certifying as to any entitlement of such Lender to an exemption from, or reduction in, withholding Tax with respect to any payments to be made to such Lender under any Loan Document. Each such Lender shall, whenever a lapse in time or change in circumstances renders such documentation (including any specific documentation required below in this Section 3.01(c)) obsolete, expired or inaccurate in any material respect, deliver promptly to the Borrower and the Administrative Agent updated or other appropriate documentation (including any new documentation reasonably requested by the Borrower or the Administrative Agent) or promptly notify the Borrower and Administrative Agent of its inability to do so.
Without limiting the foregoing:
(i) Each U.S. Lender shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly signed copies of Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding.
(ii) Each Foreign Lender shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent) whichever of the following is applicable:
(A) two properly completed and duly signed copies of Internal Revenue Service Form W-8BEN (or any successor forms) claiming eligibility for the benefits of an income tax treaty to which the United States is a party, and such other documentation as required under the Code,
(B) two properly completed and duly signed copies of Internal Revenue Service Form W-8ECI (or any successor forms),
(C) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 871(h) or Section 881(c) of the Code, (A) two properly completed and duly signed certificates substantially in the form of Exhibit F (any such certificate, a United States Tax Compliance Certificate) and (B) two properly completed and duly signed copies of Internal Revenue Service Form W-8BEN (or any successor forms),
(D) to the extent a Foreign Lender is not the beneficial owner (for example, where the Foreign Lender is a partnership or a participating Lender), Internal Revenue Service Form W-8IMY (or any successor forms) of the Foreign Lender, accompanied by a Form W-8ECI,
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W-8BEN, United States Tax Compliance Certificate, Form W-9, Form W-8IMY or any other required information (or any successor forms) from each beneficial owner that would be required under this Section 3.01(c) if such beneficial owner were a Lender, as applicable (provided that, if one or more beneficial owners are claiming the portfolio interest exemption, the United States Tax Compliance Certificate may be provided by such Foreign Lender on behalf of such beneficial owner), or
(E) two properly completed and duly signed copies of any other form prescribed by applicable U.S. federal income tax laws (including the Treasury Regulations) as a basis for claiming a complete exemption from, or a reduction in, United States federal withholding tax on any payments to such Lender under the Loan Documents.
(iii) 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 Sections 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this paragraph, the term FATCA shall include any amendments made to FATCA after the date of this Agreement.
Notwithstanding any other provision of this clause (c), a Lender shall not be required to deliver any form that such Lender is not legally eligible to deliver.
(d) In addition to the payments by a Loan Party required by Section 3.01(b), the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(e) The Loan Parties shall, jointly and severally, indemnify a Lender or Agent (each a Tax Indemnitee), within 10 days after written demand therefor, for the full amount of any Non-Excluded Taxes paid or payable by such Tax Indemnitee on or attributable to any payment under or with respect to any Loan Document, and any Other Taxes payable by such Tax Indemnitee (including Non-Excluded Taxes or Other Taxes imposed on or attributable to amounts payable under this Section 3.01), whether or not such Taxes were correctly or legally imposed or asserted by the Governmental Authority. A certificate as to the amount of such payment or liability prepared in good faith and delivered by the Tax Indemnitee or by the Administrative Agent on its own behalf or on behalf of another Tax Indemnitee, shall be conclusive absent manifest error.
(f) If and to the extent that a Tax Indemnitee, in its sole discretion (exercised in good faith), determines that it has received a refund of any Non-Excluded Taxes or Other Taxes in respect of which it has received additional payments under this Section 3.01, then such Tax Indemnitee shall pay to the relevant Loan Party the amount of such refund, net of all out-of-pocket expenses of the Tax Indemnitee (including any Taxes imposed with respect to such refund), 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 Tax Indemnitee, 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 Tax Indemnitee if the Tax Indemnitee is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (f), in no event will the Tax Indemnitee be required to pay any amount to a Loan Party pursuant to this paragraph (f) the payment of which would place the Tax Indemnitee in a less favorable net after-Tax position than the Tax Indemnitee would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection shall not be construed to require a Tax Indemnitee to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to any Loan Party or any other Person.
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(g) The agreements in this Section 3.01 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
SECTION 3.02 Illegality. If any Lender reasonably determines that any Change in 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 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 market, then, on written notice thereof by such Lender to the Borrower through the Administrative Agent, (i) 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, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans and shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurodollar Rate component of the Base Rate with respect to any Base Rate Loans, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Eurodollar Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
SECTION 3.03 Inability to Determine Rates. If the Required Lenders reasonably determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) 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, (b) 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 or in connection with an existing or proposed Base Rate Loan, or (c) 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 Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended, and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a 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.
SECTION 3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(d));
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(ii) subject any Lender to any Tax of any kind whatsoever with respect to this Agreement or any Eurodollar Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes or Other Taxes covered by Section 3.01 and any Excluded Taxes); or
(iii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender that is not otherwise accounted for in the definition of Eurodollar Rate or this clause (a);
and the result of any of the foregoing shall be to increase the cost to such Lender of making 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 to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or any other amount) then, from time to time within fifteen (15) days after demand by such Lender setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent), the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered; provided that such amounts shall only be payable by the Borrower to the applicable Lender under this Section 3.04(a) so long as it is such Lenders general policy or practice to demand compensation in similar circumstances under comparable provisions of other financing agreements.
(b) Capital Requirements. If any Lender reasonably determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lenders holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lenders capital or on the capital of such Lenders holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by it to a level below that which such Lender or such Lenders holding company, as the case may be, could have achieved but for such Change in Law (taking into consideration such Lenders policies and the policies of such Lenders holding company with respect to capital adequacy), then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent), the Borrower will pay to such Lender additional amount or amounts as will compensate such Lender or such Lenders holding company for any such reduction suffered; provided that such amounts shall only be payable by the Borrower to the applicable Lender under this Section 3.04(b) so long as it is such Lenders general policy or practice to demand compensation in similar circumstances under comparable provisions of other financing agreements.
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section 3.04 and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender, as the case may be, the amount shown as due on any such certificate within fifteen (15) days after receipt thereof.
(d) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as Eurocurrency liabilities), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.
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SECTION 3.05 Funding Losses. Upon written demand of any Lender (with a copy to the Administrative Agent) from time to time, which demand shall set forth in reasonable detail the basis for requesting such amount, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense actually incurred by it as a result of:
(a) any continuation, conversion, payment or prepayment of any Eurodollar Rate Loan on a day prior to the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurodollar Rate Loan on the date or in the amount notified by the Borrower; or
(c) any assignment of a Eurodollar Rate Loan on a day prior to the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 3.07;
including any loss or expense (excluding loss of anticipated profits or margin) actually incurred by reason of the liquidation or reemployment of funds obtained by it to maintain such Eurodollar Rate Loan or from fees payable to terminate the deposits from which such funds were obtained.
SECTION 3.06 Matters Applicable to All Requests for Compensation.
(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender 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 to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material economic, legal or regulatory respect.
(b) Suspension of Lender Obligations. If any Lender requests compensation by the Borrower under Section 3.04, the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue Eurodollar Rate Loans from one Interest Period to another Interest Period, or to convert Base Rate Loans into Eurodollar Rate Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.06(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.
(c) Conversion of Eurodollar Rate Loans. If any Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 3.02, 3.03 or 3.04 hereof that gave rise to the conversion of such Lenders Eurodollar Rate Loans no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Rate Loans made by other Lenders are outstanding, such Lenders Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans of a given Class held by the Lenders of such Class holding Eurodollar Rate Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Pro Rata Shares.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of Sections 3.01 or 3.04 shall not constitute a waiver of such Lenders right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of Section 3.01 or 3.04 for any increased costs incurred or reductions suffered more than one hundred and eighty (180) days prior to the date that such Lender notifies the Borrower of the event giving rise to
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such claim and of such Lenders intention to claim compensation therefor (except that, if the circumstance giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof).
SECTION 3.07 Replacement of Lenders under Certain Circumstances. If (i) any Lender requests compensation under Section 3.04 or ceases to make Eurodollar Rate Loans as a result of any condition described in Section 3.02 or Section 3.04, (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 or 3.04, (iii) any Lender is a Non-Consenting Lender or (iv) any other circumstance exists hereunder that gives the Borrower the right to replace a Lender as a party hereto, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, (x) require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.07), all of its interests, rights and obligations under this Agreement (or, with respect to clause (iii) above, all of its interests, rights and obligations with respect to the Class of Loans or Commitments that is the subject of the related consent, waiver, or amendment, as applicable) and the related Loan Documents to one or more Eligible Assignees that shall assume such obligations (any of which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.07(b)(iv);
(b) such Lender shall have received payment of an amount equal to the applicable outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05 and any prepayment premium pursuant to Section 2.15 that would otherwise be owed in connection therewith) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(c) such Lender being replaced pursuant to this Section 3.07 shall (i) execute and deliver an Assignment and Assumption with respect to all, or a portion, as applicable, of such Lenders Commitment and outstanding Loans, and (ii) deliver any Term Notes evidencing such Loans to the Borrower or Administrative Agent (or a lost or destroyed note indemnity in lieu thereof); provided that the failure of any such Lender to execute an Assignment and Assumption or deliver such Term Notes shall not render such sale and purchase (and the corresponding assignment) invalid and such assignment shall be recorded in the Register and the Term Notes shall be deemed to be canceled upon such failure;
(d) the Eligible Assignee shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification and confidentiality provisions under this Agreement, which shall survive as to such assigning Lender;
(e) 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;
(f) such assignment does not conflict with applicable Laws; and
(g) the Lender that acts as Administrative Agent cannot be replaced in its capacity as Administrative Agent other than in accordance with Section 9.06,
or (y) terminate the Commitment of such Lender and repay all Obligations of the Borrower owing to such Lender relating to the Loans and participations held by such Lender as of such termination date (including any prepayment premium pursuant to Section 2.15 that would otherwise be owed in connection therewith); provided that in the case of any such termination of the Commitment of a Non-Consenting Lender such termination shall be sufficient (together with all other consenting Lenders) to cause the adoption of the applicable consent, waiver or amendment of the Loan Documents and such termination shall, with respect to clause (iii) above, be in respect of all of its interests, rights and obligations with respect to the Class of Loans or Commitments that is the subject of the related consent, waiver and amendment.
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In the event that (i) any of the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of each Lender, all affected Lenders or all the Lenders or all affected Lenders with respect to a certain Class or Classes of the Loans/Commitments and (iii) the Required Lenders or Required Facility Lenders, as applicable, have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a Non-Consenting Lender.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
SECTION 3.08 Survival. All of the Borrowers 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
Conditions Precedent to Credit Extension
SECTION 4.01 Conditions to Borrowing. The obligation of each Lender to make a Borrowing available hereunder on the Closing Date is subject to satisfaction of the following conditions precedent:
(a) The Administrative Agents receipt of the following, each of which shall be originals, facsimiles or copies in .pdf format (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:
(i) a Committed Loan Notice;
(ii) executed counterparts of this Agreement;
(iii) (A) an executed certificate from a Responsible Officer of the Borrower stating its intention to incur the Term Loans as Additional Secured Debt pursuant to Section 2.10(b)(i) of the Crossing Lien Intercreditor Agreement, together with any joinder required thereunder; and
(B) an executed certificate from a Responsible Officer of the Borrower stating its intention to incur the Term Loans as Additional Senior Secured Debt pursuant to Section 7.03(d) of the Equal Priority Intercreditor Agreement, together with any joinder required thereunder;
(iv) each Collateral Document set forth on Schedule 1.01A required to be executed on the Closing Date as indicated on such schedule, duly executed by each Loan Party thereto, together with:
(A) certificates, if any, representing the Collateral that is certificated equity of the Acquired Company (to the extent required pursuant to Section 6.11 and Article XII) accompanied by undated stock powers executed in blank; and
(B) evidence that all UCC-1 financing statements in the jurisdictions of organization of the Acquired Company and its Subsidiaries that the Administrative Agent and the
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Collateral Agent may deem reasonably necessary to satisfy the requirements set forth in Section 6.11 shall have been provided for, and arrangements for the filing thereof in a manner reasonably satisfactory to the Administrative Agent shall have been made;
(v) certificates of good standing from the secretary of state of the state of organization of each Loan Party (to the extent such concept exists in such jurisdiction), customary certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party 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 or is to be a party on the Closing Date;
(vi) a customary legal opinion from (x) Simpson Thacher & Bartlett LLP, New York counsel to the Loan Parties, and (y) each local counsel to the Loan Parties, if any, listed on Schedule 4.01(a)(vi) in the jurisdictions indicated on such schedule;
(vii) a solvency certificate from a Financial Officer of the Borrower (after giving effect to the Transactions) substantially in the form attached hereto as Exhibit G; and
(viii) evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect and that the Administrative Agent has been named as loss payee and/or additional insured, as applicable, under each insurance policy with respect to such insurance as to which the Administrative Agent shall have reasonably requested to be so named.
(b) The Arranger shall have received (i) the Annual Financial Statements and (ii) the Quarterly Financial Statements.
(c) The Arranger shall have received the Pro Forma Financial Statements.
(d) The Administrative Agent shall have received at least three (3) days prior to the Closing Date all documentation and other information in respect of the Acquired Company and its Subsidiaries required under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act, that has been requested in writing by it at least ten (10) Business Days prior to the Closing Date.
(e) The Specified Representations and the Specified Acquisition Agreement Representations shall be true and correct in all material respects on and as of the Closing Date; provided that to the extent such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; provided further that the condition precedent in this clause (e) with respect to Specified Acquisition Agreement Representations shall fail to be satisfied only to the extent a breach of such Specified Acquisition Agreement Representations provides the Borrower with the right to, pursuant to the Acquisition Agreement, terminate its obligations under the Acquisition Agreement or decline to consummate the Acquisition as a result of the breach of such Specified Acquisition Agreement Representations.
(f) All fees and expenses required to be paid hereunder and invoiced at least three (3) Business Days before the Closing Date shall have been paid in full in cash.
(g) Prior to or substantially concurrently with the Borrowing on the Closing Date, the Acquisition shall have been consummated and the Acquisition Agreement shall not have been amended or waived in any material respect by the Borrower, and the Borrower shall not have granted any consents under the Acquisition Agreement, in each case, in a manner materially adverse to the Lenders party hereto as of the Closing Date (in their capacities as such) without the consent of the Arranger (such consent not to be unreasonably withheld, delayed or conditioned (it being agreed by the Arranger that, with respect to any
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consent to any such amendment, consent or waiver, their consent shall be deemed to have been given if the Arranger does not object in writing to a written request for such consent within four (4) Business Days after such request for consent is delivered to the Arranger by the Borrower); provided, that any amendment of the definition of Material Adverse Effect in the Acquisition Agreement shall be deemed materially adverse to the Lenders and shall require the consent of the Arranger; provided, further, that any change in the amount of consideration required to consummate the Acquisition shall be deemed not to be materially adverse to the Lenders so long as any reduction shall be applied to reduce the Initial Term Loans funded on the Closing Date.
(h) Prior to or substantially concurrently with the Borrowing on the Closing Date, the Closing Date Release shall have occurred.
(i) Except as set forth in, or qualified by any matter set forth in, the Disclosure Schedule (as defined in the Acquisition Agreement) (it being understood that any disclosure set forth in any particular Section (as defined in the Acquisition Agreement) of the Disclosure Schedule will be deemed disclosed for the purpose of the corresponding Section or subsection of the Acquisition Agreement and for the purpose of any other Section or subsection of the Acquisition Agreement, where the application or relevance of such disclosure as an exception to (or a disclosure for purposes of) such other Section is reasonably apparent on the face of such disclosure), since December 31, 2013 through the date of the Acquisition Agreement, there has not been any event, circumstance, condition, occurrence, effect or change that has had or could reasonably be expected to have, either individually or in the aggregate (taking into account all other events, circumstances, conditions, occurrences, effects or changes), a Closing Date Material Adverse Effect. Since the date of the Acquisition Agreement through the Closing Date, there shall not have occurred any Closing Date Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, that could reasonably be expected to result in a Closing Date Material Adverse Effect.
Without limiting the generality of the provisions of the last paragraph of Section 9.03, for purposes of determining compliance with the conditions specified in this Section 4.01, 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.
ARTICLE V
Representations and Warranties
Each of Holdings and the Borrower represents and warrant to the Administrative Agent and the Lenders on the Closing Date:
SECTION 5.01 Existence, Qualification and Power; Compliance with Laws. (a) Each of the Loan Parties and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) each of the Loan Parties and each of its Subsidiaries has all requisite power and authority to (i) own its property and assets and to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required and (ii) in the case of the Loan Parties, execute, deliver and perform its obligations under the Loan Documents to which it is a party and (c) each Loan Party is in compliance with all Law applicable to it or its property, except where the failure to be so in compliance, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.02 Authorization; Enforceability.
The execution, delivery and performance by each of the Loan Parties of each of the Loan Documents to which it is a party, the borrowing of Term Loans and the use of the proceeds thereof are, to the extent
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applicable, within each applicable Loan Partys organizational powers and have been duly authorized by all necessary organizational and, if required, equityholder action of such Loan Party. Each Loan Document to which each Loan Party is a party has been duly executed and delivered by such Loan Party and is a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors rights generally and to general principles of equity.
SECTION 5.03 Governmental Authorization; No Conflict. The execution, delivery and performance by each of the Loan Parties of each of the Loan Documents to which it is a party, the borrowing of Loans and the use of the proceeds thereof (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect and (ii) for filings necessary to perfect Liens created pursuant to the Loan Documents, (b) will not violate any Law applicable to any Loan Party or any of its Subsidiaries, (c) will not contravene the terms of any of such Persons Organizational Documents, (d) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Loan Party or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by any Loan Party or any of its Subsidiaries, and (e) will not result in the creation or imposition of any Lien on any asset of any Loan Party or any of its Subsidiaries, except Liens created pursuant to the Loan Documents, the Senior Notes Documents and the ABL Credit Documents; except, in each case other than with respect to the creation of Liens, to the extent that any such violation, default or right, or any failure to obtain such consent or approval or to take any such action, would not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.04 Insurance. All insurance required by Section 6.07 is in full force and effect and all premiums in respect of such insurance have been duly paid. The Borrower believes that the insurance maintained by or on behalf of the Borrower and the Subsidiaries is adequate and is in accordance with normal industry practice.
SECTION 5.05 Financial Statements; No Material Adverse Effect.
(a) (i) The Annual Financial Statements and the Quarterly Financial Statements fairly present in all material respects the financial position of the Acquired Company and its Subsidiaries as of the dates thereof and the results of operations of the Acquired Company and its Subsidiaries for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, (A) except as otherwise expressly noted therein and (B) subject, in the case of the Quarterly Financial Statements, to changes resulting from normal year-end adjustments and the absence of footnotes.
(ii) The unaudited pro forma consolidated balance sheet of the Borrower (the Pro Forma Balance Sheet) and the related unaudited pro forma consolidated statement of income of the Borrower and its consolidated Subsidiaries as of and for the most recently completed four fiscal quarter period ending at least 45 days (or 90 days in the case that the last day of such four fiscal quarter period is the end of the Borrowers fiscal year) prior to the Closing Date (such date, the Pro Forma Balance Sheet Date), prepared after giving effect to the Transactions as if the Transactions had occurred at the beginning of such period (together with the Pro Forma Balance Sheet, the Pro Forma Financial Statements), copies of which have heretofore been furnished to the Administrative Agent, has been prepared giving effect (as if such events had occurred on such date) to the consummation of the Transactions. The Pro Forma Financial Statements have been prepared in good faith based upon assumptions believed to be reasonable as of the date thereof, and presents fairly on a pro forma basis the estimated financial position of the Borrower its consolidated Subsidiaries as at the Pro Forma Balance Sheet Date, assuming that the events specified in the preceding sentence had actually occurred at such date.
(b) Since December 31, 2013, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect.
SECTION 5.06 Litigation. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Loan Party, threatened against or affecting the Loan Parties or any of their Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any Loan Documents.
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SECTION 5.07 Labor Matters. Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes, lockouts or slowdowns against any Loan Party pending or, to the knowledge of the Borrower, threatened, (b) the hours worked by and payments made to employees of the Loan Parties and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, provincial, local or foreign law dealing with such matters and (c) all payments due from any Loan Party or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Loan Party or such Subsidiary to the extent required by GAAP. Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect the consummation of the Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party or any of its Subsidiaries (or any predecessor) is a party or by which any Loan Party or any of its Subsidiaries (or any predecessor) is bound.
SECTION 5.08 Ownership of Property; Liens. Each Loan Party and each of its Restricted Subsidiaries has good and insurable fee simple title to, or valid leasehold interests in, or easements or other limited property interests in, all its real properties and has good and marketable title to its personal property and assets, in each case, except for defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes and except where the failure to have such title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Liens (i) permitted by Section 7.01 or (ii) arising by operation of law (which Liens, in the case of this clause (ii) do not materially interfere with the ability of any Loan Party or any of its Subsidiaries to carry on its business as now conducted or to utilize the affected properties or assets for their intended purposes).
SECTION 5.09 Environmental Matters. Except for matters that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect (i) no Loan Party nor any of its Subsidiaries has received written notice of any claim with respect to any Environmental Liability and (ii) no Loan Party nor any of its Subsidiaries (1) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law or (2) has become subject to any Environmental Liability.
SECTION 5.10 Taxes. Each Loan Party and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.11 ERISA Compliance. No ERISA Event has occurred in the five year period prior to the date on which this representation is made or deemed made and is continuing or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, would reasonably be expected to result in a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, the present value of all accumulated benefit obligations under all Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plans, in the aggregate.
SECTION 5.12 Subsidiaries. As of the Closing Date, Schedule 5.12 sets forth (a) a correct and complete list of the name and relationship to the Borrower of each and all of the Borrowers Subsidiaries, (b) a true and complete listing of each class of the Borrowers and each Subsidiarys authorized Equity Interests, of which all of such issued shares are validly issued, outstanding, fully paid and non-assessable, and owned beneficially and of record by the Persons identified on Schedule 5.12, and (c) the type of entity of the Borrower and each of its Subsidiaries. All of the issued and outstanding Equity Interests of the Subsidiaries owned by any Loan Party have
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been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable free and clear of all Liens (other than Liens permitted pursuant to Section 7.01). As of the Closing Date, there are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests or powers of attorney granted by the Borrower or a Subsidiary of the Borrower relating to Equity Interests of the Borrower or any Subsidiary.
SECTION 5.13 Federal Reserve Regulations; Investment Company Act.
(a) On the Closing Date, none of the Collateral is Margin Stock. No Loan Party nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately for any purpose that entails a violation of, or that is inconsistent with, the provisions of Regulation T, U or X.
(b) No Loan Party is an investment company under the Investment Company Act of 1940.
SECTION 5.14 Disclosure.
(a) All written information (other than the Projections, the pro forma financial statements and estimates and information of a general economic or general industry nature) concerning the Borrower, the Transactions and any other transactions contemplated hereby prepared by or on behalf of the foregoing or their representatives and made available to any Lender or the Agent in connection with the Transactions on or before the date hereof (the Information), when taken as a whole, as of the date such Information was furnished to the Lenders and as of the Closing Date, did not contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were made (giving effect to all supplements and updates).
(b) The Projections, pro forma financial statements and estimates prepared by or on behalf of the Borrower or any of its representatives and that have been made available to any Lender or the Agent in connection with the Transactions on or before the date hereof (the Other Information) (i) have been prepared in good faith based upon assumptions believed to be reasonable as of the date thereof (it being recognized that such Other Information is as to future events and is not to be viewed as a fact, the Other Information is subject to significant uncertainties and contingencies, many of which are beyond the control of the Loan Parties and their Subsidiaries, that no assurance can be given that any particular projections will be realized and that actual results during the period or periods covered by any such Other Information may differ from the projected results and such differences may be material), and (ii) as of the Closing Date, have not been modified in any material respect by the Loan Parties.
SECTION 5.15 Intellectual Property; Licenses, Etc. Each Loan Party owns or has the lawful right to use all material intellectual property used in the conduct of its business (collectively, IP Rights), without conflict with any intellectual property rights of others, except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, there is no pending or, to any Borrowers knowledge, threatened claim that any Loan Partys ownership, use, marketing, sale or distribution of any inventory or other product violates another Persons intellectual property rights.
SECTION 5.16 Solvency. As of the Closing Date, and immediately after giving effect to the Transactions: (i) the fair value of the assets of the Borrower and its Subsidiaries, on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries, on a consolidated basis; (ii) the present fair saleable value of the property of the Borrower and its Subsidiaries, on a consolidated basis, will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis, on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Borrower and its Subsidiaries, on a consolidated basis, will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Borrower and its Subsidiaries, on a consolidated basis, will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date.
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SECTION 5.17 Subordination of Junior Financing. The Obligations for principal, interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any insolvency or liquidation proceeding at the rate, including any applicable post-default rate, specified in the applicable agreement), premium (if any), fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the Loan Documents constitute Senior Indebtedness under and as defined in the Senior Notes Documents.
SECTION 5.18 USA Patriot Act and OFAC. To the extent applicable, none of the Borrower or any other Loan Party will use the proceeds of the Term Loans or otherwise make available such proceeds to any person for use in any manner that will result in a violation of (i) the USA PATRIOT Act and (ii) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R. Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto. Neither the Borrower nor any Restricted Subsidiary nor, to the knowledge of the Borrower, any director, officer or employee of the Borrower or any Restricted Subsidiary, is subject as of the Closing Date to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (OFAC) or a person on the list of Specially Designated Nationals and Blocked Persons. The proceeds of the Term Loans will not, to the knowledge of the Borrower, be made available to any Person for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.
SECTION 5.19 Collateral Documents. The provisions of the Collateral Documents are effective to create legal and valid Liens on the applicable Collateral described therein in favor of the Collateral Agent, for the benefit of the Secured Parties, the Lenders and the other Secured Parties (in each case, to the extent such matter is governed by the laws of the United States or any jurisdiction therein) and upon the taking of all actions described in the Loan Documents (but subject to the limitations set forth therein), including, without limitation, the filing of UCC financing statements covering the appropriate Collateral in the jurisdiction of organization of each Loan Party and the filings of short form agreements or other applicable documents or notices in respect of registered and applied for United States federal intellectual property owned by each Loan Party, such Liens will constitute perfected Liens on the Collateral, securing the applicable Obligations, enforceable against the applicable Loan Party, and having priority over all other Liens on the Collateral except in the case of (a) Permitted Liens and other Liens permitted under Section 7.01, to the extent any such Permitted Liens or such Liens would have priority over the Liens in favor of the Agent pursuant to any applicable law or otherwise, (b) Liens perfected only by possession (including possession of any certificate of title) to the extent the Agent has not obtained or does not maintain possession of such Collateral and (c) subject to and as provided for under the terms of the Intercreditor Agreements, the Liens granted on the Collateral under the Senior Notes Documents and the ABL Credit Documents.
ARTICLE VI
Affirmative Covenants
So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder (other than contingent indemnification obligations as to which no claim has been asserted) shall remain unpaid or unsatisfied, the Borrower shall, and shall (except in the case of the covenants set forth in Section 6.01, 6.02 and 6.03) cause each of the Restricted Subsidiaries to:
SECTION 6.01 Financial Statements. Deliver to the Administrative Agent for prompt further distribution to each Lender each of the following and shall take the following actions:
(a) within ninety (90) days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of earnings, shareholders equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (whose opinion shall not be qualified as to scope of audit or as to the status of the Borrower and its consolidated Subsidiaries as a going concern) to the effect that such consolidated financial statements present fairly, in all material respects, the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP;
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(b) within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of earnings, shareholders equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly, in all material respects, the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes;
(c) within ninety (90) days after the beginning of each fiscal year, a detailed consolidated budget of the Borrower and its Subsidiaries by month for such fiscal year (including a projected consolidated balance sheet and the related consolidated statements of projected cash flows and projected income of the Borrower and its consolidated Subsidiaries for each quarter of such fiscal year) (collectively, the Projections);
(d) simultaneously with the delivery of each set of consolidated financial statements referred to in Sections 6.01(a) and 6.01(b), the related unaudited consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements; and
(e) (i) quarterly, at a time mutually agreed with the Administrative Agent that is promptly after the delivery of the information referred to in Section 6.01(b), commencing with the delivery of information with respect to the fiscal quarter ending June 30, 2014, either (x) use commercially reasonable efforts to participate in a conference call for Lenders to discuss the financial position and results of operations of the Borrower and their respective Subsidiaries or (y) deliver a customary Managements Discussion and Analysis of Financial Condition and Results of Operations, in each case for the most recently-ended period for which financial statements have been delivered and (ii) commencing with the fiscal year ending December 31, 2015, promptly after the delivery of the information referred to in Section 6.01(a), deliver a customary Managements Discussion and Analysis of Financial Condition and Results of Operations with respect to the fiscal year most recently ended.
Notwithstanding the foregoing, the obligations referred to in Section 6.01(a) and 6.01(b) may be satisfied with respect to financial information of the Borrower and their respective Subsidiaries by furnishing (A) the applicable financial statements of any Parent Entity of the Borrower or (B) the Borrowers or such Parent Entitys Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of clauses (A) and (B), (i) to the extent such information relates to a parent of the Borrower such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such Parent Entity, on the one hand, and the information relating to the Borrower and the consolidated Restricted Subsidiaries on a standalone basis, on the other hand and (ii) to the extent such information is in lieu of information required to be provided under Section 6.01(a), such materials are accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion shall not be subject to any going concern or like qualification or any qualification as to the scope of such audit.
Any financial statements required to be delivered pursuant to Sections 6.01(a) or 6.01(b) shall not be required to contain all purchase accounting adjustments relating to the Transactions or the Hercules Transactions to the extent it is not practicable to include any such adjustments in such financial statements.
SECTION 6.02 Certificates; Other Information. Deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) no later than five (5) days after the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with such delivery for the fiscal quarter ending June 30, 2014), a duly completed Compliance Certificate signed by a Financial Officer of the Borrower;
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(b) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports, proxy statements and registration statements which the Borrower or any Restricted Subsidiary files with the SEC or with any Governmental Authority that may be substituted therefor or with any national securities exchange, as the case may be (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered to the Administrative Agent), exhibits to any registration statement and, if applicable, any registration statement on Form S-8), and in any case not otherwise required to be delivered to the Administrative Agent pursuant to any other clause of this Section 6.02;
(c) promptly after the furnishing thereof, copies of any notices of default to any holder of any class or series of debt securities of any Loan Party having an aggregate outstanding principal amount greater than the Threshold Amount or pursuant to the terms of the ABL Credit Documents, the Senior Notes Documents or the Senior Subordinated Notes Documents so long as the aggregate outstanding principal amount thereunder is greater than the Threshold Amount (in each case, other than in connection with any board observer rights) and not otherwise required to be furnished to the Administrative Agent pursuant to any other clause of this Section 6.02;
(d) together with the delivery of the financial statements pursuant to Section 6.01(a) (commencing with such delivery for the fiscal year ending December 31, 2014), (i) a report setting forth the information required by Sections 1(a) and 2 of the Perfection Certificate (or confirming that there has been no change in such information since the Closing Date or the last date of disclosure of any such information to the Administrative Agent) and (ii) a list of each Subsidiary of the Borrower that identifies each Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary as of the date of delivery of such list or a confirmation that there is no change in such information since the later of the Closing Date and the last date of disclosure of any such information to the Administrative Agent; and
(e) promptly, but subject to the limitations set forth in Section 6.10 and Section 10.08, such additional information regarding the business and financial affairs of any Loan Party or any Material Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent may from time to time on its own behalf or on behalf of any Lender reasonably request in writing from time to time.
Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(b) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrowers (or any Parent Entitys) website on the Internet at the website address listed on Schedule 10.02 hereto; or (ii) on which such documents are posted on the Borrowers behalf on SyndTrak or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.
The Borrower hereby acknowledges that (a) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, the Borrower Materials) by posting the 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 information that is (i) of a type that would be publicly available (or could be derived from publicly available information) if the Borrower were public reporting companies and (ii) material with respect to the Borrower or any of their respective securities for purposes of foreign, United States Federal and state securities laws (all such information described in the foregoing, MNPI)) (each, a Public Lender). The Borrower hereby agree that (w) at the Administrative Agents request, 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 Borrower shall be
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deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any MNPI (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.08); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated as Public Side Information; and (z) the Administrative Agent and the Arranger shall treat the Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not marked as Public Side Information. Notwithstanding the foregoing, the Borrower shall be under no obligation to mark the Borrower Materials PUBLIC.
SECTION 6.03 Notices. Promptly after a Responsible Officer obtains actual knowledge thereof, notify the Administrative Agent:
(a) of the occurrence of any Event of Default or Default; and
(b) of (i) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against any Loan Party or any of its Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect or (ii) the occurrence of any ERISA Event that, together with all other ERISA Events that have occurred and are continuing, would reasonably be expected to result in a Material Adverse Effect.
Each notice pursuant to this Section 6.03 shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to Section 6.03(a) or (b) (as applicable) and (y) setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and propose to take with respect thereto.
SECTION 6.04 Payment of Obligations. Timely pay, discharge or otherwise satisfy, as the same shall become due and payable, all of its obligations and liabilities in respect of Taxes imposed upon it or upon its income or profits or in respect of its property, except, in each case, to the extent (i) any such Tax is being contested in good faith and by appropriate actions for which appropriate reserves have been established in accordance with GAAP or (ii) the failure to pay or discharge the same would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 6.05 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; and
(b) take all reasonable action to obtain, preserve, renew and keep in full force and effect its rights, licenses, permits, privileges, franchises, and IP Rights material to the conduct of its business,
except in the case of clause (a) or (b) to the extent (other than with respect to the preservation of the existence of the Borrower) that failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or pursuant to any merger, consolidation, liquidation, dissolution or Disposition permitted by Article VII.
SECTION 6.06 Maintenance of Properties. Except if the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, maintain, preserve and protect all of its material properties and equipment used in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted.
SECTION 6.07 Maintenance of Insurance. (a) Maintain with insurance companies that the Borrower believes (in the good faith judgment of its management) are financially sound and reputable at the time the relevant coverage is placed or renewed, insurance with respect to the Borrowers and the Restricted Subsidiaries properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the
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same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Borrower and the Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons, and will furnish to the Lenders, upon written request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried; provided that, notwithstanding the foregoing, in no event shall the Borrower or any Restricted Subsidiary be required to obtain or maintain insurance that is more restrictive than its normal course of practice. Each such policy of insurance shall as appropriate, (i) name the Collateral Agent, on behalf of the Secured Parties, as an additional insured thereunder as its interests may appear and/or (ii) in the case of each casualty insurance policy, contain an additional loss payable clause or endorsement that names the Collateral Agent, on behalf of the Secured Parties, as the additional loss payee thereunder.
(b) If any portion of any Mortgaged Property is within a special flood hazard area, then the Borrower shall, or shall cause each Loan Party to, (i) maintain, or cause to be maintained, with a financially sound and reputable insurer, flood insurance in an amount and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (ii) deliver to the Collateral Agent evidence of such compliance in form and substance reasonably acceptable to the Collateral Agent.
SECTION 6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees of any Governmental Authority applicable to it or to its business or property, except if the failure to comply therewith would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect.
SECTION 6.09 Books and Records. Maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with GAAP shall be made of all material financial transactions and matters involving the assets and business of the Borrower or such Restricted Subsidiary, as the case may be (it being understood and agreed that certain Foreign Subsidiaries maintain individual books and records in conformity with generally accepted accounting principles in their respective countries of organization and that such maintenance shall not constitute a breach of the representations, warranties or covenants hereunder).
SECTION 6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such accountants customary policies and procedures), all at the reasonable expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 6.10 and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year absent the existence of an Event of Default and only one (1) such time shall be at the Borrowers expense; provided, further, that when an Event of Default exists, the Administrative Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent shall give the Borrower the opportunity to participate in any discussions with the Borrowers independent public accountants. Notwithstanding anything to the contrary in this Section 6.10, none of the Borrower or any of the Restricted Subsidiaries will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter that (a) constitutes non-financial trade secrets or non-financial proprietary information, (b) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by Law or any binding agreement or (c) is subject to attorney-client or similar privilege or constitutes attorney work product.
SECTION 6.11 Covenant to Give Security. Promptly following the acquisition by the Borrower or any Subsidiary Guarantor of any After-Acquired Property (but subject to the limitations, if applicable, described in Article XII and the Collateral Documents), execute and deliver such mortgages, deeds of trust, security instruments, financing statements and, in the case of interests in real property, certificates and opinions of counsel, as shall be reasonably necessary to vest in the Collateral Agent a perfected security interest in such After-Acquired Property and to have such After-Acquired Property added to the Notes Collateral or the ABL Collateral, as
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applicable, and thereupon all provisions of this Agreement relating to the Notes Collateral or the ABL Collateral, as applicable, shall be deemed to relate to such After-Acquired Property to the same extent and with the same force and effect.
SECTION 6.12 Compliance with Environmental Laws. Except, in each case, to the extent that the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) comply, and take all reasonable actions to cause any lessees and other Persons operating or occupying its properties to comply, with all applicable Environmental Laws and Environmental Permits; (b) obtain and renew all Environmental Permits necessary for its operations and properties; and (c) in each case to the extent required by applicable Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the applicable requirements of Environmental Laws.
SECTION 6.13 Further Assurances and Post-Closing Covenant. Subject to the limitations set forth in the Collateral Documents, the Borrower and each of the Guarantors shall execute any and all further documents, financing statements, agreements and instruments, and take all further action that may be reasonably required under applicable law, or that the Collateral Agent may reasonably request, in order to grant, preserve, protect and perfect the validity and priority of the security interests and Liens created or intended to be created by the Collateral Documents in the Collateral.
SECTION 6.14 Use of Proceeds. The proceeds of the Initial Term Loans, together with the proceeds of the ABL Revolving Loans drawn on the Closing Date will be used (i) to pay for the Closing Date Release, (ii) to pay the Acquisition Consideration and (iii) to pay the Transaction Expenses.
SECTION 6.15 Maintenance of Ratings. Use commercially reasonable efforts to maintain (i) a public corporate credit rating (but not any specific rating) from S&P and a public corporate family rating (but not any specific rating) from Moodys, in each case in respect of the Borrower, and (ii) a public rating (but not any specific rating) in respect of each Facility as of the Closing Date from each of S&P and Moodys.
ARTICLE VII
Negative Covenants
So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder (other than contingent indemnification obligations as to which no claim has been asserted) shall remain unpaid or unsatisfied, the Borrower shall not, nor shall the Borrower permit any Restricted Subsidiary to:
SECTION 7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than Permitted Liens.
SECTION 7.02 [Reserved].
SECTION 7.03 Indebtedness.
(a) Create, incur, issue, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness.
(b) For purposes of determining compliance with this Section 7.03:
(i) in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the categories of Permitted Indebtedness described in the definition of Permitted Indebtedness, the Borrower, in its sole discretion, will classify or reclassify such item of Indebtedness (or any portion thereof) and will only be required to include the amount and type of such Indebtedness in one of such clauses; and
(ii) the Borrower will be entitled to divide and classify an item of Indebtedness in more than one clause of the definition of Permitted Indebtedness.
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(c) Accrual of interest, the accretion of accreted value, the accretion or amortization of original issue discount and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence or issuance of Indebtedness for purposes of this Section 7.03.
(d) For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed or first incurred (whichever yields the lower U.S. dollar-equivalent), in the case of revolving credit debt; provided that if such Indebtedness is incurred to Refinance other Indebtedness denominated in a foreign currency, and such Refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such Refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed (i) the principal amount of such Indebtedness being Refinanced plus (ii) the aggregate amount of accrued interest, fees, underwriting discounts, premiums (including tender premiums) and penalties (if any) thereon and other costs and expenses (including OID, upfront fees or similar fees) incurred in connection with such Refinancing.
(e) Subject to the proviso to Section 7.03(d), the principal amount of any Indebtedness incurred to Refinance other Indebtedness, if incurred in a different currency from the Indebtedness being Refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such Refinancing.
SECTION 7.04 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 (other than as part of the Transactions), except that:
(a) any Restricted Subsidiary may merge or consolidate with the Borrower (including a merger, the purpose of which is to reorganize the Borrower into a new jurisdiction); provided that (x) the Borrower shall be the continuing or surviving Person and (y) such merger or consolidation does not result in the Borrower ceasing to be organized under the Laws of the United States, any state thereof or the District of Columbia or any territory thereof;
(b) (i) any Restricted Subsidiary of the Borrower that is not a Loan Party may merge or consolidate with or into any other Restricted Subsidiary of the Borrower that is not a Loan Party, (ii) any Restricted Subsidiary of the Borrower may merge or consolidate with or into any other Restricted Subsidiary of the Borrower that is a Loan Party, (iii) any merger the sole purpose of which is to reincorporate or reorganize a Loan Party in another jurisdiction in the United States shall be permitted and (iv) any Restricted Subsidiary of the Borrower may liquidate or dissolve or change its legal form if the Borrower determines in good faith that such action is in the best interests of the Borrower and the Restricted Subsidiaries and is not materially disadvantageous to the Lenders; provided that, in the case of clause (iv), the Person who receives the assets of any dissolving or liquidated Restricted Subsidiary that is a Guarantor shall be a Loan Party or such disposition shall otherwise be permitted under Section 7.06 or the definition of Permitted Investments;
(c) any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or another Restricted Subsidiary;
(d) so long as no Event of Default (or, to the extent relating to a Permitted Acquisition, no Event of Default under Section 8.01(a) or (f)) exists or would result therefrom (in each case, in the case of a Permitted Acquisition which is a Limited Condition Acquisition, such determination to be subject to Section 1.10), the Borrower may merge or consolidate with (or Dispose of all or substantially all of its assets to) any other Person; provided that (i) the Borrower shall be the continuing or surviving corporation
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or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (or, in connection with a Disposition of all or substantially all of the Borrowers assets, is the transferee of such assets) (any such Person, a Successor Borrower), (A) the Successor Borrower shall be an entity organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof, (B) the Successor Borrower shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to supplements hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) immediately after giving pro forma effect to any such transaction and any related financing transaction, as if such transactions had occurred at the beginning of the applicable four-quarter period, (1) the Successor Borrower would be permitted to incur at least $1.00 of Permitted Ratio Debt, or (2) the Fixed Charge Coverage Ratio for the Borrower would be greater than the Fixed Charge Coverage Ratio for the Borrower immediately prior to such transaction, (D) each Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Guaranty (or in another form reasonably satisfactory to the Administrative Agent) confirmed that its Guaranty of the Obligations shall apply to the Successor Borrowers obligations under this Agreement, (E) each Loan Party, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement (or in another form reasonably satisfactory to the Administrative Agent) confirmed that its obligations thereunder shall apply to the Successor Borrowers obligations under this Agreement, (F) if reasonably requested by the Administrative Agent, each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage (or other instrument reasonably satisfactory to the Collateral Agent) confirmed that its obligations thereunder shall apply to the Successor Borrowers obligations under this Agreement, and (G) the Successor Borrower shall have delivered to the Administrative Agent an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement; provided, further, that if the foregoing are satisfied, the Successor Borrower will succeed to, and be substituted for, the Borrower under this Agreement;
(e) so long as no Event of Default (or, to the extent relating to a Permitted Acquisition, no Event of Default under Section 8.01(a) or (f)) exists or would result therefrom, Holdings may merge or consolidate with (or Dispose of all or substantially all of its assets to) any other Person; provided that (A) a new Holdings shall be the continuing or surviving Person or (B) if (i) the Person formed by or surviving any such merger or consolidation is not a Holdings entity, (ii) a Holdings entity is not the Person into which the applicable previous Holdings has been liquidated or (iii) in connection with a Disposition of all or substantially all of a Holdings entitys assets, the Person that is the transferee of such assets is not a Holdings entity (any such Person, a Successor Holdings), (1) the Successor Holdings shall be an entity organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof, (2) the Successor Holdings shall expressly assume all the obligations of Holdings under this Agreement and the other Loan Documents to which Holdings is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent and (3) if reasonably requested by the Administrative Agent, the Borrower shall have delivered to the Administrative Agent an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement; provided, further, that if the foregoing are satisfied, the Successor Holdings will succeed to, and be substituted for, the applicable Holdings under this Agreement;
(f) any Restricted Subsidiary may merge or consolidate with (or Dispose of all or substantially all of its assets to) any other Person in order to effect a Permitted Investment or other Investment permitted pursuant to Section 7.06; provided, that, solely in the case of a merger or consolidation involving a Loan Party, no Event of Default (or, to the extent relating to a Permitted Acquisition, no Event of Default under Section 8.01(a) or (f)) exists or would result therefrom; provided, further, that the continuing or surviving Person shall be the Borrower or a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the applicable requirements of Section 6.11 and Article XII;
(g) a merger, dissolution, liquidation, consolidation or Disposition, the purpose of which is to effect a Disposition permitted pursuant to Section 7.05 (other than Section 7.05(e)); and
(h) the Loan Parties and the Restricted Subsidiaries may consummate the Transactions.
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SECTION 7.05 Dispositions. Make any Disposition (other than as part of or in connection with the Transactions) except:
(a) Dispositions of obsolete, damaged, worn out, used or surplus property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions of property no longer used or useful in the conduct of the business of the Borrower and the Restricted Subsidiaries;
(b) Dispositions of inventory and goods held for sale in the ordinary course of business and immaterial assets (considered in the aggregate) in the ordinary course of business;
(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property;
(d) Dispositions of property to the Borrower or a Restricted Subsidiary;
(e) Dispositions constituting Permitted Investments (other than pursuant to clause (d) thereof) or otherwise permitted by Section 7.06, Dispositions permitted by Section 7.04 (other than clause (g) thereof) and Liens permitted by Section 7.01;
(f) Dispositions of property pursuant to Sale and Lease-Back Transactions;
(g) Dispositions of cash, Cash Equivalents and Investment Grade Securities;
(h) leases, subleases, service agreements, product sales, licenses or sublicenses (including agreements involving the provision of software in copy or as a service, and related data and services), in each case in the ordinary course of business and which do not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
(i) transfers of property subject to Casualty Events;
(j) Dispositions of property, whether tangible or intangible, for fair market value; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Event of Default exists), no Event of Default shall exist or would result from such Disposition; (ii) with respect to any Disposition pursuant to this clause (j) for a purchase price in excess of $15,000,000, the Borrower or any Restricted Subsidiary shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents; provided, however, that for the purposes of this clause (ii), all of the following shall be deemed to be cash: (A) any liabilities (as shown on the Borrowers or such Restricted Subsidiarys most recent balance sheet or in the footnotes thereto) of the Borrower or such Restricted Subsidiary that are (i) assumed by the transferee with respect to the applicable Disposition or (ii) that are otherwise cancelled or terminated in connection with the transaction with such transferee and, in each case, for which the Borrower and all of the Restricted Subsidiaries (to the extent previously liable thereunder) shall have been validly released by all applicable creditors in writing, (B) any securities, notes or other obligations or assets received by the Borrower or Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within one hundred and eighty (180) days following the closing of the applicable Disposition, (C) Indebtedness of any Restricted Subsidiary that ceases to be a Restricted Subsidiary as a result of such Disposition (other than intercompany debt owed to the Borrower or its Restricted Subsidiaries), to the extent that the Borrower and all of the Restricted Subsidiaries (to the extent previously liable thereunder) are released from any guarantee of payment of the principal amount of such Indebtedness in connection with such Disposition and (D) any Designated Non-Cash Consideration received in respect of such Disposition having an aggregate fair market value, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (D) that
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is at that time outstanding, not in excess (as of the date of the receipt of such Designated Non-Cash Consideration) of the greater of $50,000,000 and 2.50% of Total Assets, with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value; and (iii) the Net Cash Proceeds thereof are applied to prepay the Loans to the extent required by Section 2.03(b)(ii);
(k) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;
(l) Dispositions or discounts of accounts receivable in connection with the collection or compromise thereof;
(m) any issuance or sale of Equity Interests in, or sale of Indebtedness or other securities of, an Unrestricted Subsidiary;
(n) to the extent allowable under Section 1031 of the Code (or comparable or successor provision), any exchange of like property (excluding any boot thereon permitted by such provision) for use in any business conducted by the Borrower or any of the Restricted Subsidiaries that is not in contravention of Section 7.07;
(o) the unwinding of any Hedging Obligations;
(p) any Disposition of Securitization Assets to a Securitization Subsidiary;
(q) abandon, or cease to maintain or cease to enforce intellectual property rights in each case in the ordinary course of business and where the loss of which does not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
(r) the licensing or sub-licensing of intellectual property or other general intangibles in the ordinary course of business;
(s) any surrender or waiver of contract rights or the settlement, release or surrender of contract rights or other litigation claims in the ordinary course of business; and
(t) the issuance of directors qualifying shares and shares issued to foreign nationals as required by applicable law.
To the extent any Collateral is Disposed of as expressly permitted by this Section 7.05 to any Person other than a Loan Party, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and, if requested by the Administrative Agent, upon the certification by the Borrower that such Disposition is permitted by this Agreement, the Administrative Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing.
SECTION 7.06 Restricted Payments.
(a) Declare or make, directly or indirectly, any Restricted Payment unless, at the time of and immediately after giving effect to such Restricted Payment, such Restricted Payment, together with the aggregate amount of all other Restricted Payments (including the fair market value of any non-cash amount) made by the Borrower and the Restricted Subsidiaries after the Closing Date (including Restricted Payments permitted by Sections 7.06(b)(i), (ii) (with respect to the payment of dividends on Refunding Capital Stock pursuant to clause (c) thereof), (vi)(C) and (ix), but excluding all other Restricted Payments permitted by Section 7.06(b) (and for the avoidance of doubt, all other Permitted Investments)), is less than the Available Amount at such time; provided to the extent such Restricted Payment is to be made out of amounts under clause (b) of the definition of Available Amount, (x) no Event of Default shall have occurred and be continuing or would occur as a consequence thereof and (y) at least $1.00 of Permitted Ratio Debt would be permitted to be incurred.
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(b) The provisions of Section 7.06(a) will not prohibit:
(i) the payment of any dividend or other distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or other distribution or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or other distribution or redemption payment would have complied with the provisions of this Section 7.06;
(ii) (a) the redemption, repurchase, retirement or other acquisition of any Equity Interest, including any accrued and unpaid dividends thereon (Treasury Capital Stock), or Subordinated Indebtedness, of any Loan Party or any Equity Interest of any Parent Entity of the Borrower, in exchange for, or out of the proceeds of, the substantially concurrent sale or issuance (other than to a Restricted Subsidiary) of, Equity Interests of the Borrower or any Parent Entity thereof to the extent contributed to the Borrower (in each case, other than any Disqualified Stock) (Refunding Capital Stock), (b) the declaration and payment of dividends on Treasury Capital Stock out of the proceeds of the substantially concurrent sale or issuance (other than to a Restricted Subsidiary of the Borrower or to an employee stock ownership plan or any trust established by the Borrower or any of its Restricted Subsidiaries) of Refunding Capital Stock, and (c) if immediately prior to the retirement of Treasury Capital Stock, the declaration and payment of dividends thereon was permitted under clause (vi) of this Section 7.06(b), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any Parent Entity of the Borrower) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;
(iii) the defeasance, redemption, repurchase, exchange or other acquisition or retirement of (1) Junior Financing of the Borrower or a Subsidiary Guarantor made by exchange for, or out of the proceeds of a sale made within 90 days of, new Indebtedness of the Borrower or a Subsidiary Guarantor or (2) Disqualified Stock made by exchange for, or out of the proceeds of a sale made within 90 days of, Disqualified Stock of the Borrower or a Subsidiary Guarantor that, in each case, is incurred in compliance with Section 7.03;
(iv) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Borrower or any Parent Entity thereof held by any future, present or former employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any of its Subsidiaries or any of its Parent Entities pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, or any equity subscription or equity holder agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by the Borrower or any Parent Entity thereof in connection with such repurchase, retirement or other acquisition), including any Equity Interest rolled over by management of the Borrower or any Parent Entity thereof in connection with the Transactions; provided that the aggregate amount of Restricted Payments made under this Section 7.06(b)(iv) does not exceed $10,000,000 in any fiscal year (which amount shall be increased to $20,000,000 following the consummation of a Qualifying IPO) (with unused amounts in any fiscal year being carried over to the succeeding fiscal years); provided, further, that each of the amounts in any fiscal year under this clause may be increased by an amount not to exceed:
(A) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Borrower and, to the extent contributed to the Borrower, the cash proceeds from the sale of Equity Interests of any Parent Entity of the Borrower, in each case to any future, present or former employees, directors, officers, managers, or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any of its Subsidiaries or any of its Parent Entities that occurs after the Closing Date, to the extent the cash proceeds from the sale of such Equity Interests are excluded from the calculation of the Available Amount; plus
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(B) the cash proceeds of life insurance policies received by the Borrower, the Restricted Subsidiaries or, to the extent such proceeds are contributed to a Loan Party, any Parent Entity of the Borrower, in each case, after the Closing Date; less
(C) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (A) and (B) of this clause (iv);
and provided, further, that cancellation of Indebtedness owing to the Borrower or any Restricted Subsidiary from any future, present or former employees, directors, officers, managers, or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any Parent Entity of the Borrower or any Restricted Subsidiary in connection with a repurchase of Equity Interests of the Borrower or any Parent Entities thereof will not be deemed to constitute a Restricted Payment for purposes of this Section 7.06 or any other provision of this Agreement;
(v) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Borrower or any Restricted Subsidiary issued in accordance with Section 7.03 or any class or series of Preferred Stock of any Restricted Subsidiary to the extent such dividends or distributions are included in the definition of Fixed Charges;
(vi) (A) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Borrower after the Closing Date;
(B) the declaration and payment of dividends or distributions to any Parent Entity of the Borrower, the proceeds of which will be used to fund the payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by such Parent Entity after the Closing Date, provided that the amount of dividends and distributions paid pursuant to this Section 7.06(b)(vi)(B) shall not exceed the aggregate amount of cash actually contributed to the Borrower from the sale of such Designated Preferred Stock; or
(C) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to Section 7.06(b)(ii);
provided, in the case of each of Sections 7.06(b)(vi)(A), (B) and (C), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, at least $1.00 of Permitted Ratio Debt would be permitted to be incurred;
(vii) Investments in Unrestricted Subsidiaries taken together with all other Investments made pursuant to this clause (vii) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities, not to exceed the greater of (a) $35,000,000 and (b) 1.50% of Total Assets;
(viii) payments made or expected to be made by the Borrower or any Restricted Subsidiary in respect of withholding or similar taxes payable upon exercise of Equity Interests by any future, present or former employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any of its Subsidiaries or any of its Parent Entities and any repurchases of Equity Interests deemed to occur upon exercise of stock options, warrants or similar rights if such Equity Interests represent a portion of the exercise price of such options, warrants or similar rights or required withholding or similar taxes;
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(ix) the declaration and payment of dividends on the Borrowers common stock (or the payment of dividends to any Parent Entity of the Borrower to fund a payment of dividends on such companys common stock), following the first public offering of the Borrowers common stock or the common stock of any Parent Entity of the Borrower after the Closing Date, of up to 6.0% per annum of the net cash proceeds received by or contributed to the Borrower in or from any such public offering, other than public offerings with respect to the Borrowers common stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution;
(x) Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (x) not to exceed at any one time outstanding (as of the date any such Restricted Payment is made) the sum of (a) the greater of (1) $50,000,000 and (2) 2.50% of Total Assets and (b) an amount equal to the amount of Excluded Contributions previously received by the Borrower;
(xi) distributions or payments of Securitization Fees;
(xii) any Restricted Payment made in connection with the Transactions, the Hercules Transactions and the fees and expenses related thereto or owed to Affiliates, in each case, with respect to any Restricted Payment made to an Affiliate, to the extent permitted by Section 7.08;
(xiii) the declaration and payment of dividends or distributions by the Borrower or any Restricted Subsidiary to, or the making of loans or advances to, the Borrower or any Parent Entity thereof in amounts required for any Parent Entity of the Borrower to pay, in each case without duplication,
(A) franchise, excise and similar taxes and other fees and expenses required to maintain their corporate or other legal existence;
(B) (i) for any taxable period in which the Borrower is a member of a consolidated, combined or similar income tax group for U.S. federal and/or applicable foreign, state or local income tax purposes of which a Parent Entity of the Borrower is the common parent (a Tax Group), to pay the portion of any U.S. federal, foreign, state and local income taxes of such Tax Group for such taxable period that are attributable to the taxable income of the Borrower and/or its Subsidiaries; provided, that for each taxable period, (A) the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount that the Borrower and/or its Subsidiaries, as applicable, would have been required to pay as stand-alone taxpayers or a stand-alone Tax Group and (B) the amount of such payments made in respect of an Unrestricted Subsidiary shall be permitted only to the extent that cash distributions were made by such Unrestricted Subsidiary to the Borrower or any Restricted Subsidiary for such purpose; and (ii) any Tax Distribution;
(C) customary salary, bonus, severance and other benefits payable to, and indemnities provided on behalf of, employees, directors, officers and managers of any Parent Entity of the Borrower, and any payroll, social security or similar taxes thereof, to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries, including, if applicable, the Borrowers proportionate share of such amounts relating to such Parent Entity being a public company;
(D) general corporate operating, administrative, compliance and overhead costs and expenses of any Parent Entity of the Borrower to the extent such costs and expenses are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries, including, if applicable, the Borrowers proportionate share of such amounts relating to such Parent Entity being a public company;
(E) fees and expenses of the Borrower related to any successful or unsuccessful equity or debt offering of such Parent Entity;
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(F) amounts payable pursuant to the Management Fee Agreement (including any amendments, modifications or waivers thereto so long as any such amendment is not materially disadvantageous in the good faith judgment of the Borrower, when taken as a whole, as compared to the Management Fee Agreement in effect on the Closing Date), solely to the extent such amounts are not paid directly by the Borrower or any of its Subsidiaries;
(G) cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests of the Borrower or any Parent Entity thereof;
(H) interest and/or principal on Indebtedness the proceeds of which have been contributed to the Borrower or any Restricted Subsidiary and that has been guaranteed by, or is otherwise considered Indebtedness of, the Borrower or any Restricted Subsidiary incurred in accordance with Section 7.03;
(I) to finance Investments that would otherwise be permitted to be made pursuant to this Section 7.06 if made by the Borrower; provided that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment, (B) such Parent Entity shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the capital of the Borrower or a Restricted Subsidiary or (2) the merger, consolidation, amalgamation or sale of the Person formed or acquired into the Borrower or a Restricted Subsidiary (to the extent not prohibited by Section 7.04) in order to consummate such Investment, (C) such Parent Entity and its Affiliates (other than the Borrower or any Restricted Subsidiary) receives no consideration or other payment in connection with such transaction except to the extent the Borrower or a Restricted Subsidiary could have given such consideration or made such payment in compliance with this Section 7.06 and (D) any property received by the Borrower shall not increase the Available Amount; and
(J) amounts that would be permitted to be paid by the Borrower under clauses (d), (k), (l) and (m) of Section 7.08; provided that the amount of any dividend or distribution under this clause (xiii)(J) to permit such payment shall reduce Consolidated Net Income of the Borrower to the extent, if any, that such payment would have reduced Consolidated Net Income of the Borrower if such payment had been made directly by the Borrower and increase (or, without duplication of any reduction of Consolidated Net Income, decrease) EBITDA to the extent, if any, that Consolidated Net Income is reduced under this clause (xiii)(J) and such payment would have been added back to (or, to the extent excluded from Consolidated Net Income, would have been deducted from) EBITDA if such payment had been made directly by the Borrower, in each case, in the period such payment is made;
(xiv) the distribution, by dividend or otherwise, or other transfer or disposition of shares of Capital Stock of, or Indebtedness owed to the Borrower or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are Cash Equivalents);
(xv) other Restricted Payments so long as immediately after giving effect to any Restricted Payment pursuant to this clause (xv), the Consolidated Net Leverage Ratio for the Test Period most recently ended on or prior to the date of any such Restricted Payment would be less than or equal to 4.50 to 1.00;
(xvi) (A) the refinancing of any Junior Financing with the Net Cash Proceeds of, or in exchange for, any Refinancing Indebtedness, (B) the conversion of any Junior Financing to Equity Interests (other than Disqualified Stock) of the Borrower or any Parent Entity thereof, (C) the prepayment of Indebtedness of the Borrower or any Restricted Subsidiary owed to the Borrower or a Restricted Subsidiary or the prepayment of Refinancing Indebtedness with the proceeds of any other Junior Financing otherwise permitted by Section 7.03, (D) prepayments, redemptions, purchases, defeasances and other payments in respect of Junior Financings prior to their scheduled maturity in an aggregate amount, not to exceed (as of
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the date any such prepayment, redemption, purchase, defeasance or other payment is made) the greater of $25,000,000 and 1.00% of Total Assets, and (E) prepayments, redemptions, purchases, defeasances and other payments in respect of Junior Financings from the Net Cash Proceeds of any Permitted Equity Issuance; and
(xvii) to the extent constituting Restricted Payments, the Borrower and the Restricted Subsidiaries may enter into and consummate transactions permitted by any provision of Section 7.01, 7.03, 7.04 or 7.08 (other than Section 7.08(b)).
provided that at the time of, and after giving effect to, any Restricted Payment permitted under clause (x)(a) of this Section 7.06(b), no Event of Default shall have occurred and be continuing or would occur as a consequence thereof.
For the avoidance of doubt, this Section 7.06 shall not restrict the making of any AHYDO catch-up payment with respect to, and required by the terms of, any Indebtedness of the Borrower or any Restricted Subsidiary permitted to be incurred under Section 7.03 hereof.
SECTION 7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and the Restricted Subsidiaries on the Closing Date or any business or any other activities that are reasonably similar, ancillary, incidental, complimentary or related to, or a reasonable extension, development or expansion of, the business conducted or proposed to be conducted by the Borrower and the Restricted Subsidiaries on the Closing Date.
SECTION 7.08 Transactions with Affiliates. Make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Borrower (each of the foregoing, an Affiliate Transaction) involving aggregate payments or consideration in excess of $20,000,000, unless such Affiliate Transaction is on terms that are not materially less favorable to the Borrower or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Borrower or such Restricted Subsidiary with an unrelated Person on an arms-length basis; provided that the foregoing restriction shall not apply to:
(a) transactions between or among Holdings, the Borrower or any Restricted Subsidiary or any entity that becomes a Restricted Subsidiary as a result of such transaction;
(b) Restricted Payments permitted by Section 7.06 (including, for the avoidance of doubt, any Permitted Investments);
(c) the payment of management, consulting, monitoring, advisory and other fees (including any transaction fee) and related expenses (including indemnification and other similar amounts) pursuant to the Management Fee Agreement (plus any unpaid management, consulting, monitoring, advisory and other fees and related expenses (including indemnification and similar amounts) accrued in any prior year) and any one-time payment under the Management Fee Agreement of a termination fee to the Sponsor in the event of either a Change of Control or the completion of a Qualifying IPO, in each case, without giving effect to amendments, modifications, or waivers of the Management Fee Agreement after the Closing Date that are, when taken as a whole, materially adverse to the Lenders compared to the Management Fee Agreement in effect on the Closing Date;
(d) the payment of reasonable and customary fees and compensation paid to, and indemnities and reimbursements and employment and severance arrangements provided on behalf of or for the benefit of, current or former employees, directors, officers, managers, distributors or consultants of the Borrower or any of its Parent Entities or any Restricted Subsidiary;
(e) any agreement as in effect as of the Closing Date and set forth on Schedule 7.08, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect in the good faith judgment of the Borrower to the Lenders when taken as a whole as compared to the applicable agreement as in effect on the Closing Date);
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(f) the existence of, or the performance by the Borrower or any Restricted Subsidiary of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Closing Date and any similar agreements which it may enter into thereafter; provided that the existence of, or the performance by the Borrower or any Restricted Subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Closing Date shall only be permitted by this clause (f) to the extent that the terms of any such amendment or new agreement are not disadvantageous in any material respect in the good faith judgment of the Borrower to the Lenders when taken as a whole;
(g) the Transactions and the Hercules Transactions and the payment of all fees and expenses related to the Transactions and the Hercules Transactions, including Transaction Expenses;
(h) transactions with customers, clients, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services that are Affiliates, in each case in the ordinary course of business and which are fair to the Borrower and the Restricted Subsidiaries, in the reasonable determination of the Borrower, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;
(i) the issuance of Equity Interests (other than Disqualified Stock) of the Borrower to any Parent Entity or to any Permitted Holder or to any employee, director, officer, manager, distributor or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any Parent Entity thereof or any Restricted Subsidiary;
(j) sales of accounts receivable, or participations therein, or Securitization Assets or related assets in connection with or any Qualified Securitization Facility;
(k) payments by the Borrower or any Restricted Subsidiary to the Sponsor made for any (x) financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Borrower in good faith, (y) consulting services relating to product management, working capital management or operational improvements and (z) procurement, sourcing and back-office services;
(l) payments and Indebtedness (and cancellation of any thereof) of the Borrower and the Restricted Subsidiaries and Preferred Stock (and cancellation of any thereof) of any Restricted Subsidiary to any future, current or former employee, director, officer, manager or consultant (or their respective Controlled Investment Affiliates or Immediate Family Members) of the Borrower, any of its Subsidiaries or any of its Parent Entities pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement; and any employment agreements, stock option plans and other compensatory arrangements (and any successor plans thereto) and any supplemental executive retirement benefit plans or arrangements with any such employees, directors, officers, managers or consultants (or their respective Controlled Investment Affiliates or Immediate Family Members) that are, in each case, approved by the Borrower in good faith;
(m) investments by any Permitted Holder in securities of the Borrower or any Restricted Subsidiary (and payment of reasonable out-of-pocket expenses incurred by any such Permitted Holder in connection therewith) so long as (a) the investment is being offered generally to other investors on the same or more favorable terms and (b) the investment constitutes less than 5.0% of the proposed or outstanding issue amount of such class of securities;
(n) payments to or from, and transactions with, any joint venture in the ordinary course of business (including, without limitation, any cash management activities related thereto);
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(o) payments by the Borrower (and any Parent Entity thereof) and its Subsidiaries pursuant to tax sharing agreements among Holdings (and any Parent Entity) and its Subsidiaries; provided that in each case the amount of such payments in any fiscal year does not exceed the amount described in Section 7.06(b)(xiii)(B);
(p) any lease entered into between the Borrower or any Restricted Subsidiary, as lessee and any Affiliate of the Borrower, as lessor, which is approved by a majority of the disinterested members of the board of directors of the Borrower in good faith; and
(q) intellectual property licenses and sublicenses, product sales, and service agreements in the ordinary course of business.
SECTION 7.09 Burdensome Agreements.
Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that prohibits, restricts, imposes any condition on or limits the ability of (a) any Restricted Subsidiary that is not a Loan Party to make Restricted Payments to (directly or indirectly) or to make or repay loans or advances to any Loan Party or to Guarantee the Obligations of any Loan Party under the Loan Documents or (b) any Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Lenders with respect to the Obligations under the Loan Documents; provided that the foregoing clauses (a) and (b) shall not apply to Contractual Obligations that:
(i) (x) exist on the Closing Date and (to the extent not otherwise permitted by this Section 7.09) are listed on Schedule 7.09 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 the restrictions described in the foregoing clauses (a) and (b) in such Contractual Obligation,
(ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary,
(iii) represent Indebtedness of a Restricted Subsidiary that is not a Loan Party that is permitted by Section 7.03,
(iv) are restrictions that arise in connection with (including Indebtedness and other agreements entered into in connection therewith) (x) any Lien permitted by Section 7.01 and relate to the property subject to such Lien or (y) any Disposition permitted by Section 7.05 applicable pending such Disposition solely to the assets subject to such Disposition,
(v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 7.06 or, for the avoidance of doubt, constituting Permitted Investments, and applicable solely to such joint venture,
(vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under Section 7.03 but solely to the extent any negative pledge relates to the property financed by or the subject of such Indebtedness and the proceeds and products thereof and, in the case of the ABL Credit Agreement, Senior Notes, Senior Subordinated Notes and Credit Agreement Refinancing Indebtedness, permit the Liens securing the Obligations without restriction (subject to the Intercreditor Agreements),
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(vii) are customary restrictions on leases, subleases, service agreements, product sales, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto,
(viii) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Restricted Subsidiary,
(ix) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business,
(x) are restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business,
(xi) are customary restrictions contained in the ABL Credit Documents, Senior Notes Documents, Senior Subordinated Notes Documents, any Permitted Incremental Equivalent Debt and any Refinancing Indebtedness of any of the foregoing (to the extent such restrictions do not prohibit the Liens securing the Obligations),
(xii) arise in connection with cash or other deposits permitted under Section 7.01 or the definition of Permitted Investments,
(xiii) comprise restrictions imposed by any agreement governing Indebtedness entered into after the Closing Date and permitted under Section 7.03 that are, taken as a whole, in the good faith judgment of the Borrower, no more restrictive with respect to the Borrower or any Restricted Subsidiary than customary market terms for Indebtedness of such type (and, in any event, are no more restrictive than the restrictions contained in this Agreement), so long as the Borrower shall have determined in good faith that such restrictions will not affect their obligation or ability to make any payments required hereunder,
(xiv) arise in connection with purchase money obligations for property acquired in the ordinary course of business or Capitalized Lease Obligations;
(xv) are imposed by applicable Law;
(xvi) arise in connection with any agreement or other instrument of a Person acquired by or merged or consolidated with or into the Borrower or any of its Restricted Subsidiaries in existence at the time of such acquisition or at the time it merges with or into the Borrower or any of its Restricted Subsidiaries or assumed in connection with the acquisition of assets from such Person (but, in any such case, not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries, or the property or assets of the Person so acquired and its Subsidiaries or the property or assets so acquired;
(xvii) arise in connection with contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Borrower pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;
(xviii) arise in connection with other Indebtedness permitted to be incurred subsequent to the Closing Date pursuant to the provisions of Section 7.03 hereof;
(xix) are restrictions created in connection with any Qualified Securitization Facility that, in the good faith determination of the Borrower are necessary or advisable to effect such Qualified Securitization Facility;
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(xx) are restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or other agreement to which the Borrower or any of its Restricted Subsidiaries is a party entered into in the ordinary course of business; provided that such agreement prohibits the encumbrance of solely the property or assets of the Borrower or such Restricted Subsidiary that are the subject to such agreement, the payment rights arising thereunder or the proceeds thereof and does not extend to any other asset or property of the Borrower or such Restricted Subsidiary or the assets or property of another Restricted Subsidiary;
(xxi) are any encumbrances or restrictions of the type referred to in clauses (a) and (b) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xx) of this Section 7.09; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Borrower, no more restrictive in any material respect with respect to such encumbrance and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.
SECTION 7.10 Accounting Changes. Make any change in fiscal year; provided, however, that the Borrower may, upon written notice from the Borrower to the Administrative Agent, change their fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.
SECTION 7.11 Modification of Terms of Junior Financing.
Amend, modify or change in any manner materially adverse to the interests of the Lenders, as determined in good faith by the Borrower, any term or condition of any Junior Financing Documentation in respect of any Junior Financing having an aggregate outstanding principal amount greater than the Threshold Amount (other than as a result of any Refinancing Indebtedness in respect thereof) without the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed); provided, however, that no amendment, modification or change of any term or condition of any Junior Financing Documentation permitted by any Intercreditor Agreement in respect thereof shall be deemed to be materially adverse to the interests of the Lenders.
SECTION 7.12 Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. The Borrower shall not permit any of its wholly-owned Subsidiaries that are Restricted Subsidiaries (and non-wholly-owned Subsidiaries if such non-wholly-owned Subsidiaries guarantee capital markets debt securities of the Borrower or any Subsidiary Guarantor), other than a Subsidiary Guarantor, a Foreign Subsidiary (except any Foreign Subsidiary that guarantees any Indebtedness of the Borrower under the ABL Facility or capital markets debt securities of the Borrower or any Subsidiary Guarantor) or a Securitization Subsidiary, to guarantee the payment of any Indebtedness of the Borrower or any other Guarantor unless:
(i) such Restricted Subsidiary, within 30 days after the guarantee of such Indebtedness, executes and delivers a Guarantor Joinder Agreement, providing for a Guaranty by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Borrower or any Subsidiary Guarantor, if such Indebtedness is by its express terms subordinated in right of payment to the Obligations or such Subsidiary Guarantors Guaranty, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Guaranty substantially to the same extent as such Indebtedness is subordinated to the Obligations; and
(ii) such Restricted Subsidiary waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Borrower or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guaranty;
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provided that this Section 7.12 shall not be applicable to (i) any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (ii) guarantees of any Qualified Securitization Facility by any Restricted Subsidiary. The Borrower may elect, in its sole discretion, to cause any Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case such Subsidiary shall not be required to comply with the 30 day period described in clause (i) above.
SECTION 7.13 Impairment of Security Interests. Subject to the rights of the holders of Permitted Liens, neither the Borrower nor any of the Guarantors shall take any action, or knowingly or negligently omit to take any action, which action or omission might or would or could be reasonably expected to have the result of materially impairing the security interest with respect to the Collateral for the benefit of the Collateral Agent and the Lenders in contravention of the provisions of this Agreement. Notwithstanding the foregoing, the Collateral Agent and the Lenders acknowledge and agree that any release of the Liens pursuant to this Agreement and the Collateral Documents shall not be deemed to impair the security under this Agreement and that any Person may rely on such provision in delivering a certificate requesting release so long as all other provisions of this Agreement with respect to such release have been complied with.
ARTICLE VIII
Events of Default and Remedies
SECTION 8.01 Events of Default. Each of the events referred to in clauses (a) through (k) of this Section 8.01 shall constitute an Event of Default:
(a) Non-Payment. The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document; or
(b) Specific Covenants. The Borrower or any Restricted Subsidiary fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a) or 6.05(a) (solely with respect to the Borrower) or Article VII; or
(c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after receipt by the Borrower of written notice thereof from the Administrative Agent; or
(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by any Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be untrue in any material respect when made or deemed made; or
(e) Cross-Default. Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period, if any, whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise, in respect of any Indebtedness (other than Indebtedness hereunder) having an aggregate outstanding principal amount (individually or in the aggregate with all other Indebtedness as to which such a failure shall exist) of not less than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness, or any other event occurs (other than, with respect to Indebtedness consisting of Hedging Obligations, termination events or equivalent events pursuant to the terms of such Hedging Obligations and not as a result of any default thereunder by any Loan Party), the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that such failure is
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unremedied and is not waived by the holders of such Indebtedness prior to any termination of the Commitments or acceleration of the Loans pursuant to Section 8.02; provided, further, that this clause (e)(B) shall not apply to (x) secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness and (y) any Indebtedness permitted to exist or be incurred under the terms of this Agreement that is required to be repurchased, prepaid, defeased or redeemed (or as to which an offer to repurchase, prepay, defease or redeem is required to be made) in connection with any asset sale event, casualty or condemnation event, change of control (without limiting the rights of the Agents and the Lenders under Section 8.02 below), excess cash flow or other customary provision in such Indebtedness giving rise to such requirement to offer or prepay in the absence of any default thereunder; provided, further, that such failure is unremedied and is not waived by the holders of such Indebtedness; or
(f) Insolvency Proceedings, Etc. The Borrower, Holdings or Restricted Subsidiary that is a Material Subsidiary 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, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under 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
(g) Judgments. There is entered against any Loan Party or any Material Subsidiary (or any group of Restricted Subsidiaries that together would constitute a Material Subsidiary) a final judgment and order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied coverage thereof) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of sixty (60) consecutive days; or
(h) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or would reasonably be expected to result in liability of any Loan Party or their respective ERISA Affiliates in an aggregate amount which would reasonably be expected to result in a Material Adverse Effect, (ii) any Loan Party or any of their respective ERISA Affiliates fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its Withdrawal Liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which would reasonably be expected to result in a Material Adverse Effect, (iii) any Loan Party or an ERISA Affiliate is notified in writing by the sponsor of a Multiemployer Plan that such Multiemployer Plan is or is expected to be, in reorganization (within the meaning of Section 4242 of ERISA), insolvent (within the meaning of Section 4245 of ERISA) or in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA) except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (iv) with respect to a Foreign Plan a termination, withdrawal or noncompliance with applicable Law or plan terms that would reasonably be expected to result in a Material Adverse Effect; or
(i) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under Section 7.04 or 7.05 or as a result of acts or omissions by an Agent or any Lender hereunder) or prior to the satisfaction in full of all the Obligations (other than any contingent obligations not then due), ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations (other than any contingent obligations not then due)), or purports in writing to revoke or rescind any Loan Document; or
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(j) Collateral Documents. (i) Any Collateral Document after delivery thereof pursuant to Section 4.01, 6.11, 6.13 or Article XII shall for any reason (other than pursuant to the terms hereof or thereof including as a result of a transaction not prohibited under this Agreement) cease to create, or any Lien purported to be created by any Collateral Document shall be asserted in writing by any Loan Party not to be, a valid and perfected lien with the priority required by the Collateral Document (or other security purported to be created on the applicable Collateral) on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 7.01, except to the extent that any such perfection or priority is not required pursuant to Section 6.11 or 6.13 or Article XII or results from the failure of the Collateral Agent or the trustee under the Senior Notes Indenture to maintain possession of Collateral actually delivered to it and pledged under the Collateral Documents or to file Uniform Commercial Code amendments relating to a Loan Partys change of name or jurisdiction of formation (solely to the extent that the Borrower provides the Collateral Agent written notice thereof in accordance with the Loan Documents, and the Collateral Agent and the Borrower have agreed that the Collateral Agent will be responsible for filing such amendments) and continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lenders title insurance policy and such insurer has not denied coverage, or (ii) any of the Equity Interests of the Borrower ceasing to be pledged pursuant to the Security Agreement free of Liens other than Liens subject to the Equal Priority Intercreditor Agreement, the Crossing Lien Intercreditor Agreement, any other Customary Intercreditor Agreement or any nonconsensual Liens arising solely by operation of Law; or
(k) Change of Control. There occurs any Change of Control.
SECTION 8.02 Remedies upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent may with the consent of the Required Lenders and shall, at the request of the Required Lenders, take any or all of the following actions:
(a) 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 Borrower; and
(b) 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;
provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under Title 11 of the United States Code entitled Bankruptcy, as now or hereafter in effect, or any successor thereto (the Bankruptcy Code), the Commitments of each Lender shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender.
SECTION 8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), subject to the Intercreditor Agreements any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:
First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.04 and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;
Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.04 and amounts payable under Article III) payable to the Lenders, ratably among them in proportion to the amounts described in this clause Second payable to them;
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Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;
Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them;
Fifth, to the payment of all other Obligations of the Loan Parties that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and
Last, the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Law.
ARTICLE IX
Administrative Agent and Other Agents
SECTION 9.01 Appointment and Authorization of the Administrative Agent. Each Lender hereby irrevocably appoints Bank of America, N.A., 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 IX (other than Sections 9.09, 9.10, 9.11, 9.12 and 9.16) are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have rights as a third party beneficiary of any such provision.
SECTION 9.02 Rights as a Lender. Any Person serving as an Agent (including as 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 an Agent and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include each Person serving as an Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not an Agent hereunder and without any duty to account therefor to the Lenders. The Lenders acknowledge that, pursuant to such activities, any Agent or its Affiliates may receive information regarding any Loan Party or any of its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that no Agent shall be under any obligation to provide such information to them.
SECTION 9.03 Exculpatory Provisions. The Administrative Agent and the Arranger shall not have any duties or obligations except those expressly set forth in this Agreement and in the other Loan Documents, and such duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, an Agent (including the Administrative Agent) and an Arranger:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing and without limiting the generality of the foregoing, the use of the term agent herein and in the other Loan Documents with reference to any Agent or Arranger is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law and 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;
(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 such Agent or Arranger is required to exercise as directed in writing by the Required
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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 no Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent or Arranger 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; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of their Affiliates that is communicated to or obtained by any Person serving as an Agent, Arranger or any of their Affiliates in any capacity.
Neither the Administrative Agent nor any of its Related Persons shall be liable for any action taken or not taken by it (i) with the consent or at the request of the Required 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 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by the final and non-appealable judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower or a Lender.
No Agent-Related Person shall be responsible for or have any duty to ascertain or inquire into (i) any recital, 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 IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof. The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender or the holder of any Term Note; and nothing in this Agreement or in any other Loan Document, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein.
Notwithstanding any other provision of this Agreement or any provision of any other Loan Document, each Arranger is named as such for recognition purposes only, and in its capacity as such shall have no powers, duties, responsibilities or liabilities with respect to this Agreement or the other Loan Documents or the transactions contemplated hereby and thereby; it being understood and agreed that each Arranger shall be entitled to all indemnification and reimbursement rights in favor of the Administrative Agent as, and to the extent, provided for under Section 10.05. Without limitation of the foregoing, each Arranger shall not, solely by reason of this Agreement or any other Loan Documents, have any fiduciary relationship in respect of any Lender or any other Person.
SECTION 9.04 Lack of Reliance on the Administrative Agent. Independently and without reliance upon the Administrative Agent, each Lender and the holder of each Term Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of Holdings, the Borrower and the Restricted Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of Holdings, the Borrower and the Restricted Subsidiaries and, except as expressly provided in this Agreement, the Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Term Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. The Administrative Agent shall not be responsible to any Lender or the holder of any Term Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing
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delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectability, priority or sufficiency of this Agreement or any other Loan Document or the financial condition of Holdings, the Borrower or any of the Restricted Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Loan Document, or the financial condition of Holdings, the Borrower or any of the Restricted Subsidiaries or the existence or possible existence of any Default or Event of Default.
SECTION 9.05 Certain Rights of the Administrative Agent. If the Administrative Agent requests instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from the Required Lenders; and the Administrative Agent shall not incur liability to any Lender by reason of so refraining. Without limiting the foregoing, neither any Lender nor the holder of any Term Note shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of the Required Lenders.
SECTION 9.06 Reliance by the 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. With respect to all legal matters pertaining to this Agreement and any other Loan Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent. In determining compliance with any condition hereunder to the making of a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), 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 9.07 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 Documents 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 Agent-Related Persons. The exculpatory provisions of this Article IX shall apply to any such sub agent and to the Agent-Related Persons 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.
SECTION 9.08 Indemnification. Whether or not the transactions contemplated hereby are consummated, to the extent the Administrative Agent or any other Agent-Related Person (solely to the extent any such Agent-Related Person was performing services on behalf of the Administrative Agent) is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and indemnify the Administrative Agent or any other Agent-Related Person (solely to the extent any such Agent-Related Person was performing services on behalf of the Administrative Agent) in proportion to their respective percentage as used in determining the Required Lenders from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Administrative Agent or any other Agent-Related Person (solely to the extent any such Agent-Related Person was performing services on behalf of the Administrative Agent) in performing its duties hereunder or under any other Loan Document or in any way relating to or arising out of this Agreement or any other Loan Document; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agents or any other Agent-Related Persons gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision). In the case of any investigation, litigation or proceeding giving
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rise to any Indemnified Liabilities, this Section 9.08 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower, provided that such reimbursement by the Lenders shall not affect the Borrowers continuing reimbursement obligations with respect thereto, provided, further, that the failure of any Lender to indemnify or reimburse the Administrative Agent shall not relieve any other Lender of its obligation in respect thereof. The undertaking in this Section 9.08 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent.
SECTION 9.09 The Administrative Agent in Its Individual Capacity. With respect to its obligation to make Loans under this Agreement, the Administrative Agent shall have the rights and powers specified herein for a Lender and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term Lender, Required Lenders or any similar terms shall, unless the context clearly indicates otherwise, include the Administrative Agent in its respective individual capacities. The Administrative Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to any Loan Party or any Affiliate of any Loan Party (or any Person engaged in a similar business with any Loan Party or any Affiliate thereof) as if they were not performing the duties specified herein, and may accept fees and other consideration from any Loan Party or any Affiliate of any Loan Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. The Lenders acknowledge that, pursuant to such activities, any Agent or its Affiliates may receive information regarding any Loan Party or any of its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that no Agent shall be under any obligation to provide such information to them.
SECTION 9.10 Holders. The Administrative Agent may deem and treat the payee of any Term Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Term Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Term Note or of any Term Note or Term Notes issued in exchange therefor.
SECTION 9.11 Resignation by the Administrative Agent. The Administrative Agent may resign from the performance of all its respective functions and duties hereunder and/or under the other Loan Documents at any time by giving 30 Business Days prior written notice to the Lenders and the Borrower. If the Administrative Agent is in material breach of its obligations hereunder as Administrative Agent, then the Administrative Agent may be removed as the Administrative Agent at the reasonable request of the Required Lenders. Such resignation or removal shall take effect upon the appointment of a successor Administrative Agent as provided below.
Upon any such notice of resignation by, or notice of removal of, the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower, which acceptance shall not be unreasonably withheld or delayed (provided that the Borrowers approval shall not be required if an Event of Default under Section 8.01(a) or, solely with respect to the Borrower, Section 8.01(f) has occurred and is continuing).
If a successor Administrative Agent shall not have been so appointed within such 30 Business Day period, the Administrative Agent, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed, provided that the Borrowers consent shall not be required if an Event of Default under Section 8.01(a) or, solely with respect to the Borrower, Section 8.01(f) has occurred and is continuing), shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.
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If no successor Administrative Agent has been appointed pursuant to the foregoing by the 35th Business Day after the date such notice of resignation was given by the Administrative Agent or such notice of removal was given by the Required Lenders or the Borrower, as applicable, the Administrative Agents resignation shall nonetheless become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Loan Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above. The retiring 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 under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and 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 directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section 9.11.
Upon the acceptance of a successors appointment as Administrative Agent hereunder and upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to (i) continue the perfection of the Liens granted or purported to be granted by the Collateral Documents or (ii) otherwise ensure that requirements of Section 6.11, 6.13 and Article XII are satisfied, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring 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 9.11).
The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agents resignation hereunder and under the other Loan Documents, the provisions of this Article IX and Sections 10.04 and 10.05 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Agent-Related Persons in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
Upon a resignation of the Administrative Agent pursuant to this Section 9.11, the Administrative Agent (i) shall continue to be subject to Section 10.08 and (ii) shall remain indemnified to the extent provided in this Agreement and the other Loan Documents and the provisions of this Article IX (and the analogous provisions of the other Loan Documents) shall continue in effect for the benefit of the Administrative Agent for all of its actions and inactions while serving as the Administrative Agent.
SECTION 9.12 Collateral Matters. Each Lender irrevocably authorizes and directs the Collateral Agent to take the actions to be taken by them as set forth in Article XII, in cash case subject to the terms of the Intercreditor Agreements, as applicable.
SECTION 9.13 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 Documents 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 Agent-Related Persons. The exculpatory provisions of this Article IX shall apply to any such sub agent and to the Agent-Related Persons 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.
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SECTION 9.14 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 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 Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.07 and 10.04) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Administrative Agent under Sections 2.07 and 10.04.
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 any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
The Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Required Lenders, to credit bid all or any portion of the Obligations (including accepting some or all of the Collateral in satisfaction of some or all of the Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code of the United States, including under Sections 363, 1123 or 1129 of the Bankruptcy Code of the United States, or any similar Laws in any other jurisdictions to which a Loan Party is subject, (b) at any other sale or foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable Law. In connection with any such credit bid and purchase, the Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid on a ratable basis (with Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that would vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) in the asset or assets so purchased (or in the Equity Interests or debt instruments of the acquisition vehicle or vehicles that are used to consummate such purchase). In connection with any such bid (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles to make a bid, (ii) to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or Equity Interests thereof shall be governed, directly or indirectly, by the vote of the Required Lenders, irrespective of the termination of this Agreement and without giving effect to the limitations on actions by the Required Lenders contained in clauses (a) through (g) of Section 10.01 of this Agreement, (iii) the Administrative Agent shall be authorized to assign the relevant Obligations to any such acquisition vehicle pro rata by the Lenders, as a result of which each of the Lenders shall be deemed to have received a pro rata portion of any Equity Interests and/or debt instruments issued by such an acquisition vehicle on account of the assignment of the Obligations to be credit bid, all without the need for any Secured Party or acquisition vehicle to take any further action, and (iv) to the extent that Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Obligations assigned to the acquisition vehicle exceeds the amount of debt credit bid by the acquisition vehicle or otherwise), such Obligations shall automatically be reassigned to the Lenders pro rata and the Equity Interests and/or debt instruments issued by any acquisition vehicle on account of the Obligations that had been assigned to the acquisition vehicle shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action.
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SECTION 9.15 Appointment of Supplemental Administrative Agents.
(a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, the Administrative Agent is hereby authorized to appoint an additional individual or institution selected by the Administrative Agent in its sole discretion as a separate trustee, co-trustee, administrative agent, collateral agent, administrative sub-agent or administrative co-agent (any such additional individual or institution being referred to herein individually as a Supplemental Administrative Agent and collectively as Supplemental Administrative Agents).
(b) In the event that the Administrative Agent appoints a Supplemental Administrative Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Administrative Agent to the extent, and only to the extent, necessary to enable such Supplemental Administrative Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Administrative Agent shall run to and be enforceable by either the Administrative Agent or such Supplemental Administrative Agent, and (ii) the provisions of this Article IX and of Sections 10.04 and 10.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Administrative Agent and all references therein to the Administrative Agent shall be deemed to be references to the Administrative Agent and/or such Supplemental Administrative Agent, as the context may require.
(c) Should any instrument in writing from any Loan Party be reasonably required by any Supplemental Administrative Agent so appointed by the Administrative Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments reasonably acceptable to it promptly upon request by the Administrative Agent. In case any Supplemental Administrative Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Administrative Agent, to the extent permitted by Law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Administrative Agent.
SECTION 9.16 Intercreditor Agreements. The Administrative Agent is hereby authorized to enter into any Intercreditor Agreement to the extent contemplated by the terms hereof, and the parties hereto acknowledge that such Intercreditor Agreement is binding upon them. Each Lender (a) hereby agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreements, (b) hereby authorizes and instructs the Administrative Agent to enter into the Intercreditor Agreements and to subject the Liens on the Collateral securing the Obligations to the provisions thereof and (c) without any further consent of the Lenders, hereby authorizes and instructs the Administrative Agent to negotiate, execute and deliver on behalf of the Secured Parties any intercreditor agreement or any amendment (or amendment and restatement) to the Collateral Documents or a Customary Intercreditor Agreement to effect the provisions contemplated by clause (ii) of the definition of Permitted Liens. In addition, each Lender hereby authorizes the Administrative Agent to enter into (i) any amendments to any Intercreditor Agreements, and (ii) any other intercreditor arrangements, in the case of clauses (i), and (ii) to the extent required to give effect to the establishment of intercreditor rights and privileges as contemplated and required or permitted by Section 7.01 of this Agreement. Each Lender acknowledges and agrees that any of the Administrative Agent (or one or more of their respective Affiliates) may (but are not obligated to) act as the Senior Representative or like term for the holders of Credit Agreement Refinancing Indebtedness under the security agreements with respect thereto and/or under the Crossing Lien Intercreditor Agreement, the Equal Priority
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Intercreditor Agreement or other Customary Intercreditor Agreement. Each Lender waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and agrees not to assert against any Agent or any of its affiliates any claims, causes of action, damages or liabilities of whatever kind or nature relating thereto.
SECTION 9.17 Withholding Tax. To the extent required by any applicable Laws, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. Without limiting or expanding the provisions of Section 3.01, each Lender shall indemnify and hold harmless the Administrative Agent against, and shall make payable in respect thereof within 10 days after demand therefor, any and all Taxes and any and all related losses, claims, liabilities and expenses (including fees, charges and disbursements of any counsel for the Administrative Agent) incurred by or asserted against the Administrative Agent by the IRS or any other Governmental Authority as a result of the failure of the Administrative Agent to properly withhold Tax from amounts paid to or for the account of such Lender for any reason (including, without limitation, because the appropriate form was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of withholding Tax ineffective). 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 hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due the Administrative Agent under this Section 9.17. The agreements in this Section 9.17 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.
ARTICLE X
Miscellaneous
SECTION 10.01 Amendments, Etc. Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders (other than with respect to any amendment or waiver contemplated in clause (g) below (in the case of clause (g), to the extent permitted by Section 2.12), which shall only require the consent of the Required Facility Lenders under the applicable Facility or Facilities, as applicable) (or by the Administrative Agent with the consent of the Required Lenders) and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and the Administrative Agent hereby agrees to acknowledge any such waiver, consent or amendment that otherwise satisfies the requirements of this Section 10.01 as promptly as possible, however, to the extent the final form of such waiver, consent or amendment has been delivered to the Administrative Agent at least one Business Day prior to the proposed effectiveness of the consents by the Lenders party thereto, the Administrative Agent shall acknowledge such waiver, consent or amendment (i) immediately, in the case of any amendment which does not require the consent of any existing Lender under this Agreement or (ii) otherwise, within two hours of the time copies of the Required Lender consents or other applicable Lender consents required by this Section 10.01 have been provided to 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, that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender without the written consent of such Lender (it being understood that a waiver of any condition precedent set forth in Section 4.01 or the waiver of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute extension or increase of any Commitment of any Lender);
(b) postpone any date scheduled for, or reduce the amount of, any payment of principal or interest under Section 2.05 or 2.06 (other than pursuant to Section 2.06(b)) or any payment of fees or premiums hereunder or under any Loan Document with respect to payments to any Lender without the written consent of such Lender, it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of the Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest and it being further understood that any change to the definition of Senior Net Leverage Ratio, Secured Net Leverage Ratio, Consolidated Net Leverage Ratio or Fixed Charge Coverage Ratio or, in each case, in the component definitions thereof shall not constitute a reduction in any amount of interest;
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(c) reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (iii) of the proviso immediately succeeding clause (g) of this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document to any Lender without the written consent of such Lender, it being understood that any change to the definition of Senior Net Leverage Ratio, Secured Net Leverage Ratio, Consolidated Net Leverage Ratio or Fixed Charge Coverage Ratio or, in each case, in the component definitions thereof shall not constitute a reduction in any rate of interest; provided that only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrower to pay interest at the Default Rate;
(d) except as contemplated by clause (c) in the sentence immediately after the proviso immediately succeeding clause (g) of this Section 10.01, change any provision of this Section 10.01 or the definition of Required Lenders, Required Facility Lenders or any other provision specifying the number of Lenders or portion of the Loans or Commitments required to take any action under the Loan Documents, without the written consent of each Lender directly and adversely affected thereby;
(e) other than in a transaction permitted under Section 7.04 or Section 7.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;
(f) other than in a transaction permitted under Section 7.04 or Section 7.05, release all or substantially all of the aggregate value of the Guaranty, without the written consent of each Lender;
(g) amend, waive or otherwise modify any term or provision (including the availability and conditions to funding under Section 2.12 with respect to Incremental Term Loans and the rate of interest applicable thereto) which directly affects Lenders of one or more Incremental Term Loans and does not directly affect Lenders under any other Facility, in each case, without the written consent of the Required Facility Lenders under such applicable Incremental Term Loans (and in the case of multiple Facilities which are affected, such Required Facility Lenders shall consent together as one Facility); provided, however, that, to the extent permitted under Section 2.12, the waivers described in this clause (g) shall only require the consent of the Required Facility Lenders under such applicable Incremental Term Loans;
and provided, further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent under this Agreement or any other Loan Document; (ii) Section 10.07(g) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (iii) the consent of the applicable Required Facility Lenders shall be required with respect to any amendment that by its terms adversely affects the rights of Lenders under one or more Term Facilities (and in the case of multiple Term Facilities which are so adversely affected, such Required Facility Lenders shall consent together as one Term Facility) in respect of payments hereunder in a manner different than such amendment affects other Term Facilities.
Notwithstanding the foregoing,
(a) no Lender consent is required to effect any amendment or supplement to the Crossing Lien Intercreditor Agreement, the Equal Priority Intercreditor Agreement or any other Customary Intercreditor Agreement (i) that is for the purpose of adding the holders of Permitted Incremental Equivalent Debt, Credit Agreement Refinancing Indebtedness, Permitted Ratio Debt or any other Permitted Indebtedness that is Secured Indebtedness (or a Senior Representative with respect thereto) as parties thereto, as expressly contemplated by the terms of such Crossing Lien Intercreditor Agreement, such Equal Priority Intercreditor Agreement or such other Customary Intercreditor Agreement, as applicable (it being understood that any such amendment, modification or supplement may make such other changes to the applicable Intercreditor Agreement as, in the good faith determination of the Administrative Agent, are
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required to effectuate the foregoing and provided, that such other changes are not adverse, in any material respect, to the interests of the Lenders) or (ii) that is expressly contemplated by the Crossing Lien Intercreditor Agreement (or the comparable provisions, if any, of the Equal Priority Intercreditor Agreement or other Customary Intercreditor Agreement); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or the Collateral Agent, as applicable;
(b) this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrower (i) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and the accrued interest and fees in respect thereof and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders;
(c) (i) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of Lenders holding Loans or Commitments of a particular Class (but not the Lenders holding Loans or Commitments of any other Class) may be effected by an agreement or agreements in writing entered into by the Borrower and the requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section 10.01 if such Class of Lenders were the only Class of Lenders hereunder at the time, (ii) any provision of this Agreement or any other Loan Document may be amended by an agreement in writing entered into by the Borrower and the Administrative Agent to cure any ambiguity, omission, defect or inconsistency (including, without limitation, amendments, supplements or waivers to any of the Collateral Documents, guarantees, intercreditor agreements or related documents executed by any Loan Party or any other Subsidiary in connection with this Agreement if such amendment, supplement or waiver is delivered in order to cause such Collateral Documents, guarantees, intercreditor agreements or related documents to be consistent with this Agreement and the other Loan Documents) so long as, in each case, the Lenders shall have received at least five Business Days prior written notice thereof and the Administrative Agent shall not have received, within five Business Days of the date of such notice to the Lenders, a written notice from the Required Lenders stating that the Required Lenders object to such amendment; provided that the consent of the Lenders or the Required Lenders, as the case may be, shall not be required to make any such changes necessary to be made in connection with any borrowing of Incremental Term Loans, any borrowing of Other Term Loans, any Extension or any borrowing of Replacement Loans and otherwise to effect the provisions of Section 2.12, 2.13 or 2.14 or the immediately succeeding paragraph of this Section 10.01, respectively, and (C) the Borrower and the Administrative Agent may, without the input or consent of the other Lenders, (i) effect changes to any Mortgage as may be necessary or appropriate in the opinion of the Collateral Agent and (ii) effect changes to this Agreement that are necessary and appropriate to provide for the mechanics contemplated by the offering process set forth in Section 2.03(a)(iv).
In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Borrower and the Lenders providing the Replacement Loans (as defined below) to permit the refinancing of all outstanding Term Loans of any Class (Refinanced Loans) with replacement term loans (Replacement Loans) hereunder; provided that (a) the aggregate principal amount of such Replacement Loans shall not exceed the aggregate principal amount of such Refinanced Loans, plus accrued interest, fees, premiums (if any) and penalties thereon and reasonable fees and expenses incurred in connection with such refinancing of Refinanced Loans with such Replacement Loans, (b) the All-In Yield with respect to such Replacement Loans (or similar interest rate spread applicable to such Replacement Loans) shall not be higher than the All-In Yield for such Refinanced Loans (or similar interest rate spread applicable to such Refinanced Loans) immediately prior to such refinancing, (c) the Weighted Average Life to Maturity of such Replacement Loans shall not be shorter than the Weighted Average Life to Maturity of such Refinanced Loans at the time of such refinancing (except by virtue of amortization or prepayment of the Refinanced Loans prior to the time of such incurrence) and (d) all other terms applicable to such Replacement Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Loans than, those applicable to such Refinanced Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the Latest Maturity Date of the
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Loans in effect immediately prior to such refinancing. Each amendment to this Agreement providing for Replacement Loans may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower to effect the provisions of this paragraph, and for the avoidance of doubt, this paragraph shall supersede any other provisions in this Section 10.01 to the contrary.
Notwithstanding anything to the contrary contained in this Section 10.01, the Guaranty, the Collateral Documents and related documents executed by Subsidiaries in connection with this Agreement and the other Loan Documents may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause the Guaranty, Collateral Documents or other document to be consistent with this Agreement and the other Loan Documents (including by adding additional parties as contemplated herein).
If the Administrative Agent and the Borrower shall have jointly identified an obvious error (including, but not limited to, an incorrect cross-reference) or any error or omission of a technical or immaterial nature, in each case, in any provision of this Agreement or any other Loan Document (including, for the avoidance of doubt, any exhibit, schedule or other attachment to any Loan Document), then the Administrative Agent (acting in its sole discretion) and the Borrower or any other relevant Loan Party shall be permitted to amend such provision and such amendment shall become effective without any further action or consent of any other party to any Loan Document.
SECTION 10.02 Notices and Other Communications; Facsimile Copies.
(a) General. 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 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 Holdings, the Borrower or the Administrative Agent, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and
(ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire.
Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below shall be effective as provided in such subsection (b).
(b) Electronic Communication. Notices and other communications to the Lenders 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 pursuant to Article II if such Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article II by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
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(c) Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(d) 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 Agent-Related Persons or any Arranger (collectively, the Agent Parties) have any liability to Holdings, the Borrower, any Lender, or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower or the Administrative Agents 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 non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to Holdings, the Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(e) Change of Address. Holdings, the Borrower and the Administrative Agent may change its address, facsimile or telephone number for notices and other communications hereunder by written notice to the other parties hereto. Each other Lender may change its address, facsimile or telephone number for notices and other communications hereunder by written notice to the Borrower and the Administrative Agent. 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 Lenders 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 Borrower or its securities for purposes of United States Federal or state securities laws.
(f) Reliance by the Administrative Agent. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, each Lender and the Agent-Related Persons 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 Borrower. 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.
SECTION 10.03 No Waiver; Cumulative Remedies. No failure by any Lender 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
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partial exercise of any right, remedy, power or privilege hereunder 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 under 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 8.02 for the benefit of all the Lenders; 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) any Lender from exercising setoff rights in accordance with Section 10.09 (subject to the terms of Section 2.11), or (c) 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 8.02 and (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.11, 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 10.04 Costs and Expenses. The Borrower agrees (a) if the Closing Date occurs, to pay or reimburse the Administrative Agent and the Arranger for all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent and the Arranger (promptly following a written demand therefor, together with backup documentation supporting such reimbursement request) incurred in connection with the preparation, negotiation, syndication, execution, delivery and administration of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs of Fried, Frank, Harris, Shriver & Jacobson LLP and, if necessary, a single local counsel in each relevant material jurisdiction, and (b) upon presentation of a summary statement, together with any supporting documentation reasonably requested by the Borrower, to pay or reimburse the Administrative Agent and the Lenders, taken as a whole, promptly following a written demand therefor for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all Attorney Costs of one counsel to the Administrative Agent and the Lenders taken as a whole (and, if necessary, one local counsel in any relevant material jurisdiction and solely in the case of a conflict of interest, one additional counsel in each relevant jurisdiction to each group of affected Lenders similarly situated taken as a whole)). The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 10.04 shall be paid promptly following receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail. If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion.
SECTION 10.05 Indemnification by the Borrower. The Borrower shall indemnify and hold harmless the Agents, each Lender, the Arranger and their respective Related Persons (collectively, the Indemnitees) from and against any and all losses, claims, damages, liabilities or expenses (including Attorney Costs and Environmental Liability) to which any such Indemnitee may become subject arising out of, resulting from or in connection with (but limited, in the case of legal fees and expenses, to the reasonable and documented out-of-pocket fees, disbursements and other charges of one counsel to all Indemnitees taken as a whole and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction, and solely in the case of a conflict of interest, one additional counsel in each relevant jurisdiction to each group of affected Indemnitees similarly situated taken as a whole) any actual or threatened claim, litigation, investigation or proceeding relating to the Transactions or to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents, the Loans or the use, or proposed use of the proceeds therefrom, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, litigation, investigation or proceeding), and regardless of whether any Indemnitee is a
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party thereto (all the foregoing, collectively, the Indemnified Liabilities); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or expenses resulted from (x) the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Indemnified Persons as determined by a final, non-appealable judgment of a court of competent jurisdiction, (y) a material breach of any obligations under any Loan Document by such Indemnitee or any of its Related Indemnified Persons as determined by a final, non-appealable judgment of a court of competent jurisdiction or (z) any dispute solely among Indemnitees other than any claims against an Indemnitee in its capacity or in fulfilling its role as an administrative agent or arranger or any similar role under any Loan Document and other than any claims arising out of any act or omission of the Borrower or any of their Affiliates (as determined by a final, non-appealable judgment of a court of competent jurisdiction). To the extent that the undertakings to indemnify and hold harmless set forth in this Section 10.05 may be unenforceable in whole or in part because they are violative of any applicable law or public policy, the Borrower shall contribute the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through SyndTrak or other similar information transmission systems in connection with this Agreement (except to the extent such damages are found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from the willful misconduct, bad faith or gross negligence of such Indemnitee), nor shall any Indemnitee or any Loan Party have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date) (other than, in the case of any Loan Party, in respect of any such damages incurred or paid by an Indemnitee to a third party for which such Indemnitee is otherwise entitled to indemnification pursuant to this Section 10.05). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. All amounts due under this Section 10.05 shall be paid within twenty (20) Business Days after written demand therefor. The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. This Section 10.05 shall not apply to Taxes, except any Taxes that represent losses or damages arising from any non-Tax claim. Notwithstanding the foregoing, each Indemnitee shall be obligated to refund and return promptly any and all amounts paid by the Borrower, Holdings, the Sponsor or any of their Affiliates under this Section 10.05 to such Indemnitee for any such fees, expenses or damages to the extent such Indemnitee is not entitled to payment of such amounts in accordance with the terms hereof.
SECTION 10.06 Marshaling; Payments Set Aside. None of the Administrative Agent or any Lender shall be under any obligation to marshal any assets in favor of the Loan Parties or any other party or against or in payment of any or all of the Obligations. To the extent that any payment by or on behalf of the Borrower is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent 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 setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by any 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.
SECTION 10.07 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and registered assigns permitted hereby, except that neither Holdings nor the Borrower may, except as permitted by Section 7.04, assign or otherwise transfer any of its rights or obligations hereunder 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 (including, without limitation, to existing Lenders and their Affiliates) except (i) to an assignee in accordance with the provisions of Section 10.07(b) (such an
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assignee, an Eligible Assignee) and (A) in the case of any Eligible Assignee that, immediately prior to or upon giving effect to such assignment, is an Affiliated Lender, Section 10.07(h), (B) in the case of any Eligible Assignee that is Holdings, the Borrower or any Subsidiary thereof, Section 10.07(l) or (C) in the case of any Eligible Assignee that, immediately prior to or upon giving effect to such assignment, is a Debt Fund Affiliate, Section 10.07(k), (ii) by way of participation in accordance with the provisions of Section 10.07(d), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.07(f), or (iv) to an SPC in accordance with the provisions of Section 10.07(g) (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 Section 10.07(d) and, to the extent expressly contemplated hereby, Indemnitees and Related Persons of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts.
(A) in the case of an assignment of the entire remaining amount of the assigning Lenders Commitment and the Loans at the time owing to it 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 10.07, the aggregate amount of the Commitment or, 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 $1,000,000 unless each of the Administrative Agent and, so long as no Event of Default under Section 8.01(a) or, solely with respect to the Borrower, Section 8.01(f) has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.
(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement with respect to the Loans or the Commitment assigned.
(iii) Required Consents. No consent shall be required for any assignment except to the extent required by Section 10.07(b)(i)(B) and, in addition:
(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default under Section 8.01(a) or, solely with respect to the Borrower, Section 8.01(f) has occurred and is continuing at the time of such assignment determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if a Trade Date is specified in the Assignment and Assumption, as of the Trade Date or (2) in respect of an assignment of all or a portion of the Term Loans only, such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided, that the Borrower shall be deemed to have consented to any assignment of all or a portion of the Term Loans unless it shall have objected thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice of a
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failure to respond to such request for assignment; provided, further, that no consent of the Borrower shall be required for an assignment of all or a portion of the Loans pursuant to Section 10.07(h), (k) or (l); and
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; provided that no consent of the Administrative Agent shall be required for an assignment (i) of all or a portion of the Loans pursuant to Section 10.07(g), (h), (k) or (l), or (ii) from an Agent to its Affiliate.
(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent). Other than in the case of assignments pursuant to Section 10.07(l), the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
(v) No Assignments to Certain Persons. No such assignment shall be made (A) to Holdings, the Borrower or any of the Borrowers Subsidiaries except as permitted under Section 2.03(a)(iv), (B) subject to Sections 10.07(h), (k) and (l) below, to any Affiliate of the Borrower, (C) to a natural person or (D) to any Disqualified Institution. In no event shall the Administrative Agent be obligated to ascertain, monitor or inquire as to whether any prospective assignee is a Disqualified Institution or have any liability in connection therewith.
This Section 10.07(b) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis among such Facilities.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to clause (c) of this Section 10.07 (and, in the case of an Affiliated Lender or a Person that, after giving effect to such assignment, would become an Affiliated Lender, to the requirements of clause (h) of this Section 10.07), from and after the effective date specified in each Assignment and Assumption, other than in connection with an assignment pursuant to Section 10.07(l), (x) the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and (y) 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 Lenders 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, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment), but shall in any event continue to be subject to Section 10.08. Upon request, and the surrender by the assigning Lender of its Term Note, the Borrower (at its expense) shall execute and deliver a Term Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.07(d).
(c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agents Office a copy of each Assignment and Assumption delivered to it, each Affiliated Lender Assignment and Assumption delivered to it, each notice of cancellation of any Loans delivered by the Borrower pursuant to subsections (h) or (l) below, and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Loans and amounts 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 Borrower, the Agents 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. The Register shall be available for inspection by the Borrower, any Agent and, with respect to its own Loans, any Lender, at any reasonable time and from time to time
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upon reasonable prior notice. This Section 10.07(c) and Section 2.09 shall be construed so that all Loans are at all times maintained in registered form within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any other relevant or successor provisions of the Code or of such Treasury regulations). Notwithstanding the foregoing, in no event shall the Administrative Agent be obligated to ascertain, monitor or inquire as to whether any Lender is an Affiliated Lender, nor shall the Administrative Agent be obligated to monitor the aggregate amount of the Term Loans or Incremental Term Loans held by Affiliated Lenders.
(d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person, the Borrower or any Affiliate or Subsidiary of the Borrower or a Disqualified Institution) (each, a Participant) in all or a portion of such Lenders rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lenders 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 Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; 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 to Section 10.01 (other than clauses (d) and (g) thereof) that directly affects such Participant. Subject to subsection (e) of this Section 10.07, the Borrower agree that each Participant shall be entitled to the benefits of Sections 3.01 (subject to the requirements of Section 3.01 (including subsections (b), (c) and/or (d), as applicable as though it were a Lender)), Section 3.04 and 3.05 (through the applicable Lender) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section 10.07. To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.11 as though it were a Lender.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01, 3.04 or 3.05 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 or such entitlement to a greater payment results from a Change in Law after the sale of the participation takes place. Each Lender that sells a participation shall (acting solely for this purpose as a non-fiduciary agent of the Borrower) maintain a register complying with the requirements of Sections 163(f), 871(h) and 881(c)(2) of the Code and the Treasury regulations issued thereunder on which is entered the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Loans or other obligations under this Agreement (the Participant Register). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender and the Borrower 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; provided that no Lender shall have the obligation to disclose all or a portion of the Participant Register (including the identity of the Participant or any information relating to a Participants interest in any commitments, loans, letters of credit or other obligations under any Loan Document) to any Person except to the extent such disclosure is necessary to establish that any such commitments, loans, letters of credit or other obligations are in registered form for U.S. federal income tax purposes.
(f) 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 Term Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any other 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) Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an SPC) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, (ii) if an SPC elects not to
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exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) such SPC and the applicable Loan or any applicable part thereof shall be appropriately reflected in the Participant Register. Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.01, 3.04 or 3.05), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the Lender hereunder. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500 (which processing fee may be waived by the Administrative Agent in its sole discretion), assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.
(h) Any Lender may at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to a Person who is or will become, after such assignment, an Affiliated Lender through (x) Dutch auctions or other offers to purchase or take by assignment open to all Lenders on a pro rata basis in accordance with procedures of the type described in Section 2.03(a)(iv) or (y) open market purchase on a non-pro rata basis, in each case subject to the following limitations:
(i) Affiliated Lenders will not receive information provided solely to Lenders by the Administrative Agent or any Lender and will not be permitted to attend or participate in conference calls or meetings attended solely by the Lenders and the Administrative Agent, other than the right to receive notices of prepayments and other administrative notices in respect of its Loans or Commitments required to be delivered to Lenders pursuant to Article II;
(ii) each Affiliated Lender that purchases any Term Loans pursuant to clause (x) above shall represent and warrant to the selling Term Lender (other than any other Affiliated Lender) that it does not possess material non-public information (or material information of the type that would not be public if the Borrower or any Parent Entity were a publicly-reporting company) with respect to the Borrower and its Subsidiaries that either (1) has not been disclosed to the Term Lenders generally (other than Term Lenders that have elected not to receive such information) or (2) if not disclosed to the Term Lenders, would reasonably be expected to have a material effect on, or otherwise be material to (A) a Term Lenders decision to participate in any such assignment or (B) the market price of such Term Loans, or shall make a statement that such representation cannot be made;
(iii) each Lender (other than any other Affiliated Lender) that assigns any Term Loans to an Affiliated Lender pursuant to clause (y) above shall deliver to the Administrative Agent and the Borrower a customary Big Boy Letter (unless such Affiliated Lender is willing, in its sole discretion, to make the representation and warranty contemplated by the foregoing clause (ii));
(iv) the aggregate principal amount of Term Loans of any Class under this Agreement held by Affiliated Lenders at the time of any such purchase or assignment shall not exceed 25% of the aggregate principal amount of Term Loans of such Class outstanding at such time under this Agreement (such percentage, the Affiliated Lender Cap); provided that to the extent any assignment to an Affiliated Lender would result in the aggregate principal amount of all Term Loans of any Class held by Affiliated Lenders exceeding the Affiliated Lender Cap, the assignment of such excess amount will be void ab initio;
(v) as a condition to each assignment pursuant to this subsection (h), the Administrative Agent and the Borrower shall have been provided a notice in connection with each assignment to an Affiliated Lender or a Person that upon effectiveness of such assignment would constitute an Affiliated Lender pursuant to which such Affiliated Lender shall waive any right to bring any action in connection with such Term Loans against the Administrative Agent, in its capacity as such; and
(vi) the assigning Lender and the Affiliated Lender purchasing such Lenders Term Loans shall execute and deliver to the Administrative Agent an assignment agreement substantially in the form of Exhibit D-2 hereto (an Affiliated Lender Assignment and Assumption).
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Notwithstanding anything to the contrary contained herein, any Affiliated Lender that has purchased Term Loans pursuant to this subsection (h) may, in its sole discretion, contribute, directly or indirectly, the principal amount of such Term Loans or any portion thereof, plus all accrued and unpaid interest thereon, to the Borrower for the purpose of cancelling and extinguishing such Term Loans. Upon the date of such contribution, assignment or transfer, (x) the aggregate outstanding principal amount of Term Loans shall reflect such cancellation and extinguishing of the Term Loans then held by the Borrower and (y) the Borrower shall promptly provide notice to the Administrative Agent of such contribution of such Term Loans, and the Administrative Agent, upon receipt of such notice, shall reflect the cancellation of the applicable Term Loans in the Register.
Each Affiliated Lender agrees to notify the Administrative Agent and the Borrower promptly (and in any event within 10 Business Days) if it acquires any Person who is also a Lender, and each Lender agrees to notify the Administrative Agent and the Borrower promptly (and in any event within ten (10) Business Days) if it becomes an Affiliated Lender. The Administrative Agent may conclusively rely upon any notice delivered pursuant to the immediately preceding sentence and/or pursuant to clause (v) of this subsection (h) and shall not have any liability for any losses suffered by any Person as a result of any purported assignment to or from an Affiliated Lender.
(i) Notwithstanding anything in Section 10.01 or the definition of Required Lenders, or Required Facility Lenders to the contrary, for purposes of determining whether the Required Lenders and Required Facility Lenders (in respect of a Class of Term Loans) have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, or subject to Section 10.07(j), any plan of reorganization pursuant to the U.S. Bankruptcy Code, (ii) otherwise acted on any matter related to any Loan Document, or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, no Affiliated Lender shall have any right to consent (or not consent), otherwise act or direct or require the Administrative Agent or any Lender to take (or refrain from taking) any such action and:
(i) all Term Loans held by any Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether the Required Lenders and Required Facility Lenders (in respect of a Class of Term Loans) have taken any actions; and
(ii) all Term Loans held by Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether all Lenders have taken any action unless the action in question affects such Affiliated Lender in a disproportionately adverse manner than its effect on other Lenders.
(j) Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, each Affiliated Lender hereby agrees that, and each Affiliated Lender Assignment and Assumption shall provide a confirmation that, if a proceeding under any Debtor Relief Law shall be commenced by or against the Borrower or any other Loan Party at a time when such Lender is an Affiliated Lender, such Affiliated Lender irrevocably authorizes and empowers the Administrative Agent to vote on behalf of such Affiliated Lender with respect to the Term Loans held by such Affiliated Lender in any manner in the Administrative Agents sole discretion, unless the Administrative Agent instructs such Affiliated Lender to vote, in which case such Affiliated Lender shall vote with respect to the Term Loans held by it as the Administrative Agent directs; provided that such Affiliated Lender shall be entitled to vote in accordance with its sole discretion (and not in accordance with the direction of the Administrative Agent) in connection with any plan of reorganization to the extent any such plan of reorganization proposes to treat any Obligations held by such Affiliated Lender in a disproportionately adverse manner than the proposed treatment of similar Obligations held by Term Lenders that are not Affiliated Lenders.
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(k) Although Debt Fund Affiliates shall be Eligible Assignees and shall not be subject to the provisions of Section 10.07(h), (i) or (j), any Lender may, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to a Person who is or will become, after such assignment, a Debt Fund Affiliate only through (x) Dutch auctions or other offers to purchase or take by assignment open to all Lenders on a pro rata basis in accordance with procedures of the type described in Section 2.03(a)(iv) (for the avoidance of doubt, without requiring any representation as to the possession of material non-public information by such Affiliate) or (y) open market purchase on a non-pro rata basis. Notwithstanding anything in Section 10.01 or the definition of Required Lenders to the contrary, for purposes of determining whether the Required Lenders have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, (ii) otherwise acted on any matter related to any Loan Document or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, all Term Loans held by Debt Fund Affiliates, in the aggregate, may not account for more than 49.9% of the Term Loans of consenting Lenders included in determining whether the Required Lenders have consented to any action pursuant to Section 10.01.
(l) Any Lender may, so long as no Default or Event of Default has occurred and is continuing, at any time, assign all or a portion of its rights and obligations with respect to Term Loans under this Agreement to Holdings, the Borrower or any Subsidiary of the Borrower through (x) Dutch auctions or other offers to purchase open to all Lenders on a pro rata basis in accordance with procedures of the type described in Section 2.03(a)(iv) or (y) open market purchases on a non-pro rata basis; provided, that:
(i) (x) if the assignee is Holdings or a Subsidiary of the Borrower, upon such assignment, transfer or contribution, the applicable assignee shall automatically be deemed to have contributed or transferred the principal amount of such Term Loans, plus all accrued and unpaid interest thereon, to the Borrower; or (y) if the assignee is the Borrower (including through contribution or transfers set forth in clause (x)), (a) the principal amount of such Term Loans, along with all accrued and unpaid interest thereon, so contributed, assigned or transferred to any the Borrower shall be deemed automatically cancelled and extinguished on the date of such contribution, assignment or transfer, (b) the aggregate outstanding principal amount of Term Loans of the remaining Lenders shall reflect such cancellation and extinguishing of the Term Loans then held by the Borrower and (c) the Borrower shall promptly provide notice to the Administrative Agent of such contribution, assignment or transfer of such Term Loans, and the Administrative Agent, upon receipt of such notice, shall reflect the cancellation of the applicable Term Loans in the Register; and
(ii) each Person that purchases any Term Loans pursuant to clause (x) of this subsection (l) shall represent and warrant to the selling Term Lender (other than any Affiliated Lender) that it does not possess material non-public information (or material information of the type that would not be public if the Borrower or any Parent Entity were a publicly-reporting company) with respect to the Borrower and its Subsidiaries that either (1) has not been disclosed to the Term Lenders generally (other than Term Lenders that have elected not to receive such information) or (2) if not disclosed to the Term Lenders, would reasonably be expected to have a material effect on, or otherwise be material to (A) a Term Lenders decision to participate in any such assignment or (B) the market price of such Term Loans, or shall make a statement that such representation cannot be made.
(m) Notwithstanding anything to the contrary contained herein, without the consent of the Borrower or the Administrative Agent, (1) any Lender may in accordance with applicable Law create a security interest in all or any portion of the Loans owing to it and the Term Note, if any, held by it and (2) any Lender that is a Fund may create a security interest in all or any portion of the Loans owing to it and the Term Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.
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SECTION 10.08 Confidentiality. Each of the Agents, the Arranger and the Lenders agrees to maintain the confidentiality of the Information in accordance with its customary procedures (as set forth below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates respective partners, directors, officers, employees, legal counsel, independent auditors, agents, trustees, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential, with such Affiliate being responsible for such Persons compliance with this Section 10.08; provided, however, that such Agent, Arranger or Lender, as applicable, shall be principally liable to the extent this Section 10.08 is violated by one or more of its Affiliates or any of its or their respective employees, directors or officers), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners); provided, however, that each Agent, each Arranger and each Lender to seek confidential treatment with respect to any such disclosure, (c) to the extent required by applicable laws or regulations or by any subpoena or otherwise as required by applicable Law or regulation or as requested by a governmental authority; provided that such Agent, such Arranger or such Lender, as applicable, agrees (x) that it will notify the Borrower as soon as practicable in the event of any such disclosure by such Person (except in connection with any request as part of any audit or examination conducted by bank accountants or any regulatory authority ) unless such notification is prohibited by law, rule or regulation and (y) to seek confidential treatment with respect to any such disclosure, (d) to any other party hereto, (e) subject to an agreement containing provisions at least as restrictive as those of this Section 10.08, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or any Eligible Assignee (or its agent) invited to be an Additional Lender or (ii) with the prior consent of the Borrower, any actual or prospective direct or indirect counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any of their Subsidiaries or any of their respective obligations; provided that such disclosure shall be made subject to the acknowledgment and acceptance by such prospective Lender, Participant or Eligible Assignee that such Information is being disseminated on a confidential basis (on substantially the terms set forth in this paragraph or as is otherwise reasonably acceptable to the Borrower, the Agents and the Arranger, including, without limitation, as set forth in any confidential information memorandum or other marketing materials) in accordance with the standard syndication process of the Agents and the Arranger or market standards for dissemination of such type of information which shall in any event require click through or other affirmative action on the part of the recipient to access such confidential information, (f) for purposes of establishing a due diligence defense, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach by any Person of this Section 10.08 or any other confidentiality provision in favor of any Loan Party, (y) becomes available to any Agent, any Arranger, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than Holdings, the Borrower or any Subsidiary thereof, and which source is not known by such Agent, such Lender or the applicable Affiliate to be subject to a confidentiality restriction in respect thereof in favor of Holdings, the Borrower or any Affiliate of the Borrower or (z) is independently developed by the Agents, the Lenders, the Arranger or their respective Affiliates, in each case, so long as not based on information obtained in a manner that would otherwise violate this Section 10.08.
For purposes of this Section 10.08, Information means all information received from any Loan Party or any Subsidiary thereof relating to any Loan Party or any Subsidiary or Affiliate thereof or their respective businesses, other than any such information that is available to any Agent, any Lender on a nonconfidential basis prior to disclosure by any Loan Party or any Subsidiary thereof; it being understood that all information received from Holdings, the Borrower or any Subsidiary or Affiliate thereof after the date hereof shall be deemed confidential unless such information is clearly identified at the time of delivery as not being confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 10.08 shall be considered to have complied with its obligation to do so in accordance with its customary procedures 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 Agent, each Arranger, each Lender acknowledges that (a) the Information may include trade secrets, protected confidential information, or material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of such information and (c) it will handle such information in accordance with applicable Law, including United States Federal and state securities Laws and to preserve its trade secret or confidential character.
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The respective obligations of the Agents, the Arranger and the Lenders under this Section 10.08 shall survive, to the extent applicable to such Person, (x) the payment in full of the Obligations and the termination of this Agreement, (y) any assignment of its rights and obligations under this Agreement and (z) the resignation or removal of any Agent.
SECTION 10.09 Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender to or for the credit or the account of any Loan Party against any and all of the obligations of such Loan Party then due and payable under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document. The rights of each Lender under this Section 10.09 are in addition to other rights and remedies (including other rights of setoff) that such Lender may have. Each Lender agrees to notify the Borrower 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.
SECTION 10.10 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate). If any 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 Borrower. In determining whether the interest contracted for, charged, or received by an 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 10.11 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the 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 (including in .pdf format) means shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 10.12 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 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 10.13 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 Borrowing, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.
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SECTION 10.14 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.
SECTION 10.15 GOVERNING LAW.
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) THE BORROWER, HOLDINGS, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY IN THE BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO AGREES THAT THE AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION IN CONNECTION WITH THE EXERCISE OF ANY RIGHTS UNDER ANY COLLATERAL DOCUMENT OR THE ENFORCEMENT OF ANY JUDGMENT.
(c) THE BORROWER, HOLDINGS, THE ADMINISTRATIVE AGENT AND EACH LENDER EACH IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION 10.15. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
SECTION 10.16 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 10.16.
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SECTION 10.17 Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, Holdings and the Administrative Agent and the Administrative Agent shall have been notified by each Lender that each such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, Holdings, each Agent and each Lender and their respective successors and assigns.
SECTION 10.18 Lender Action. Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any bankers lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, without the prior written consent of the Administrative Agent. The provision of this Section 10.18 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.
SECTION 10.19 Use of Name, Logo, Etc. Each Loan Party consents to the publication in the ordinary course by Administrative Agent or the Arranger of customary advertising material relating to the financing transactions contemplated by this Agreement using such Loan Partys name, product photographs, logo or trademark. Such consent shall remain effective until revoked by such Loan Party in writing to the Administrative Agent and the Arranger.
SECTION 10.20 USA PATRIOT Act. Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the USA PATRIOT Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act.
SECTION 10.21 Service of Process. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
SECTION 10.22 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), each of the Borrower and Holdings acknowledges and agrees that (i) (A) the arranging and other services regarding this Agreement provided by the Agents and the Arranger are arms-length commercial transactions between the Borrower, Holdings and their respective Affiliates, on the one hand, and the Administrative Agents and the Arranger, on the other hand, (B) each of the Borrower and Holdings has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Borrower and Holdings 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) each Agent, Arranger and 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 the Borrower, Holdings or any of their respective Affiliates, or any other Person and (B) none of the Agents, the Arranger nor any Lender has any obligation to the Borrower, Holdings or any of 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 Agents, the Arranger, the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, Holdings and their respective Affiliates, and none of the Agents, the Arranger nor any Lender has any obligation to disclose any of such interests to the Borrower, Holdings or any of their respective Affiliates. To the fullest extent permitted by law, each of the Borrower and Holdings hereby waives and releases any claims that it may have against the Agents, the Arranger or any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
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ARTICLE XI
Guaranty
SECTION 11.01 Guaranty Subject to this Article XI, each of the Guarantors hereby, jointly and severally, irrevocably and unconditionally, guarantees to each Lender and to the Collateral Agent and its successors and assigns, irrespective of the validity and enforceability of this Agreement or the obligations of the Borrower hereunder or thereunder, that: (a) the principal of and interest and premium, if any, on the Term Loans shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Term Loans, if any, if lawful, and all other obligations of the Borrower hereunder or thereunder shall be promptly paid in full, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Term Loans or any of such other obligations, that same shall be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Term Loans or this Agreement, the absence of any action to enforce the same, any waiver or consent by any Lender with respect to any provisions hereof or thereof, the recovery of any judgment against the Borrower, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Borrower, any right to require a proceeding first against the Borrower, protest, notice and all demands whatsoever and covenants that this Guaranty shall not be discharged except by full payment of the obligations contained in this Agreement.
Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys fees) incurred by the Collateral Agent in enforcing any rights under this Section 11.01.
If any Lender or the Collateral Agent is required by any court or otherwise to return to the Borrower, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Borrower or the Guarantors, any amount paid either to the Collateral Agent or such Borrower, this Guaranty, to the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Lenders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Lenders and the Collateral Agent, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article VIII hereof for the purposes of this Guaranty, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article VIII hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guaranty. The Guarantors shall have the right to seek contribution from any nonpaying Guarantor so long as the exercise of such right does not impair the rights of the Lenders under the Guaranty.
Each Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Borrower for liquidation, reorganization, should the Borrower become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Borrowers assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment of the Term Loans are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Term Loans or Guaranty, whether as a voidable preference, fraudulent transfer or otherwise, all as though such payment had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Term Loans shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
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In case any provision of any Guaranty shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
The Guaranty issued by any Guarantor shall be a general secured senior obligation of such Guarantor and shall rank equally in right of payment with all existing and future First Lien Obligations of such Guarantor, if any.
Each payment to be made by a Guarantor in respect of its Guaranty shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
SECTION 11.02 Limitation on Guarantor Liability. Each Guarantor and each Lender, hereby confirms that it is the intention of all such parties that the Guaranty of such Guarantor not constitute a fraudulent transfer or conveyance, or similar limitation, for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guaranty. To effectuate the foregoing intention, the Collateral Agent, the Lenders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor shall be limited to the maximum amount as shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article XI, result in the obligations of such Guarantor under its Guaranty not constituting a fraudulent conveyance or fraudulent transfer, or similar limitation, under applicable law. Each Guarantor that makes a payment under its Guaranty shall be entitled upon payment in full of all guaranteed obligations under this Agreement to a contribution from each other Guarantor in an amount equal to such other Guarantors pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
SECTION 11.03 Execution and Delivery. To evidence its Guaranty set forth in Section 11.01 hereof, each Guarantor hereby agrees that this Agreement shall be executed on behalf of such Guarantor by a Responsible Officer.
Each Guarantor hereby agrees that its Guaranty set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guaranty on any Term Loan Notes.
If required by Section 7.12 hereof, the Borrower shall cause any Restricted Subsidiary to comply with the provisions of Section 7.12 hereof and this Article XI, to the extent applicable.
SECTION 11.04 Subrogation. Each Guarantor shall be subrogated to all rights of the Lenders against the Borrower in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 11.01 hereof; provided that, if an Event of Default has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Borrower under this Agreement shall have been paid in full.
SECTION 11.05 Benefits Acknowledged. Each Guarantor acknowledges that it shall receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the guarantee and waivers made by it pursuant to its Guaranty are knowingly made in contemplation of such benefits.
SECTION 11.06 Release of Guaranty by Guarantors. Each Guaranty by a Guarantor shall provide by its terms that it shall be automatically and unconditionally released and discharged, and no further action by such Guarantor, the Borrower or the Collateral Agent is required for the release of the such Guarantors Guaranty, upon:
(a) (i) any sale, exchange, disposition or transfer (by merger, amalgamation, consolidation or otherwise) of (i) the Capital Stock of such Guarantor, after which the applicable Guarantor is no longer a Restricted Subsidiary or (ii) all or substantially all the assets of such Guarantor, in each case if such sale, exchange, disposition or transfer is made in compliance with the applicable provisions of this Agreement;
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(ii) the release or discharge of the guarantee by such Guarantor of Indebtedness under a guarantee (other than a guarantee of the ABL Credit Agreement or the Senior Notes) that resulted in the creation of such Guaranty, except a discharge or release by or as a result of payment under such guarantee (it being understood that a release subject to a contingent reinstatement is still a release, and that if any such Guaranty is so reinstated, such Guaranty shall also be reinstated to the extent that such Subsidiary Guarantor would then be required to provide a Guaranty pursuant to Section 7.12 hereof) (notwithstanding the foregoing, a Guaranty provided by a Guarantor on the Closing Date may not be released and discharged pursuant to this Section 11.06(a)(ii)); and
(b) the designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in compliance with the applicable provisions of this Agreement.
ARTICLE XII
Collateral Documents
SECTION 12.01 Collateral and Collateral Documents.
(a) The due and punctual payment of the principal of and interest on the Term Loans when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of and interest on the Term Loans and performance of all other Obligations of the Borrower and the Guarantors to the Lender, the Administrative Agent or the Collateral Agent under this Agreement, the Term Loans, the Intercreditor Agreements and the Collateral Documents, according to the terms hereunder or thereunder, shall be secured as provided in the Collateral Documents, which define the terms of the Liens that secure the Term Loans and such other Obligations, subject to the terms of the Intercreditor Agreements. The Administrative Agent and the Borrower hereby acknowledge and agree that the Collateral Agent holds the Collateral in trust for the benefit of the Collateral Agent, the Administrative Agent and the Lenders, in each case pursuant to the terms of the Collateral Documents and the Intercreditor Agreements. Each Lender consents and agrees to the terms of the Collateral Documents (including the provisions providing for the possession, use, release and foreclosure of Collateral) and the Intercreditor Agreements as the same may be in effect or may be amended from time to time in accordance with their terms and this Agreement and the Intercreditor Agreements, and authorizes and directs the Administrative Agent to enter into the Collateral Documents and the Intercreditor Agreements and to perform its obligations and exercise its rights thereunder in accordance therewith. The Borrower shall deliver to the Collateral Agent copies of all documents pursuant to the Collateral Documents, and shall do or cause to be done all such acts and things as may be reasonably required by the next sentence of this Section 12.01, to assure and confirm to the Collateral Agent the security interest in the Collateral contemplated hereby, by the Collateral Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Agreement and of the Term Loans secured hereby, according to the intent and purposes herein expressed. The Borrower shall, and shall cause the Restricted Subsidiaries of the Borrower to, use its and their commercially reasonable efforts to take any and all actions reasonably required to cause the Collateral Documents to create and maintain, as security for the Obligations, a valid and enforceable perfected Lien and security interest in and on all of the Collateral (subject to the terms of the Intercreditor Agreements), in favor of the Collateral Agent for the benefit of the Secured Parties.
(b) Notwithstanding the foregoing,
(i) the Capital Stock of the Restricted Subsidiaries of the Borrower that are owned by the Borrower or any Guarantor (other than the capital stock of the Borrower) shall constitute Collateral only to the extent that such Capital Stock can secure the Term Loans without Rule 3-16 of Regulation S-X under the Securities Act (Rule 3-16) (or any other law, rule or regulation) requiring separate financial statements of such Subsidiary to be filed with the SEC (or any other governmental agency);
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(ii) in the event that Rule 3-16 requires or is amended, modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any other governmental agency) of separate financial statements of any Restricted Subsidiary (other than the Borrower) due to the fact that such Subsidiarys Capital Stock secure the Term Loans, then the Capital Stock of such Subsidiary shall automatically be deemed not to be part of the Collateral, but only to the extent necessary to not be subject to such requirement (in such event, the Collateral Documents may be amended or modified, without the consent of any Lender, to the extent necessary to release the security interests in the shares of Capital Stock and other securities that are so deemed to no longer constitute part of the Collateral); and
(iii) in the event that either Rule 3-16 is amended, modified or interpreted by the SEC to permit (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) such Subsidiarys Capital Stock to secure the Term Loans in excess of the amount then pledged without the filing with the SEC (or any other governmental agency) of separate financial statements of such Subsidiary, then the Capital Stock of such Subsidiary shall automatically be deemed to be a part of the Collateral but only to the extent necessary to not be subject to any such financial statement requirement (in such event, the Collateral Documents may be amended or modified, without the consent of any Lender, to the extent necessary to subject to the Liens under the Collateral Documents such additional Capital Stock).
(c) In addition to the limitations described in Section 12.01(b), the Collateral shall not include (i) property or assets as to which the Collateral Agent has notified any Guarantor in writing that it has reasonably determined that the costs of obtaining a security interest are excessive in relation to the value of the security to be afforded thereby and (ii) the Excluded Assets.
(d) In the case of any Foreign Subsidiary, the Collateral shall be limited to 100% of the non-voting Capital Stock and 65% of the voting Capital Stock of such Foreign Subsidiaries.
(e) Each Lender (i) consents to the subordination of Liens provided for in the Crossing Lien Intercreditor Agreement and (ii) agrees that it shall be bound by, and shall take no actions contrary to, the provisions of the Crossing Lien Intercreditor Agreement. The foregoing provisions of this Section 12.01(e) are intended as an inducement to the holders of Indenture Noteholder Lien Obligations to acquire the Term Loans and such Lenders are intended third party beneficiaries of such provisions and of the Crossing Lien Intercreditor Agreement.
(f) In addition, the Borrower and its Subsidiaries shall not be required to obtain any landlord waivers, estoppels or collateral access letters and shall not be required to (i) take actions to perfect by control, other than stock pledges and control agreements relating to ABL Collateral, promissory notes, letter of credit rights and commercial tort claims, in each case not exceeding of $5,000,000 or (ii) take any actions under any laws outside of the United States to grant, perfect or enforce any security interest.
SECTION 12.02 [Reserved]
SECTION 12.03 Release of Collateral.
(a) Subject to Sections 12.03(b) and 12.04 hereof, Collateral may be released from the Lien and security interest created by the Collateral Documents at any time or from time to time in accordance with the provisions of the Collateral Documents, the Intercreditor Agreements or as provided hereby. The Borrower and the Guarantors shall be entitled to a release of property and other assets included in the Collateral from the Liens securing the Term Loans, and the Collateral Agent shall release, or instruct the Notes Collateral Agent to release, as applicable, the same from such Liens at the Borrowers sole cost and expense, under one or more of the following circumstances:
(i) to enable the Borrower or any Guarantor to sell, exchange or otherwise dispose of any of the Collateral to the extent not prohibited under Section 7.05 hereof;
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(ii) in the case of a Guarantor that is released from its Guaranty with respect to all of the Obligations, the release of the property and assets of such Guarantor;
(iii) to the extent property is subject to a lease, upon termination of the lease;
(iv) pursuant to an amendment or waiver in accordance with Article X hereof;
(v) if all of the Term Loans have been satisfied and discharged pursuant to Article X hereof; or
(vi) upon payment in full of the principal of, together with accrued and unpaid interest on, all of the Term Loans and all other Obligations related thereto under this Agreement, the Guaranty and the Collateral Documents with respect thereto, that are due and payable at or prior to the time such principal, together with accrued and unpaid interest are paid.
(b) Subject to the provisions contained in the Intercreditor Agreements, in general the second-priority lien on the ABL Collateral securing the Term Loans shall remain in full force and effect notwithstanding the termination and repayment in full of the ABL Credit Agreement and the release by the ABL Agent of the first-priority liens on the ABL Collateral. The second-priority lien on the ABL Collateral securing the Term Loans shall terminate and be released automatically if the first-priority liens on the ABL Collateral are released by the ABL Agent (unless, at the time of such release of such first-priority liens, an Event of Default shall have occurred and be continuing under this Agreement). Notwithstanding the existence of an Event of Default, the second-priority lien on the ABL Collateral securing the Senior Notes shall also terminate and be released automatically to the extent the first-priority liens on the ABL Collateral are released by the ABL Agent in connection with a sale, transfer or disposition of ABL Collateral that is either not prohibited under this Agreement or occurs in connection with the foreclosure of, or other exercise of remedies with respect to, such ABL Collateral by the ABL Agent (except with respect to any proceeds of such sale, transfer or disposition that remain after satisfaction in full of the obligations under the ABL Credit Agreement). Notwithstanding the foregoing, in the event of a release of liens by the ABL Agent on all or substantially all of the ABL Collateral (other than in connection with a foreclosure upon or other exercise of rights and remedies by the ABL Agent with respect to such ABL Collateral), no release of the second-priority liens on the ABL Collateral securing the Term Loans shall be made unless (i) consent to such release has been given by the requisite percentage or number of the holders of the Lenders at the time outstanding, in accordance with Section 10.01 hereof, as provided for in this Agreement or the Collateral Documents and (ii) the Borrower has delivered an Officers Certificate to the Collateral Agent certifying that all such consents have been obtained. The second priority Liens in the ABL Collateral securing the Term Loans that otherwise would have been released pursuant to the second sentence of this clause (b) but for the occurrence and continuation of an Event of Default shall be released when such Event of Default and all other Events of Default under this Agreement cease to exist.
(c) Upon satisfaction of all conditions precedent under this Agreement and the Collateral Documents, if any, to such release have been met and any necessary or proper instruments of termination, satisfaction or release prepared by the Borrower, the Administrative Agent shall, or shall cause the Collateral Agent, to execute, deliver or acknowledge (at the Borrowers expense) such instruments or releases to evidence the release of any Collateral permitted to be released pursuant to this Agreement or the Collateral Documents or the Intercreditor Agreements. Neither the Administrative Agent nor the Collateral Agent shall be liable for any such release executed in accordance with the terms hereof.
SECTION 12.04 Permitted Releases Not To Impair Lien. Any release of Collateral permitted by Section 12.03 hereof shall be deemed not to impair the Liens under this Agreement and the Collateral Documents in contravention thereof.
SECTION 12.05 [Reserved].
SECTION 12.06 Suits To Protect the Collateral.
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Subject to the provisions of Article VIII hereof and the Intercreditor Agreements, the Administrative Agent in its sole discretion and without the consent of the Lenders, on behalf of the Lenders, may direct the Collateral Agent to take all actions it deems necessary or appropriate in order to:
(a) enforce any of the terms of the Collateral Documents; and
(b) collect and receive any and all amounts payable in respect of the Obligations hereunder.
(c) Subject to the provisions of the Collateral Documents and the Intercreditor Agreements, the Administrative Agent shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Collateral Documents or this Agreement, and such suits and proceedings as the Administrative Agent, in its sole discretion, may deem expedient to preserve or protect its interests and the interests of the Lenders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Lien on the Collateral or be prejudicial to the interests of the Lenders or the Collateral Agent). Nothing in this Section 12.06 shall be considered to impose any such duty or obligation to act on the part of the Administrative Agent.
SECTION 12.07 Authorization of Receipt of Funds by the Administrative Agent Under the Collateral Documents.
Subject to the provisions of the Intercreditor Agreements, the Administrative Agent is authorized to receive any funds for the benefit of the Lenders distributed under the Collateral Documents, and to make further distributions of such funds to the Lenders according to the provisions of this Agreement.
SECTION 12.08 Purchaser Protected.
In no event shall any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the Collateral Agent or the Administrative Agent to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted by this Article XII to be sold be under any obligation to ascertain or inquire into the authority of the Borrower or the applicable Guarantor to make any such sale or other transfer.
SECTION 12.09 Powers Exercisable by Receiver or Administrative Agent.
In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XII upon the Borrower or a Guarantor with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Borrower or a Guarantor or of any officer or officers thereof required by the provisions of this Article XII; and if the Administrative Agent shall be in the possession of the Collateral under any provision of this Agreement, then such powers may be exercised by the Administrative Agent.
SECTION 12.10 Release Upon Termination of the Borrowers Obligations.
In the event that the Borrower delivers to the Administrative Agent, in form and substance reasonably acceptable to it, an certificate of a Responsible Officer certifying that (i) payment in full of the principal of, together with accrued and unpaid interest on, all of the Term Loans and all other Obligations under this Agreement and the Collateral Documents with respect thereto, that are due and payable at or prior to the time such principal, together with accrued and unpaid interest, are paid or (ii) the Borrower shall have exercised its satisfaction and discharge option, in compliance with the provisions of Article X hereof, in each case with respect to all of the Term Loans, the Administrative Agent shall deliver to the Borrower and the Collateral Agent a notice stating that the Administrative Agent, on behalf of the Lenders, disclaims and gives up any and all rights it has in or to the
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Collateral, and any rights it has under the Collateral Documents, and upon receipt by the Collateral Agent of such notice, the Collateral Agent shall be deemed not to hold a Lien in the Collateral on behalf of the Administrative Agent and shall do or cause to be done all acts reasonably necessary at the Borrowers cost to release such Lien as soon as is reasonably practicable.
SECTION 12.11 Collateral Agent.
(a) The Administrative Agent and each of the Lenders hereby designates and appoints the Collateral Agent as its agent under this Agreement, the Collateral Documents and the Intercreditor Agreements and the Administrative Agent and each of the Lenders hereby irrevocably authorizes the Collateral Agent to take such action on its behalf under the provisions of this Agreement, the Collateral Documents and the Intercreditor Agreements and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms of this Agreement, the Collateral Documents and the Intercreditor Agreements, together with such powers as are reasonably incidental thereto. The provisions of this Section 12.11 are solely for the benefit of the Notes Collateral Agent and none of the Administrative Agent, any of the Lenders, the Borrower nor any of the Guarantors shall have any rights as a third party beneficiary of any of the provisions contained herein other than as expressly provided in Section 12.03. Notwithstanding any provision to the contrary contained elsewhere in this Agreement, the Collateral Documents and the Intercreditor Agreements, the Collateral Agent shall not have any duties or responsibilities hereunder nor shall the Collateral Agent have or be deemed to have any fiduciary relationship with the Administrative Agent, any Lender or any Guarantor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement, the Collateral Documents and the Intercreditor Agreements or otherwise exist against the Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term agent in this Agreement with reference to the Collateral 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 merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Agreement, the Collateral Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Collateral Agent is expressly entitled to take or assert under this Agreement, the Collateral Documents and the Intercreditor Agreements, including the exercise of remedies pursuant to Article VIII, and any action so taken or not taken shall be deemed consented to by the Administrative Agent and the Lenders.
(b) None of the Collateral Agent or any of its Affiliates shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or the transactions contemplated hereby (except for its own gross negligence or willful misconduct) or under or in connection with any Collateral Document or the Intercreditor Agreements or the transactions contemplated thereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Administrative Agent or any Lender for any recital, statement, representation, warranty, covenant or agreement made by the Borrower or any Guarantor, or any officer or Affiliate of any of the foregoing, contained in this or any Agreement, or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement, the Collateral Documents or the Intercreditor Agreements, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the Collateral Documents or the Intercreditor Agreements, or for any failure of the Borrower, any Guarantor or any other party to this Agreement, the Collateral Documents or the Intercreditor Agreements to perform its obligations hereunder or thereunder. None of the Collateral Agent or any of its Affiliates shall be under any obligation to the Administrative Agent or any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, the Collateral Documents or the Intercreditor Agreements or to inspect the properties, books, or records of the Borrower, any Guarantor or any Guarantors Affiliates.
(c) The Collateral Agent and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with the Borrower, any Guarantor and their Affiliates as though it was not the Collateral Agent hereunder and without notice to or consent of the Administrative Agent. The Administrative Agent and the Lenders acknowledge that, pursuant to such activities, the Collateral Agent or its Affiliates may receive information regarding the Borrower, any Guarantor or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower, any such Guarantor or such Affiliate) and
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acknowledge that the Collateral Agent shall not be under any obligation to provide such information to the Administrative Agent or the Lenders. Nothing herein shall impose or imply any obligation on the part of the Collateral Agent to advance funds.
(d) The Collateral Agent is authorized and directed to (i) enter into the Collateral Documents, (ii) enter into the Intercreditor Agreements, (iii) bind the Lenders on the terms as set forth in the Collateral Documents and the Intercreditor Agreements and (iv) perform and observe its obligations under the Collateral Documents and the Intercreditor Agreements.
(e) The Administrative Agent agrees that it shall not (and shall not be obliged to), and shall not instruct the Collateral Agent to, unless specifically requested to do so by the Required Lenders, take or cause to be taken any action to enforce its rights under this Agreement or against the Borrower or any Guarantor, including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral.
If at any time or times the Administrative Agent shall receive (i) by payment, foreclosure, set-off or otherwise, any proceeds of Collateral or any payments with respect to the Obligations arising under, or relating to, this Agreement, except for any such proceeds or payments received by the Administrative Agent from the Collateral Agent pursuant to the terms of this Agreement, or (ii) payments from the Collateral Agent in excess of the amount required to be paid to the Administrative Agent pursuant to Article VIII, the Administrative Agent shall promptly turn the same over to the Collateral Agent, in kind, and with such endorsements as may be required to negotiate the same to the Collateral Agent.
(f) The Administrative Agent is each Lenders agent for the purpose of perfecting the Lenders security interest in assets which, in accordance with Article 9 of the Uniform Commercial Code can be perfected only by possession. Should the Administrative Agent obtain possession of any such Collateral, upon request from the Borrower, the Administrative Agent shall notify the Collateral Agent thereof, and, promptly upon the Collateral Agents request therefor shall deliver such Collateral to the Collateral Agent or otherwise deal with such Collateral in accordance with the Collateral Agents instructions.
(g) The Collateral Agent shall have no obligation whatsoever to the Administrative Agent or any of the Lenders to assure that the Collateral exists or is owned by the Borrower or any Guarantor or is cared for, protected, or insured or has been encumbered, or that the Collateral Agents Liens have been properly or sufficiently or lawfully created, perfected, protected, maintained or enforced or are entitled to any particular priority, or to determine whether all or the Borrower or any Guarantors property constituting collateral intended to be subject to the Lien and security interest of the Collateral Documents has been properly and completely listed or delivered, as the case may be, or the genuineness, validity, marketability or sufficiency thereof or title thereto, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities, and powers granted or available to the Collateral Agent pursuant to this Agreement, any Collateral Document or the Intercreditor Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Collateral Agent may act in any manner it may deem appropriate, in its sole discretion given the Collateral Agents own interest in the Collateral and that the Collateral Agent shall have no other duty or liability whatsoever to the Administrative Agent or any Lender as to any of the foregoing.
(h) No provision of this Agreement, the Intercreditor Agreements or any Collateral Document shall require the Collateral Agent (or the Administrative Agent) to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or thereunder or to take or omit to take any action hereunder or thereunder or take any action at the request or direction of Lenders (or the Administrative Agent in the case of the Collateral Agent) if it shall have reasonable grounds for believing that repayment of such funds is not assured to it.
(i) The Collateral Agent (i) shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers, or for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Collateral Agent was grossly negligent in ascertaining the pertinent facts, (ii) shall not be liable for interest on any money received by it except as the
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Collateral Agent may agree in writing with the Borrower (and money held in trust by the Collateral Agent need not be segregated from other funds except to the extent required by law), (iii) the Collateral Agent may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it in good faith and in accordance with the advice or opinion of such counsel. The grant of permissive rights or powers to the Collateral Agent shall not be construed to impose duties to act.
(j) Neither the Collateral Agent nor the Administrative Agent shall be liable for delays or failures in performance resulting from acts beyond its control. Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters. Neither the Collateral Agent nor the Administrative Agent shall be liable for any indirect, special or consequential damages (included but not limited to lost profits) whatsoever, even if it has been informed of the likelihood thereof and regardless of the form of action.
SECTION 12.12 Designations.
Except as provided in the next sentence, for purposes of the provisions hereof and the Intercreditor Agreements requiring the Borrower to designate Indebtedness for the purposes of the term Additional Noteholder Lien Debt Facility or any other such designations hereunder or under the Intercreditor Agreements, any such designation shall be sufficient if the relevant designation is set forth in writing, signed on behalf of the Borrower by a Responsible Officer and delivered to the Administrative Agent, the Collateral Agent and the ABL Agent.
SECTION 12.13 Additional Collateral.
(a) (i) Subject to the limitations set forth or referenced in this Section 12.13, applicable law and any exceptions set forth in the Security Agreement, the Borrower and each Subsidiary Guarantor will cause the issued and outstanding Capital Stock (other than Excluded Capital Stock) of each Subsidiary directly owned by the Borrower or any Subsidiary Guarantor to be subject at all times to a first priority (subject to the Intercreditor Agreements and to other Permitted Liens), perfected Lien in favor of the Collateral Agent pursuant to the terms and conditions of this Agreement and the other Collateral Documents.
(ii) Subject to the limitations set forth or referenced in this Section 12.13, applicable law and any exceptions set forth in the Security Agreement, the Borrower and each Subsidiary Guarantor will cause, except with respect to intercompany Indebtedness, all evidences of Indebtedness for borrowed money in a principal amount in excess of $2,500,000 (individually) that is owing to the Borrower or any Subsidiary Guarantor to be evidenced by a duly executed promissory note and pledged and delivered to the Collateral Agent under the Security Agreement and accompanied by instruments of transfer with respect thereto endorsed in blank.
(iii) Each of the Borrower and each Subsidiary Guarantor agrees that all Indebtedness of Holdings, the Borrower and each of its Subsidiaries that is owing to the Borrower or any Subsidiary Guarantor shall be evidenced by the Intercompany Note, which promissory note shall be required to be pledged and delivered to the Collateral Agent under the Security Agreement and accompanied by instruments of transfer with respect thereto endorsed in blank.
(b) In furtherance of Section 6.13, but subject to the limitations set forth or referenced in this Section 12.13, applicable law and any exceptions set forth in the Security Agreement, and without limiting the foregoing, the Borrower and each Subsidiary Guarantor will execute and deliver to the Collateral Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents and such other actions or deliveries, as applicable (including the delivery of the Real Property Collateral Requirements), which may be required by law or which the Collateral Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Collateral Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Borrower and the Guarantors, provided, however, that neither the Borrower nor any Subsidiary Guarantor shall be required to grant any security interest or take any action to perfect any security interest under the law of any jurisdiction outside the United States of America.
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(c) Subject to the limitations set forth or referred to in this Section 12.13, applicable law and any exceptions set forth in the Security Agreement, if any material assets (including any real property or improvements thereto or any interest therein) are acquired by the Borrower or any Subsidiary Guarantor after the Closing Date (other than assets constituting Collateral under the Security Agreement that become subject to the Lien in favor of the Collateral Agent upon acquisition thereof), the Borrower will, as soon as reasonably practicable, notify the Collateral Agent thereof, and, if requested by the Collateral Agent, the Borrower or such Subsidiary Guarantor will cause such assets to be subjected to a Lien securing the Obligations and will take such actions as shall be necessary or reasonably requested by the Collateral Agent to grant and perfect such Liens, including actions described in paragraph (b) of this Section 12.13, all at the expense of the Borrower and the Guarantors.
(d) Notwithstanding anything to the contrary contained in this Agreement, real property required to be mortgaged under the Collateral Documents (i) shall exclude the Miami, Florida and Simi Valley, California real estate and (ii) shall be limited to real property located in the United States of America that is owned in fee by the Borrower or a Subsidiary Guarantor, the cost or book value of which (whichever is greater) at the time of the acquisition thereof (or, in the case of real property owned on the Closing Date), the cost or book value of which (whichever is greater) on the Closing Date is $2,500,000 or more (provided that the cost of perfecting such Lien is not unreasonable in relation to the benefits to the Lenders of the security afforded thereby in the reasonable determination of the Borrower and the Administrative Agent).
(e) Notwithstanding anything to the contrary contained herein, the Borrower and the Subsidiary Guarantors shall not be required to include as Collateral any Excluded Assets.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
BORROWER: | AMERICAN TIRE DISTRIBUTORS, INC. | |||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Executive Vice President, General Counsel | |||||||
and Secretary | ||||||||
HOLDINGS: | AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC. | |||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Executive Vice President, General Counsel | |||||||
and Secretary | ||||||||
SUBSIDIARY GUARANTORS: | AM-PAC TIRE DIST. INC. | |||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
THE HERCULES TIRE AND RUBBER COMPANY | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
HERCULES ASIA PACIFIC LLC | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
TIRE WHOLESALERS, INC. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary |
[Credit Agreement]
TERRYS TIRE TOWN HOLDINGS, INC. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
T & Z TIRE WHOLESALERS, INC. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
TERRYS TIRE TOWN, INC. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
TERRYS TIRE TOWN VIRGINIA, LTD. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
TERRYS TIRE TOWN BALTIMORE, LTD. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
SUMMIT TIRES NORTHEAST, LLC | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary | |||||||
ENGLEWOOD TIRE WHOLESALE, INC. | ||||||||
By: | /s/ J. Michael Gaither | |||||||
Name: | J. Michael Gaither | |||||||
Title: | Secretary |
[Credit Agreement]
2
BANK OF AMERICA, N.A., | ||||||||
as Administrative Agent and Lender | ||||||||
By: | /s/ Edward Martin | |||||||
Name: | Edward Martin | |||||||
Title: | Director |
[Credit Agreement]
3
EXHIBIT 31.1
CERTIFICATIONS
I, William E. Berry, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of American Tire Distributors Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 16, 2014
/s/ WILLIAM E. BERRY |
William E. Berry |
President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS
I, Jason T. Yaudes, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of American Tire Distributors Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 16, 2014
/s/ JASON T. YAUDES |
Jason T. Yaudes |
Executive Vice President and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of American Tire Distributors Holdings, Inc., a Delaware corporation (the Company), hereby certifies that, to his best knowledge:
(a) | the Quarterly Report on Form 10-Q for the quarter ended April 5, 2014 (the Report) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(b) | information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 16, 2014 | By: | /s/ WILLIAM E. BERRY | ||||||
Name: Title: |
William E. Berry President and Chief Executive Officer | |||||||
By: | /s/ JASON T. YAUDES | |||||||
Name: Title: |
Jason T. Yaudes Executive Vice President and Chief Financial Officer |
Changes in Carrying Amount of Goodwill (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended |
---|---|
Apr. 05, 2014
|
|
Goodwill [Line Items] | |
Beginning balance | $ 504,333 |
Purchase accounting adjustments | 128 |
Acquisitions | 162,362 |
Currency Translation | (1,876) |
Ending balance | $ 664,947 |
Assumptions Used to Determine Average Fair Value of Stock Options of Two Thousand Ten Plan (Detail) (2010 Plan)
|
3 Months Ended |
---|---|
Mar. 30, 2013
|
|
2010 Plan
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 1.38% |
Dividend yield | |
Expected life | 6 years |
Volatility | 45.39% |
Pre-Tax Effect of Derivative Instruments on Condensed Consolidated Statement of Comprehensive Income (Loss) (Detail) (Interest Expense, USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Apr. 05, 2014
|
Mar. 30, 2013
|
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
(Gain) loss recognized in interest expense | $ (4) | $ (436) |
Interest rate swap, fixed rate 1.105% and expired in February 2013 | 1Q 2011 Swap
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
(Gain) loss recognized in interest expense | (149) | |
Interest Rate Swap | 3Q 2011 Swaps
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
(Gain) loss recognized in interest expense | (86) | (156) |
Interest Rate Swap | 3Q 2012 Swaps
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
(Gain) loss recognized in interest expense | 47 | (131) |
Interest Rate Swap | 3Q 2013 Swaps
|
||
Derivative Instruments, Gain (Loss) [Line Items] | ||
(Gain) loss recognized in interest expense | $ 35 |
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